Video games are a subset of entertainment which is capped in TAM by the population the game reaches, the amount of money they're willing to spend per hour on average, and average number of hours they can devote to entertainment.
In other words, every dollar you make off a game is a dollar that wasn't spent on another game, or trip to the movies, or vacation. And every hour someone plays your game is an hour they didn't spend working, studying, sleeping, eating, or doing anything else in the attention economy.
What makes this different from other markets is that there is no value creation or new market you can create from the aether to generate 10x/100x/1000x growth. And there's no rising tide to lift your boat and your competitors - if you fall behind, you sink.
The only way to grow entertainment businesses by significant multiples is by increasing discretionary income, decreasing working hours, or growing population with discretionary time and money. But those are societal-level problems that take governments and policy, and certainly not venture capital.
Talking about the shift raises the question of why it used to be the other way. Were VCs bad at picking founders who were honest and/or competent, or were VCs always wrong to mistrust founders?
“ Some say YC is now big enough that it has a self-fulfilling distortion effect where the best founders in the world know they should all apply to YC first before they talk to any other startup accelerators or investors.”
That’s an interesting point but I have to imagine all the worst founders know it too so the filtering may not have gotten easier. I’d be curious to hear from them.
This mirrors the military doctrine of "mission tactics" which entrusts subordinates with wide latitude in executing orders. But it requires a high degree of alignment and competence, which explains why YC focuses on founders over product or idea.
This makes sense in a dynamic environment with sensitive local conditions and "network lag" in the chain of command. But in more static or settled market environments it may be wiser (for investors) to focus elsewhere and restrict founder autonomy. We see this pretty commonly with successful founders who get "phased out" and replaced with more experienced managers.
I wonder how much this sort of "distributed decision-making" has been formalized and studied.
If it focused on founders over product or idea you’d see some actual heterogeneity in the YC set. It has been a few months since I last skimmed the startup lists but it seemed like 95% were LLM for X companies.
One recent concern I have is (anecdotally) how poor a deal YC startups I've seen are offering for founding engineers.
Before YC started, early hires who helped make a startup successful could get rich on stock.
YC may have changed the investment scene for the better in some ways, such that founders are less likely to screwed by investors. But today, early hires are the ones who seem to be getting screwed.
In cases I've seen recently, even if the startup has a nice exit for founders and investors, employees would have been better off as a worker drone at a FAANG-like.
Do we need PG to write an essay (or the richest managing partners to make a video), about the value of incentivizing early hires?
Or, don't even talk about the value of it (since some aspiring founders are aggressively confident now, that they know how all the ducks are lined up), but talk about new criteria: YC looks for a respectable pool to incentivize early hires as positive signal, when determining who to fund.
A related but slightly different impression of early YC that I mentioned the other day, touching on the "disingenous and exploitative finance" aspect this article alludes to:
> This reminds me of when YC seemed to be a response to the dotcom boom environment, a bit "by hackers, for hackers", to help hackers start Internet businesses. Rather than mostly only the non-hackers starting dotcoms (such as with affluent family angel investors and connections). Or rather than hackers having to spend their energy jumping through a lot of hoops, while dealing with disingenuous and exploitative finance bro types.
Given the argument around YC effectively "cancelling" naughty list founders. The John Wick Excommunicado poster for illustration is an interesting choice because John Wick is the hero of the series and is constantly being threatened by the institution that both created and emancipated him only to try to destroy him later. Not sure how intentional, but Reeves himself is beloved figure and often noted as a paragon of hard work and integrity in a grimy industry despite a reputation as a "bad actor".
And yet YC still makes bets on pretty easily detected BS like Pickle VR[0]. That's a startup I sure wouldn't trust.
Pickle is one of the most egregious examples, but I've noticed a trend of these fly-by-night operations with YC backing getting found out as frauds over the last handful of years. I don't know if it's happening more or if I just wasn't aware of them or if the rate was the same but people started talking about them more.
It is the nature of YC that you're going to get instances like Pickle. YC invests at a very early stage in lots of companies. 40% are literally just an idea. It isn't a scam that one of the companies pivot, it's expected. They're meant to work on their idea, and if it doesn't work or they have a better idea they pivot.
What Pickle is doing is essentially they're falling on the wrong line of "fake it to you make it", it would be totally fine to do what they're doing (allowing pre-orders with a $200 deposit for a Q4 '26 product) if they just weren't lying about the specs. It's pretty clear they aren't going to deliver anything like what they've promised, but that is just ambition. The whole point of YC is that 1 out of 1000 of these companies are going to deliver something revolutionary and you don't get that without 1000 of them trying to do something revolutionary.
