SpaceX and Tesla were really possible because of the large amounts of money that Elon put into the companies, it is estimated that Elon invested $100MM into SpaceX. his extremely impressive resume was not enough to receive the level of funding to get the company off the ground (get it?)
how can a first time entrepreneur actually receive substantial investment without putting in such a large personal investment?
It would clearly be a different path than Elon's startups. But it's impressive that YC is willing to do the funding legwork for such an ambitious company, if they believe in it.
I think that doesn't apply to very long time horizon projects. You might not have anything to show investors as progress until 10 years down the road. You either need enough money upfront or personal money to put in along the way.
This is something that YC can help with, though. They have shown a willingness to be much less risk averse than the average VC, and are at least making an effort to seek out long shots that probably would have trouble raising funds for a 10 year horizon project (such as SpaceX) on their own. YC can help a non-Elon Musk get started in the right direction for some of these projects, put in some money (both through YC VC and as angels), and help introduce these teams to the right partners at the right VC's for raising the right funds at the right time. This doesn't make it a sure thing that this will lead to more Tesla/SpaceX successes, but it can only increase the odds. Bravo.
Tesla would not exist if Elon Musk hadn't bet his personal fortune. He showed terrible results at first so all his investors gave up on him. Your average YC founder would not have been in a position to pony up $40M to do the Series E himself.
I 100% agree when it comes to software, but if we are talking about long term ground breaking technology.. how can you start a spaceship company without a $100M initial investment? what results can you show at an early stage?
it's an honest question and I think about this all the time. If you can solve the funding issue, I would bet a lot more people will choose the more ambitious projects. What can a spaceship company accomplish with $100k?
I feel like this is not a good comparison. Boeing took fifty years to go from the company that built that plane, to the company that helped build the Saturn V. I'm all for long time horizons, but I don't think that most startup founders envision spending fifty years on a company in order to finally, at the end of that, get to do what they wanted to do in the first place.
I don't know about most startup founders, but I think YC might be okay with a fifty-year time horizon given that Sam said that they invest with an "infinite time horizon" and that needing to raise a billion dollars over the course of a company's lifetime is a "plus".
Boeing didn't take a straight path from A to B so the timescale is not all that relevant. It's just an example of how things that seem impossible from a cold start seem more possible when you think in steps. It's not step 1 - raise $250m , step 2 - build spaceship.
Elon Musk seems like the counterexample because he started with so much capital and credibility. But he was very obviously thinking steps from the start. Each one risky. Build engine. Build high end car. Buildlower end cars. Maybe then build parts for other manufacturers.
Most big goals are reached in steps. The more difficult and risky the goal the more steps there are and the bigger and riskier they are likely to be but they are still steps.
If your goal is building spaceships you could start by doing something useful with satellites as a step 1. This could be a kickstart-able sized undertaking.
Obviously if you are trying to push the boundaries of what a cold start startup can possibly achieve, you are going to find yourself on the difficult-impossible border region but that's the point, isn't it?
On these multi-decade projects, it always seemed to me like
investors would be more interested if a few of the decades were
accomplished in advance of trying to achieve funding.
If your life's work was geared toward making money for investors someday
in case you encounter capital,
and you were not going to let a lack of capital keep you from starting your pressing
research anyway,
a number of decades would be expected to have elapsed before you had
the most attractive technology you could offer up for investment into.
For those things that truly require decades before maximum fruition,
there is no substitute for decades, just do it.
-Unfortunately, there seems to be far more opportunity out there than ability....
We should remember that good fortune often happens when opportunity meets with preparation.
-Pretty much everything will come to him who hustles while he waits.
Take a look at John Carmack's Armadillo Aerospace work, or at XCOR aerospace.
Design a better pump. Build a VTVL hopper. Work on a GPS that will work at high altitude / high acceleration. There's a whole group of new-space companies out there. Solve one of their pain-points.
Was Elon's resume impressive back in 2002 when he was starting SpaceX? That was before even Tesla, so as far as I can tell back in 2002 his resume had a BS in Economics, a BS in Physics, X.com, and Paypal.
Normally that would be plenty impressive, but I don't think that is a particularly impressive resume for somebody looking to start a rocket company. The connection between Paypal and space exploration isn't exactly strong, even with an undergraduate degree in physics. I suppose he could also put "hassled Russians for a decommissioned ICBM" on his resume too though. ;)
> Was Elon's resume impressive back in 2002 [..] and Paypal
Paypal wasn't exactly some trivial event in his life, it IPOed in early 2002 and made him (and his investors) fabulously wealthy. It was also one of the first successful IPOs in the wake of the .com bubble bursting.
Musk made ~$25M from shares that were sold in the IPO, and his remaining stake of the company (10 percent!) was worth somewhere near $150M.[1] I'd say that's a pretty impressive resume.
It's a bit easier to start a rocket company when your net worth is in the 9-digit range and you just made a bunch of investors a ton of money in your first project.
But Tesla is a good example of starting reasonably. The Roadster was mostly a Lotus Elise and the batteries were off-the-shelf notebook batteries, for example.
