Possibly that these smart young people view everything like highschool. Everything is a formula driven contest to outshine your peers for the limited spots at prestigious schools. Get the perfect grades, study nonstop for the SAT, find the perfect volunteer experience, get dad to shmooze with his senator friend for that shiny recommendation letter, get into Harvard.
Same thing on loop. After the prestigious internships and summa cum laude, they graduate into a FANG job at 21.
I think the criticism is that these people are conformists. They're good at following an obvious system to the T but has never innovated or taken risks in their life.
This attitude continues into job interviews: the thought that, if you work hard enough and have enough talent, you should get the job you want. In reality, you might just not be a match.
That’s a good insight. The problem, though, is that this pattern kinda works (until it doesn’t). Get your FAANG job at 21, follow the pattern to get promoted, get promoted, make more money, compete to buy a nice house, get married, have kids, compete to get your kid into the “best” preschool, then the “best” private school. Compete to get into the “best country club”, then retire and...play golf all day?
At that point you've got enough wealth built up that if you've played things right you have a part time job managing your own portfolio. And a lot of people on that route that I've met have vague ideas of doing charity work or something at that point.
I don’t think it necessarily has to be negative (which being a grifter implies). I think there are just some people who think of life as a game where you need to collect as many badges of “honor” as possible. Undergrad degree, business school, graduate degree, incubator, spouse, zip code, country club, etc.
I hear ya. I meant negative in the "chaotic evil" sense (which is what a grifter implies). This is more "bland/purposeless", which is indeed a different flavor of negative.
And btw I agree with you - not the path the an enriched life!
I assume it's referring to people who're using the incubator as a networking opportunity, with no particular intention to build a successful company / product from it.
A commenter offers a definition in the responses [1]:
> People that have no soul or connection to the product they build because they see everything they do as a checklist to get to the C suite level in some Series A/B/C company
He lost me with the whole "make founders take on massive personal debt to survive" tweet. Removing that particular stressor, particularly from people from poorer backgrounds who lack the access to that kind of credit is how we get a better sampling of ideas.
Not a filtering function - I know of a few founders who scrapped by on Medicaid and food stamps for years to build a successful business by they had no savings
They don’t know at onset if a company deserves that much money. $25k is enough to see what people can accomplish in 3 months - maybe they take less equity. Most companies either have wrong leaders, wrong market, wrong skills, wrong business ideas but big dreams. That amount is enough to filter through the above.
yeah a lot people can't do that. Specifically anyone caring for someone, so like 50% of adult population. A huge proportion of adults are caring for a parent or child.
Its also impossible if you have any health problems, or need to save for retirement or have student loan debt.
Its really only possible if you're young and healthy, so this would filter out probably 80% of adult population
Why not? Lot's of people live off and raise families off of food stamps + medicaid. That's how I was raised. No reason you couldn't also throw building a company in the mix.
You could but it gets much harder that way and the likelihood of you failing goes up significantly. It is more risk averse to the VCs to cut a decent size check which ensures founders are not struggling for basic needs and can actually focus on the startup.
It is a filtering function and it's the wrong filtering function. Like others have said, it filters out anyone with a great idea who is unwilling to put their lives in danger, or more importantly the lives of people dependent on them.
I’d suggest the opposite. One who is used to living off $1k a month for 1-2 years have an upper hand on founders used to a more cushy lifestyle. Or even having no income and almost broke for years like many successful founders I know of.
Just because someone is broke does not mean they don’t have Safety net. It’s easy to make no money when you can always move back home or get support from family. But if you have no safety net (financial family support), then not making money is a really difficult thing to try.
There’s a significant trade-off here – it can result in overvaluing money in comparison to time / effort. If you’ve been scraping by for a while, you train yourself to always pick the cheapest option, which often isn’t the best option. I’ve seen several founders waste time and effort trying to work around shortcomings in cheap / free tools or implementing something themselves when spending an insignificant amount of money would make the problem go away immediately.
It’s not really possible to live in $1k a month as a single adult in the Bay Area unless you are somehow living rent free. Even if you rent a room in a terrible area out in the boonies, the cost of getting to/from the parts of the Bay Area with the tech industry will push you over.
I agree nobody needs a cushy lifestyle when starting a company but as a single adult in the Bay Area you need at least $2k/month after taxes to live. And somehow you need to get someone to rent to you with an income that low. Not everybody is lucky in having a nearby relative they can live with for free.
Performance under pressure can be better at times, but there's diminishing returns. Applying pressure is good, but if the pressure is too great, then you start to get the reverse effect. When the pressure leads to anxiety rather than focus, then you've lost any possible improvement that stress can lead to.
A deadline is useful to help ensure work gets done. If the deadline is set to 3 hours from now, however, and realistically you need 4 or so to get it done, the pressure is going to have the inverse effect. It would likely just demoralize the team.
Depends on what stage of life you're in. Ramen profitable works for a 20-something just out of college. It does not work for a married middle-aged person potentially with kids.
It's a lot harder to start a startup once you get to that stage of life because of this and other reasons.
Those 20 somethings as potential founders was what other investment companies overlooked and partly made YC new and different. That was one of their innovations. Before YC investment companies were always looking at uni professors and execs dropping out of corporations.
Changing this focus -- to focus on older more experienced invidividuals is changing YC imo. Less social justice more hackery/building stuff people might like would be a positive move for YC and the audience. I don't think we're in such a climate to discuss this though.
Is making it easier for a middle-aged person to start a startup something that YC has to care about? There could be a separate organization that focused on that.
It's far easier to live off of ramen when the worst that can happen is that you fall back on your savings, or your family (for a home), or your MBA network (for a job), etc, when your business bottoms out.
This means that it's naturally a filtering function for people who have such safety nets already. It means that there are people who would be putting their lives and the lives of their dependents at risk in order to make the YC gamble.
It might be a filter that "works," but it will inherently be an uneven filter, doing very little to filter founders who already have the means, while effectively barring many potential founders from being able to participate at all, at least not without dire personal consequences.
I'd be willing to bet that a clear majority of the most successful startups from the past 20 years were founded by people who were otherwise independently financially stable.
It's very hard to focus on building a successful business when the cost of failure is potentially life-ruining.
Then don't start one if you can't consume the risk.
I'm not sure what your point is -- that people who have kids should be given special exemption where they make more money from sales and inventment oportunties to compensate for choices they made?
This comment assumes a.) we're talking exclusively about parents and b.) about forces within a person's control. There are a lot of late-teens / early-20 year olds out there who have familial obligations to their parents, siblings, etc.
> Then don't start one if you can't consume the risk.
Corollary: startups can only be started by people in a position to consume [sic] the risk.
Do we, as a society, or even just an economy, really want that?
And the point was not a "special exemption for people with kids". It was that "consuming the risk" when you have no safety net (e.g. move back in with family etc.) is a much bigger issue than if you do.
> It was that "consuming the risk" when you have no safety net (e.g. move back in with family etc.) is a much bigger issue than if you do.
My point is these are the same. One individual has a different risk profile because (s)he made different choices and thats fine. If you have kids -- it will negatively affect your capacity to start a company.
>Corollary: startups can only be started by people in a position to consume [sic] the risk.
>Do we, as a society, or even just an economy, really want that?
That Corollary is fine with me. Startups are inherently risky.
There are many people (the vast majority of people, in fact) who could not deal with risk for reasons entirely unrelated to having kids. A person's risk profile (particularly if they are young) has much more to with their family background than choices they made (or didn't make).
I'd rather not have new ideas for businesses filtered through "can afford zero income for N months".
This all makes sense, but at some point you have to consider that startups are a privilege, not a right. Those that tailor their lives to be able to consume risk make tradeoffs like moving to a remote location, living single, minimizing expenses, forgoing healthcare, choosing to spend less time with friends, not getting that dog you always wanted, not having children, not getting married, not buying a house, etc. Narrowing your life for success takes tremendous sacrifices. It sounds like you want the benefits of having made those sacrifices without incurring any of their costs.
There's nothing wrong with choosing to have a family and raising kids, but that is a choice. No matter what conditions are set, the person who makes the necessary tradeoffs is going to be in a better position to succeed and YC as a business entity can do nothing to level the field for people who are willing to go all-in versus people who prioritize a comfortable home life.
Again, startups are privilege that form out of the security of societal infrastructure and excess of wealth. Nowhere in society is it prescribed that everyone should be able to forego having a job and drain their savings to gamble at a chance at massive wealth. How is it reasonable that we've come to expect this as some sort of entitlement?
The top comment makes a dismissive remark about "rich white men," and YC being against inclusivity and diversity. The natural response to this is that YC is not racially exclusive, but that they exclude based on those who can assume risk. Yes, but white people are rich so they can consume risk and black people are poor, therefore YC is in reality discriminative against blacks. The simplification of this kind of argument and its decontextualization from reality should be self-evident. Unfortunately, it's emblematic of the kind of emotionally reflexive and broadly appealing arguments we see thrown around instead of practicing any form of intellectual sophistication or nuance. It's far easier to make a glib side-remark suggestive of racial privilege. It's even easier when this is politically and socially trendy, even expected, and the individual making the remarks is protected from backlash by the insulation of a particular ideology.
This is not (for me) about having kids+family vs startup.
It's about number of people who can take risk of having zero income for N months. That is such a small group of people, and this narrows the pool of people who might found a startup that could change the world (or part of it). It means that all the ideas for startups are coming from people who have (at least) one thing in common. Maybe it's not the optimal thing to have in common?
ps. I did the startup thing with a wife and a daughter. These days you know it as Amazon.
I didn't state it strongly enough. Startups are for the rich and privileged, by the very nature of their mechanism of success. Lottery tickets, playing blackjack, rolling dice, are things which should only be done with what you have in excess. I don't think it's YC's responsibility to even societal odds. They are downstream from that position and simply consume and profit off those who have more than they need.
YC is a business entity not a non-profit organization dedicated to wealth distribution. You're asking it to do a job outside its core responsibility (profit, survival). If you want to make the argument that YC should up it's funding, that argument has to establish itself as being strongly in the interest of YC, otherwise it doesn't make much sense.
Well then I guess I didn't state it strongly enough: society does worse when the startup process is only accessible by the rich and priviledged.
YC isn't under an obligation to do the best it can for society. But if it wants to do that, or even to approximate it, the filter functions it uses implicitly and explicitly need to be considered carefully. YC has said a variety of things that indicate that it does have some desire to trend in this direction, at least in the past.
It seems like YC has grown large and successful enough that it can shed some monetary value for the sake of greater social benefit. It has zero effect on me if they grant 25k, 50k, 100k, 200k to groups. My argument and position is not that participating companies shouldn't receive more money. That I don't care about at all. My concern is that it's being expressed that YC should be acting in accordance to perceived social justice rather than as what it is and always has been, a startup incubator. The argument is that an amount of money like 25k is equivocal to YC practicing racial exclusivity because it's not enough money to cover the needs, expenses, and risk calculations of a financially and socially impaired person. In that case, what amount of seed money is not considered to fall under the practice of racial exclusivity? I think the accusation is flimsy in the first place, and no defined amount of money would allay those kinds of allegations.
This is about YC as an investor. If you've got a profitable startup in you, they want you to start it. Lowering the risk gets them more founders and makes them more money.
Maybe not life-ruining risk, but YC offers a measly 120k in funding for your entire startup and G/FB/NFLX will pay you 350k per person per year for a senior engineer. Founding and joining startups entails a massive opportunity cost from what you can make at the top paying public companies.
I think the point is that the amount of support does impact the amount of success after. If you offered $1 dollar of support, you'd have fewer % of startups succeed. If you offered a million dollars, you'd have more succeed.
I think it is worth pointing out that the lower levels of support mean there will be fewer successful startups, and those startups will be founded and started by people that have a safety net of some kind. If the goal is efficiency of investment, this is fine, if there are other goals, it's worth noting how this policy impacts the other goals.
It's the right idea but the wrong tool. Debt is actually the enemy of the founder/entrepreneur IMO...but building equity in yourself through moonlighting, side hustle, etc - is a better pathway. This is known as hard work = 60-80 hrs/week combined type of stuff.
Debt will creep up and crush you eventually, do not go into debt to "fund" your startup.
how the hell do you post this and then also another comment that says nobody should pay their developers? which is it? don't go into debt, or don't get paid?!
It's helpful, I have spoken to maybe 5 companies of the current batch who were introduced through the YC network and are working on problems that would help us succeed.
The idea that check sizes should be small so people should be forced into dire financial situations is a terrible one, and one that would absolutely hurt diversity. You're going to end up with a bunch of rich white dudes as founders (because very, very obviously the other way that people can afford to take smaller checks is if they have a lot of money in the bank).
The smaller class size issue is probably fair, but reducing check sizes as a filtering method will absolutely filter out socioeconomically disadvantaged people. Just a terrible suggestion from somebody who I would wager heavily is not unsure of where his next meal is coming from.
Yeah I noped out of this as soon as I saw it. The guy is suggesting investing in startup founders but not giving them enough to live while they get that company off the ground. What is the point of that? Completely self-defeating.
It is not YC’s job to support the company. That is the founders job. I’d suggest money supporting the company at seed diverts from a focus on monetary fit asap. $25k is enough to scrap by for enough months which should be the initial goal
The problem is there are many brilliant people that can't just scrap by - with a mortgage and family. But I respect the VC's right to choose the kind of people they sponsor.
Yeah, the idea of creating an environment that only favors young, privileged, unattached folks has always been pretty off-putting for me.
