Some genuinely encouraging thoughts here - very interesting to my relationship with Inventions vs. Long-Form Writing:
>Paul : The biggest one is made-up ideas. The best startups come from personal experience. It was something you or someone you know needed. Occasionally, I’ll ask a company, “Why do you think is a good idea?” And they’ll say, “Oh, I read an article in TechCrunch.” You have to understand it at a deep level. It can’t just be something you read.
I also like people who get things done. If you’ve been working on your startup for two years and have nothing to show, that’s a pretty bad sign. I’ve discovered that most people are really good at finding obstacles. I don’t fund these people.
One thing I've learned, over five years plus of developing Inventions, Pitches, and the occasional Prototype, is that there's a really big realization that Angel Investors / PE-type Investors don't want small businesses to figure out:
If your idea is good, you can obtain a patent, and afford to take a loan <$50,000 to go from "Prototype-to-Trade Show Ready" then you don't need Investors. You don't need "wisdom and guidance" aiming for a quick ramp-up and exit. You don't need to think in Quarterly Capitalism terms. And, most importantly, you don't need to dilute your control whatsoever[1].
For a while I've caught some whiffs that the Investing Realm is quite a bit more "Me Too" risk averse than often portrayed. Very similar to the Music Industry. Labels don't want interesting life story pieces, they want bubblegum they can market to kids with some discretionary money to burn. Thus, I take a lot of the recent "Start Up" culture with a grain of salt, because the time, effort, and study it takes to create a genuinely valuable idea basically points to starting a "Traditional Small Business" moreso than any super-duper-evolution-in-funding-or-growth. YMMV of course.
[1] It does help to study both success stories, failures, and Public Slap Fights (Cruise, Otto); while I've solicited in the past, I've cooled to the idea and instead plan to go my own Patent-Prototype-Promote business model.
I disagree about the amount of money needed to bootstrap (for the kind of ideas VCs invest on, not for niche products or lifestyle businesses I mean).
Patents aren't worth the paper they're printed on unless you have money to defend them, and are very likely to be overturned in court without that (OTOH there are some ridiculous patents that the patent-holders have enough money to make them stick).
Going with your hypothetical model, once you've burned out your 50.000 ramp, then what?
I'm trying to build my own product, and without outside investment it's freaking hard.
If your idea is good, you can obtain a patent, and afford to take a loan <$50,000 to go from "Prototype-to-Trade Show Ready" then you don't need Investors.
You seem to be thinking about "Seen on TV" type of products, not software. You also seem to be talking about companies that would never see a BN+ exit or are made to flip (never actually seen one that was built with the intention to sell quickly and successful did).
Those are great, but they are in a different category than venture backed companies so your measurement criteria are off.
If your startup, or idea, is based on a perplexing problem that you yourself are experiencing, it's likely that others are also experiencing the same, or a similar, problem. Test that hypothesis, get some traction and the money will come, sometimes even with favourable terms.
> For example, Facebook had an offer from Yahoo for a billion dollars, which everyone told Zuck to take. Fortunately, he said no. Had he said yes, it would have been another failed Yahoo acquisition and Facebook would not have nearly as much impact.
It seems to me that the world would be overall a better place if FB had sold to Yahoo. Yahoo would have screwed it up (like AOL with Myspace) and there would be more competition in the space all around. Monopolies are good for the investors, not for the customers.
Zuck dropped the offer because Yahoo lower the price to ~$700 million. He has famously said he would have sold FB if yahoo kept the $1 billion tag.
Buying companies for billions and billions of dollars is a skill in itself and requires a vision also which is not very common. I mean to say only people like Zuck can do it
When it comes to social networks, I believe the network affect generally leads to a winner takes all (or most). Certainly tech and usability is a determining factor, but another company would have nailed those and dominated the market anyway.
The CFAA enables these monopolies. The government is not performing its role of ensuring an open, actively competitive marketplace exists in tech. Investors really don't want that to happen, because it's much more profitable to allow FB, Twitter, et al to hold user data hostage and thus propagate lock-in.
As always, user lock-in is the end goal of all software companies; they want you to be stuck with them forever, whether you like it or not.