That's oversimplifying the problem. Even if you use some common parts, it's still designing a new car. Even if you use proven battery tech, it's using it at a different scale.
It's only in hindsight that it was reasonable to start a car company in Silicon Valley at all.
> But Tesla is a good example of starting reasonably.
The Tesla Roadster was first shown to the public in July of 2006. By that time, Tesla had already raised (and spent) nearly $60M. Before they sold the first Roadster, they had raised $145M including $40M of Elon's own money.
Plowing $150M into a car company before making a sale isn't remotely reasonable.
You don't need to be a first time founder to apply to YC. You also can still benefit massively from the connections YC can afford you even if you're an experienced startup founder already.
This list seems like YC is (publicly, at least) expanding their vision. Previous RFS lists seemed mostly like software ideas, while this list seems more focused on problems and markets, regardless of technology.
Any chance we can form an Ideas list please folks:
My starter for ten:
"The Internet lets people around the world coordinate action" HelpYourNeighbour.com
Given certain amounts of basic training and oversight, social services could outsource small amounts of care to anyone willing to help - elderly person in need of trip to doctors, local park needs trees planting. All this is kind of sort of done on adhoc basis by charities - seems very inefficient and probably lacks the network effect lift that a single government approved point has.
I like the ambition but a lot of Startups like this will have their roots in basic research (read: University labs). That leads to interesting dynamics (and issues) with the founding teams. e.g. Profs who have been critical in developing tech but are not jumping ship into the startup lifestyle (although continued involvement is key). I've seen this play out with some ugly stories (people got screwed) and some enlightened ones (balance was struck). Does YC have any views/experience with this?
Fwiw, I'm working on internet infrastructure (see profile)
I feel like this is a big shift in focus for YC and for the industry if others follow suit. This will do a lot of good in changing the image of the typical startup, from who starts them to what their ambitions are, signaling to those in other industries that the valley isn't just about young code-slingers and iOS apps. I hope this encourages people in STEM with years of specialized domain experience to look at starting a company as a seriously viable option.
It's a huge shift in terms of funding levels. Instead of getting $100k to build a focused software startup focusing essentially on a single "simple" problem, you usually need around $10-$100 million to get started on these big problems.
On the other hand, one can start with $100k which is mainly used to secure the rest of the funding.
This new "shift" is essentially what the Founders Fund is trying to do.
Someone needs to show that you can actually make money with something like this. The problem with these sorts of ventures is that besides being capital-intensive and risky, it can be quite hard to capture the economic benefits of the development in a way that justifies the investment.
There's also the issue of whether Silicon Valley has the requisite infrastructure to facilitate these sorts of projects. If you want to do projects in robotics, DARPA has both money to give you, deep connections with the universities developing the basic science, and a program manager to manage the project that typically has a PhD in the field. There's a lot of downsides to DARPA, namely that everything has to have some sort of military angle, but there's a wealth of technical expertise sloshing around there.
> If you want to do projects in robotics, DARPA has both money to give you, deep connections with the universities developing the basic science, and a program manager to manage the project that typically has a PhD in the field.
The last head of DARPA now heads up Google X. SFBA has tens, if not hundreds, of billions of dollars available to it.
Capability isn't the question. Its the will that matters. As an investor, are you willing to sacrifice returns for the equivalent of the laser or the transistor?
Well first, I think Google starting engineer salaries are closing in pretty quickly on what the head of DARPA makes, so there's that aspect of things. Second, SFBA does have a lot of money, but it's expertise is in investing that money into consumer products. It does not have an established track-record of doing fundamental R&D, and VC's don't have the kind of technical expertise (in the relevant areas) a place like DARPA does.
Now could they acquire that capability? Sure, with time and money you can buy whatever you want. But will comes into play there--why invest in that capability when you can get quicker returns in consumer products?
I do agree, though, that a big corporate R&D lab like at Google is better-positioned to tackle these sorts of projects than VC-funded start ups.
The only thing that really matters for YC is if the company can be acquired. With Google just buying a bunch of robotics companies and the belief in "geek exceptionalism" as high as ever I've seen worse bets.
Why not? Advances in materials, energy, batteries, would be right up Boeing's alley. Diagnostics, communications for planes? What if YC funded a company that had a novel method to make petroleum extraction 20% faster, cleaner or more efficient? Or could help scale lotus-effect paints to mass production? Or could bring big data/ machine-learning to health care to crunch through our habits and health history to find strange correlations and insights that we wouldn't think of?
YC now (publicly) looks like it's working on the ideas and types of companies that the world needs more of. If this shift is real, it opens up YC to smart people without CS degrees. (I know it was before, but it's perception as well) And there are exits, they're just outside of SV. GE, Philips, Exxon, GSK, Pfizer, Bombardier...
The value of YC is the connections, expertise, and support it provides. In terms of these things, what does it bring to the table in oil extraction or aerospace? You're not showing how to get from point A to point B.
