> The main problem is that companies stop doing what they were doing during YC—instead of relentlessly focusing on building a great product and growing, they focus on everything else. They also work less hard and less effectively—the peer pressure during YC is a powerful force.
I'm curious about why there's no consideration of the possibility that perhaps such a high-intensity pace is simply not sustainable on a personal level for most people.
If they considered that, they'd also have to consider whether the ridiculously high-intensity pace during their incubator directly contributes to that post-YC slump.
There's no reason why Y Combinator can't simultaneously be great for the businesses of those capable of working sixteen-hour days indefinitely, and toxic for the businesses of everyone else.
If the pace isn't sustainable for a given person, that person probably shouldn't be trying to do a startup. This might seem a bit blunt, but I think it's probably true. There are many other options to bring the same financial and "impact" success that a startup provides and the expected value of these options is probably higher than creating a startup given an aversion to the high-intensity pace.
This seems like a failure of YC - if companies that have gone through the program are consistently forgetting the lessons it has taught as soon as they leave, maybe they're not being taught correctly?
That said, I'm not surprised. YC is a rare opportunity, and people will absolutely punish themselves for the duration of their stay in YC to get the most out of it. Few people can maintain that kind of pressure longer term. I don't think that's a weakness, I think it's just being human.
Of course it's a failure of YC. There is a 0% chance YC has all this stuff right. It would be depressing to them if they did: that would mean there were no further opportunities to improve the outcomes for YC companies.
I think it comes down to discipline. Not doing what you know you need/should do is a discipline issue. There is probably a lot of incentive to do what needs to be done during YC when everyone is watching, and preparing for demo day.
I have to disagree with a lot of people who seem to be saying that "working hard" necessarily means torturous 100 hour weeks.
I don't think the measure of working hard is counting how many hours you're at the office. I think the signal of working hard is how often you let yourself get into your comfort zone and coast.
I think working hard means pushing yourself out of your comfort zone - continuously. It means forcing yourself to ask the hard questions about your business you're scared to ask. It means figuring out how to do things you're not good at, like hiring or selling. It means identifying the most important problem for your company today, and tackling it, even if it's not what you want to be doing.
I'd guess that during YC, the partners and the community act as a force to keep people asking the hard, honest questions about their business. And I'd guess that after YC, without those outside forces, people revert to their default comfort zones, with things that feel nice. Getting press feels nice. Going to conferences feels nice. But what's true early is true later too: it's the work that doesn't feel nice that usually matters most.
You could spend 40 hours a week in the office doing the right things, or 100 hours doing the wrong ones. One of those will lead to growth, the other one won't. And it doesn't have to do with the hours.
"So how can startups avoid this slump? Work on real work."
Simply working hard does not guarantee any path to success, at least in the world of startups. You can work extremely hard, do no "fake work", and have really great product and the vast majority of startups will still fail. You need a great deal of luck as well, ie. #rightplacerighttime, and that's something that isn't admitted by VCs whatsoever.
One common theme from the YC CEOs I've talked with (maybe 8-10 - small sample size, etc.) is that post-YC they don't know the basics of sales (what a purchase order is, etc.). It would not surprise me if this was part of the reason.
What a contentless article, "Work harder! Grumble grumble grumble." We all know that none of these VC "gurus" are actually cleverer than the rest of us, but yet we give them an audience for empty posts like this because their job is (hilariously) to maintain the VC guru image.
I just don't get why these "insightful advice" posts ever gain traction.
> At the end of a YC batch, the general consensus among the partners is that about 25% of the companies are on a trajectory that could lead to a multi-billion dollar company. Of course, only a handful of them do. Most go on to be decent or bad.
Pure hubris.
> The main problem is that companies stop doing what they were doing during YC—instead of relentlessly focusing on building a great product and growing, they focus on everything else. They also work less hard and less effectively—the peer pressure during YC is a powerful force.
No, the problem is that it's difficult to build a large company. High growth is easy in the beginning when you're going from 0 to $100,000, but try going from $100,000 to $100,000,000. "Fake work" isn't what prevents the vast majority of companies from doing this.
I think there's also a theme around young founders, the ability to work as a team when the going gets tough, hubris, and the fame that comes with being in YC.