If you thought lock-in was bad when it was just a `.doc` file on your desktop and you had to use something like OpenOffice to try to render a sloppy import of it, the reality of keeping the only copy in server-side databases controlled exclusively by the companies that provide the client for manipulating that data is a dystopia.
The CFAA makes it so any "unauthorized" extrication of this data is a federal crime, which means there is no real possibility for a serious OpenOffice-esque client to come in and try to save users from the cloud service lock-in.
Source: large company threatened to sue me via the CFAA for talking to their website in a way that indirectly caused them negative publicity, but was otherwise polite and had no negative impact on their service/functionality
Social networks are natural monopolies with one winner taking 80-90% of the market. Before Facebook it was MySpace before that it was Friendster. If Facebook whithered away for some reason the new thing would also tend towards capturing the entire market. It's the reason why Facebook tries to buy any new upstarts, if an upstart gains traction it can become threatening even to the largest social network.
There are no instances I know of where anyone involved with skin in the game cares as to what happens to the outside actors. That's the nature of the system we have.
Then there is the 'benevolent monopolist' theory which I find hard to evaluate. Can't do a controlled experiment and impossible to know what a world with fb by Yahoo! looks like.
PB was the first investor in 7 Cups. I'm thankful for all of the ways that he helped us. He is very good at motivating founders. I can't all the way understand how he does it, but it is remarkable. I think a big part of it is helping people face reality directly. i.e., he alludes to this in the interview when he says most people are good at finding obstacles (i.e., excuses) and that he doesn't fund them. He is good at keeping you honest so that you do not delude yourself into making fake progress or going down wrong turns. Another way of saying this is that he helps you minimize denial. Quick story:
I had been working on 7 Cups for about a month prior to getting to YC. I had a home page up, which I was pretty excited about. The core idea of the chat/voice support wasn't yet live. I showed him the website and wanted to show him some of the segments we wanted to focus on (parents of children with disabilities, veterans etc.). He quickly asked - have you got the actual product in front of users yet? I tried to dodge the question, talk more about the site etc. He repeated the question. I had to honestly answer that no we hadn't yet released it. He was like, okay go do that and report back next week. I was stalling because, on some level, I was afraid that it wouldn't work as well as I hoped. We pushed through, launched it, and learned a ton in that next week. For example, we learned that voice was too intimate and people preferred messaging.
And that basic cycle happened over and over again. Like there might be things that sound right or are even partially right, but if they are not the most direct thing that is going to help you learn and make a product people want, then it is probably not a good use of your time.
>>Larry Page assigned the project to me. He said, “Build some kind of email something” and chose me because I had an interest in email.
This is how you know you've found an awesome developer - someone who only needs to be given only a high-level vision of what is needed, and who can then run with it, fill in the details, and deliver something more awesome than you thought possible.
Or, a more current parable found in a post by Benjamin Hardy(1):
A certain farmer had become old and ready to pass his farm down to one of his two sons. When he brought his sons together to speak about it, he told them: The farm will go to the younger son.
The older son was furious! “What are you talking about?!” he fumed.
The father sat patiently, thinking.
“Okay,” the father said, “I need you to do something for me. We need more stocks. Will you go to Cibi’s farm and see if he has any cows for sale?”
The older son shortly returned and reported, “Father, Cibi has 6 cows for sale.”
The father graciously thanked the older son for his work. He then turned to the younger son and said, “I need you to do something for me. We need more stocks. Will you go to Cibi’s farm and see if he has any cows for sale?”
The younger son did as he was asked. A short while later, he returned and reported, “Father, Cibi has 6 cows for sale. Each cow will cost 2,000 rupees. If we are thinking about buying more than 6 cows, Cibi said he would be willing to reduce the price 100 rupees. Cibi also said they are getting special jersey cows next week if we aren’t in a hurry, it may be good to wait. However, if we need the cows urgently, Cibi said he could deliver the cows tomorrow.”
The father graciously thanked the younger son for his work. He then turned to the older son and said, “That’s why your younger brother is getting the farm.”
The "Message to Garcia" is great, thank you for that. I love that while it was written in 1899 it still seems to be true; will likely be still true in 100 years I think.
> My favorite anti-portfolio example is Airbnb. Michael Siebel (Y Combinator Core CEO) emailed me their deck before they joined Y Combinator and I couldn’t help but think “Wow, air mattress rental? That’s a terrible idea!”