> it can be quite hard to capture the economic benefits of the development
This is a key issue, I think. When doing something technically innovative, a very common pattern is that the team that spends all the money & time up front to get the first working version is not the one that ends up with the successful market leadership: once the up-front investment is sunk, a 2nd team can much more cheaply iterate on the market/business side of things and capture the market without spending money on the R&D. Sometimes it might even be a different market, since inventions researched for one purpose may turn out to be applicable in another field. Patents are an attempt to provide a mechanism to reimburse the first group in that scenario, but are pretty imperfect.
One reason I prefer to see research publicly funded is that I think it's often good that it's difficult to capture/monetize the benefits benefits of research breakthroughs. I'd rather not have researchers spending their time trying to figure out how to encumber/"own" the results of their research out of a need to get their investors an ROI.
With YC companies not solving hard problems in computing I don't see them suddenly solving hard problems in other fields. And with "hard problems" I don't (only) mean CS, I mean problems with the state of computing like security, robustness, cross-platforms tools etc. that could be huge enablers for other fields.
Spot on. A VC will fund something really risky and innovative if and only if they think they'll likewise make a larger profit from it compared less risky ventures. But as pointed out by other commenters even this risk-taking is limited.
Ventures like SpaceX and Tesla that have a long lead time and (at least in these two cases) are loss-making at the start probably wouldn't get YC-VC funding. Or at least they wouldn't get anywhere near the level of funding they'd need to get to profitability point.
I wager that for some of the really big world-changing projects we simply have to be willing to fund it as long as necessary, taking an extremely long-term view. And for this, VC funding is probably not going to be enough. Both Tesla and SpaceX needed to take in public (read: Government) funding to keep going.
This is great news. Many colleges and universities have been focusing on these types of startups for the past 5-10 years for their own VC type competitions, and now YC is seeing the value in them too. Hopefully many others will follow suit. Rock Health has been doing this for a while and has been pretty successful in the biotech/healthcare scene.
I thought it was interesting (and a bit funny) to see powered exoskeletons on an RFS so close to Elon Musk's companies, given the running joke about him being the real life Tony Stark.
So my lab is working on treatment and vaccine candidates for early childhood infections -- some of which have severe health impacts in second and third world countries. We're primarily government funded (state and NIH), but we'd love more collaboration with our clinical counterparts, especially not in the US. Would YC back a company whose sole purpose is to interface between wetlab people and people people? I would like to setup a group that does this, but its seems infeasible without the right corporate connections.
"It used to be the case that governments funded a lot of development of breakthrough technologies. The bad news is that they have mostly stopped"
That statement is very passive. There has been a shift in the past 30-35 years in public perception as to whether or not government is an agent of good (with noted problems) or if it is unfortunately necessary but the smaller it is the better we are all off. Unfortunately, in my view, those who believe in investing in basic research are losing out to those who believe the existing market structure is always superior.
I'm highly doubtful that YC or other similar groups really have the stomach for the long term investment that is necessary to make up for that loss of government backing. If your model is that waving a couple hundred million dollars around will induce a eureka moment in somebody smart, it is bound to be a failure. Real breakthroughs typically seem like breakthroughs but actually were the result of spending decades and a lot of money searching dead ends and making incremental progress.
At best it seems like YC can pick some slightly higher hanging fruit than the current model allows, but they can't afford to reach very high.
- smart pothole patches. Currently patches barely make the road any more driveable and uneven road surfaces result in billions in economic loss due to accidents, repairs, and traffic.
- drone machine equipment. Employ operators in the midwest in trailers while they control equipment all over the world. You'll get few accidents and utilize resources more efficiently. Put the operators in geographically advantageous locations and you can run the equipment 24/7.
- Volunteer traffic shaping network. I figure all you need is 15-20 volunteer drivers to effectively eliminate rush hour stop and go traffic on one side of a highway by throttling throughput. Create an app to help coordinate and reward them.
You already have millions of internet connected (gps localized) accelerometers on the roads daily. If you could convince enough drivers to record/report that information you'd have a decent map of any rough spots.
Good luck with that. If you even tried to convince drivers to do that, they'd scream about a conspiracy to track everyone's movement (beyond the tracking that already exists).
That exists, it seems to be a popular civic hack-a-thon project[1]. I'm not too worried about identifying pot holes, I'm more interested in road construction that avoids them completely or makes them easier to fix in a better way,
On potholes, there is more recent technology called "infrared repair" that heats up existing asphalt instead of a cut and replace method. You have to get the government to adopt it.
I have seen that, which is what made me more convinced we need better pot hole repair and road construction. Those systems are expensive and complicated. What I envision is something even easier and fool proof than a large piece of equipment you need extensive training on. It should be dumber than cutting the pavement and filling it with new asphalt.
I'm imagining essentially a self leveling cement that untrained people can use that has the same lasting properties of the infrared repair solutions.
> Throughout history, when the cost of energy has come down a lot (for example, with the steam engine)
I'm going to have to review my physics textbook, but I could swear that steam engine consumes energy.
edit: Can't believe I'm getting downvoted. I thought this place was full of pedantic engineers, like me?
The steam engine turns energy into work. If anything, it probably increased the price of energy (at least temporarily, until the steam engine was put to work in the fossil fuels mining business).