Larger checks certainly attract the 'free sabbatical' folks that the author seems to dislike so much, but it also enables entire classes of potential founders to have access to capital that enables them to focus on their business rather than their kids' stomachs.
It's why we've had a glut of startups doing lifestyle products that appeal to mid/late 20's bros with lots of disposable income. These... haven't been great startups as a generalization.
Counterpoint. As a father of a baby, I have significantly less energy and time for work. With starting a company you tend to have to plow a ton of hours and energy into the endeavor, especially if you want to move at bottleneck speed. With the baby there are many weeks where I have a difficulty working a mere 40 hours.
That being said, I have significantly more insight (due to experience) than I did when I was more free and willing to work 60+ hours a week and was willing to live off of 20k a year.
As a father of a 4 year old I don't think it is my job (or yours) to vet who gets the help they need when they decide they need it. You may not have felt you had the time and ability to commit, but why should you be able to speak for anyone but yourself?
But that's the thing -- most successful businesses (as opposed to youthful adventures that paint one as 'innovative' on a resume) are started by older founders who have a depth of experience in their field. As parent of a 3-yr old, babyhood goes fast. You'll be sleeping & able to put in extra hours, if you wish, at some point. You'll also notice that your patience for bullshit has decreased, your patience with actual important shit has increased, and by the time the kids in their teens you might be ready to be a founder who doesn't do the hustle-grind-performative-dance and actually... creates a business.
Yep - that's life. It's called 'the choices we make close doors'. Responsibilities we take on, have repercussions. Founders with such obligations can work at home after their job like every other person starting a small business that is not tech. That way they have infinite runaway, and personal life stress, but not 'monetary stress'.
Yes. They invest seed money. They help you turn an idea into a series A. Maybe it has lost it's soul because the round structures are so much looser, or the greater availability of angel money.
Seed money used to be a godsend because you had a good idea that wasn't at a scale enough to interest traditional VC and you didn't know an angel. YC was particularly great because it had the emphasis on the network and the larger number of investments allowed it to distribute risk across the class.
They purpose was not to build a company or make a good living, it allowed you to create a company you wouldn't have been able to, otherwise. I agree with the gp post, the goal is not to fund a sustainable company, it's to get one off the ground.
No, it just diverts focus from building a successful company to figuring out how to eat.
Forcing entrepreneurs to risk devastating personal bankruptcy just isn’t kosher, and there’s zero evidence that it creates healthy companies. It just encourages founders to take even more risks, which aren’t always ethical (i.e. Instacart’s predatory pricing and tipping model).
While this strikes me as possibly true, maybe even probably true, I would prefer to see actual simple data about this. Sure it would be hard to get but here's the schema I imagine would be needed.
Founder ID,
Founder bank account balance average during company's first year,
Founder health metrics array [acute visits to hospital or clinic for diet/mental health issues],
Outcome of company
---
If we notice that founders with low bank balances, lots of health events in their life, and unsuccessful business outcomes are popping up in the data, and then conversely founders with 100k in their personal bank on day 1 are never visiting the hospital and their companies are doing fine, then I think we could call check size a definitive contributing factor. This would fly in the face of "ramen profitability" as a virtue.
EDIT: and i think there are enougg startups out there (40,000 probably??? ask crunchbase) to have a meaningful sample size
This is absolutely terrible advice. There are a few professional services that can have a dramatic impact on the early success of a startup. You need the best PR firm you can get to return your calls. That ain't cheap, but it has a rather huge impact if used properly.
It's not about "who's job it is", it's about supply and demand.
The founder could probably get a 300k salary at Google or a six-figure stipend with another investor. If Y-Combinator wants to compete they have to provide something that outweighs that.
How is it YC's problem? The founder is choosing to start a company and asking YC for money. Clearly they're not short of startups on the supply side of their equation.
You're not thinking about it the right way. It doesn't matter if they have "enough" applicants. They're trying to fill the positions with the best candidates out there - who they will just have to compete for. The more barriers they put up, the shittier the candidates they will get.
Why would Y comb need to compete with someone who is considering an offer to G? In that case, the founder would leave for the better deal anyways - so it's best to leave before it gets REALLY hard.
Disagree. If someone's choice either is to work for G, or start the company, it is the founders risk to take and give up that job for the outsized risk and return of starting up. It is not YC's need to compensate a founder for their alternative.
If you think about these things in terms of "should" and "who's responsibility" you will never understand how it works.
What are the founder's other alternatives? What are there other early stage & incubation options? YC simply does have to compete with that.
I mean, look. Take your idea to the extreme - why do they pay a stipend at all? Why not force the founders to sleep in tubes above the office/outside on the street and supply just enough soylent, huel & low-dosage amphetamines to keep their brain working?
I must be misunderstanding you; I read that as you stopped reading the entire thread because there was a single point you disagree with. Is that what you mean?
Suppose the first slide of my 10 minute sales deck described building a house out of literal waffles, and letting customers eat those waffles. Would you actually pay attention to the other 9 minutes?
Overlooking the fact that if I attempted such a thing it would be amusing as hell. Imagine somebody taking that idea very seriously.
There's a difference between "sells waffles" and "constructions a house using waffles as the building material", and I'm reasonably sure the second one doesn't exist.
I feel like the point is "you never know when an apparently crazy idea will turn into something reasonable, so you should always stick with someone until the end of their pitch and/or point."
Admittedly, I'm not sure that's universally true (we all have a limited amount of time, and it's reasonable to focus that time in places where it is going to give us the most benefit), but I'm pretty sure I see where the commenter is coming from.
Waffle House would probably get great mileage with a publicity stunt building a house made of waffles. Hearken back to Hansel and Gretel, use it to host a waffle-eating contest, donate excess pastries to charity. Could really revitalize the brand.
Y'all are missing the truly horrible part of my idea (though Hansel & Gretel is about the right idea). After the house is built, the customers are intended to eat the house itself. I didn't flesh out the whole idea in my comment, but they should be inside the house while eating it. If it's big enough to warrant the name "house" (not "shack" nor "misshapen pile") then it's big enough for its inevitable collapse to endanger the customers.
Responding further upthread: this is an illustration of a "time waster." They exist on both sides (investors / founders, salespeople / customers, etc) and recognizing them is an important skill. Time is your most valuable resource. Use it wisely.
Yeah people who use this phrase "noped out of it" usually have little tolerance for things they disagree with and won't continue diving deeper for nuance or any redeeming thoughts present in the article (which may or may not be there)
I get that awkwardly (and disingenuously) mocking strangers on the internet for perceived hypocrisy is the new hotness, but why would anyone keep reading an article where the author IMMEDIATELY makes it clear he doesn't understand human beings, economics or has a base level of empathy?
Yes, I think this single point is so moronic that it doesn't warrant entertaining anything further. Saying that a founder should go into personal debt, and if they don't they don't "believe" in their business enough, is mind-boggling.
He does list having both too little money and too much money.
I agree, maybe the $25k made sense back before life in California was more expensive than living in Manhattan, and it should be enough to cover more living expenses.
Maybe alternatively, YC could provide less money, but basic housing and needs so founders minimals could be met, while also providing them a collaborative environment?
I think the idea is to not be an "attractive nuisance" to get strung along by ideas which look good but don't work out. There is some theoretical strategic merit but it doesn't seem to synergize. It seems at odds with the Venture Capital model in the first place of rushing growth over profits and letting the wins make up for losses.
Especially if he has a larger pool of capital than when he started (which he should unless he is doing it wrong), smaller checks /and/ wanting more personal attention and less canidates. That just cannot scale up to larger ammounts of money by definition, even if it would yield a better rate of return on investment in dollars. Diversification is another option for fund self-perpetuation but it will likely not have the same yields and cause total portfolio growth to decline with size.
As for motivations I guess either trying to eat his cake and have it too.
The solution may be wrong, but the idea is right. If people can just casually come into YC with no particular consequences for failure, that greatly reduced drive to succeed. "I'll just go back to FAMGAN after" or "I'll be able to transition from MBA grad + YC to something high paying" I don't think is great for success drive.
you can be motivated without going hungry. not being able to afford basic things is extremely stressful and takes time away from doing whatever YC wants them to do - that time is spent making sure that food is on the table. exactly the opposite of what you intend.
For some founders & entrepreneurs, it forces them to work smarter - not necessarily harder - and that's the goal, to figure out what isn't working right and change it to reduce/eliminate the anxiety caused by an under-performing startup.
Yes - but this is what every company does at founding. Get really lean, survive on whatever it can. Founders should expect company building to be a nervous and anxiety inducing endeavor for 7 years. It is incredibly painful - and not for those who see it closer to a paid sabbatical
If that logic were true, then there would be far fewer companies built by founders who already have a successful exit. The success of a company is far more likely to be correlated by the founders not having to put their own wellbeing on the line than the other way around.
I think, as a point of failure, that most would agree that a system that allows a few people a 'free sabbatical' but also provides security for those founders who would not succeed without it, but who will with it is a good thing.
You have to work a second full-time job that isn't the startup.
Probably during the day, so you can't do daytime things with your startup.
You have to borrow on credit cards to pay the rent, bills and food.
You get evicted if you don't.
You don't eat much so you can't think as clearly.
You lose your computer when the bailiffs come to collect.
You have to have a borrowing facility, and it has to not be declined all the time.
If you hit a limit, you have to pause the startup and work elsewhere, probably for months.
You can't go personally bankrupt otherwise your startup will be liquidated as well.
You literally don't have as much time, energy and mental capacity to put into the startup.
Saying that every company does this at founding is false. For those with better savings, better support buffers, they do not have the same amount of the above problems. In particular they can eat and have somewhere reliable to sleep.
For those without, they literally cannot put as much time and cognition into the startup.
Agree that the lower funding amount doesn't make sense and will probably further disadvantage minority and other founders. However, the problem identified seems real where the culture seems to be shifting from attracting relentless company builders to those seeking another checkbox on their Linkedin profile.
This is also why other accelerators are emerging that aim to capture the YC essence of old (OnDeck & Jeff Morriss Jr.'s new initiative)
They are doubling down on what works. I'd be very interested to learn if Ycombinator has diversity and inclusion as a value and if they discussed what smaller checks might mean on D&I.
It's interesting how the best incubator found that smaller checks out of the gate is beneficial, but you can raise a 30-50 million series B and founders can take a few million off the table, which is also good, so they can go long.
It also doesn't make any sense from an investment perspective. Reddit would have been one of the most successful YC companies of all time, except for that they basically had to shut down because they couldn't raise money. This happened to lots of early YC companies that could have otherwise been successful.
Had Reddit not sold for pennies on the dollar to Conde Nast, that alone would have probably paid for the extra 100k for every YC startup since.
Great point. People think a willingness to take extreme financial risks is somehow a useful personality trait when it comes to entrepreneurship because of selection bias. People who take that risk and make it tell that story. People who take that risk and don't make it aren't heard from. People who don't take that risk also aren't heard from.
There are lots of people with great ideas and the ability to execute on them who also have a deep sense of financial responsibility that precludes them from going 50k into credit card debt.
> People who take that risk and don't make it aren't heard from
when you do, it's often quite heartbreaking. have read a few online, and knew one personally - kept going in to further debt, ended up getting divorced and creating a huge rift in his family, etc.
It's all just legacy from the insane power dynamic that comes from a relatively broke entrepreneur and an investor with money. The only thing that seems to stem true about the myth about "founders should be paid too much" is that when you suddenly have more resources than you ever had, you tend to be exposed to new distractions.
And often, getting credit card debt is not a material risk, but a minor embarrassment when they ask their family to bail them out and/or move in the guest house for a few months, rent-free. When poorer folk take the "same" risk, they can be ruined for decades.
Here here. When you empty your 401k to build your business, and don't contribute to it for 15 years while you are building, as you simply don't have the cash, and cannot afford it ...
Yeah. The implicit assumptions of the "live in poverty" of the OP, are wrong.
I'm 54, and I was financially wiped out at 51. I will not ever recover from this. No family wealth to fall back on. I do not believe I will ever be able to retire. And noting that there is a bit of ageism in this space, makes the threat of potential long term unemployment even worse for folks like me.
Sort of an inverse Ozymandias. Gaze upon my flaming cratered company, and beware. Here be demons. That you cannot control.
Not all of it. I blog here[1]. The post where I talked about the end is here[2]. Note the 'laws' I quote at the end of the post. My first post is here[3]. There I talk about the HPC market, accelerators, and some of our plans. We were working on board level inexpensive accelerators before these were a thing. We gave up trying to get funding for this in 2006.
I did say, you have to be at the right place, at the right time. And be lucky. We got 2 of 3. Luck eluded us.
Oh man, I remember reading your blog when I was in grad school (mid-2000s) doing molecular simulations on HPC systems (and not really enjoying the science aspect, but I did like working on the tools), thinking that you were a great example of being able to bootstrap a business in the HPC space. Sad to hear it didn't work out.
> Or when you go visit customers, they love your product, the benchmark results are mind blowing … and then the CIO/CFO kills the deal because, you know … you are too small.
We've been in similar situations several times. We're serving a niche, but this niche is a core piece of our customers business. Without software like ours, their whole operation stops.
Anyway, we'd have demos. Department heads were on fire, wondering if we could install same day we had demo, all smiles, everything looked great. And then we lost because someone higher up decided we were "too small". We're small, but we're pretty much the best in our niche and we have had very solid financials for decades.