I've heard this sentiment repeated a lot ("Everyone thought AirBnB was a horrible idea"), but I honestly can't imagine why, and it makes me think AirBnB must have just had a bad initial pitch deck. At the time AirBnB was founded, Couchsurfing was already really popular, and HomeAway had received some gargantuan investment rounds. Is it really that much of a stretch to say people would want a safe, secure way to rent out private accommodations?
I ran into the AirBnB guys around the time they were in YC. It was a bad idea then, and it is still a bad idea. They were pitching a for-profit couchsurfing clone. And that idea never did take off, really. What happened is they persisted and were positioned to pivot to vacation rentals and then create a new segment of pseudo-hotel operations at a time when real estate values crashed and the economy was down. The combination of lots of investment real estate under water and a down economy is what made the hotel idea take off.
At the start, AirBnb was focused entirely on renting out individual rooms in your place, while the host stayed there (sometimes including cooking breakfast!). The ability to rent a whole place came later.
Even in hindsight, that's a quirky idea to build a company around.
The reason AirBnB was so tough to fund, at least from Fred's post, is because it represented a change in cultural norms. Investors are very resistant to ideas that change people's behavior - particularly if the investor can't picture making that change in their own lives.
Jasper : Sam Altman has said that the only criterion Y Combinator uses to evaluate applying companies is, “Can this be a $10 billion plus company?” like Airbnb and Dropbox. While this model works great for a fund, there is an Early Exits movement that suggests individual entrepreneurs have a much higher likelihood of success when they raise less capital and target exits in the $20 million range. What do you think this view?
Paul : The math does not support this strategy but if other investors want to try it that’s fine. Also, it is not just returns we are looking for but really impactful companies. When you sell too early you don’t realize the full potential.
> The math does not support this strategy but if other investors want to try it that’s fine.
I think Jasper and Paul are talking past each other here. The math doesn't support the strategy of small exits if you are an investor in a large fund. If you are an individual starting a company, though, I've seen a lot of math that says you have a much better chance at success if you swing for a "$20 million niche" than a $10 billion company.
"Sam Altman has said that the only criterion Y Combinator uses to evaluate applying companies is, “Can this be a $10 billion plus company?” like Airbnb and Dropbox. "
I would have thought there would be no way to predict this when looking at the initial barebones product from a few hackers building something that barely works.
If Sam can do this consistently he is a genius. Except maybe Amazon, I can't think of a single company I would have identified as "having the potential to grow into a 10 billion dollar company" in its initial form. :-(
It's odd that there's no pushback on that statement versus reality. Does he really think that some of these developer tools startups, sous vide cookers, or glass of wine in the mail every month type companies are headed to eleven figure valuations?
> Paul: The best startups come from personal experience. It was something you or someone you know needed.
I've seen this comment before. It emphasizes the need for more founders with diverse backgrounds. More types of problems solved and more opportunities to reach new markets.
"If you’ve been working on your startup for two years and have nothing to show, that’s a pretty bad sign."
"Just get started and deliver now. You should have a long term vision but must also act right now, have near term deliverables and be in contact with the customer."
>For example, Facebook had an offer from Yahoo for a billion dollars, which everyone told Zuck to take. Fortunately, he said no. Had he said yes, it would have been another failed Yahoo acquisition and Facebook would not have nearly as much impact.
Really? How can you know what the path of Facebook would have been with a yahoo acquisition? That's like predicting the future.
Besides, what is the real "impact" of Facebook? Which impact are we talking about? To the shareholder? To society? If he refers to the latter, I can think of no way to measure the "impact".
I truly believe in small life style business is much better than "pie in the sky" 10B startup that will happened once every 10 years and 99% will fail hurting employees, owners and small investors...
> Just get started and deliver now. [...] Don’t disappear for years working on this thing, completely disconnected from the world. An extreme example of this is, I wrote the the first version of Gmail in a day!
Paul has some good observations, but IMHO what he has so far has just been lucky due to the general potential of Moore's law and the Internet. IMHO, with the astoundingly high growth rates of Moore's law and the Internet over, his ideas won't work now.