I think you know what he meant. But just in case: the steam engine allowed people to harness energy that would have been impractical or even impossible to harness without it.
I totally know what he meant, but he's wrong--the steam engine likely increased the price of energy, at least in the short term, but creating increased demand for it.
"The price of energy" is kind of a confusing term when you're comparing fuel that may be burned to produce steam with fodder that may be fed to draft animals. Per unit of work produced, coal beats hay hands-down. It may be that the price of coal increased once it was used for more than heating and smelting, but that's the price of coal, not "the price of [mechanical] energy".
> I'm going to have to review my physics textbook, but I could swear that steam engine consumes energy.
If you're going to be pedantic, at least be correct.
If you were to consult your physics textbook, somewhere near the beginning under the heading "Conservation of Energy", you'd see that the steam engine neither creates nor destroys energy, merely transforms it into a different form.
I didn't say that the steam engine created or destroyed energy, but that it consumes it (e.g. it burns coal and uses the energy to perform work). Conservation of energy is a given.
> I didn't say that the steam engine created or destroyed energy, but that it consumes it (e.g. it burns coal and uses the energy to perform work). Conservation of energy is a given.
Technically you said that the steam engine consumes energy. Which is silly since it merely consumes coal (which contains energy).
But point taken, your meaning was implied and obvious but not explicit. Sorry for wasting your time with a needlessly pedantic correction that added nothing to the conversation.
In light of this new information, are you still confused about the downvotes for your initial comment?
I hope someone is crazy enough for the Tall Tower project. It is the kind of project the Human Race needs to convince ourselves that we are still capable of getting Big Things done.
If you don't know about it already, it is a project jump-started in part by Neal Stephenson, to build a 15km tall tower.
No. Getting into space (starting at 100 km) is relatively easy. Staying in space, i.e. reaching orbit, is the hard part, because you need a very high speed to do this. xkcd's what-if #58 sums it up pretty well.
But even then, 15 km would only be ~5% of a typical low earth orbit (LEO) of 300 km, so ... yeah, not worth it at all.
But the net cost is higher because of all the money spent on building the tower. Why not just launch from the top of a mountain? Or build the tower on top of a mountain?
Despite democratic propaganda, government is a particular institution within society with its own particular capabilities, faults, and goals. It is not an avatar of the will of the united people.
My ultimate goal is to work on a project like this. For now though, I have a hard enough time coming up with bad ideas. I can't imagine how I'll end up in a position where I know how to fix real problems.
"It used to be the case that governments funded a lot of development of breakthrough technologies. The bad news is that they have mostly stopped"
I have to plug the newest BBC In Our Time podcast on absolute zero - where basic science research (hey let's see how cold we can make this gas? Cool! Now this one?) provided refrigeration, superconductivity, superfluids, MRI scanners and more.
We cannot think VC can replace government long term funding but we can and should support VCs who are willing to go all in on long term funding and make it cool again. Politicians will go a long way on just standing next to billionaire investors for photoshoots.
It stands for Request for Startups, which is a wink and nod (reference) to documents that describe internet standards, which are called RFC. For example, the document that lays out the HTTP protocol is RFC2616 https://tools.ietf.org/html/rfc2616
What does RFC stand for? "Request for Comments". Presumably, because standards have to be reviewed by other people and get their feedback.
This sounds terrific, but it doesn't seem self-consistent between wanting companies with the scale of ambition of SpaceX and Tesla, but insisting on early momentum being critical and avoiding a big and expensive initial project.
Tesla took four years to introduce their first product, the Roadster. When they went public two years later, they had gone through a net loss of around 300 million dollars, and were still two years away from introducing the Model S. Even then, it had a few near-death experiences. SpaceX took 200 million dollars of investment, and took four years to launch their first flight, which failed. Over the next two years, their second and third flights also failed. Neither company really showed momentum until seven to nine years after founding.
It would be nice to see a clear path from a three-month-to-demo-day minimum viable product to a breakthrough company that overturns a capital-intensive industry, but it's hard to think of good examples of this so far. At the least, it would probably require substantial development before applying to YC, and/or starting with a very limited prototype.
Both Thalmic Labs and the Meta project are examples of longer term projects that raise money through YC. There are a bunch more in the current batch that have a much longer time frame. While the three month demo is a constraint, it is not one that kills ambitious projects at YC.
Given that these more visionary, long-term, scientific startups will often require founders of a different demographic than what we're used to seeing (eg. older, more experienced in a given field, maybe with obligations like a spouse and kids), will you guys modify your approach to evaluating applications, more specifically the founding teams?
Sure, there is a subset of science-oriented startups that don't require founders who fit that description, but for many of the industries listed in the article to be disrupted, you'd need doctors, lawyers, researchers, biotech engineers -- ie. seasoned experts who understand the intricacies and harsh realities of their fields -- and many of them would certainly fit my description. I'm assuming that the type of startups they're looking to fund include those that try to "fix" these industries, instead of building a product that sits on the periphery -- eg. a healthcare solution to help streamline the claims process vs. an app for patients to record bowel movements.