During YC, you're in a very controlled environment - everyone around you is working hard, you have a deadline, you don't have money, and you just focus on building, etc. Once you leave YC, suddenly, a few things happen (I've seen this with exactly 2 start-ups so apologies for extrapolating):
1. You suddenly have a lot more money, and simultaneously lose the very guided structure you had at YC
2. A lot of YC founders are young, haven't worked in teams with different personality types, etc before and they have to learn how to manage people and each other
3. Because growth is the only thing they've been taught to look for at YC, at the first sign of any slowdown in growth (which could be natural and acceptable, or due to some other reason), they start freaking out and churning. This further exacerbates point 2 and they start stressing out their team and each other
4. There's a bit of a personality cult around YC founders right now - I recently attended a YC party in an apartment in a fancy high-rise in SF and it's amazing how many hanger-ons that were there fawning over the founders. It was a very SF start-up version of a celebrity night-club in LA/NYC. This unfortunately builds on the narrative of infallible YC founders who are building great billion dollar companies, etc
I guess where I'm going with this is that in addition to just growth, folks need to be taught how to work in teams, how to gear up to build a longer term, sustainable company, and to appreciate that they can and will make mistakes, but they need to handle that with grace and maturity.
> and it's amazing how many hanger-ons that were there fawning over the founders. It was a very SF start-up version of a celebrity night-club in LA/NYC
Lol... I think your YMMV on what you encounter here, maybe I just know the boring founders that could care less about social status. In fact I think the ones who care about social status are by and large the ones who don't actually get accepted.
I think it's super interesting to hear that they're developing software to automate traction updates. It would be so cool to be able to "gem install yc" into your Rails app (or whatever) and then have hooks that will automatically keep them abreast of user growth and engagement.
It provides really interesting opportunities for them to be proactive about giving help at the right time. For instance, they'll be able to setup rules for notifications e.g. when you're having a slowing rate of growth, or to send congratulations when you've had a strong month etc.
I imagine one of the problems in investing in so many companies is that you aren't always aware of problems before it's too late. By using software to collect metrics about their portfolio companies, they can systematize how to become aware of and help out companies where they can make a difference.
What if it were a daily and weekly internal email that hooked into your existing analytics or database?
I'm working on an alpha for a product called Growth Report that does just that. It's not "gem install yc" but it's pretty close. Interested to try it out with FieldDay?
YC is a coaching environment. Imagine if you took a professional soccer team and removed the coaches for a month. They would start loosing and if they didn't you would find that one of the players had taken on the role of a coach. This is almost certainly what is happening here.
Raising money is not fake work if you don't know how you are going to pay your team in 6 months, or 3 months, or next month. Twice I have taken out a second mortgage on my house to pay my team, its not a good idea.
Press seems to be a necessary evil, again I have made the best product on the market, only to go unnoticed because of lack of press coverage. Its not like 99.9% of the press are out looking for a great product, they are being lead by the PR agents.
I agree raising money and getting press are "non productive work" as far as product advance goes. But so are things like washing the dishes in your house, they don't help you get more work done that day, but it is a needed part of the system.
So maybe y-combinator should take those two VERY important survival aspects over for the 25% of companies that they feel are the unicorns. For another 10% they will make sure they have enough money for the next year, and that they will get the press they need. Seems like a natural extension....
Agree with the first part, less so the second. YC is (rightly) worried about signalling risk. If they exposed who they thought the 25% were, the other 75% would struggle to get funding.
I'm surprised how many people here seemed to have missed the point of the article.
What the author is talking about is how there are a lot of fun things one can work on that could be useful at some point in the future. But probably not within the next week or month. Instead, the author is saying to focus on the things that will without a doubt be useful within the near future (<month).
Seems like it would be a simple inexpensive investment (probably completely outsourced) for YC to set up fortnightly (down from Tuesday dinners/weekly) dinners for founders of a single batch to come and report updates to each other.
I recall reading somewhere that YC batches are now split into clusters because there are so many companies in each batch. Maybe these dinners can be cluster specific as well.
As the companies grow in size, they can democratically decide to reduce frequency to monthly - I can see how changes would be slower as the companies become larger.