Those we lost went with bigger, supposedly "safer" competitors and had some very sub-par years with them before they had to pay their way out of those contracts and come back to us.
We had a customer that POCed on our systems, then bought some crap from HP + one of the SSD card vendors in 2013. They then called us up in 2014 and asked to pay us to help them achieve the performance they saw on our system, on their 5x as expensive "low risk" HP + SSD card system.
My response was simple. No.
I invited them to throw away the crap they bought and buy the right thing from us, but that was politically untenable. Turns out spending multiple millions of dollars for crappy half baked "solutions" versus a lower sum of money for something that actually worked, would likely get some people fired.
The world isn't fair, and sometimes not even sane. The people who made these decisions, despite being disastrous ones, were promoted. Enough of these built up that we couldn't survive.
> ...I'm 54, and I was financially wiped out at 51. I will not ever recover from this....
You need a fighting spirit to achieve great things. Many people have overcome far greater problems.
Never give up you are only one transaction away from financial success. Good luck
(really not sure why this was down voted ... it is a good comment)
Thanks. I'm aware of others struggles. I figure that my story could be a cautionary tale for some, and others may take lessons from it.
When I say in other fora, never, ever take debt financing of anything if you can avoid it, this is coming from personal agonizing experience.
If I go back into the startup world, I'm going with a very clear perception of what is what. No rose colored glasses. No "if you build a better mousetrap" mentality. I know how things can go horribly wrong. I know where the traps and mines are.
> When poorer folk take the "same" risk, they can be ruined for decades.
In the vast majority of circumstances that's an extreme exaggeration.
Speaking from past personal experience with poverty (ie being "poorer folk"), you can default on every possible type of debt - wait about seven years (can vary slightly by state, but it's typically around that), and you're free from it. My credit rating went from 800, to 480, back to 760 in that process over eight years, without requiring any special effort. I defaulted on numerous credit cards, I defaulted on medical debt; it all vanished, one after another as time ticked by, and my credit rating jumped as each item fell off. Every negative mark falls off your credit report after N years.
It's very unpleasant to have your credit rating wrecked for years. To say that it will ruin you for decades, that's reaching into the land of absurdity. I'm sure it happens, some people get stuck in a vicious cycle for ... decades, however it's not rocket science to properly utilize the negative mark credit cycling to your advantage and reboot. It doesn't take more than an hour or two of reading to self-educate at zero cost about how the system works.
If you're actually poor you can't even get a credit card. Because of a lack of credit history the only card I could get at one point was a $300 credit card where I had to send in $300 as a deposit to the bank. Let me just pay a couple of employees a somewhat livable wage on that...
I really hate this condescending "if you really wanted it the money shouldn't matter" coming from millionaires.
True statements, fact of the matter is, this is not a fair world in which we live in. We are all created equal, but it doesn't mean that we are all given the same privilege.
As one who bootstrapped, took that risk, and lost ... everything ... I've been talking passively about this for a while.
I speak with startups who have a product that is poorly differentiated, me-too like, that think they are going to take over the world. The reality, the vicious Darwinian reality, is that you and your team have to bust your collective rear-ends. And get lucky.
Really, I hate to deflate many many bubbles, but being at the right place at the right time is often the deciding factor for success or failure. IMO moreso than the product, the product market fit, etc. You have to be seen as the sole provider of something the people deem important. Even if this isn't really true. You need influencers to drive carefully staged hype, and then you need to be able to convert small victories into evidence the hype is real.
This is very ... very hard for bootstrapped companies, operating on shoestring budgets at best.
The greatest lie ever told to entrepreneurs like me is "build a better mousetrap and the world will beat a path to your door." There is soooo much more than that. And the cost to you, financially, mentally, physically, will be huge. Not can be. Will be.
If you are lucky, you will have a reasonable exit. Most of the time that doesn't happen.
I understand what you say and I assume you have more experience than me in this field.
But even if you fail, that's experience too. If you have a dream, I strongly encourage you to pursue it. It is usually more painful to look back in hindsight and one day wake up to a reality where you never even tried.
To whoever is reading this: Try. Then try again. Then try another. And don't forget to look after yourself and your loved ones.
There is a saying in karate. Fall down 7 times. Get up 8.
But also, definitely, make sure you are not going to be financially destroyed by your actions. Take time to be with your family. Remain focused upon your life, and life goals.
Do I regret my time building some of the insanest things in market (at the time)? No.
But if you're bootstrapping you can just make money doing consulting for a few months each year. Between having a job or having a VC-backed company, bootstrapping seems like arguably the lowest risk option of the three.
I did that at the beginning. Until I had enough cash to build and market product. But it was barely enough cash.
Then big orders started hitting.
Before I knew it, we were at $3MM/y sales, growing about 33% yoy.
And then we crashed. We needed more capital. Those who wanted to put money in via convertible notes demanded terms that would have killed the company's ability to raise capital going forward. Our lawyers told us that it appeared that the large company wanted to buy us on the cheap, and these terms enabled that.
I've replayed that in my head many times. It was a crappy deal, and they weren't willing to budge. But I would have had a sort-of-exit had they exercised one of the convertible clauses, to basically demand payment in full if we couldn't raise more money.
If someone tells you corporate VC is less slimy than the regular version, don't believe them. Different type of slimy, but still slimy.
I should also point out that this is a common misconception for hardware/solution companies. Very hard to make enough money to fund R&D with consulting. I did that for the first 4 years of the company.
Put bluntly, that model, the consulting bit, is not for the faint of heart. It is just as hard, as in you absolutely have to hustle hard this whole time, to get business. Leaving you with precious little time to develop your ideas.
I've lived it. I don't recommend it, without a partner with a strong income. My wife was a stay-at-home mom for part of this time, and worked at a school as a teacher. Not sufficient income to live off of for 1 person in a house with a mortgage. Nevermind a family.
Right, it doesn't really work if you need to spend a lot of time selling consulting. It works better if you write a bestselling book at some point so that you're recognized as the #1 person in your field, and then you just have a waitlist of clients willing to pay $250 an hour or whatever. That way you can just consult a few months a year and still support a family, and then spend the rest of the year working full time on your startup.
> I speak with startups who have a product that is poorly differentiated, me-too like, that think they are going to take over the world. The reality, the vicious Darwinian reality, is that you and your team have to bust your collective rear-ends. And get lucky.
Even being Early (or in our case the first to do something) doesn't always work, we had to give our services away for free, or at a significant loss when operating costs were accounted for, because we were using technology that was not really understood (much less by our demographic) and had not been attempted in the past to facilitate or service the Industry we chose. So we had to engage our future paying customers in a way that they relied on us for something they found useful and pay for it in the future, so I boot-strapped and fell back on my other skill-sets, that ultimately took time from further development that could have otherwise yielded a better product in less time, but again... uncharted territory means you are make the Map as you go along, with all the mistakes and hidden landmines along the way.
> This is very ... very hard for bootstrapped companies, operating on shoestring budgets at best.
I'd say Bootstrapping is a Pyrrhic Victory, because on a financial level, had I decided to stay on the sidelines and just DCA while trimming the fat from my budget working a normal day job, as so many now in this space did, I'd have an ROI way better than my Startup, and most ever created in that space for that matter, ever was. They thought they were geniuses, when in reality they were just 'free-riders' that directly benefited from the work done by risk takers and people who actually did the heavy lifting to get the project to where it was and currently is. But ultimately looking at our holdings and net-worth on paper wasn't the point for some of us, it was to bring our vision into existence and prove a technology could solve far more problems than even it's core developers and even the greater community at large could ever think it could and bring about a desirable change to the Enviorment. And for that it takes a lot of sacrifice, which ultimately made me understand that 'disruption isn't always profitable' is a very true statement in a financial sense, but can be very profitable if you're goals are to do more than that. It's just how you quantify it.
> And the cost to you, financially, mentally, physically, will be huge. Not can be. Will be.
Agreed. Still dealing with that to this day. Just my Physical Therapy costs alone have been something I didn't anticipate to be so expensive in every sense of the word.
i had thought myself reasonably well informed on the Reddit story but this is surprising. you're saying if they had their 7% of the ~1-2b it wouldve paid for every YC startup since? but its not liquid...
It’s also, AFAIK, never turned a profit. So unless they sold their stake to someone willing to gamble further, they wouldn’t have anything to show for the increased investment.
> Reddit would have been one of the most successful YC companies of all time, except for that they basically had to shut down because they couldn't raise money.
I can't give details, but I can tell you that the $80K would not have made a difference. What would have made a difference was a small seed of a few million, which YC is pretty good at getting for companies these days.
Yeah I mean in that specific example, it only works if you assume that Reddit would have had an extra few months to get more traction before raising the one round that they raised.
We have a silicon valley success story in our family. His parents were telling me how he built everything up out of nothing, clearly unaware of their own contribution.
He could pour all his money into his start-up because if he'd lost every dime he could have moved back in with them. He'd have his own bedroom, bathroom, and a fresh-cooked meal every night. He could have stayed with them as long has he wanted. Very few people have that kind of soft-landing.
I don't know think this is as clear. Can you link me to some researcher where a stronger social net leads to better entrepreneur outcomes?
Because looking at country level data, USA, with it's terribly scary and risky path of entrepreneurship completely outperforms welfare state countries like the Nordics.
You could say the difference is from capital markets, but still even the difference in startups that are not successes is humongous.
Do you have statistics demonstrating that, per capita, the USA outperforms Nordic countries on entrepreneurship?
I don't either way. But I have run across the counterintuitive fact that Nordic countries outperform the USA on how many people per capita are worth at least $30 million. And at least some of them got there through entrepreneurship.
Can't ignore old money. Nordics (most obviously Sweden and Denmark), Baltics (Lithuania) and many CEE countries (Poland) have hundreds of old aristocratic families with family trees two to four times as old as the US.
> with it's terribly scary and risky path of entrepreneurship completely outperforms welfare state countries like the Nordics
or maybe it's worse than you suggest: taking a risk on a startup is the only opportunity to earn any income, where "welfare state countries" take basic income out of the picture. And, according to which mesurement are these welfare states being outperformed? and is it relevant to the humans involved?
It isn't the only opportunity in the US at least (Artisinal miners, tree poachers, dump pickers, and street vendors certainly certainly are an example and can be found), but that it tends to pay the most. In addition to some social baggage that the individual may have had. Drop out (small) business owner who has issues with authority other than their own is a niche stereotype.
Apparently according to some traveler's accounts Ukraine has a lot of "side hustles" due to lower wages of day jobs and lack of consolidation.
I suspect it may be both and a result of culture shaping actions shaping culture. Essentially a more risk adverse culture is more likely to support a strong safety net and a culture with a strong safety net is in itself incentivised to not encourage have people take stupid risks even if the nominal purpose is to allow those risks. (That sort of left hand vs right hand thing crops up every organization large enough with distinct duties.)
Then there is the whole Maslow hierarchy of needs aspect where they would ironically need to be better off before considering anything collective. Revolutions have been lead by disgruntled college students far more often than the desperately poor.
I don't know of any research, but personally know people who looked for ways to start their company while hedging various risks[1], couldn't find a way, and never tried.
I started a company after the first dot.com bust, because I had almost nothing to lose. But I also had no dependents to hurt. So it can cut both ways, but I don't think many folks take the path I did by choice.
[1] One had a spouse with a chronic medical condition, losing insurance was not an option; one had a large student loan debt and didn't want to risk defaulting. I've heard other stories.
There are cultural factors as well that make entrepreneurs valued and respected in the USA in ways they aren't in other places, so the right comparison doesn't seem to be across countries (where non-financial cultural factors may overshadow all else) but within a country in which the government-supplied safety net is severely lacking. In the USA, those best-suited to pursue entrepreneurship are those for whom the personal safety net is strong, despite the overall national safety net being weak.
> looking at country level data, USA, with it's terribly scary and risky path of entrepreneurship completely outperforms welfare state countries like the Nordics.
False.
>> The U.S. likes to think of itself as the world capital of start-ups. But America doesn't lead the world in actually starting new businesses. By various measures, it's behind Canada, Denmark, and Norway.
It's easy to find many countries with much worse social nets than the USA, but with worse entrepreneurial outcomes. The social net versus entrepreneurial outcome function might not be a monotonically increasing one.
Technically that constraint only applies to rational actors. There are plenty of reckless actors who risk it all on a longshot without anything to fall back on and enough survivor bias to make others think it is a good idea in general.
Within your (and my) peer group it is, sure. But even you surely know a bunch of folks who don't have an easy fallback like that. For anyone from a poorer background, and especially those who have to move (or, yikes, immigrate) somewhere else to found a startup, it's very much not.
It's the privilege argument that I'm sure you're sick of arguing about. The world is set up well for perfectly ordinary middle class educated kids with working (or wealthy) parents. That's not everyone.
<shrug> I have a supportive, middle class family and if I went broke I'd be sleeping on an air mattress in front of the TV and trying to figure out how soon I could start contributing to the monthly expenses. It enough to keep me from wanting to take any large risks.
I also didn't mention location, but my relative's parents are withing spitting distance of the valley. Someone who has to move from Mountain View to Omaha is going to find it really hard to get back into the thick of things.
The most underrated type of privilege is location privilege. If you grow up far away from a major city, you have to invest heavily to break-in. One false move and everything you worked to establish gets wiped away.
People growing up in Omaha are at a severe disadvantage vs people who grow up in Mountainview.
