Ask YC: Why do you disproportionately invest in younger founders?
http://news.ycombinator.com/item?id=809233
I found the following thread interesting (quoted in part):
====== START QUOTE
5 points by jacquesm
[To pg] Are you willing to share the number of companies YC has invested in where founders were in their 20s, 30s, 40s, 50s or older ?
7 points by pg
I don't actually know the numbers. We don't keep track. But I know there haven't been any with founders in their 50s, and only 2 or 3 with founders in their 40s or their teens. Most founders are in their 20s or 30s. Completely guessing, I'd say 15-20% have founders in their 30s.
[...other posts and questions...]
10 points by pg
Off the top of my head, I'd say that older founders are more likely to succeed. They don't give up so easily. On the other hand, they also tend to have much higher burn rates, which make their startups easier for circumstances to kill.
====== END QUOTE
So, pg is essentially saying that 75-80% of YC's investment goes to founders in their 20s. But he also acknowledges that older founders are more likely to succeed.
I can see multiple possible reasons for this strategy...for example, if you are doing social investing, you might assume that older workers are already established and relatively safe, but those just starting out could use a hand. Or perhaps you care more about disruptive companies than successful ones and you feel that, although older founders may be successful more often, they will be disruptive less often. If, however, your goal is simply to make money, then it seems like you should be investing disproportionately in older founders.
So, what's the reasoning for your investment strategy?
58 comments
[ 3.0 ms ] story [ 95.5 ms ] threadPeople right out of college, or early in their careers who know they want to do a startup, and who haven't had the time to put aside this level of capital are the prime target for YC, and they are also likely to be younger.
Nobody's criticizing YC here though; we're all just making the obvious point that YC trends young because people with established careers in tech make a lot more money in a year than many YC participants will see in several.
Did you succeed at your goals?
$15,000 is just too little money to make fuss about. The free PR alone is probably as valuable as the $15K.
It's kind of like that betting strategy where you double your bet every time you lose. If you have an infinite amount of money, you will always make your money back. If you have a finite amount of money, well... you lose everything very quickly.
Similarly, older founders may do well, but not before the money runs out.
(I had a coworker who was talking about a friends startup. Millions of dollars worth of initial funding for a project that's very similar to something YC invested in. If your $3000 investment fails, it's not a big deal. If your $30,000,000 investment fails, you become very unhappy. Since most startups fail...)
http://en.wikipedia.org/wiki/Martingale_%28betting_system%29
Is there some self-selection going on where founders that think they can do more with less go for YC instead of someone else? Do people of the "first, let's buy aeron chairs, then we can worry about deciding what to make" mentality even know that YC exists?
So, they are not likely to benefit as much from either the cash or the contacts YC provides.
If, for example, 20% of YC-invested founders are in their 30s and 20% of applicants are in their 30s, then in all likelihood age is a complete non-factor in their investment strategy. YC applicants are just disproportionately likely to be younger, due to the fact that older people are more likely to have financial dependents and commitments which make it far more difficult (if not entirely impossible) to do the 3-month-long YC experience.
From personal experience, the overlap of the sets:
1) of people over 30
2) of people who are entrepreneurial
3) of people who have actionable ideas
4) of people who are in a position to take income risks
5) of people who need the money/PR/connections that YC provides
is pretty small. There just aren't that many 30-something entrepreneurs who are in a position to need what YC provides, and who are able and willing to take a vacation from what is probably a substantial, stable income.
Without info about the pool of applicants, you don't yet know if YC invests disproportionately in younger founders.
And, even when compared to raw number of applicants, if older founders are underrepresented in those funded, that could be due to the universe of factors other than YC's preferences. For example, the best older founder-types may already be locked into other opportunities and obligations, making good older founders underrepresented in the applicant pool.
As far as I can tell, the age distribution of people we fund is the same as the age distribution of applicants.
And yeah, sorry about the 'wall of text' -- I was trying to be very clear about why I was asking, and the fact that this was a request for information, not an accusation of age discrimination.
I'd wager that older founders have more anchoring commitments, so while you can draw on a large (geographical) pool of young founders, you can only draw from the few older founders that happen to live near YC itself.
Of course, you have a lot more data, and probably a lot more insight into this question.
Even now, I'm financially secure, I still find it appealing, but uprooting my family (wife+kids) for a few months is not something I am willing to do.
And, as I'm working on a startup but well out of my twenties, and have a co-founder who is a woman PhD student in the research lab in the computer science department at CU, we probably have a disproportionate number of discussions about age and gender in startups.
So with that disclaimer out of the way...
I think this is interesting. I believe absolutely that YC funds the best people out of those that apply as pg says. Judging the best people out of thousands of applicants would I imagine be difficult even with great judgement. But why would YC not choose the best possible people?
pg is quoted above saying "Off the top of my head, I'd say that older founders are more likely to succeed."
So if
1) the selection team reflects pg's view that older founders are likely to be more likely to succeed (and I think based on other comments I've read that's based on them being more persistent/tougher/resilient), and
2) the age distribution of those selected is the same as the age distribution of the applicants,
then there must be a counterweighting factor that offsets the view that older founders are more likely to succeed. Otherwise you would expect, all other things being equal, that older founders would be disproportionately represented in the selected teams, assuming likely success is one of the determinants of the "best people".
The higher risk and difficulty of maintaining a desirable lifestyle on a ramen income therefore likely have two impacts:
1) Fewer older startup founders apply as noted.
2) The perception of older founders as being more likely to succeed is offset by the perception, conscious or otherwise, that they are less likely to succeed on a "just enough" level of funding.
If this is true, I doubt it's a conscious selection bias, and there's nothing wrong in it. It's just a reality that these factors likely are going to impact any judgement of who are the "best people" for YC's purposes. The older founders selected are likely to have been standout candidates, like all the others selected.
If you have less people applying, of course you'll have less people being accepted.
It's just they don't need the relatively small amount that YC invests because they have saved it themselves or have the kind of connections at that point in life where friends/family can invest it instead.
Still, all the stuff YC does for a new business apart from the money is pretty awesome. I'd apply just for that if I didn't mind moving to the US.
business = plumbing, food stall, import/export, constulting, YC company etc.
startup = YC companies and other similar intense low odds/high reward businesses
edit: vaksel stole my thunder
All I can now talk about is from personal experience. For example I know at least 12 startup founders (meaning low cost, tech centric startups) in Nottingham, working for 3 of those startups. None are/were under 25 when they started their business. The majority of them were over 30. Only 2 had started a previous business before 25. My friend has worked for 3 different tech startups elsewhere. All had founders over 30. Most of these people were married. Some had kids. They still started a business in the tech field.
Perhaps it's because the events and things I go to appeal to people my age, and the events the younger founders go to appeal to a different age. But I doubt it. What I suspect is that older people are probably more likely to go into b2b, the less glamorous startups, because it's easier money and most of these people knew the industries from working in them beforehand. And thus relied on existing contacts and sales forces rather than techcrunch et al. for publicity.
In fact it's almost impossible for an out-of-college/still-in-college founder to enter b2b precisely because they have no experience of that business domain or contacts in it. They can't see the opportunities unless they work in it. The only business they might know is the startup one.
In the end, my point is the idea that older people have no interest in starting tech-centric startups is wrong. It doesn't even make any sense. Do you think older people are scared of tech or something?
It is good when it was their own innovative business idea, and not so good, when someone else's one (look at politics!)