Edit: To clarify, this is purely a peer group - no YC presence needed. Have to do it this way to scale.
I believe this could be a problem in general, but I keep thinking about a recent high profile failure from YC - Homejoy. They had a number of problems with their platform, but from what I've gathered through the press/blogs is that they focused too much on (geographical) growth after their $38mm round at the expense of fixing issues with quality and their business model (costing them retained users and continued local market growth). I think this is an outlier to Sam's theory, but it also provides some food for thought.
This pre-investment spike for startups reminds me somewhat of the pump and dump marketing tactics of a more mature company looking for a sale or an IPO. I've been in companies that have done this: go overboard trying to game some unsustainable metric, such as top line traffic, until you don't have to anymore. If you have done digital marketing for awhile, you can come up with dozens of ways to "grow" your metrics that appear sustainable on the surface but have some kind of catch that makes it impractical long term.
"At the end of a YC batch, the general consensus among the partners is that about 25% of the companies are on a trajectory that could lead to a multi-billion dollar company. Of course, only a handful of them do. Most go on to be decent or bad."
"You have to keep up a high level of intensity for many, many years."
Don't take this the wrong way /u/sama, but could it be that perhaps business models are the problem and not founders not grinding away for years on "real work"? 90% of startups fail [1] [2]. I am highly suspect of the idea that this is caused by teams not being committed or working on "fake work". More likely, markets shift, business models aren't viable, and so forth. This is not a case of people "not giving it their all".
EDIT: Its been proven scientifically that people encounter diminising returns past 40-50 hour work weeks. [3] Don't encourage grinding harder. Encourage finding where to exert the most leverage, and hiring best people you can hire today. Quality people + automation leverage (your software) + quality marketing is a solid formula (but not a guarantee) for success. Luck, while no one wants to admit it, is a non-insignificant component of success ("right place at the right time").
I agree. Perhaps some of the root cause here is a faulty premise. The idea that "25% of the companies are on a trajectory that could lead to a multi-billion dollar company" feels wildly optimistic to me. (And I say that with full respect of YC and the top-teir companies in the program.)
Strong early growth is a very positive sign. But growth is a funny thing and can be hard to sustain. The true market test may come later... from when you are trying to grow a $50 million dollar business into a $500 million dollar business.
Comparing those numbers to the 5 and 10 year survival rate of more typical small businesses (50% and 33% respectively[1]) puts this into perspective.
This suggests that creating a business with the intent of not exiting, but retaining and growing it gives better odds. While a more typical small business has its own stressors and certainly can have long hours, in my experience the level of intensity is much more sustainable.
The down side - you're much less likely to walk away with large sums of money. On the up side, you're much more likely to create a sustainable venture that has a lot more success paths than the binary 'get acquired or go public' routes available to vc-funded startups.
1st article relies entirely on startup accelerators for stats, which means 92% of companies that enter startup accelerators fail, which is a totally different statistic.
2nd article just links to other articles on fortune which don't have anything to back them up.
>Its been proved scientifically that people encounter diminising returns past 40-50 hour work weeks.
Sure, but I don't think there have been any studies that find negative returns after 40-50 hours.
If we are optimizing for maximum returns, rather than maximal efficiency, you would advocate for increasing hours worked until the result of one hour of work was zero.
Many activities have diminishing returns after a certain amount of work (oil drilling, distance running, mining bitcoin, etc.), but it doesn't mean that the rational decision is to stop when the point of diminishing returns is reached.
> Its been proved scientifically that people encounter diminising returns past 40-50 hour work weeks
In the average case.
People who build billion-dollar businesses are not the average case.
That isn't to say everyone should grind super hard. People should, however, have the self-awareness to recognize whether or not they are capable of high levels of achievement. Few people are.
I don't want to put words in Sam's mouth, but I read his point as referring to the patterns of thinking and behavior applied by the founders more than hours worked. I equate "intensity" with "focus," as I've seen (and been a part of) many startups that have lost focus after achieving a modicum of success and taking their foot off the gas.
After the startup curve, the focus has to be about Revenue. And in a simple way, there's a formula, and activity outside of this formula is a lot of the 'fake work' Sam mentions.
Revenue = Value x Sales Activity x Conversion Rate x Retention
The specific approach will differ depending on your size, your vision, funding or bootstrapped etc, but the fundamentals are the same.