People growing up in Alliance, Nebraska, are at a severe disadvantage vs Omaha. Almost everyone in Nebraska lives within 50 miles of Omaha (1.3M of 1.9M people).
And if your parents are in Mountain View or nearby, you can stay with them a few extra years after you get your first job to save money for a downpayment on your own house.
A person without that option may spend a decade paying rent and trying desperately to save up enough for a down payment.
I distinctly remember moving to Silicon Valley as a developer from out of country. Realizing that the standard of living bump due to my 2x Salary, was actually a standard of living drop.
Then looking around at the company, seeing the IT support guy with the brand new Porsche. Wondering if he 'struck it rich' with a previous .com and finding out it's just because he lives at home still.
A room and a meal indefinitely with absolutely no pressure to leave or contribute? With the freedom to find the next job or opportunity that fits, not just desperately throw out their resume and accept the first offer? Not so much.
What’s your estimate of the percent of the population that could move in with their parents? And then additionally what’s your estimate of the percent of the population that can program that this is true for?
40% of young adults in the USA do live with family, and it’s a good bet that a large fraction of the rest could. It’s certainly not universal by any means, but it’s also far from some great rarity.
I’ll grant that the original comment talked of having “his own bathroom” and that is reasonably rare, but it’s the least important part of the package compared to a room and shared meals.
I think the comment they're responding to and others are grasping at straws and trying to find excuses.
Like I said in another comment even in the poorer European countries it's possible to move back with one's parents. And in fact people do live with their parents into their twenties.
The parent said "very few people have that kind of soft landing."
The fact is, having parents with a place you can crash at is perfectly normal. If your parents weren't complete degenerates or very unlucky, they have a couch you can sleep on. Anybody who's startup founder material can at that point find themselves a job.
A. All upper class and some (most?) middle class people can afford to support their children indefinitely. Less wealthy individuals, the millions and millions of people who live paycheque to paycheque just to get by and whose retirement plan is to work until their last days, cannot.
For so many families, the only way they can afford to support their children even in their childhood is government aid, which gets cut off when the child reaches 18.
B. For immigrants, moving back to one's parents is a much more difficult process. You may have to move to another continent. You have to give up on trying to find a job or settle down in the US. Moving back to the US afterwards would not be exactly easy either, because being away from the US for extended periods of time may mean losing your green card.
Multigenerational living is pretty common in many parts of the world - many places children dont (or cant) move out of their parents house until they are married, and later in life their parents move in with them. There's a difference between supporting a child or parent with a roof and a meal and supporting a child with a NYC apartment and a trust fund.
It is of course a spectrum between no support and supporting a lavish lifestyle. Some parents may be able to let their child sleep on their couch, but cannot afford to rent a bigger home with an extra bedroom. Some parents may be able to afford the groceries, but (after the age of 21) not the health insurance for their child. Some parents may be able to support their child, but with significant financial difficulties that would put a strain on family finances, make their retirement plans nonviable, or pushes back their retirement date significantly; so the child would not dare take financial risks because while they would not go homeless, they will be putting an unreasonable burden on their parents, ...
So yes, if the family is reasonably well-off (owns their home, has savings and good income, have a margin of safety in their finances) you can depend on them as your safety net. If they are not, you cannot or cannot in good conscience.
No parent wants to support their adult child indefinitely. The whole point of raising a child is to raise them to be self sufficient as adults. There's quite a difference between a parent offering their child a place to stay while they get back on their feet and supporting them "indefinitely".
For children of immigrants, B is absolutely not a problem, in general (of course there are exceptions). In my experience there is far less stigma attached with living with your parents well into adulthood for children of immigrants than natives. It's even culturally common to remain with your parents until you're married. Of course first generation immigrants have it more difficult. That is part of the inherent risk of moving to a different country.
First generation immigrants were my point in B. Please note that this includes many of your university classmates and current colleagues. They may even come from well-off families who can support them, but they would have to move back to their country of origin and because of the way US immigration works, that would most probably be a one-way trip.
First gen immigrants have it more difficult. No doubt, but at the same time, they start businesses more often than their own children and multi-generation natives do in the US: https://www.forbes.com/sites/elainepofeldt/2013/06/26/first-... . But yes, many first gen immigrants are from relatively well off families in their respective countries. Chances are the immigration policies in the US are more favorable than whatever country they emigrated from. It's perfectly fine that we expect people who come here to work and support themselves otherwise our social programs would get burdened with taking care of anyone who could hop a flight.
I moved around a lot as a child, and in my admittedly anecdotal experience... this is not the case for most people in urban / suburban areas.
In most places in the United States, extra space is a premium that requires consistent stable work at or above the median household income in a single field of work over extended periods of time.
From this alone we can rule out those who work minimum wage jobs, most of those who do not have an established field other than "Service Industry" and many of those who specialize in an "unskilled" trade, e.g. forklift operators.
Those who do manage to purchase a home with the requisite space often don't live in posh neighbourhoods with comfortable amenities, and generally are not swimming in excess income.
Additionally modern society, with its' inundation of appealing marketing campaigns and easy credit, has rendered even your "middle class" families cash-poor, stretching their budgets thinner and thinner with each additional monthly payment.
When you culminate all of these things together with a fundamental breakdown in nuclear families and rising divorce rates, "going home after a rough patch" is not an outcome most are able to, much less willing to, consider.
If the family you'd fall back on lives in Section 8 housing and you don't meet several criteria and become an approved occupant, you can't go back to live with them. If you stay with them, they will lose their housing. This applies to about 1.2 million Americans. The VA and HUD also have rental assistance programs, each of which also has rules about who can live in the rental. Altogether, programs like this serve about 5.2 million Americans. Given that we're predominantly talking about adult children, a larger group is touched by these rules.
Uh, most parents would take their kids back in the event of financial disaster. That's not even rare. Many folks live with their parents until late 20s / early 30s these days.
This does make the assumption that the parents are doing well enough to be able to support their adult children. There are some situations where the parents need the support of adult children, instead of the other way around.
Sleep in the couch or basement, food costs very little. That's still a lot of support, means that no matter what you have a place to stay and regroup. Not all parents can do that but most could
That assumption holds for most of the population in European countries, even the poorest ones. In fact it's common for young people to live with their parents a long time.
One has to be either dirt poor or very unlucky not to he able to move back with relatives. This sound like an excuse.
The median wealth of African American households in the U.S. is $35k, vs. $150k for white households.
Yes - most people might be able to move back in with relatives, but among those people who can't, minorities are almost certainly going to be overrepresented, which was OP's point.
What it got to do with household income? there are whole countries where the average income is lower than that and people stay with their parents. If you lived with your parents before why wouldn't you be able to live again after some financial disaster? If anything it is the opposite, as an adult you can contribute to the household income.
Tired of those black people excuses, the reason they are not represented is not because they can't go back to their parents, it is the same reason they are not also regularly represented in tech companies as employees, because they never bothered to learn anything technical. Unlike slightly less black Indians with lower median household wealth to start with and much less chances to hook with someone in Tinder in the US, which is the real pure racism nobody talks about.
My personal stance towards high-risk startups changed dramatically a few years ago when I took on a big chunk of responsibility for my parents' retirement. My "nest egg" that could be absorbed in a pre-revenue startup has more or less been transformed into the house they've retired into. Having my first kid a couple of years later only compounded the effect. (They're also mutually-dependent, since my parents provide essential childcare while schools and daycare are shut down due to COVID. My parents not having to work right now is literally a matter of life and death given their age and medical histories.)
Regardless, "smart, sustainable work that will support my family" doesn't really map to the intentionally-accelerated make-or-break pace of most incubators and funds. Nor do those programs naturally align with founders who want to create a solid long-term business working from sound operating fundamentals (positive cashflow, measured and even conservative hiring, working to the team's strengths) instead of chasing the next exploding market and "faking it until you make it".
Coincidentally those safer, longer-term plays are also the ones most likely to actually build generational wealth and financial independence for people starting without either. The lack of a safety net (or the presence of one that you're thoroughly entangled in for others' sake) makes all-or-nothing, giant bets far less tenable when you aren't effectively free from having to worry about mundane details like housing or medical costs. That in turn discourages if not de facto shuts out both the least privileged and those with meaningful resources but too much to lose if it all goes wrong.
can't really do that if your parents share an 800 square foot public housing apartment with your sister and her kids. or if they're in prison, or dead, or abusive, or they threw you out for not conforming to their religious choices, or disowned you for not being cisgender and heterosexual, or or or
Of course not, and that might be the case for 10-20% of the population. But you don't have to be some privileged trust fund kid for your parents to give you a place to stay in the event of financial hardship. That's not rare and let's hope that never becomes rare because I'd shudder a world where parents by and large would not do this for their kids.
How is 10%-20% not a problem? Not to mention tens of percentages above that where staying with one's parents is incredibly difficult and/or uncomfortable.
This is the right time to shudder, much as I'm happy that you're in a situation where it seems hard to imagine (or empathize with).
Here's the reason I think it would be a problem for an imaginary, abstract incubator (because I don't think YCombinator actually does have this) to have a rule "To apply here you need to have alive parents, who like you, with a spare bedroom".
I think that the 10-20% group you are talking about is likely to have more than its share of not-white people. Maybe it's a small divergence, if we imagine the population of the US to be 50% white and 50% not white, maybe the group of people who can't go back and crash with their parents is 49% white and 51% not white.
OK, so imagine there's a different imaginary incubator with a rule that every applicant has to roll a 100 sided die. If they're white they have to roll a 50 or higher to get in, and if they're not white they have to roll a 51 or higher.
I wouldn't like the "roll a die" rule, I think a lot of people probably wouldn't, but it's ultimately not a heck of a lot different than the "crash with your parents" rule. You are still more likely to fall afoul of both rules if you are not white- or (if you change the dice game) gay, or poor, or marginalized in other ways.
(yes the probabilities are different, not the point)
> But you don't have to be some privileged trust fund kid for your parents to give you a place to stay in the event of financial hardship. That's not rare
I think the point is that it is rare for people who don't have this fallback option to put all their time and resources behind entrepreneurship (the same applies to post-secondary education), because to do so is actually risky for them. It's not that they're worse at business or have less ambition, which is an extremely common sentiment expressed widely in the US.
No, but then again in those situations of extreme poverty one probably has bigger problems than not being able to get a start-up off the ground.
And of their parents threw them out or don't otherwise like them that's just bad luck. Some people will not have an easy life, I don't see why we have to make those with loving families feel bad about it.
There are parents with ample incomes and large comfortable homes that will welcome their child with open arms, proud of them for risking everything on a start up and encouraging them to try again.
There are parents with little extra cash and homes without space for permanent guests who are going to accept their children back with some disappointment and disapproval for taking large risks and failing.
Children of the first set of parents are just going to be more comfortable going out and taking chances.
There are parents with ample incomes and large comfortable homes that will accept their children back with some disappointment and disapproval for taking large risks and failing.
There are parents with little extra cash and homes without space for permanent guests who will welcome their child with open arms, proud of them for risking everything on a start up and encouraging them to try again.
Because the risk is to become homeless and that sounds even scarier than it is in reality. Ive met people who had a stretch of being homeless and they eventually got back on their feet. They were also young.
I suspect that people living with family until 20s/30s is likely to be much more common than people here expect, and that not doing so is an anomaly of the current age in only certain cultures, with a possible return to norm in the future.
Don't misunderstand me, the parents did nothing wrong.
Their problem was their mental model where their child's success was entirely due to their child's talents and drive, and that since they ( the parents ) had not provided any seed money, they had nothing to do with their child's success.
the point is that the vast majority of people able to have that sort of success do have the soft landing and it is that advantage that enables them to create the successes they do.
Agree-- the idea that limited means "always" fosters resourcefulness is a gross sentiment that has long been debunked. For many folks limited means just means extra stress with no added chances of success. Maybe the founder saying this is motivated by less money, but most people aren't and this would just further limit diversity.
Maybe the point of economic filtering is to only accept single young men, who can devote every waking moment to their startup without any concern for dependents and such. You can get great velocity from such a pool.
Myself, with family, mortgage, etc. I would never be able to achieve that kind of velocity if I were accepted to YC.
So, even if I had incredible ideas, as people around here keep saying, and PG makes clear in his Viaweb essay, it is not about the ideas but about execution.
Thus, the economic filtering for those who are unencumbered and thus can really execute on their idea or something that YC comes up with makes a lot of sense.
I don't understand this point. Do you think anyone at any life situation should have equal opportunity of becoming a successful entrepreneur?
You do realize that by having a family and owning a house, you're pretty much on a completely different financial and stability level than a single young male.
>Maybe the point of economic filtering is to only accept single young men, who can devote every waking moment to their startup without any concern for dependents and such.
Maybe I am missing something here, but why can't women do that too?
Sorry that hurts your feelings but white households are much more rich than black households. According to the federal reserve, both mean and median net worth of black families are under 15% of the mean and median net worth of white families: https://www.federalreserve.gov/econres/notes/feds-notes/rece...
If you force start ups founders into dire financials situations, those who can afford it are way more likely to be white than black. That's why 75% of start up founders are white. Still not sure how skin color has to do with the topic?
This is bringing race into a discussion where it does not belong, this is perpetuating racial bias and racial discrimination. Your comment does the same.
I have flagged the original comment because I think this has no place on HN or anywhere.
"You're going to end up with a bunch of rich white dudes as founders (because very, very obviously the other way that people can afford to take smaller checks is if they have a lot of money in the bank)."