E.g., he wrote the first version of G-mail in a day. Okay. We can't expect more Googles from such efforts.
Paul, YC, and Silicon Valley have been taken in from their successes, their Sand Hill Road echo chamber, and their own Kool-Aid.
Instead of such influences, we have some much better examples of doing big things from the all-time, unique, world-class, grand champion of really big successes from really big technology, the US DoD, with high irony, what got Silicon Valley going, along with Dean Terman. For runner up, we have Bell Labs with the transistor, solid state lasers, and optical fibers. These successes were not done in a day. And with high irony, they were not risky, that is, the batting average was really high, much higher than VCs in Silicon Valley.
Paul is making another big, fundamental mistake, really implicit in the subject and title of the interview, what can be learned from 200 investments: He does have some good lessons, but broadly
what he explains is very much the wrong approach.
Why? Because for his $20 billion criterion, necessarily he is looking for really exceptional, rare events.
There's no hope at good lessons for such successes, such rare events, except just to count on luck, when looking at 200 projects where all or nearly all were just mediocre.
Yes, these events are so rare and difficult to do that maybe most of them, that is, the Googles, Facebooks, etc., were more likely from luck, Moore's law, and the Internet than sufficiently good work with little or no good luck. He's just not
looking at approaches that are good
at detecting the desired rare events.
Instead, it really is possible to conceive of, plan, and execute really big, earth changing work, with quite high reliability. E.g., did I mention the US DoD and Bell Labs? Uh, there's no way to see from Paul's lessons from the 200 startups just how the US DoD and Bell Labs were so successful. E.g., those organizations didn't need 200 rolls of the dice to get the Manhattan Project, GPS, stealth and the F-117, the SR-71, Keyhole (the DoD's Hubble, aimed at the earth instead of space), the transistor, solid state lasers, or optical fibers. And now we can include RSA, WMAP, LIGO, LHC, etc. -- no 199 failures to get one big success. Indeed, in all that work, nearly no failures. Also include the Human Genome project and the work of Craig Venter -- worked great, right away.
But the conception, planning, and execution of such low risk, high payoff projects are not illustrated by Paul's, YC's, or Silicon Valley's investment or project evaluation approaches.
Uh, hint: What Paul is describing is
available to middle school students. So, we can set aside all education
and research past middle school?
SMTP, HotMail, Gmail -- those were simple projects, flashes in the pan from luck and the rapid growth of Moore's law and the Internet, and do not illustrate the approach to $20 billion for the future.
Uh, early in e-mail, the software I had put one icon on my desktop for each e-mail message sent or received. I could wait for minutes for a single e-mail message to appear on my desktop. Total brain dead bummer. So, I got out the SMTP RFCs, read a little, use the interpretive language Rexx that had the TCP/IP calls, to write my own e-mail. For reading, writing e-mail, I used just my still favorite text editor -- KEdit. For converting to/from base 64 for the MIME attachments, I wrote some code in Rexx. My e-mail had a file that permitted nicknames and groups. It worked great. It put all the e-mail I sent/received, just
as it was sent/received, exactly,
in a file -- appended to the file with
a delimiter line after each e-mail message. When the file got over
10 MB, I started another one. I still
have all the files, and finding messages in the files is easy. I wrote all of it in just one afternoon except did the base 64 stuff in another afternoon. My e-mail set up was good enough that I had a cute feature: In files of other work, I'd put just the date line from an e-mail message as a link to that message, and one keystroke in KEdit would cause KEdit to get and display that e-mail message. Sure, the date lines do not have to be distinct, but I never found a duplicate! I was not lucky enough to
get rich from it, but I used it for about 10 years, until I got a copy of Outlook 2003. I still
wish I knew the syntax of the
Outlook PST files or whatever they
are called so that I could
implement links to those.
So, really in some ways, my little
one afternoon project remains
better than Outlook 2003. Writing basic client side e-mail is dirt simple
and no big accomplishment in
any sense.
We don't want to be duped into
believing that the last $100
million lottery winner has
some really great ideas!
In comparison with the DoD, etc. work,
the work of Paul, YC, SV, etc. is, really, brain-dead. For more, Paul's approaches are not what got us to 14 nm and won't get us to 10 or 7 nm.