Value: Covers getting your business model right. Volume x Margin, Product-Market fit kind of thing. It's essentially a hypothesis you're taking into Sales activity and refining.
Sales Activity: Includes lead generation, but I don't like to put 'Marketing' as a separate heading because blogging and chatting to bloggers is the easiest way to feel busy and achieve nothing. Are you getting in front of clients?
Conversion Rate: And how many of your clients are actually buying? Track this! Segment it when you can! [channels the power of Danielle Morrill] "Know your numbers!"
Retention: Obviously depends on the business model, but ongoing or repeat clients are lovely. In a recurring revenue business, churning a client for every new one you bring on board wastes all the previous steps.
How about backing these assertions with real data? Can YC show that companies are more likely to flatlines post-YC vs. while being coached? Or is that simply due to fast growth being hard to sustain? A careful statistical analysis of the growth of their companies, given the large sample they have, could have made this an interesting post rather than just a smug one...
We felt this coming out of 500 Startups B12. We were a team of four, we had limited analytics in place, we were ranking horribly for SEO, accounting was a mess, and we were doing a ton of things that didn't scale which we needed to now scale. Post demo day we had to worry about fundraising, then recruiting, hiring, and now training--and in some cases firing, and starting all over again. If we get this iteration wrong we're doomed to fail. Basically we needed to add a whole new level to our pyramid and we need to find people we can delegate tasks to do that the process scales and so everything has come to a grinding halt for a few months. If you raise more money quickly it may be possible to attract more & better talent at the top of the funnel and run this process more quickly but it's been a massive growing pain for us.
[+] [-] ceejayoz|10 years ago|reply
I'm curious about why there's no consideration of the possibility that perhaps such a high-intensity pace is simply not sustainable on a personal level for most people.
[+] [-] gyardley|10 years ago|reply
There's no reason why Y Combinator can't simultaneously be great for the businesses of those capable of working sixteen-hour days indefinitely, and toxic for the businesses of everyone else.
[+] [-] dhaivatpandya|10 years ago|reply
[+] [-] mrkurt|10 years ago|reply
[+] [-] fortes|10 years ago|reply
[+] [-] untog|10 years ago|reply
That said, I'm not surprised. YC is a rare opportunity, and people will absolutely punish themselves for the duration of their stay in YC to get the most out of it. Few people can maintain that kind of pressure longer term. I don't think that's a weakness, I think it's just being human.
[+] [-] tptacek|10 years ago|reply
[+] [-] roseburg|10 years ago|reply
[+] [-] arasmussen|10 years ago|reply
[+] [-] webmasterraj|10 years ago|reply
I don't think the measure of working hard is counting how many hours you're at the office. I think the signal of working hard is how often you let yourself get into your comfort zone and coast.
I think working hard means pushing yourself out of your comfort zone - continuously. It means forcing yourself to ask the hard questions about your business you're scared to ask. It means figuring out how to do things you're not good at, like hiring or selling. It means identifying the most important problem for your company today, and tackling it, even if it's not what you want to be doing.
I'd guess that during YC, the partners and the community act as a force to keep people asking the hard, honest questions about their business. And I'd guess that after YC, without those outside forces, people revert to their default comfort zones, with things that feel nice. Getting press feels nice. Going to conferences feels nice. But what's true early is true later too: it's the work that doesn't feel nice that usually matters most.
You could spend 40 hours a week in the office doing the right things, or 100 hours doing the wrong ones. One of those will lead to growth, the other one won't. And it doesn't have to do with the hours.
[+] [-] mreiland|10 years ago|reply
Which is why people talk about it the way they do. The doing it right is assumed.
[+] [-] steven2012|10 years ago|reply
Simply working hard does not guarantee any path to success, at least in the world of startups. You can work extremely hard, do no "fake work", and have really great product and the vast majority of startups will still fail. You need a great deal of luck as well, ie. #rightplacerighttime, and that's something that isn't admitted by VCs whatsoever.
[+] [-] lanstein|10 years ago|reply
[+] [-] bsbechtel|10 years ago|reply
[+] [-] rexignis|10 years ago|reply
I just don't get why these "insightful advice" posts ever gain traction.