There are many founders of various social identities who are not rich yet have managed to succeed with bootstrapping or small seed/accelerator investments because they are capable.
To assert that some people are inherently advantaged or disadvantaged as founders and/or entrepreneurs based on such factors as race and gender is the definition of prejudice.
My understanding of it is that much of the money is supposed to be for Google and Facebook ads - something which I would never want to have to pay out of pocket for in the US market. So it's not just that the founders can pay themselves a ramen salary or better, but that there's a big early marketing budget built-in.
IDK, in my observation as a working-class white dude, comfortable white people are less likely to start an entrepreneurial venture. Why take the risk when you have easier employment options?
There were pretty obvious, observable backgrounds/personality types that were starting businesses in my circle. Mostly SMBs like trading/retail firms, personal services, etc.
Well do to people assume that the masses are a bunch of hardscrabble foster children. Those folks exist. But the reality is that most people have families and have support systems to fall back on -- perhaps not as comfortable a fall-back as the kid where mom and dad are dentists or F500 executives, but not intolerable.
Startups aren't really businesses, so maybe they are different. Optimizing for successful venture funding cycle is a different problem.
If you have no capital to bring, then you will have no equity either unless you provide labor for free. Labor compensated with equity is capital, since you have to pay your living expenses out of savings or loans that you are liable for. And you'll just be an employee of sorts, except with less pay and more risk. Why bother?
If you're unsure where your next meal is coming from, then you probably aren't currently a good candidate to be a founder. Maybe later you will be, but first things first: accumulate a bit of wealth. Venture capital isn't a government welfare program. You might get YC or others to pay a sort of a social tax by providing a sort of welfare, but the founders won't be owners (see above).
Yeah, it's commonly known as sweat equity. You do the work, and other people provide the money, then you split up the equity accordingly to the relative value of the two different types of contributions (I mean that's oversimplying but it's generally accurate).
If you're unsure where your next meal is coming from, you may still have a great idea and the ability to execute on it. If someone gives you enough money that you have the leeway to do those things, then everyone wins.
Obviously venture capital isn't welfare... no one has begun to suggest that it is. VC puts money into companies in exchange for equity because those companies need money. If the companies didn't ever need money, there would be no need for VC. The idea that VC should only fund people who already have plenty of capital available to them fundamentally misunderstands the entire model.
The way YC currently works is something like $125k for 7% equity. So founders can pay themselves enough to live on and still own 93% of their company. This wasn't a hypothetical that the parent comment you're replying to made up.
So whatever bizarre first-principles argument you're trying to make, which I am not really following, already doesn't match the current reality.
Man... Diversity for the sake of diversity won't make anybody richer, just the opposite. The root of the 'diversity' movement is barbaric socialism, marxism. Marx, Lenin, Mao, Pol Pot all fought for disadvantaged working class; today's marxists fight for socioeconomically disadvantaged people, and they will gladly fake 'disadvantage' and attribute them to random group of people. The result of such fights will be similar to those achieved by Lenin, Mao, Pol Pot.
What has to be ensured is an equal opportunity for everyone regardless of color, sex, religion etc. As of today, we have it in this country and in the most civilized capitalist world.
I think the money needs to cover your rent. It should not be enough to hire technical people to build the product - that was supposed to be the founders thing.
In that light, SF is the wrong place because the rents are so high.
I think the financial argument is an interesting one. It is true that you need to be financial stable so that you can really focus on the startup BUT on the other hand, too much money can spoil you and you could end up burning the cash without lot of trial and error which can be useful starting up.
Completely agree with the point except the needless use of racial stereotyping on an economic issue.
The reality is that millions of white people come from impoverished backgrounds. And millions of Indian, Asian, and yes even Black and Latino people are from wealthy backgrounds.
Polices designed to help economic diversity will necessarily and disproportionately help certain racial minorities and that’s all for the good. If you want to actually help the world stop making it about race when it is not. And feel free to make it about race when it actually is.
That's a great point, but I do think there is a legitimate counterpoint - that by shifting most of the risk from the founder (where $25-$100k is a lot of money) to the VC (where it ultimately is very little money) potentially eliminates a filter criteria and could create perverse incentives or lead to a scattershot approach.
"I believe in this idea so much I am willing to gamble my short-term financial future on it" is a great way to find out what people really care about.
The diversity issue is real though. As is the broader issue of wealthy people being able to take on much more risk than normal people, leading to a reinforcement cycle (winners keep winning) and a winner take all outcome.
Which, now that I think about it, pretty much describes US capitalism perfectly.
People who take huge financial risks are IMO much more likely to be just kinda stupid than rationally confident & committed. It strikes me as a really dumb way of filtering for smart people.
The financial purgatory expected by angels is ridiculous and one we never subscribed to and is far too much like a parent child relationship than an adult to adult relationship. Investors who want their founders in a tonne of personal debt and living on baked beans are hurting their investment and stroking their ego.
Investors are trying to sell money, companies are selling a possibly enormous return on that money, it's a win-win and founders should be treated like the professionals they would be in industry.
Start ups have basically unlimited upside risk for investors and totally limited (to the amount of money invested) downside risk for them (and in the UK very healthy tax breaks for investing), the founders on the other hand loose years building a product that may prove worthwhile, don't make them carry years of financial pain and repercussions because they tried to grow your $5-$100K.
Counterpoint: founding a startup and being financially secure isn't some inalienable right. As you point out, writing small checks will skew the population of founders, but by doing otherwise for the reasons you've brought up, you're addressing a symptom very inefficiently. It might be more effective to take an approach similar to affirmative action. I think the idea is totally valid. Pouring money into a small set of founders can have diversity implications as well, it's hard to guarantee you're distributing investment equitably if the batch size is small.
The other big difference on check sizes is that YC started during now documented collusion in silicon valley. Now, the check size really doesn't matter a ton to the FANG engineers looking for a sabbatical. Building a 100k cushion to fund said sabbatical is pretty easy when you're making 400k at Google.
I think there's no real way for reducing checks to have meaningful impact at this point.
> You're going to end up with a bunch of rich white dudes as founders
Is there any reason you included "white"? Are black people not able to be rich, or are white people more interested in tech, or are black people discriminated against by YC, or... what?
His perspective seems built around ego. It's no longer the special club he wanted it to be, it's not "hard enough" for the people he sees as "wrong" to participate. He liked YC when it was a band no one else had heard of etc. etc.
Without knowing the metrics for how YC judges the performance of its intake and their future objectives, there's no way of making sensible recommendations for how (or if) it should change.
You can absolutely hire a rockstar dev, you need to think in terms of cashflow. You may not be able to pay a full year of salary, but you can still pay their full weekly salary as you go until you either run out of money or produce enough revenue to get to that point.
My last company had a technical cofounder who by all means was highly sought after and managed a team of 15-20 other developers in their primary dev consulting company meaning not only did they rock technically but also had biz acumen.
That individual worked FOR FREE for 3 years 25 hrs/week before collecting any money.
Don't ever think you have to pay a developer some market salary (or any salary) upfront. If the idea + company + team is legit, they will jump at the chance to be involved.
> Don't ever think you have to pay a developer some market salary (or any salary) upfront
"A developer" should definitely be paid market rates, otherwise they are a founder and should be rewarded accordingly with equity. I think this mindset of "getting work for free" is very damaging to the person holding the short end of the stick.
Someone who already has a well paid job, is willing to do a startup on the side, and actually be effective at it is extremely rare. What you'll usually find is someone at the beginning of their career that doesn't really understand what they are getting into.
"otherwise they are a founder and should be rewarded accordingly with equity."
Of course - as they were. My point was on cash money comp. Never said they worked for free hence their title of technical cofounder which implies equity.
"...and actually be effective at it is extremely rare. What you'll usually find is someone at the beginning of their career that doesn't really understand what they are getting into."
The onus is on the founding team to be sufficiently compelling to attract such a rare breed and if they execute correctly there is no short end to the stick to be had.
This is rich with availability bias. Just because you have had this experience doesn't mean that's possible for other people to do routinely. It sounds like a long tail event and using it as an example seems to be baseless. Congrats on being able to get him going, but I certainly wouldn't rely on that happening.
Availability bias is a behavioral psychology term.
> The availability bias is the human tendency to think that examples of things that come readily to mind are more representative than is actually the case.
Ahh, my apologies, and thank you for the correction on gender.
The only instance in which I would work for free for three years would be if the business was started by a household name for HN regulars and they had a very good track record of successful ventures. Anything less is ridiculous.
this is ridiculous. you expect people to give you their labor for free? not only expect it, but CELEBRATE IT IN ALL CAPS?! and you encourage others to not have to pay a developer a "market salary (or any salary)"?
also it's not working for free if you've got fat equity on the way because you're a co-founder - you're just taking your compensation in a different form.
so not only is this not some virtuous thing that they did out of the good of their heart, it's exploitative and should be looked at as an example of the reprehensible attitudes toward labor that have proliferated in the valley.
you're probably one of those people who think interns should work for free, and that weekends are for catching up on work.
As someone who did yc in s09 and w19, it was very different. But, you get out what you put in, like most things. These generalized critiques are useless. B2b is thriving at yc because it’s easier and more in the wheelhouse of developers. If there were tech climbers there I didn’t meet them. There are so many people the useless are easy to avoid. We got 6 months of work done in 3 months and the bigger check vs 09 was very helpful.
Also if you look at how the US economy works, all the money is in businesses, not consumers - compare the current stock market to the unemployment numbers for example. B2B was always going to out-compete B2C in the long run.
* pick something famous
* say it's dead
* cherry pick the worst things about it
* get your 10 minutes of fame
All it costs you are some burnt bridges. I've met several really smart founders from recent batches who are building something interesting. Making blanket statements like this is not particularly helpful to YC.
Famous institutions always attract climbers. That's inevitable, but it doesn't invalidate the institution.
I went through YC in S14 as a co-founder of a hardware company. I agree that YC optimizes heavily for SaaS companies, but smaller checks would probably exacerbate this trend. Hardware companies need to not only subsist on the $120k but also develop prototypes. That's difficult enough, but it is completely impossible on $25k unless the co-founders are independently wealthy or have already raised money.
One thing that made YC great was that it was started to allow the original 4 partners to learn how to be investors. The first batch wasn't intended to be profitable, it was intended to reveal what works and what doesn't. (Luckily for YC it got a lot right by accident). Sure YC could go back to small batches and small investments but they can't go back to "let's figure things out with only rough theory as a guide" because YC is no longer the startup born out of ignorance and curiosity it once was. You can't forget lessons learned and dial back your sophistication. The magic of early YC isn't lost forever but it will be refound among the next group of rich people who are willing to spend a bit to figure out if this investing thing is to their taste.
He says "the check sizes are too big" as if they're giving prelaunch startups $50M or something. The $125k that YC gives startups is nowhere near big enough to remove the drive/urgency to succeed.
If startups are coming into YC with a more mature product than in the early years (and it seems that way), then adjusting the focus towards fundraising actually makes sense.
Not to repeat what's been said in other comments, but to say that founders should be willing to put themselves in deep financial risk to prove their drive...that just comes from an incredibly privileged mindset.
It reminds me of the people saying that if their school is going online-only, students should instead take gap years to build something, incorrectly assuming that no one needs that student loan money for living expenses.
$25k is like 2 developer months + ops overhead. I don't think that's going to buy anything but high margin/quickly realizable ideas like B2B SaaS and developer tools.
According to the thread it's not supposed to be enough. You're supposed to go deep into credit card debt because that's how you know you're a Real Founder(tm). You know, if you're privileged enough to have limits high enough on your credit cards to go into that sort of debt, dont have people dependent on you, have a safety net to make this not so big a deal, etc. Clearly the best founders are the ones starving themselves so they can lower their risk of having to file for bankruptcy. And the best thing to do to fund a high risk tech startup with uncertain cash flows is apparently debt. Equity financing exists for a reason, you know. And the point of incorporating as a separate entity is liability protection/equity financing etc. For an investor, pushing your founders to increase the risk levels of their high risk companies by levering up with a personal guarantee is ridiculous. They increase the risk level so debtors can get the reward if things work, which is now less likely because of the compounding interest and personal stress.
I am somewhat sympathetic to the check size argument simply because I have seen a lot of people drift from accelerator to accelerator to accelerator and mostly focus on getting to their next one. They become really good at the pitch and grant collecting, but have websites that barely work or rarely go and meet customers. There is a perverse incentive in the accelerator spot in itself being a reward.
I suppose it depends on what YC wants to optimize for. You can risk giving money to not so serious founders or risk excluding ones who want to cap their risk.
I don't get why they would want to ban dev tools and SaaS. The latter especially is a huge segment. Many enormous companies like IBM and SAP are built around those types of offerings.
That's the second third and fourth accelerators fault. If this is their third accelerator app and they haven't done anything useful with the money they were given initially, then YC should reject them. They shouldn't make it harder for everyone else so they can accommodate investments into zombie companies on their third round through the accelerator circuit.
A smaller check size hurts startups in capital intensive industries. Others already made excellent points about the diversity if founders that can be attracted with a smaller check size, since less money favors people with money already in the bank or with easy "friends and family" rounds. I'd also like to add that smaller sizes work against company and market level diversity as well. If YC is purely for software, sure, but they've been trying to fund hardware/biotech/etc, and you need that cash to build an actual prototype. Smaller class sizes makes sense as a proposal, but if you reduce funding to original levels as well, you'll be stuck with an overwhelming number of overrepresented demographic founders starting b2b SAAS companies. From a financial perspective that locks out a talent pool and limits your investment horizons in a pretty big way.