Uh, NASA and, IIRC, JPL, launched some equipment into space and eventually sent back some astounding pictures of -- sit down for this one -- Pluto. Up close. First time. No 200 failures for the one success.
But, wait, there's more: With the current power and prices of computing and the Internet, there is a very special case of information technology. There we take in bits, manipulate them, and put out bits. The goal is to have the output bits be darned valuable, well over the $20 billion criterion.
Then, what is the key to evaluating such work? The team? Personal need? The attitude? The determination? Their desire to get the main work done in a day? Their grit? Their novelty? Their interview impression? Other imponderables and tea-leaf reading?
Hand shake style? Eye contact? "Taking the measure" of the person? And may I have the envelope please? [Drum roll}. And the winner is ....
I'll keep that a secret (hint: None of the above.).
[+] [-] 6stringmerc|8 years ago|reply
>Paul : The biggest one is made-up ideas. The best startups come from personal experience. It was something you or someone you know needed. Occasionally, I’ll ask a company, “Why do you think is a good idea?” And they’ll say, “Oh, I read an article in TechCrunch.” You have to understand it at a deep level. It can’t just be something you read.
I also like people who get things done. If you’ve been working on your startup for two years and have nothing to show, that’s a pretty bad sign. I’ve discovered that most people are really good at finding obstacles. I don’t fund these people.
One thing I've learned, over five years plus of developing Inventions, Pitches, and the occasional Prototype, is that there's a really big realization that Angel Investors / PE-type Investors don't want small businesses to figure out:
If your idea is good, you can obtain a patent, and afford to take a loan <$50,000 to go from "Prototype-to-Trade Show Ready" then you don't need Investors. You don't need "wisdom and guidance" aiming for a quick ramp-up and exit. You don't need to think in Quarterly Capitalism terms. And, most importantly, you don't need to dilute your control whatsoever[1].
For a while I've caught some whiffs that the Investing Realm is quite a bit more "Me Too" risk averse than often portrayed. Very similar to the Music Industry. Labels don't want interesting life story pieces, they want bubblegum they can market to kids with some discretionary money to burn. Thus, I take a lot of the recent "Start Up" culture with a grain of salt, because the time, effort, and study it takes to create a genuinely valuable idea basically points to starting a "Traditional Small Business" moreso than any super-duper-evolution-in-funding-or-growth. YMMV of course.
[1] It does help to study both success stories, failures, and Public Slap Fights (Cruise, Otto); while I've solicited in the past, I've cooled to the idea and instead plan to go my own Patent-Prototype-Promote business model.
[+] [-] GFischer|8 years ago|reply
Patents aren't worth the paper they're printed on unless you have money to defend them, and are very likely to be overturned in court without that (OTOH there are some ridiculous patents that the patent-holders have enough money to make them stick).
Going with your hypothetical model, once you've burned out your 50.000 ramp, then what?
I'm trying to build my own product, and without outside investment it's freaking hard.
[+] [-] AndrewKemendo|8 years ago|reply
You seem to be thinking about "Seen on TV" type of products, not software. You also seem to be talking about companies that would never see a BN+ exit or are made to flip (never actually seen one that was built with the intention to sell quickly and successful did).
Those are great, but they are in a different category than venture backed companies so your measurement criteria are off.
[+] [-] kamilszybalski|8 years ago|reply
[+] [-] rabidrat|8 years ago|reply
It seems to me that the world would be overall a better place if FB had sold to Yahoo. Yahoo would have screwed it up (like AOL with Myspace) and there would be more competition in the space all around. Monopolies are good for the investors, not for the customers.
[+] [-] mandeepj|8 years ago|reply
Buying companies for billions and billions of dollars is a skill in itself and requires a vision also which is not very common. I mean to say only people like Zuck can do it
Edit - Added some more meat
[+] [-] imjk|8 years ago|reply
[+] [-] cookiecaper|8 years ago|reply
As always, user lock-in is the end goal of all software companies; they want you to be stuck with them forever, whether you like it or not.
If you thought lock-in was bad when it was just a `.doc` file on your desktop and you had to use something like OpenOffice to try to render a sloppy import of it, the reality of keeping the only copy in server-side databases controlled exclusively by the companies that provide the client for manipulating that data is a dystopia.