[+] [-] 7Figures2Commas|10 years ago|reply
Pure hubris.
> The main problem is that companies stop doing what they were doing during YC—instead of relentlessly focusing on building a great product and growing, they focus on everything else. They also work less hard and less effectively—the peer pressure during YC is a powerful force.
No, the problem is that it's difficult to build a large company. High growth is easy in the beginning when you're going from 0 to $100,000, but try going from $100,000 to $100,000,000. "Fake work" isn't what prevents the vast majority of companies from doing this.
[+] [-] babababa|10 years ago|reply
During YC, you're in a very controlled environment - everyone around you is working hard, you have a deadline, you don't have money, and you just focus on building, etc. Once you leave YC, suddenly, a few things happen (I've seen this with exactly 2 start-ups so apologies for extrapolating):
1. You suddenly have a lot more money, and simultaneously lose the very guided structure you had at YC
2. A lot of YC founders are young, haven't worked in teams with different personality types, etc before and they have to learn how to manage people and each other
3. Because growth is the only thing they've been taught to look for at YC, at the first sign of any slowdown in growth (which could be natural and acceptable, or due to some other reason), they start freaking out and churning. This further exacerbates point 2 and they start stressing out their team and each other
4. There's a bit of a personality cult around YC founders right now - I recently attended a YC party in an apartment in a fancy high-rise in SF and it's amazing how many hanger-ons that were there fawning over the founders. It was a very SF start-up version of a celebrity night-club in LA/NYC. This unfortunately builds on the narrative of infallible YC founders who are building great billion dollar companies, etc
I guess where I'm going with this is that in addition to just growth, folks need to be taught how to work in teams, how to gear up to build a longer term, sustainable company, and to appreciate that they can and will make mistakes, but they need to handle that with grace and maturity.
[+] [-] orthoganol|10 years ago|reply
Lol... I think your YMMV on what you encounter here, maybe I just know the boring founders that could care less about social status. In fact I think the ones who care about social status are by and large the ones who don't actually get accepted.
[+] [-] jashmenn|10 years ago|reply
It provides really interesting opportunities for them to be proactive about giving help at the right time. For instance, they'll be able to setup rules for notifications e.g. when you're having a slowing rate of growth, or to send congratulations when you've had a strong month etc.
I imagine one of the problems in investing in so many companies is that you aren't always aware of problems before it's too late. By using software to collect metrics about their portfolio companies, they can systematize how to become aware of and help out companies where they can make a difference.
[+] [-] aacook|10 years ago|reply
I'm working on an alpha for a product called Growth Report that does just that. It's not "gem install yc" but it's pretty close. Interested to try it out with FieldDay?
[+] [-] hyperion2010|10 years ago|reply
[+] [-] jonlucc|10 years ago|reply
[+] [-] BatFastard|10 years ago|reply
Raising money is not fake work if you don't know how you are going to pay your team in 6 months, or 3 months, or next month. Twice I have taken out a second mortgage on my house to pay my team, its not a good idea. Press seems to be a necessary evil, again I have made the best product on the market, only to go unnoticed because of lack of press coverage. Its not like 99.9% of the press are out looking for a great product, they are being lead by the PR agents.
I agree raising money and getting press are "non productive work" as far as product advance goes. But so are things like washing the dishes in your house, they don't help you get more work done that day, but it is a needed part of the system.
So maybe y-combinator should take those two VERY important survival aspects over for the 25% of companies that they feel are the unicorns. For another 10% they will make sure they have enough money for the next year, and that they will get the press they need. Seems like a natural extension....
[+] [-] Schwolop|10 years ago|reply
[+] [-] Nimitz14|10 years ago|reply
What the author is talking about is how there are a lot of fun things one can work on that could be useful at some point in the future. But probably not within the next week or month. Instead, the author is saying to focus on the things that will without a doubt be useful within the near future (<month).
[+] [-] grndn|10 years ago|reply
[+] [-] param|10 years ago|reply
I recall reading somewhere that YC batches are now split into clusters because there are so many companies in each batch. Maybe these dinners can be cluster specific as well.
As the companies grow in size, they can democratically decide to reduce frequency to monthly - I can see how changes would be slower as the companies become larger.