Is a sign that Y Co is a plant grown too large for its pot and needs to be split up and transplanted.
In 2019 the best business model was selling pitchforks to gold miners in San francisco, in 2020 the disruption happened. Big cities have a competitive advantage in terms of exploiting the Bezzle, but when that is gone then what?
I'm curious if the author has data that the 'free sabbatical' folks are less successful as founders than others. If YC is selecting the wrong types of people/companies for their batches, I think they'll figure it out pretty quick when those companies fail to pan out and their fund suffers as a result.
Is the author's YC company's success somehow contingent on YC not having these types of founders?. If so, I have grave concerns about their company anyway. If not, like, what are you complaining about? YC's decision to accept people who match that profile literally has nothing to do with you.
I think the impact size of that effect is likely to be very, very small. The whole thread reeks of gatekeeping around (as someone in another comment put it) what it means to be "Real Founder."
Would love to know YC's real matriculation rate. I know of several teams that got accepted in and opted not to go, in part because of ballooning batch size and dilutive terms.
The YC application process in and of itself can be very useful for founders. It forces them to really think about what they're building and why it's going to bring value to customers.
I don't think the author is advocating that founders take on a ton of of personal debt, just that historically it was a filtering function that is now absent. I would imagine that this filter function can be replaced by something else that does not also weed out people without any safety net.
The point is valid - startups are a risk, and so if all the risk is removed, it will increase the number of people who are coming to YC for status vs. coming because they believe in their idea.
As good at interviewing as the YC partners may be, interviewing is no substitute for the harsh reality and incentives imposed by taking a great risk.
As an investor, all I can say is that having gone through YC is not the signal of quality it was 7 or 8 years ago. This doesn't mean YC is doing anything wrong regarding their investment strategy. It simply means they are expecting a very skewed power law of returns.
I find it disturbing that this is getting so much attention. The argument (such as it is) is utterly without merit, unsupported by anything other than the tweeter's personal opinion. It is, quite simply, a troll. And it seems to be working.
In fact, the whole cultural phenomenon of paying attention to what people tweet is deeply disturbing. Twitter is not designed to support rational argument supported by data, it's designed to be a morphine drip of novelty, a machine that dispenses mental M&Ms. People who follow twitter are like lab rats pressing a lever in exchange for a drop of sugar water. It's troubling to see this phenomenon invading HN.
"So if you're an outsider you should actively seek out contrarian projects. Instead of working on things the eminent have made prestigious, work on things that could steal that prestige."
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[ 2.6 ms ] story [ 241 ms ] threadSame thing on loop. After the prestigious internships and summa cum laude, they graduate into a FANG job at 21.
I think the criticism is that these people are conformists. They're good at following an obvious system to the T but has never innovated or taken risks in their life.
And btw I agree with you - not the path the an enriched life!
> People that have no soul or connection to the product they build because they see everything they do as a checklist to get to the C suite level in some Series A/B/C company
[1] https://twitter.com/vcknowledgekit/status/128578661447247052...
...and also fail to be white men from a middle-class background, as far as I can tell.
Its also impossible if you have any health problems, or need to save for retirement or have student loan debt.
Its really only possible if you're young and healthy, so this would filter out probably 80% of adult population
The point isn't that it's impossible, but it seems like you're advocating strife for strife's sake.
It is a filtering function and it's the wrong filtering function. Like others have said, it filters out anyone with a great idea who is unwilling to put their lives in danger, or more importantly the lives of people dependent on them.
I agree nobody needs a cushy lifestyle when starting a company but as a single adult in the Bay Area you need at least $2k/month after taxes to live. And somehow you need to get someone to rent to you with an income that low. Not everybody is lucky in having a nearby relative they can live with for free.
A deadline is useful to help ensure work gets done. If the deadline is set to 3 hours from now, however, and realistically you need 4 or so to get it done, the pressure is going to have the inverse effect. It would likely just demoralize the team.
pg once coined the phrase .. ramen profitable.
I deeply agree with that concept. Cover bills but all those frills and cushy "living wage" nonense needs to go while the startup is finding its feet.
It's a lot harder to start a startup once you get to that stage of life because of this and other reasons.
Changing this focus -- to focus on older more experienced invidividuals is changing YC imo. Less social justice more hackery/building stuff people might like would be a positive move for YC and the audience. I don't think we're in such a climate to discuss this though.
Funny this gets flagged but not the comments insinuating that life-ruining risk should be acceptable* for founders who aren't wealthy.
* Not just acceptable, preferred! Amazing!
So yeah, it's in their best interest to care.
This means that it's naturally a filtering function for people who have such safety nets already. It means that there are people who would be putting their lives and the lives of their dependents at risk in order to make the YC gamble.
It might be a filter that "works," but it will inherently be an uneven filter, doing very little to filter founders who already have the means, while effectively barring many potential founders from being able to participate at all, at least not without dire personal consequences.
It's very hard to focus on building a successful business when the cost of failure is potentially life-ruining.
I'm not sure what your point is -- that people who have kids should be given special exemption where they make more money from sales and inventment oportunties to compensate for choices they made?
Corollary: startups can only be started by people in a position to consume [sic] the risk.
Do we, as a society, or even just an economy, really want that?
And the point was not a "special exemption for people with kids". It was that "consuming the risk" when you have no safety net (e.g. move back in with family etc.) is a much bigger issue than if you do.
My point is these are the same. One individual has a different risk profile because (s)he made different choices and thats fine. If you have kids -- it will negatively affect your capacity to start a company.
>Corollary: startups can only be started by people in a position to consume [sic] the risk.
>Do we, as a society, or even just an economy, really want that?
That Corollary is fine with me. Startups are inherently risky.
I'd rather not have new ideas for businesses filtered through "can afford zero income for N months".
There's nothing wrong with choosing to have a family and raising kids, but that is a choice. No matter what conditions are set, the person who makes the necessary tradeoffs is going to be in a better position to succeed and YC as a business entity can do nothing to level the field for people who are willing to go all-in versus people who prioritize a comfortable home life.
Again, startups are privilege that form out of the security of societal infrastructure and excess of wealth. Nowhere in society is it prescribed that everyone should be able to forego having a job and drain their savings to gamble at a chance at massive wealth. How is it reasonable that we've come to expect this as some sort of entitlement?
The top comment makes a dismissive remark about "rich white men," and YC being against inclusivity and diversity. The natural response to this is that YC is not racially exclusive, but that they exclude based on those who can assume risk. Yes, but white people are rich so they can consume risk and black people are poor, therefore YC is in reality discriminative against blacks. The simplification of this kind of argument and its decontextualization from reality should be self-evident. Unfortunately, it's emblematic of the kind of emotionally reflexive and broadly appealing arguments we see thrown around instead of practicing any form of intellectual sophistication or nuance. It's far easier to make a glib side-remark suggestive of racial privilege. It's even easier when this is politically and socially trendy, even expected, and the individual making the remarks is protected from backlash by the insulation of a particular ideology.
It's about number of people who can take risk of having zero income for N months. That is such a small group of people, and this narrows the pool of people who might found a startup that could change the world (or part of it). It means that all the ideas for startups are coming from people who have (at least) one thing in common. Maybe it's not the optimal thing to have in common?
ps. I did the startup thing with a wife and a daughter. These days you know it as Amazon.
YC is a business entity not a non-profit organization dedicated to wealth distribution. You're asking it to do a job outside its core responsibility (profit, survival). If you want to make the argument that YC should up it's funding, that argument has to establish itself as being strongly in the interest of YC, otherwise it doesn't make much sense.
YC isn't under an obligation to do the best it can for society. But if it wants to do that, or even to approximate it, the filter functions it uses implicitly and explicitly need to be considered carefully. YC has said a variety of things that indicate that it does have some desire to trend in this direction, at least in the past.
Absolutely mind-boggling when YC literally exists to support and incubate startups so founders don't have to take on life-ruining risks.
I think it is worth pointing out that the lower levels of support mean there will be fewer successful startups, and those startups will be founded and started by people that have a safety net of some kind. If the goal is efficiency of investment, this is fine, if there are other goals, it's worth noting how this policy impacts the other goals.
Debt will creep up and crush you eventually, do not go into debt to "fund" your startup.
The smaller class size issue is probably fair, but reducing check sizes as a filtering method will absolutely filter out socioeconomically disadvantaged people. Just a terrible suggestion from somebody who I would wager heavily is not unsure of where his next meal is coming from.
Larger checks certainly attract the 'free sabbatical' folks that the author seems to dislike so much, but it also enables entire classes of potential founders to have access to capital that enables them to focus on their business rather than their kids' stomachs.
That being said, I have significantly more insight (due to experience) than I did when I was more free and willing to work 60+ hours a week and was willing to live off of 20k a year.
Seed money used to be a godsend because you had a good idea that wasn't at a scale enough to interest traditional VC and you didn't know an angel. YC was particularly great because it had the emphasis on the network and the larger number of investments allowed it to distribute risk across the class.
They purpose was not to build a company or make a good living, it allowed you to create a company you wouldn't have been able to, otherwise. I agree with the gp post, the goal is not to fund a sustainable company, it's to get one off the ground.
Forcing entrepreneurs to risk devastating personal bankruptcy just isn’t kosher, and there’s zero evidence that it creates healthy companies. It just encourages founders to take even more risks, which aren’t always ethical (i.e. Instacart’s predatory pricing and tipping model).
Founder ID,
Founder bank account balance average during company's first year,
Founder health metrics array [acute visits to hospital or clinic for diet/mental health issues],
Outcome of company
---
If we notice that founders with low bank balances, lots of health events in their life, and unsuccessful business outcomes are popping up in the data, and then conversely founders with 100k in their personal bank on day 1 are never visiting the hospital and their companies are doing fine, then I think we could call check size a definitive contributing factor. This would fly in the face of "ramen profitability" as a virtue.
EDIT: and i think there are enougg startups out there (40,000 probably??? ask crunchbase) to have a meaningful sample size
Saying someone "needs" something (ie paid PR) in order to succeed could also be deemed terrible advice.
A good PR firm can you get a national audience for pennies compared to paying for ads.
The founder could probably get a 300k salary at Google or a six-figure stipend with another investor. If Y-Combinator wants to compete they have to provide something that outweighs that.
What are the founder's other alternatives? What are there other early stage & incubation options? YC simply does have to compete with that.
I mean, look. Take your idea to the extreme - why do they pay a stipend at all? Why not force the founders to sleep in tubes above the office/outside on the street and supply just enough soylent, huel & low-dosage amphetamines to keep their brain working?
I must be misunderstanding you; I read that as you stopped reading the entire thread because there was a single point you disagree with. Is that what you mean?
Overlooking the fact that if I attempted such a thing it would be amusing as hell. Imagine somebody taking that idea very seriously.
[1] https://www.wafflehouse.com/
Admittedly, I'm not sure that's universally true (we all have a limited amount of time, and it's reasonable to focus that time in places where it is going to give us the most benefit), but I'm pretty sure I see where the commenter is coming from.
Responding further upthread: this is an illustration of a "time waster." They exist on both sides (investors / founders, salespeople / customers, etc) and recognizing them is an important skill. Time is your most valuable resource. Use it wisely.
See, there are no bad companies, all companies can pivot. In fact the original idea doesn't matter at all. Hurr durr buy my startup book
Eh, who cares, mocking strangers it is!
http://paulgraham.com/startupmistakes.html
He does list having both too little money and too much money.
I agree, maybe the $25k made sense back before life in California was more expensive than living in Manhattan, and it should be enough to cover more living expenses.
Maybe alternatively, YC could provide less money, but basic housing and needs so founders minimals could be met, while also providing them a collaborative environment?
What about a YC building complex a bit outside SF? Maybe one close to NY too, and ... two in Europe, two in ... each continent? :- )
"Ycplex"? "Hackerplex"?
There could be a gym so people could stay healthy (and what about child care & school?).
Especially if he has a larger pool of capital than when he started (which he should unless he is doing it wrong), smaller checks /and/ wanting more personal attention and less canidates. That just cannot scale up to larger ammounts of money by definition, even if it would yield a better rate of return on investment in dollars. Diversification is another option for fund self-perpetuation but it will likely not have the same yields and cause total portfolio growth to decline with size.
As for motivations I guess either trying to eat his cake and have it too.
I think, as a point of failure, that most would agree that a system that allows a few people a 'free sabbatical' but also provides security for those founders who would not succeed without it, but who will with it is a good thing.
You have to work a second full-time job that isn't the startup.
Probably during the day, so you can't do daytime things with your startup.
You have to borrow on credit cards to pay the rent, bills and food.
You get evicted if you don't.
You don't eat much so you can't think as clearly.
You lose your computer when the bailiffs come to collect.
You have to have a borrowing facility, and it has to not be declined all the time.
If you hit a limit, you have to pause the startup and work elsewhere, probably for months.
You can't go personally bankrupt otherwise your startup will be liquidated as well.
You literally don't have as much time, energy and mental capacity to put into the startup.
Saying that every company does this at founding is false. For those with better savings, better support buffers, they do not have the same amount of the above problems. In particular they can eat and have somewhere reliable to sleep.
For those without, they literally cannot put as much time and cognition into the startup.
https://www.thestreet.com/technology/what-are-fang-stocks-an...