The CFAA makes it so any "unauthorized" extrication of this data is a federal crime, which means there is no real possibility for a serious OpenOffice-esque client to come in and try to save users from the cloud service lock-in.
Source: large company threatened to sue me via the CFAA for talking to their website in a way that indirectly caused them negative publicity, but was otherwise polite and had no negative impact on their service/functionality
[+] [-] guelo|8 years ago|reply
[+] [-] fullshark|8 years ago|reply
[+] [-] devoply|8 years ago|reply
[+] [-] jonbarker|8 years ago|reply
[+] [-] 7cupsoftea|8 years ago|reply
I had been working on 7 Cups for about a month prior to getting to YC. I had a home page up, which I was pretty excited about. The core idea of the chat/voice support wasn't yet live. I showed him the website and wanted to show him some of the segments we wanted to focus on (parents of children with disabilities, veterans etc.). He quickly asked - have you got the actual product in front of users yet? I tried to dodge the question, talk more about the site etc. He repeated the question. I had to honestly answer that no we hadn't yet released it. He was like, okay go do that and report back next week. I was stalling because, on some level, I was afraid that it wouldn't work as well as I hoped. We pushed through, launched it, and learned a ton in that next week. For example, we learned that voice was too intimate and people preferred messaging.
And that basic cycle happened over and over again. Like there might be things that sound right or are even partially right, but if they are not the most direct thing that is going to help you learn and make a product people want, then it is probably not a good use of your time.
[+] [-] F_J_H|8 years ago|reply
>>Larry Page assigned the project to me. He said, “Build some kind of email something” and chose me because I had an interest in email.
This is how you know you've found an awesome developer - someone who only needs to be given only a high-level vision of what is needed, and who can then run with it, fill in the details, and deliver something more awesome than you thought possible.
Reminds me of the famous "Message to Garcia" essay from way back in 1899: (http://www.benning.army.mil/infantry/199th/ocs/content/pdf/m...)
Or, a more current parable found in a post by Benjamin Hardy(1):
A certain farmer had become old and ready to pass his farm down to one of his two sons. When he brought his sons together to speak about it, he told them: The farm will go to the younger son.
The older son was furious! “What are you talking about?!” he fumed.
The father sat patiently, thinking.
“Okay,” the father said, “I need you to do something for me. We need more stocks. Will you go to Cibi’s farm and see if he has any cows for sale?”
The older son shortly returned and reported, “Father, Cibi has 6 cows for sale.”
The father graciously thanked the older son for his work. He then turned to the younger son and said, “I need you to do something for me. We need more stocks. Will you go to Cibi’s farm and see if he has any cows for sale?”
The younger son did as he was asked. A short while later, he returned and reported, “Father, Cibi has 6 cows for sale. Each cow will cost 2,000 rupees. If we are thinking about buying more than 6 cows, Cibi said he would be willing to reduce the price 100 rupees. Cibi also said they are getting special jersey cows next week if we aren’t in a hurry, it may be good to wait. However, if we need the cows urgently, Cibi said he could deliver the cows tomorrow.”
The father graciously thanked the younger son for his work. He then turned to the older son and said, “That’s why your younger brother is getting the farm.”
1 https://benjaminhardy.com/one-behavior-separates-successful-...
[+] [-] gregpilling|8 years ago|reply
[+] [-] dando|8 years ago|reply
This makes very little sense to me.
You should do tasks without asking questions to try and figure out what was intended?
Being able to figure out things yourself and deliver and asking questions are not mutually exclusive.
[+] [-] temp246810|8 years ago|reply
Someone with a knack for product AND great engineering chops is extremely rare.
Not disagreeing with you, if anything bolstering your point.
[+] [-] hn_throwaway_99|8 years ago|reply
I've heard this sentiment repeated a lot ("Everyone thought AirBnB was a horrible idea"), but I honestly can't imagine why, and it makes me think AirBnB must have just had a bad initial pitch deck. At the time AirBnB was founded, Couchsurfing was already really popular, and HomeAway had received some gargantuan investment rounds. Is it really that much of a stretch to say people would want a safe, secure way to rent out private accommodations?