This isn't like normal tech-transfer. Most of the teams that would be looking for funding on a break-through idea, and can't get it from NIH/NSF aren't going to be seasoned tenured faculty. They're going to be senior graduate students and young post-doc's. They'll know the field, but they will have radical ideas and won't fit in to the academic funding heterodoxy. They'll probably be 25-35.
D-wave is a great example of a company in the class described. Founded in 1999, they didn't ship their first quantum computer until 2011. However, they were able to show progress along the way, solving sub-challenges and as a result were able to raise many rounds of funding before ever shipping a product.
http://en.m.wikipedia.org/wiki/D-Wave_Systems
I'd like to think my last startup was a breakthrough technology startup. We were building software, not sending things into space, so weren't nearly so capital intensive, but went through several iterations (discovering breakthroughs is research, and research takes time!), had some near-death experiences, and didn't have a compelling product for 5 or so years. However, fundamental advances are incredibly valuable, and things changed quickly once we got there. I think this is a great model for startups, esp. if you have propensity for technology development. However, it can be hard to fund. I agree, the OP seems unrealistic.
But it's plausible as a fast, minimal entry point to electric vehicles in general, potentially attracting more capital to expand a proven product line, instead of trying to start with a car. I hope they're planning something like that.
I think another company ate their lunch, unfortunately. Came out with a similar product for 1/2 the price and 2x the range. That company also makes other EVs..
I didn't want to link it since it's a pretty uncanny clone and I'm not sure how I feel about it, but here it is: http://e-go.com/
They're for sale now, whereas boosted is still a month away from the 2nd batch preorder that I made.
On the weight-range-performance triangle, boosted picked weight and performance, where as this company picked weight and range. This board seems like a better setup for commuting, whereas boosted might be better for the "sport" of longboarding with its 2kw dual-motors.
I would be especially interested in this, as I fall into what I consider the relatively rare demographic of skateboarder/HN reader. As far as I knew, Boosted Boards had the most elegant solution from a consumer point of view.
All of the alternatives I have seen either are too heavy, too expensive, insufficient range or power, or simply created without an understanding of how a skateboard functions.
I don't think "ate their lunch" is a reasonable description, it's early days and successful startups win over the long run. The "E-Go" board you linked to below has hardly any of the mindshare that boosted boards has, and their website doesn't inspire much confidence that their product is anything more than a cheap knockoff that pretends to have more range by reducing top speed.
The point isn't to try and do everything right off the bat, but rather to find a the right size bit of the "capital intensive" problem for a startup to bite off and chew.
From Sam's article:
> We think the YC model works well for these companies. We invest with infinite time horizon and are not afraid of risky-looking companies. ... And our model helps companies figure out a right-sized initial project achievable with a small amount of time and money—great companies get built with a series of small wins that compound over time, and early momentum is critical. A common failure mode of many ambitious companies is to bite off an initial project that is far too big and expensive.
One could imagine a company building high-altitude autonomous drones and/or non-orbital rocketry as a step towards full orbital capacity like SpaceX.
ScaledComposites followed a somewhat similar model: it took them 3 years to build SpaceShipOne[1] and win the X-Prize. That attracted enough investment for them to begin work on the VirginGalactic stuff.
3 years may be a lot longer than the typical 3 months YC development cycle, but it's easy to imagine building a scaled down drone version in 3 months (After all: "it's just a remote control plane").
SpaceShipOne took 18 months to get to first (unmanned) flight.
What these all had in common AFAICT is one or more über rich individuals that see it as their personal goal to make this happen. In a way, these are more than just companies. They are also one of the many hobbies the über rich can partake in. Had they not also been the hobby of one or more rich individuals, they probably would have never gotten as far as they have.
I have wanted to experiment with some ideas that would solve "real world" problems, but software has always been vastly more accessible. Maybe YC could also consider funding companies with consumer products aimed at making other fields more accessible at home. Sort of analogues to the cheap personal computer. Like the Personal Lab, Personal Biobrick Lab, Personal Fab Lab.
Another idea is just any consumer focused startup in one of the areas he focused on. For example an inexpensive solar panel kit you could buy at Walmart. Or maybe advanced hydroponics kits for people to grow some of their own food. I believe the key to really taking advantage of new technologies in an efficient way is to get them widely distributed and into the hands of individuals and families. And I think that high tech solutions to a number of traditionally highly centralized or large organization-driven areas such as energy and food production can make better distribution of those things practical and will result in not only a more efficient but also more robust and secure future for families.
A distinction between actual breakthrough companies and meta-breakthrough ones would be nice. Companies that enable others to magnify their efforts (such as https://experiment.com/) are different from ones that create new tech (Tesla/SpaceX). Meta companies have fuzzier goals and have longer term goals than tech ones. They are also, perhaps, more software oriented than tech ones.
YC will need a change in their funding model if they want to fund these type of technologies. $14k to $20k is irrelevant if you need 3 years R&D and/or $5M capital to prototype; we need new metrics for funding businesses with high capital cost and/or long incubation time.
Yup. And, it can't be "idea to demo day" in 3 months for those hardware issues where iterations take weeks (or at least days) compared to hours/minutes for compile-time on software.