[0]: https://fr.wikipedia.org/wiki/GAFAM
This is also why other accelerators are emerging that aim to capture the YC essence of old (OnDeck & Jeff Morriss Jr.'s new initiative)
It's interesting how the best incubator found that smaller checks out of the gate is beneficial, but you can raise a 30-50 million series B and founders can take a few million off the table, which is also good, so they can go long.
Had Reddit not sold for pennies on the dollar to Conde Nast, that alone would have probably paid for the extra 100k for every YC startup since.
There are lots of people with great ideas and the ability to execute on them who also have a deep sense of financial responsibility that precludes them from going 50k into credit card debt.
when you do, it's often quite heartbreaking. have read a few online, and knew one personally - kept going in to further debt, ended up getting divorced and creating a huge rift in his family, etc.
Yeah. The implicit assumptions of the "live in poverty" of the OP, are wrong.
I'm 54, and I was financially wiped out at 51. I will not ever recover from this. No family wealth to fall back on. I do not believe I will ever be able to retire. And noting that there is a bit of ageism in this space, makes the threat of potential long term unemployment even worse for folks like me.
Sort of an inverse Ozymandias. Gaze upon my flaming cratered company, and beware. Here be demons. That you cannot control.
I had skin in the game. And I lost it.
I did say, you have to be at the right place, at the right time. And be lucky. We got 2 of 3. Luck eluded us.
[1] https://scalability.org
[2] https://scalability.org/2017/03/requiem/
[3] https://scalability.org/2005/10/venture-capital-and-high-per...
I still write, albeit less frequently, and I have to keep to a narrower range of topics.
We've been in similar situations several times. We're serving a niche, but this niche is a core piece of our customers business. Without software like ours, their whole operation stops.
Anyway, we'd have demos. Department heads were on fire, wondering if we could install same day we had demo, all smiles, everything looked great. And then we lost because someone higher up decided we were "too small". We're small, but we're pretty much the best in our niche and we have had very solid financials for decades.
Those we lost went with bigger, supposedly "safer" competitors and had some very sub-par years with them before they had to pay their way out of those contracts and come back to us.
My response was simple. No.
I invited them to throw away the crap they bought and buy the right thing from us, but that was politically untenable. Turns out spending multiple millions of dollars for crappy half baked "solutions" versus a lower sum of money for something that actually worked, would likely get some people fired.
The world isn't fair, and sometimes not even sane. The people who made these decisions, despite being disastrous ones, were promoted. Enough of these built up that we couldn't survive.
Incredibly frustrating.
You need a fighting spirit to achieve great things. Many people have overcome far greater problems. Never give up you are only one transaction away from financial success. Good luck
Thanks. I'm aware of others struggles. I figure that my story could be a cautionary tale for some, and others may take lessons from it.
When I say in other fora, never, ever take debt financing of anything if you can avoid it, this is coming from personal agonizing experience.
If I go back into the startup world, I'm going with a very clear perception of what is what. No rose colored glasses. No "if you build a better mousetrap" mentality. I know how things can go horribly wrong. I know where the traps and mines are.
In the vast majority of circumstances that's an extreme exaggeration.
Speaking from past personal experience with poverty (ie being "poorer folk"), you can default on every possible type of debt - wait about seven years (can vary slightly by state, but it's typically around that), and you're free from it. My credit rating went from 800, to 480, back to 760 in that process over eight years, without requiring any special effort. I defaulted on numerous credit cards, I defaulted on medical debt; it all vanished, one after another as time ticked by, and my credit rating jumped as each item fell off. Every negative mark falls off your credit report after N years.
It's very unpleasant to have your credit rating wrecked for years. To say that it will ruin you for decades, that's reaching into the land of absurdity. I'm sure it happens, some people get stuck in a vicious cycle for ... decades, however it's not rocket science to properly utilize the negative mark credit cycling to your advantage and reboot. It doesn't take more than an hour or two of reading to self-educate at zero cost about how the system works.
I really hate this condescending "if you really wanted it the money shouldn't matter" coming from millionaires.
I speak with startups who have a product that is poorly differentiated, me-too like, that think they are going to take over the world. The reality, the vicious Darwinian reality, is that you and your team have to bust your collective rear-ends. And get lucky.
Really, I hate to deflate many many bubbles, but being at the right place at the right time is often the deciding factor for success or failure. IMO moreso than the product, the product market fit, etc. You have to be seen as the sole provider of something the people deem important. Even if this isn't really true. You need influencers to drive carefully staged hype, and then you need to be able to convert small victories into evidence the hype is real.
This is very ... very hard for bootstrapped companies, operating on shoestring budgets at best.
The greatest lie ever told to entrepreneurs like me is "build a better mousetrap and the world will beat a path to your door." There is soooo much more than that. And the cost to you, financially, mentally, physically, will be huge. Not can be. Will be.
If you are lucky, you will have a reasonable exit. Most of the time that doesn't happen.
But even if you fail, that's experience too. If you have a dream, I strongly encourage you to pursue it. It is usually more painful to look back in hindsight and one day wake up to a reality where you never even tried.
To whoever is reading this: Try. Then try again. Then try another. And don't forget to look after yourself and your loved ones.
But also, definitely, make sure you are not going to be financially destroyed by your actions. Take time to be with your family. Remain focused upon your life, and life goals.
Do I regret my time building some of the insanest things in market (at the time)? No.
It was an itch, I had to scratch.
this 1000 times.
Then big orders started hitting.
Before I knew it, we were at $3MM/y sales, growing about 33% yoy.
And then we crashed. We needed more capital. Those who wanted to put money in via convertible notes demanded terms that would have killed the company's ability to raise capital going forward. Our lawyers told us that it appeared that the large company wanted to buy us on the cheap, and these terms enabled that.
I've replayed that in my head many times. It was a crappy deal, and they weren't willing to budge. But I would have had a sort-of-exit had they exercised one of the convertible clauses, to basically demand payment in full if we couldn't raise more money.
If someone tells you corporate VC is less slimy than the regular version, don't believe them. Different type of slimy, but still slimy.
Put bluntly, that model, the consulting bit, is not for the faint of heart. It is just as hard, as in you absolutely have to hustle hard this whole time, to get business. Leaving you with precious little time to develop your ideas.
I've lived it. I don't recommend it, without a partner with a strong income. My wife was a stay-at-home mom for part of this time, and worked at a school as a teacher. Not sufficient income to live off of for 1 person in a house with a mortgage. Nevermind a family.
I'm assuming you're joking.
Even being Early (or in our case the first to do something) doesn't always work, we had to give our services away for free, or at a significant loss when operating costs were accounted for, because we were using technology that was not really understood (much less by our demographic) and had not been attempted in the past to facilitate or service the Industry we chose. So we had to engage our future paying customers in a way that they relied on us for something they found useful and pay for it in the future, so I boot-strapped and fell back on my other skill-sets, that ultimately took time from further development that could have otherwise yielded a better product in less time, but again... uncharted territory means you are make the Map as you go along, with all the mistakes and hidden landmines along the way.
> This is very ... very hard for bootstrapped companies, operating on shoestring budgets at best.
I'd say Bootstrapping is a Pyrrhic Victory, because on a financial level, had I decided to stay on the sidelines and just DCA while trimming the fat from my budget working a normal day job, as so many now in this space did, I'd have an ROI way better than my Startup, and most ever created in that space for that matter, ever was. They thought they were geniuses, when in reality they were just 'free-riders' that directly benefited from the work done by risk takers and people who actually did the heavy lifting to get the project to where it was and currently is. But ultimately looking at our holdings and net-worth on paper wasn't the point for some of us, it was to bring our vision into existence and prove a technology could solve far more problems than even it's core developers and even the greater community at large could ever think it could and bring about a desirable change to the Enviorment. And for that it takes a lot of sacrifice, which ultimately made me understand that 'disruption isn't always profitable' is a very true statement in a financial sense, but can be very profitable if you're goals are to do more than that. It's just how you quantify it.
> And the cost to you, financially, mentally, physically, will be huge. Not can be. Will be.
Agreed. Still dealing with that to this day. Just my Physical Therapy costs alone have been something I didn't anticipate to be so expensive in every sense of the word.
I can't give details, but I can tell you that the $80K would not have made a difference. What would have made a difference was a small seed of a few million, which YC is pretty good at getting for companies these days.
He could pour all his money into his start-up because if he'd lost every dime he could have moved back in with them. He'd have his own bedroom, bathroom, and a fresh-cooked meal every night. He could have stayed with them as long has he wanted. Very few people have that kind of soft-landing.
Because looking at country level data, USA, with it's terribly scary and risky path of entrepreneurship completely outperforms welfare state countries like the Nordics.
You could say the difference is from capital markets, but still even the difference in startups that are not successes is humongous.
I don't either way. But I have run across the counterintuitive fact that Nordic countries outperform the USA on how many people per capita are worth at least $30 million. And at least some of them got there through entrepreneurship.
or maybe it's worse than you suggest: taking a risk on a startup is the only opportunity to earn any income, where "welfare state countries" take basic income out of the picture. And, according to which mesurement are these welfare states being outperformed? and is it relevant to the humans involved?
Apparently according to some traveler's accounts Ukraine has a lot of "side hustles" due to lower wages of day jobs and lack of consolidation.
I suspect it may be both and a result of culture shaping actions shaping culture. Essentially a more risk adverse culture is more likely to support a strong safety net and a culture with a strong safety net is in itself incentivised to not encourage have people take stupid risks even if the nominal purpose is to allow those risks. (That sort of left hand vs right hand thing crops up every organization large enough with distinct duties.)
Then there is the whole Maslow hierarchy of needs aspect where they would ironically need to be better off before considering anything collective. Revolutions have been lead by disgruntled college students far more often than the desperately poor.
I started a company after the first dot.com bust, because I had almost nothing to lose. But I also had no dependents to hurt. So it can cut both ways, but I don't think many folks take the path I did by choice.
[1] One had a spouse with a chronic medical condition, losing insurance was not an option; one had a large student loan debt and didn't want to risk defaulting. I've heard other stories.
Here are a couple of the most relevant: http://www.andrewoswald.com/docs/entrepre.pdf and https://www.nber.org/papers/w19276.pdf
is Harvard good enough?
https://news.harvard.edu/gazette/story/2016/07/public-progra...
https://www.nber.org/papers/w18441.pdf
> looking at country level data, USA, with it's terribly scary and risky path of entrepreneurship completely outperforms welfare state countries like the Nordics.
False.
>> The U.S. likes to think of itself as the world capital of start-ups. But America doesn't lead the world in actually starting new businesses. By various measures, it's behind Canada, Denmark, and Norway.
https://www.inc.com/magazine/20110201/in-norway-start-ups-sa...
It's the privilege argument that I'm sure you're sick of arguing about. The world is set up well for perfectly ordinary middle class educated kids with working (or wealthy) parents. That's not everyone.
If you're somewhere in the lower or middle "middle class", the world still isn't set up very well for you.
Being of the "cultural upper middle class" (born into a professor, scientist, engineer, etc. family) is also an advantage.
I also didn't mention location, but my relative's parents are withing spitting distance of the valley. Someone who has to move from Mountain View to Omaha is going to find it really hard to get back into the thick of things.
People growing up in Omaha are at a severe disadvantage vs people who grow up in Mountainview.
And if your parents are in Mountain View or nearby, you can stay with them a few extra years after you get your first job to save money for a downpayment on your own house.
A person without that option may spend a decade paying rent and trying desperately to save up enough for a down payment.
I think this comment is (no offense intended towards you specifically) very indicative of how insulated and lacking in diversity tech is.
A room and a meal indefinitely with absolutely no pressure to leave or contribute? With the freedom to find the next job or opportunity that fits, not just desperately throw out their resume and accept the first offer? Not so much.
40% of young adults in the USA do live with family, and it’s a good bet that a large fraction of the rest could. It’s certainly not universal by any means, but it’s also far from some great rarity.
https://www.cbsnews.com/news/percentage-of-young-americans-l...
I’ll grant that the original comment talked of having “his own bathroom” and that is reasonably rare, but it’s the least important part of the package compared to a room and shared meals.
Like I said in another comment even in the poorer European countries it's possible to move back with one's parents. And in fact people do live with their parents into their twenties.
The fact is, having parents with a place you can crash at is perfectly normal. If your parents weren't complete degenerates or very unlucky, they have a couch you can sleep on. Anybody who's startup founder material can at that point find themselves a job.
For so many families, the only way they can afford to support their children even in their childhood is government aid, which gets cut off when the child reaches 18.
B. For immigrants, moving back to one's parents is a much more difficult process. You may have to move to another continent. You have to give up on trying to find a job or settle down in the US. Moving back to the US afterwards would not be exactly easy either, because being away from the US for extended periods of time may mean losing your green card.
So yes, if the family is reasonably well-off (owns their home, has savings and good income, have a margin of safety in their finances) you can depend on them as your safety net. If they are not, you cannot or cannot in good conscience.
33 percent of 25-29 year olds live with their parents today: https://qz.com/1248081/the-share-of-americans-age-25-29-livi... It's not rare at all.
For children of immigrants, B is absolutely not a problem, in general (of course there are exceptions). In my experience there is far less stigma attached with living with your parents well into adulthood for children of immigrants than natives. It's even culturally common to remain with your parents until you're married. Of course first generation immigrants have it more difficult. That is part of the inherent risk of moving to a different country.
In most places in the United States, extra space is a premium that requires consistent stable work at or above the median household income in a single field of work over extended periods of time.