[+] [-] PatentTroll|8 years ago|reply
[+] [-] showerst|8 years ago|reply
Even in hindsight, that's a quirky idea to build a company around.
[+] [-] sirspacey|8 years ago|reply
[+] [-] abecedarius|8 years ago|reply
[+] [-] sharemywin|8 years ago|reply
Paul : The math does not support this strategy but if other investors want to try it that’s fine. Also, it is not just returns we are looking for but really impactful companies. When you sell too early you don’t realize the full potential.
[+] [-] hn_throwaway_99|8 years ago|reply
I think Jasper and Paul are talking past each other here. The math doesn't support the strategy of small exits if you are an investor in a large fund. If you are an individual starting a company, though, I've seen a lot of math that says you have a much better chance at success if you swing for a "$20 million niche" than a $10 billion company.
[+] [-] blacksmythe|8 years ago|reply
[+] [-] nostrademons|8 years ago|reply
http://www.paulgraham.com/swan.html#f1n
[+] [-] plinkplonk|8 years ago|reply
I would have thought there would be no way to predict this when looking at the initial barebones product from a few hackers building something that barely works.
If Sam can do this consistently he is a genius. Except maybe Amazon, I can't think of a single company I would have identified as "having the potential to grow into a 10 billion dollar company" in its initial form. :-(
[+] [-] CPLX|8 years ago|reply
[+] [-] rgrieselhuber|8 years ago|reply
[+] [-] neurotech1|8 years ago|reply
If an idea is very niche like "Maserati custom accessories sold online" then that isn't likely to grow to $10Bn+ company or have any major impact.
[+] [-] stevenj|8 years ago|reply
[+] [-] theprop|8 years ago|reply
[+] [-] rattray|8 years ago|reply
I hadn't heard that before; does anyone know of sources with more on this story?
[+] [-] romanhn|8 years ago|reply
[+] [-] iamwil|8 years ago|reply
[+] [-] wmblaettler|8 years ago|reply
[+] [-] a_imho|8 years ago|reply
[+] [-] prodmerc|8 years ago|reply
[+] [-] thearn4|8 years ago|reply
[+] [-] tkt|8 years ago|reply
I've seen this comment before. It emphasizes the need for more founders with diverse backgrounds. More types of problems solved and more opportunities to reach new markets.
[+] [-] MarkMc|8 years ago|reply
"If you’ve been working on your startup for two years and have nothing to show, that’s a pretty bad sign."
"Just get started and deliver now. You should have a long term vision but must also act right now, have near term deliverables and be in contact with the customer."
[+] [-] baxtr|8 years ago|reply
Really? How can you know what the path of Facebook would have been with a yahoo acquisition? That's like predicting the future.
Besides, what is the real "impact" of Facebook? Which impact are we talking about? To the shareholder? To society? If he refers to the latter, I can think of no way to measure the "impact".
[+] [-] SirLJ|8 years ago|reply
[+] [-] ndr|8 years ago|reply
> Just get started and deliver now. [...] Don’t disappear for years working on this thing, completely disconnected from the world. An extreme example of this is, I wrote the the first version of Gmail in a day!
[+] [-] graycat|8 years ago|reply
E.g., he wrote the first version of G-mail in a day. Okay. We can't expect more Googles from such efforts.
Paul, YC, and Silicon Valley have been taken in from their successes, their Sand Hill Road echo chamber, and their own Kool-Aid.
Instead of such influences, we have some much better examples of doing big things from the all-time, unique, world-class, grand champion of really big successes from really big technology, the US DoD, with high irony, what got Silicon Valley going, along with Dean Terman. For runner up, we have Bell Labs with the transistor, solid state lasers, and optical fibers. These successes were not done in a day. And with high irony, they were not risky, that is, the batting average was really high, much higher than VCs in Silicon Valley.
Paul is making another big, fundamental mistake, really implicit in the subject and title of the interview, what can be learned from 200 investments: He does have some good lessons, but broadly what he explains is very much the wrong approach.
Why? Because for his $20 billion criterion, necessarily he is looking for really exceptional, rare events. There's no hope at good lessons for such successes, such rare events, except just to count on luck, when looking at 200 projects where all or nearly all were just mediocre.