I love the change in focus to be more bold, real, rather than just chasing easy things like software/apps/games. But, the model must change too. I think Sam & team are up for that challenge, & will adapt, so don't think of this as a permanent shortcoming in any way.
I would assume companies applying to this RFS would be mostly in their later stages and probably already have some type of funding. A lot of these seem to require significant costs up front.
One thing that makes YC and other incubators so amazing is people who didn't grow up with a wealthy family and have financial obligations such as student loans can hack together a prototype over a weekend, apply to YC, and have almost as good of a chance of getting in as anyone else. I can totally see why YC would want to fund later stage companies though.
I would imagine that these types of startups don't work with YC's traditional valuation and round sizes. I hope they start changing the terms, especially as they now have enough data to find a better "break even" number.
For instance, I'm tackling energy economics, and doing business development alone in this industry dwarfs YC's round.
$20,000 for 2-10% of investment isn’t particularly attractive when you need to raise an enormous amount of money. Moreover, Y Combinator doesn’t have partners with relevant experience in most of these markets.
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[ 2.9 ms ] story [ 256 ms ] threadhow can a first time entrepreneur actually receive substantial investment without putting in such a large personal investment?
Elon is an all-in kind of guy, but has his hands full. More Elons please.
it's an honest question and I think about this all the time. If you can solve the funding issue, I would bet a lot more people will choose the more ambitious projects. What can a spaceship company accomplish with $100k?
Here's the first product of Boeing, which built the bottom stage of the Saturn V:
http://www.boeing.com/boeing/history/boeing/bw.page
Elon Musk seems like the counterexample because he started with so much capital and credibility. But he was very obviously thinking steps from the start. Each one risky. Build engine. Build high end car. Buildlower end cars. Maybe then build parts for other manufacturers.
Most big goals are reached in steps. The more difficult and risky the goal the more steps there are and the bigger and riskier they are likely to be but they are still steps.
If your goal is building spaceships you could start by doing something useful with satellites as a step 1. This could be a kickstart-able sized undertaking.
https://www.google.ie/search?q=site:https://www.kickstarter....
Obviously if you are trying to push the boundaries of what a cold start startup can possibly achieve, you are going to find yourself on the difficult-impossible border region but that's the point, isn't it?
If your life's work was geared toward making money for investors someday in case you encounter capital, and you were not going to let a lack of capital keep you from starting your pressing research anyway, a number of decades would be expected to have elapsed before you had the most attractive technology you could offer up for investment into.
For those things that truly require decades before maximum fruition, there is no substitute for decades, just do it.
-Unfortunately, there seems to be far more opportunity out there than ability.... We should remember that good fortune often happens when opportunity meets with preparation.
-Pretty much everything will come to him who hustles while he waits.
--TAEdison
Design a better pump. Build a VTVL hopper. Work on a GPS that will work at high altitude / high acceleration. There's a whole group of new-space companies out there. Solve one of their pain-points.
Normally that would be plenty impressive, but I don't think that is a particularly impressive resume for somebody looking to start a rocket company. The connection between Paypal and space exploration isn't exactly strong, even with an undergraduate degree in physics. I suppose he could also put "hassled Russians for a decommissioned ICBM" on his resume too though. ;)
Paypal wasn't exactly some trivial event in his life, it IPOed in early 2002 and made him (and his investors) fabulously wealthy. It was also one of the first successful IPOs in the wake of the .com bubble bursting.
Musk made ~$25M from shares that were sold in the IPO, and his remaining stake of the company (10 percent!) was worth somewhere near $150M.[1] I'd say that's a pretty impressive resume.
It's a bit easier to start a rocket company when your net worth is in the 9-digit range and you just made a bunch of investors a ton of money in your first project.
[1] - http://news.cnet.com/2100-1017-935360.html
It's only in hindsight that it was reasonable to start a car company in Silicon Valley at all.
The Tesla Roadster was first shown to the public in July of 2006. By that time, Tesla had already raised (and spent) nearly $60M. Before they sold the first Roadster, they had raised $145M including $40M of Elon's own money.
Plowing $150M into a car company before making a sale isn't remotely reasonable.
Why not? After all, it resulted in Tesla.
My starter for ten:
"The Internet lets people around the world coordinate action" HelpYourNeighbour.com Given certain amounts of basic training and oversight, social services could outsource small amounts of care to anyone willing to help - elderly person in need of trip to doctors, local park needs trees planting. All this is kind of sort of done on adhoc basis by charities - seems very inefficient and probably lacks the network effect lift that a single government approved point has.
Fwiw, I'm working on internet infrastructure (see profile)
On the other hand, one can start with $100k which is mainly used to secure the rest of the funding.
This new "shift" is essentially what the Founders Fund is trying to do.
There's also the issue of whether Silicon Valley has the requisite infrastructure to facilitate these sorts of projects. If you want to do projects in robotics, DARPA has both money to give you, deep connections with the universities developing the basic science, and a program manager to manage the project that typically has a PhD in the field. There's a lot of downsides to DARPA, namely that everything has to have some sort of military angle, but there's a wealth of technical expertise sloshing around there.