From this alone we can rule out those who work minimum wage jobs, most of those who do not have an established field other than "Service Industry" and many of those who specialize in an "unskilled" trade, e.g. forklift operators.
Those who do manage to purchase a home with the requisite space often don't live in posh neighbourhoods with comfortable amenities, and generally are not swimming in excess income.
Additionally modern society, with its' inundation of appealing marketing campaigns and easy credit, has rendered even your "middle class" families cash-poor, stretching their budgets thinner and thinner with each additional monthly payment.
When you culminate all of these things together with a fundamental breakdown in nuclear families and rising divorce rates, "going home after a rough patch" is not an outcome most are able to, much less willing to, consider.
Do you mean an extra bedroom with two or more beds for your kids or an extra bedroom per kid? That makes the difference and it is more uncommon.
One has to be either dirt poor or very unlucky not to he able to move back with relatives. This sound like an excuse.
Yes - most people might be able to move back in with relatives, but among those people who can't, minorities are almost certainly going to be overrepresented, which was OP's point.
Tired of those black people excuses, the reason they are not represented is not because they can't go back to their parents, it is the same reason they are not also regularly represented in tech companies as employees, because they never bothered to learn anything technical. Unlike slightly less black Indians with lower median household wealth to start with and much less chances to hook with someone in Tinder in the US, which is the real pure racism nobody talks about.
Regardless, "smart, sustainable work that will support my family" doesn't really map to the intentionally-accelerated make-or-break pace of most incubators and funds. Nor do those programs naturally align with founders who want to create a solid long-term business working from sound operating fundamentals (positive cashflow, measured and even conservative hiring, working to the team's strengths) instead of chasing the next exploding market and "faking it until you make it".
Coincidentally those safer, longer-term plays are also the ones most likely to actually build generational wealth and financial independence for people starting without either. The lack of a safety net (or the presence of one that you're thoroughly entangled in for others' sake) makes all-or-nothing, giant bets far less tenable when you aren't effectively free from having to worry about mundane details like housing or medical costs. That in turn discourages if not de facto shuts out both the least privileged and those with meaningful resources but too much to lose if it all goes wrong.
This is the right time to shudder, much as I'm happy that you're in a situation where it seems hard to imagine (or empathize with).
I think that the 10-20% group you are talking about is likely to have more than its share of not-white people. Maybe it's a small divergence, if we imagine the population of the US to be 50% white and 50% not white, maybe the group of people who can't go back and crash with their parents is 49% white and 51% not white.
OK, so imagine there's a different imaginary incubator with a rule that every applicant has to roll a 100 sided die. If they're white they have to roll a 50 or higher to get in, and if they're not white they have to roll a 51 or higher.
I wouldn't like the "roll a die" rule, I think a lot of people probably wouldn't, but it's ultimately not a heck of a lot different than the "crash with your parents" rule. You are still more likely to fall afoul of both rules if you are not white- or (if you change the dice game) gay, or poor, or marginalized in other ways.
(yes the probabilities are different, not the point)
I think the point is that it is rare for people who don't have this fallback option to put all their time and resources behind entrepreneurship (the same applies to post-secondary education), because to do so is actually risky for them. It's not that they're worse at business or have less ambition, which is an extremely common sentiment expressed widely in the US.
And of their parents threw them out or don't otherwise like them that's just bad luck. Some people will not have an easy life, I don't see why we have to make those with loving families feel bad about it.
It's not their fault that there's so much misery in the world, nor do they have an obligation to fix it.
There are parents with little extra cash and homes without space for permanent guests who are going to accept their children back with some disappointment and disapproval for taking large risks and failing.
Children of the first set of parents are just going to be more comfortable going out and taking chances.
There are parents with little extra cash and homes without space for permanent guests who will welcome their child with open arms, proud of them for risking everything on a start up and encouraging them to try again.
* having a place to live if you go broke
* a place within some manageable travel distance ( i.e. same state/country/continent )
* a place where you will feel a warm sense of welcome
* a place where you will have creature comforts: a comfortable bed, a private room, an bathroom with minimal wait times
* a place where you don't need to contribute to living expenses, at least not right away and not until you can get back on your feet
* a place which is a good launching point for your next career
* (US) health care
Successful founders I know have all of these - every last one.
It seems to me that you're just taking the logical argument of better safety net --> lower overall risk --> better performance.
In reality the flow I've seen throughout the years is more like:
Big risk of failure --> additional motivation to succeed --> world changing technology.
If you have a safety net and your life is stable, why even take such a big risk like entrepreneurship?
https://www.theatlantic.com/family/archive/2020/07/pandemic-...
https://www.newsobserver.com/news/coronavirus/article2434685...
Don't we want, as a society, to encourage parents to do these things for their kids? Isn't that a net win for society as a whole?
The alternative would require a near 100% estate/death tax, wouldn't it?
Their problem was their mental model where their child's success was entirely due to their child's talents and drive, and that since they ( the parents ) had not provided any seed money, they had nothing to do with their child's success.
Myself, with family, mortgage, etc. I would never be able to achieve that kind of velocity if I were accepted to YC.
So, even if I had incredible ideas, as people around here keep saying, and PG makes clear in his Viaweb essay, it is not about the ideas but about execution.
Thus, the economic filtering for those who are unencumbered and thus can really execute on their idea or something that YC comes up with makes a lot of sense.
You do realize that by having a family and owning a house, you're pretty much on a completely different financial and stability level than a single young male.
And, if someone has family, house, etc. to provide stability do they need YC financial assistance?
Maybe I am missing something here, but why can't women do that too?
Not sure what skin colour has to do with the topic.
Could we stop assigning racial etiquettes and discriminating based on skin colour? Not to mention racial stereotypes in this case.
If you force start ups founders into dire financials situations, those who can afford it are way more likely to be white than black. That's why 75% of start up founders are white. Still not sure how skin color has to do with the topic?
This is bringing race into a discussion where it does not belong, this is perpetuating racial bias and racial discrimination. Your comment does the same.
I have flagged the original comment because I think this has no place on HN or anywhere.
There are many founders of various social identities who are not rich yet have managed to succeed with bootstrapping or small seed/accelerator investments because they are capable.
To assert that some people are inherently advantaged or disadvantaged as founders and/or entrepreneurs based on such factors as race and gender is the definition of prejudice.
There were pretty obvious, observable backgrounds/personality types that were starting businesses in my circle. Mostly SMBs like trading/retail firms, personal services, etc.
Well do to people assume that the masses are a bunch of hardscrabble foster children. Those folks exist. But the reality is that most people have families and have support systems to fall back on -- perhaps not as comfortable a fall-back as the kid where mom and dad are dentists or F500 executives, but not intolerable.
Startups aren't really businesses, so maybe they are different. Optimizing for successful venture funding cycle is a different problem.
If you're unsure where your next meal is coming from, then you probably aren't currently a good candidate to be a founder. Maybe later you will be, but first things first: accumulate a bit of wealth. Venture capital isn't a government welfare program. You might get YC or others to pay a sort of a social tax by providing a sort of welfare, but the founders won't be owners (see above).
If you're unsure where your next meal is coming from, you may still have a great idea and the ability to execute on it. If someone gives you enough money that you have the leeway to do those things, then everyone wins.
Obviously venture capital isn't welfare... no one has begun to suggest that it is. VC puts money into companies in exchange for equity because those companies need money. If the companies didn't ever need money, there would be no need for VC. The idea that VC should only fund people who already have plenty of capital available to them fundamentally misunderstands the entire model.
So whatever bizarre first-principles argument you're trying to make, which I am not really following, already doesn't match the current reality.
What has to be ensured is an equal opportunity for everyone regardless of color, sex, religion etc. As of today, we have it in this country and in the most civilized capitalist world.
In that light, SF is the wrong place because the rents are so high.
Rich, young, socially connected, white, dudes. That's a full Bingo card.
The reality is that millions of white people come from impoverished backgrounds. And millions of Indian, Asian, and yes even Black and Latino people are from wealthy backgrounds.
Polices designed to help economic diversity will necessarily and disproportionately help certain racial minorities and that’s all for the good. If you want to actually help the world stop making it about race when it is not. And feel free to make it about race when it actually is.
But also, most of the data in VC does suggest that racial/gender diversity is seriously lacking.
"I believe in this idea so much I am willing to gamble my short-term financial future on it" is a great way to find out what people really care about.
The diversity issue is real though. As is the broader issue of wealthy people being able to take on much more risk than normal people, leading to a reinforcement cycle (winners keep winning) and a winner take all outcome.
Which, now that I think about it, pretty much describes US capitalism perfectly.
Investors are trying to sell money, companies are selling a possibly enormous return on that money, it's a win-win and founders should be treated like the professionals they would be in industry.
Start ups have basically unlimited upside risk for investors and totally limited (to the amount of money invested) downside risk for them (and in the UK very healthy tax breaks for investing), the founders on the other hand loose years building a product that may prove worthwhile, don't make them carry years of financial pain and repercussions because they tried to grow your $5-$100K.
I think there's no real way for reducing checks to have meaningful impact at this point.
Is there any reason you included "white"? Are black people not able to be rich, or are white people more interested in tech, or are black people discriminated against by YC, or... what?
Without knowing the metrics for how YC judges the performance of its intake and their future objectives, there's no way of making sensible recommendations for how (or if) it should change.
https://www.ycombinator.com/deal/
My last company had a technical cofounder who by all means was highly sought after and managed a team of 15-20 other developers in their primary dev consulting company meaning not only did they rock technically but also had biz acumen.
That individual worked FOR FREE for 3 years 25 hrs/week before collecting any money.
Don't ever think you have to pay a developer some market salary (or any salary) upfront. If the idea + company + team is legit, they will jump at the chance to be involved.
"A developer" should definitely be paid market rates, otherwise they are a founder and should be rewarded accordingly with equity. I think this mindset of "getting work for free" is very damaging to the person holding the short end of the stick.
Someone who already has a well paid job, is willing to do a startup on the side, and actually be effective at it is extremely rare. What you'll usually find is someone at the beginning of their career that doesn't really understand what they are getting into.
Of course - as they were. My point was on cash money comp. Never said they worked for free hence their title of technical cofounder which implies equity.
"...and actually be effective at it is extremely rare. What you'll usually find is someone at the beginning of their career that doesn't really understand what they are getting into."
The onus is on the founding team to be sufficiently compelling to attract such a rare breed and if they execute correctly there is no short end to the stick to be had.
"That individual worked FOR FREE for 3 years 25 hrs/week before collecting any money."
so... yeah. you did say they worked for free.
you're a creep with all your talk about 'rare breeds'
Also, the individual in reference wasn't the of the gender you're assuming.
> The availability bias is the human tendency to think that examples of things that come readily to mind are more representative than is actually the case.
Ahh, my apologies, and thank you for the correction on gender.
also it's not working for free if you've got fat equity on the way because you're a co-founder - you're just taking your compensation in a different form.
so not only is this not some virtuous thing that they did out of the good of their heart, it's exploitative and should be looked at as an example of the reprehensible attitudes toward labor that have proliferated in the valley.
you're probably one of those people who think interns should work for free, and that weekends are for catching up on work.
* pick something famous * say it's dead * cherry pick the worst things about it * get your 10 minutes of fame
All it costs you are some burnt bridges. I've met several really smart founders from recent batches who are building something interesting. Making blanket statements like this is not particularly helpful to YC.
Famous institutions always attract climbers. That's inevitable, but it doesn't invalidate the institution.
If startups are coming into YC with a more mature product than in the early years (and it seems that way), then adjusting the focus towards fundraising actually makes sense.
Not to repeat what's been said in other comments, but to say that founders should be willing to put themselves in deep financial risk to prove their drive...that just comes from an incredibly privileged mindset.
It reminds me of the people saying that if their school is going online-only, students should instead take gap years to build something, incorrectly assuming that no one needs that student loan money for living expenses.
I suppose it depends on what YC wants to optimize for. You can risk giving money to not so serious founders or risk excluding ones who want to cap their risk.
I don't get why they would want to ban dev tools and SaaS. The latter especially is a huge segment. Many enormous companies like IBM and SAP are built around those types of offerings.
In 2019 the best business model was selling pitchforks to gold miners in San francisco, in 2020 the disruption happened. Big cities have a competitive advantage in terms of exploiting the Bezzle, but when that is gone then what?
Is the author's YC company's success somehow contingent on YC not having these types of founders?. If so, I have grave concerns about their company anyway. If not, like, what are you complaining about? YC's decision to accept people who match that profile literally has nothing to do with you.
Isn't it $125k/7% ? Which seems OK for pre-mvp or even pre-revrnue ? Worth it just for the network value?
Or is the selection so hard that most teams already have real traction ?
The point is valid - startups are a risk, and so if all the risk is removed, it will increase the number of people who are coming to YC for status vs. coming because they believe in their idea.
As good at interviewing as the YC partners may be, interviewing is no substitute for the harsh reality and incentives imposed by taking a great risk.
In fact, the whole cultural phenomenon of paying attention to what people tweet is deeply disturbing. Twitter is not designed to support rational argument supported by data, it's designed to be a morphine drip of novelty, a machine that dispenses mental M&Ms. People who follow twitter are like lab rats pressing a lever in exchange for a drop of sugar water. It's troubling to see this phenomenon invading HN.
It's nice that the commenters have pointed out most of the wrongness though.
http://www.paulgraham.com/marginal.html