Having said that, you only need to watch the launch video to realise the CEO is total moron ("If everyone wore the same pair of glasses, what would they look like?"). But the way YC works, they don't actually have the power to tell Pickle what to do. YC are going to lose their investment on that company.
Is YC still an (upwards going) thing? Looks like their best days are behind them, I'd say 2018-2019 was its heyday.
I don't feel bad for Paul Graham and his partners, I'm sure he's got his bag and then some, but from the outside it looks like it (the YC-adjacent thing, that is) lost big(-ish) when it came to riding the AI hype train.
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[ 3.1 ms ] story [ 54.0 ms ] threadVideo games are a subset of entertainment which is capped in TAM by the population the game reaches, the amount of money they're willing to spend per hour on average, and average number of hours they can devote to entertainment.
In other words, every dollar you make off a game is a dollar that wasn't spent on another game, or trip to the movies, or vacation. And every hour someone plays your game is an hour they didn't spend working, studying, sleeping, eating, or doing anything else in the attention economy.
What makes this different from other markets is that there is no value creation or new market you can create from the aether to generate 10x/100x/1000x growth. And there's no rising tide to lift your boat and your competitors - if you fall behind, you sink.
The only way to grow entertainment businesses by significant multiples is by increasing discretionary income, decreasing working hours, or growing population with discretionary time and money. But those are societal-level problems that take governments and policy, and certainly not venture capital.
That’s an interesting point but I have to imagine all the worst founders know it too so the filtering may not have gotten easier. I’d be curious to hear from them.
This makes sense in a dynamic environment with sensitive local conditions and "network lag" in the chain of command. But in more static or settled market environments it may be wiser (for investors) to focus elsewhere and restrict founder autonomy. We see this pretty commonly with successful founders who get "phased out" and replaced with more experienced managers.
I wonder how much this sort of "distributed decision-making" has been formalized and studied.
One recent concern I have is (anecdotally) how poor a deal YC startups I've seen are offering for founding engineers.
Before YC started, early hires who helped make a startup successful could get rich on stock.
YC may have changed the investment scene for the better in some ways, such that founders are less likely to screwed by investors. But today, early hires are the ones who seem to be getting screwed.
In cases I've seen recently, even if the startup has a nice exit for founders and investors, employees would have been better off as a worker drone at a FAANG-like.
Do we need PG to write an essay (or the richest managing partners to make a video), about the value of incentivizing early hires?
Or, don't even talk about the value of it (since some aspiring founders are aggressively confident now, that they know how all the ducks are lined up), but talk about new criteria: YC looks for a respectable pool to incentivize early hires as positive signal, when determining who to fund.
https://news.ycombinator.com/item?id=46437148
> This reminds me of when YC seemed to be a response to the dotcom boom environment, a bit "by hackers, for hackers", to help hackers start Internet businesses. Rather than mostly only the non-hackers starting dotcoms (such as with affluent family angel investors and connections). Or rather than hackers having to spend their energy jumping through a lot of hoops, while dealing with disingenuous and exploitative finance bro types.
Pickle is one of the most egregious examples, but I've noticed a trend of these fly-by-night operations with YC backing getting found out as frauds over the last handful of years. I don't know if it's happening more or if I just wasn't aware of them or if the rate was the same but people started talking about them more.
0. https://x.com/thedowd/status/2007337800430198913
What Pickle is doing is essentially they're falling on the wrong line of "fake it to you make it", it would be totally fine to do what they're doing (allowing pre-orders with a $200 deposit for a Q4 '26 product) if they just weren't lying about the specs. It's pretty clear they aren't going to deliver anything like what they've promised, but that is just ambition. The whole point of YC is that 1 out of 1000 of these companies are going to deliver something revolutionary and you don't get that without 1000 of them trying to do something revolutionary.
Having said that, you only need to watch the launch video to realise the CEO is total moron ("If everyone wore the same pair of glasses, what would they look like?"). But the way YC works, they don't actually have the power to tell Pickle what to do. YC are going to lose their investment on that company.
I don't feel bad for Paul Graham and his partners, I'm sure he's got his bag and then some, but from the outside it looks like it (the YC-adjacent thing, that is) lost big(-ish) when it came to riding the AI hype train.
Ah, now I know why the vibe of Humble Bundle changed.
The first ones were truly fun packages with soul. Now they're churned out without feelings, it feels all algorithms.