The last head of DARPA now heads up Google X. SFBA has tens, if not hundreds, of billions of dollars available to it.
Capability isn't the question. Its the will that matters. As an investor, are you willing to sacrifice returns for the equivalent of the laser or the transistor?
Now could they acquire that capability? Sure, with time and money you can buy whatever you want. But will comes into play there--why invest in that capability when you can get quicker returns in consumer products?
I do agree, though, that a big corporate R&D lab like at Google is better-positioned to tackle these sorts of projects than VC-funded start ups.
And interestingly it also seems to go against Mark Cubans SV hypothesis as well.
https://news.ycombinator.com/item?id=7430152
YC now (publicly) looks like it's working on the ideas and types of companies that the world needs more of. If this shift is real, it opens up YC to smart people without CS degrees. (I know it was before, but it's perception as well) And there are exits, they're just outside of SV. GE, Philips, Exxon, GSK, Pfizer, Bombardier...
This is a key issue, I think. When doing something technically innovative, a very common pattern is that the team that spends all the money & time up front to get the first working version is not the one that ends up with the successful market leadership: once the up-front investment is sunk, a 2nd team can much more cheaply iterate on the market/business side of things and capture the market without spending money on the R&D. Sometimes it might even be a different market, since inventions researched for one purpose may turn out to be applicable in another field. Patents are an attempt to provide a mechanism to reimburse the first group in that scenario, but are pretty imperfect.
One reason I prefer to see research publicly funded is that I think it's often good that it's difficult to capture/monetize the benefits benefits of research breakthroughs. I'd rather not have researchers spending their time trying to figure out how to encumber/"own" the results of their research out of a need to get their investors an ROI.
I didn't become an engineer to crank out CRUD apps in some rock star's crazy DSL all day.
Ventures like SpaceX and Tesla that have a long lead time and (at least in these two cases) are loss-making at the start probably wouldn't get YC-VC funding. Or at least they wouldn't get anywhere near the level of funding they'd need to get to profitability point.
I wager that for some of the really big world-changing projects we simply have to be willing to fund it as long as necessary, taking an extremely long-term view. And for this, VC funding is probably not going to be enough. Both Tesla and SpaceX needed to take in public (read: Government) funding to keep going.
In all seriousness, fixing my local animal shelter's web site has a bigger impact on this planet than 99% of Silly Valley's app lottery.
That statement is very passive. There has been a shift in the past 30-35 years in public perception as to whether or not government is an agent of good (with noted problems) or if it is unfortunately necessary but the smaller it is the better we are all off. Unfortunately, in my view, those who believe in investing in basic research are losing out to those who believe the existing market structure is always superior.
I'm highly doubtful that YC or other similar groups really have the stomach for the long term investment that is necessary to make up for that loss of government backing. If your model is that waving a couple hundred million dollars around will induce a eureka moment in somebody smart, it is bound to be a failure. Real breakthroughs typically seem like breakthroughs but actually were the result of spending decades and a lot of money searching dead ends and making incremental progress.
At best it seems like YC can pick some slightly higher hanging fruit than the current model allows, but they can't afford to reach very high.
- smart pothole patches. Currently patches barely make the road any more driveable and uneven road surfaces result in billions in economic loss due to accidents, repairs, and traffic.
- drone machine equipment. Employ operators in the midwest in trailers while they control equipment all over the world. You'll get few accidents and utilize resources more efficiently. Put the operators in geographically advantageous locations and you can run the equipment 24/7.
- Volunteer traffic shaping network. I figure all you need is 15-20 volunteer drivers to effectively eliminate rush hour stop and go traffic on one side of a highway by throttling throughput. Create an app to help coordinate and reward them.
You already have millions of internet connected (gps localized) accelerometers on the roads daily. If you could convince enough drivers to record/report that information you'd have a decent map of any rough spots.
Good luck with that. If you even tried to convince drivers to do that, they'd scream about a conspiracy to track everyone's movement (beyond the tracking that already exists).
[1] https://www.google.com/search?q=pot+hole+detection+app
https://encrypted.google.com/search?hl=en&q=infrared%20repai...
I'm imagining essentially a self leveling cement that untrained people can use that has the same lasting properties of the infrared repair solutions.
I'm going to have to review my physics textbook, but I could swear that steam engine consumes energy.
edit: Can't believe I'm getting downvoted. I thought this place was full of pedantic engineers, like me?
The steam engine turns energy into work. If anything, it probably increased the price of energy (at least temporarily, until the steam engine was put to work in the fossil fuels mining business).
Before the steam engine, there was the horse. The horse turned a much smaller fraction of the energy input into useful work.
This means that the steam engine lowered the cost of useful work. We (over)simplify this, and say that the steam engine lowered the cost of energy.
But I have a nagging feeling that I may be explaining the blindingly obvious to the deliberately obtuse...
If you're going to be pedantic, at least be correct.
If you were to consult your physics textbook, somewhere near the beginning under the heading "Conservation of Energy", you'd see that the steam engine neither creates nor destroys energy, merely transforms it into a different form.