Edit: To clarify, this is purely a peer group - no YC presence needed. Have to do it this way to scale.
[+] [-] bsbechtel|10 years ago|reply
[+] [-] wbeckler|10 years ago|reply
[+] [-] toomuchtodo|10 years ago|reply
"You have to keep up a high level of intensity for many, many years."
Don't take this the wrong way /u/sama, but could it be that perhaps business models are the problem and not founders not grinding away for years on "real work"? 90% of startups fail [1] [2]. I am highly suspect of the idea that this is caused by teams not being committed or working on "fake work". More likely, markets shift, business models aren't viable, and so forth. This is not a case of people "not giving it their all".
[1] http://www.quora.com/What-percentage-of-startups-fail?share=...
[2] http://www.forbes.com/sites/neilpatel/2015/01/16/90-of-start...
EDIT: Its been proven scientifically that people encounter diminising returns past 40-50 hour work weeks. [3] Don't encourage grinding harder. Encourage finding where to exert the most leverage, and hiring best people you can hire today. Quality people + automation leverage (your software) + quality marketing is a solid formula (but not a guarantee) for success. Luck, while no one wants to admit it, is a non-insignificant component of success ("right place at the right time").
[3] http://www.lostgarden.com/2008/09/rules-of-productivity-pres...
[+] [-] toddmorey|10 years ago|reply
Strong early growth is a very positive sign. But growth is a funny thing and can be hard to sustain. The true market test may come later... from when you are trying to grow a $50 million dollar business into a $500 million dollar business.
[+] [-] sama|10 years ago|reply
But a lot can, and poor execution is why they don't.
[+] [-] GrinningFool|10 years ago|reply
This suggests that creating a business with the intent of not exiting, but retaining and growing it gives better odds. While a more typical small business has its own stressors and certainly can have long hours, in my experience the level of intensity is much more sustainable.
The down side - you're much less likely to walk away with large sums of money. On the up side, you're much more likely to create a sustainable venture that has a lot more success paths than the binary 'get acquired or go public' routes available to vc-funded startups.
[1] pdf - https://www.sba.gov/sites/default/files/FAQ_Sept_2012.pdf
[+] [-] mattmanser|10 years ago|reply
2nd article just links to other articles on fortune which don't have anything to back them up.
So I'd be dubious of those figures.
[+] [-] Plough_Jogger|10 years ago|reply
Sure, but I don't think there have been any studies that find negative returns after 40-50 hours.
If we are optimizing for maximum returns, rather than maximal efficiency, you would advocate for increasing hours worked until the result of one hour of work was zero.
Many activities have diminishing returns after a certain amount of work (oil drilling, distance running, mining bitcoin, etc.), but it doesn't mean that the rational decision is to stop when the point of diminishing returns is reached.
[+] [-] obstacle1|10 years ago|reply
In the average case.
People who build billion-dollar businesses are not the average case.
That isn't to say everyone should grind super hard. People should, however, have the self-awareness to recognize whether or not they are capable of high levels of achievement. Few people are.
[+] [-] kyleashipley|10 years ago|reply
[+] [-] blairanderson|10 years ago|reply
Did you read beyond the first two paragraphs?
[+] [-] JacobAldridge|10 years ago|reply
Revenue = Value x Sales Activity x Conversion Rate x Retention
The specific approach will differ depending on your size, your vision, funding or bootstrapped etc, but the fundamentals are the same.
Value: Covers getting your business model right. Volume x Margin, Product-Market fit kind of thing. It's essentially a hypothesis you're taking into Sales activity and refining.
Sales Activity: Includes lead generation, but I don't like to put 'Marketing' as a separate heading because blogging and chatting to bloggers is the easiest way to feel busy and achieve nothing. Are you getting in front of clients?
Conversion Rate: And how many of your clients are actually buying? Track this! Segment it when you can! [channels the power of Danielle Morrill] "Know your numbers!"
Retention: Obviously depends on the business model, but ongoing or repeat clients are lovely. In a recurring revenue business, churning a client for every new one you bring on board wastes all the previous steps.
[+] [-] pesenti|10 years ago|reply
[+] [-] rdlecler1|10 years ago|reply