Technically you said that the steam engine consumes energy. Which is silly since it merely consumes coal (which contains energy).
But point taken, your meaning was implied and obvious but not explicit. Sorry for wasting your time with a needlessly pedantic correction that added nothing to the conversation.
In light of this new information, are you still confused about the downvotes for your initial comment?
If you don't know about it already, it is a project jump-started in part by Neal Stephenson, to build a 15km tall tower.
http://hieroglyph.asu.edu/project/the-tall-tower/
https://www.youtube.com/watch?v=TE0n_5qPmRM
But even then, 15 km would only be ~5% of a typical low earth orbit (LEO) of 300 km, so ... yeah, not worth it at all.
This tower seems like a truly useless project.
[1] http://what-if.xkcd.com/58/
If such a tower were built, it would indeed be a huge waste of natural resources; but it would improve our engineering abilities.
I'm pretty sure we can improve our engineering abilities in much more constructive, useful ways.
Aren't all social services crowdfunded?
This is actually kind of a nice illustration of how backwards our ideas of social services have become.
I have to plug the newest BBC In Our Time podcast on absolute zero - where basic science research (hey let's see how cold we can make this gas? Cool! Now this one?) provided refrigeration, superconductivity, superfluids, MRI scanners and more.
We cannot think VC can replace government long term funding but we can and should support VCs who are willing to go all in on long term funding and make it cool again. Politicians will go a long way on just standing next to billionaire investors for photoshoots.
As far as I can tell, the other answer on your comment seem to be the only place on the internet where this usage of this acronym is documented.
What does RFC stand for? "Request for Comments". Presumably, because standards have to be reviewed by other people and get their feedback.
I assume the spirit is same here.
Tesla took four years to introduce their first product, the Roadster. When they went public two years later, they had gone through a net loss of around 300 million dollars, and were still two years away from introducing the Model S. Even then, it had a few near-death experiences. SpaceX took 200 million dollars of investment, and took four years to launch their first flight, which failed. Over the next two years, their second and third flights also failed. Neither company really showed momentum until seven to nine years after founding.
It would be nice to see a clear path from a three-month-to-demo-day minimum viable product to a breakthrough company that overturns a capital-intensive industry, but it's hard to think of good examples of this so far. At the least, it would probably require substantial development before applying to YC, and/or starting with a very limited prototype.
I'm not convinced that this describes the Thalmic guys at all.
There are lots of these types of people in every recent YC batch.
They're for sale now, whereas boosted is still a month away from the 2nd batch preorder that I made.
On the weight-range-performance triangle, boosted picked weight and performance, where as this company picked weight and range. This board seems like a better setup for commuting, whereas boosted might be better for the "sport" of longboarding with its 2kw dual-motors.
All of the alternatives I have seen either are too heavy, too expensive, insufficient range or power, or simply created without an understanding of how a skateboard functions.
From Sam's article:
> We think the YC model works well for these companies. We invest with infinite time horizon and are not afraid of risky-looking companies. ... And our model helps companies figure out a right-sized initial project achievable with a small amount of time and money—great companies get built with a series of small wins that compound over time, and early momentum is critical. A common failure mode of many ambitious companies is to bite off an initial project that is far too big and expensive.
Boosted Boards is exactly such a company.
ScaledComposites followed a somewhat similar model: it took them 3 years to build SpaceShipOne[1] and win the X-Prize. That attracted enough investment for them to begin work on the VirginGalactic stuff.
3 years may be a lot longer than the typical 3 months YC development cycle, but it's easy to imagine building a scaled down drone version in 3 months (After all: "it's just a remote control plane").
SpaceShipOne took 18 months to get to first (unmanned) flight.
[1] http://en.wikipedia.org/wiki/Scaled_Composites_SpaceShipOne
Another idea is just any consumer focused startup in one of the areas he focused on. For example an inexpensive solar panel kit you could buy at Walmart. Or maybe advanced hydroponics kits for people to grow some of their own food. I believe the key to really taking advantage of new technologies in an efficient way is to get them widely distributed and into the hands of individuals and families. And I think that high tech solutions to a number of traditionally highly centralized or large organization-driven areas such as energy and food production can make better distribution of those things practical and will result in not only a more efficient but also more robust and secure future for families.
We're working on it: http://automicrofarm.com/ (well, aquaponics, not hydroponics).
I love the change in focus to be more bold, real, rather than just chasing easy things like software/apps/games. But, the model must change too. I think Sam & team are up for that challenge, & will adapt, so don't think of this as a permanent shortcoming in any way.
One thing that makes YC and other incubators so amazing is people who didn't grow up with a wealthy family and have financial obligations such as student loans can hack together a prototype over a weekend, apply to YC, and have almost as good of a chance of getting in as anyone else. I can totally see why YC would want to fund later stage companies though.
For instance, I'm tackling energy economics, and doing business development alone in this industry dwarfs YC's round.
$20,000 for 2-10% of investment isn’t particularly attractive when you need to raise an enormous amount of money. Moreover, Y Combinator doesn’t have partners with relevant experience in most of these markets.