Yes, these events are so rare and difficult to do that maybe most of them, that is, the Googles, Facebooks, etc., were more likely from luck, Moore's law, and the Internet than sufficiently good work with little or no good luck. He's just not looking at approaches that are good at detecting the desired rare events.
Instead, it really is possible to conceive of, plan, and execute really big, earth changing work, with quite high reliability. E.g., did I mention the US DoD and Bell Labs? Uh, there's no way to see from Paul's lessons from the 200 startups just how the US DoD and Bell Labs were so successful. E.g., those organizations didn't need 200 rolls of the dice to get the Manhattan Project, GPS, stealth and the F-117, the SR-71, Keyhole (the DoD's Hubble, aimed at the earth instead of space), the transistor, solid state lasers, or optical fibers. And now we can include RSA, WMAP, LIGO, LHC, etc. -- no 199 failures to get one big success. Indeed, in all that work, nearly no failures. Also include the Human Genome project and the work of Craig Venter -- worked great, right away.
But the conception, planning, and execution of such low risk, high payoff projects are not illustrated by Paul's, YC's, or Silicon Valley's investment or project evaluation approaches.
Uh, hint: What Paul is describing is available to middle school students. So, we can set aside all education and research past middle school?
SMTP, HotMail, Gmail -- those were simple projects, flashes in the pan from luck and the rapid growth of Moore's law and the Internet, and do not illustrate the approach to $20 billion for the future.
Uh, early in e-mail, the software I had put one icon on my desktop for each e-mail message sent or received. I could wait for minutes for a single e-mail message to appear on my desktop. Total brain dead bummer. So, I got out the SMTP RFCs, read a little, use the interpretive language Rexx that had the TCP/IP calls, to write my own e-mail. For reading, writing e-mail, I used just my still favorite text editor -- KEdit. For converting to/from base 64 for the MIME attachments, I wrote some code in Rexx. My e-mail had a file that permitted nicknames and groups. It worked great. It put all the e-mail I sent/received, just as it was sent/received, exactly, in a file -- appended to the file with a delimiter line after each e-mail message. When the file got over 10 MB, I started another one. I still have all the files, and finding messages in the files is easy. I wrote all of it in just one afternoon except did the base 64 stuff in another afternoon. My e-mail set up was good enough that I had a cute feature: In files of other work, I'd put just the date line from an e-mail message as a link to that message, and one keystroke in KEdit would cause KEdit to get and display that e-mail message. Sure, the date lines do not have to be distinct, but I never found a duplicate! I was not lucky enough to get rich from it, but I used it for about 10 years, until I got a copy of Outlook 2003. I still wish I knew the syntax of the Outlook PST files or whatever they are called so that I could implement links to those. So, really in some ways, my little one afternoon project remains better than Outlook 2003. Writing basic client side e-mail is dirt simple and no big accomplishment in any sense.
We don't want to be duped into believing that the last $100 million lottery winner has some really great ideas!
In comparison with the DoD, etc. work, the work of Paul, YC, SV, etc. is, really, brain-dead. For more, Paul's approaches are not what got us to 14 nm and won't get us to 10 or 7 nm.
Uh, NASA and, IIRC, JPL, launched some equipment into space and eventually sent back some astounding pictures of -- sit down for this one -- Pluto. Up close. First time. No 200 failures for the one success.
But, wait, there's more: With the current power and prices of computing and the Internet, there is a very special case of information technology. There we take in bits, manipulate them, and put out bits. The goal is to have the output bits be darned valuable, well over the $20 billion criterion.
Then, what is the key to evaluating such work? The team? Personal need? The attitude? The determination? Their desire to get the main work done in a day? Their grit? Their novelty? Their interview impression? Other imponderables and tea-leaf reading? Hand shake style? Eye contact? "Taking the measure" of the person? And may I have the envelope please? [Drum roll}. And the winner is ....
I'll keep that a secret (hint: None of the above.).
[+] [-] pdog|8 years ago|reply
This decision set a terrible precedent.
It made it acceptable for a company to deliver "tailored advertising" by reading all your emails.
But I guess there are few alternatives to the ad-supported business model on the web facilitated by the vast collection of personal data.
Still kind of sucks, though.
[+] [-] unknown|8 years ago|reply
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[+] [-] sirspacey|8 years ago|reply
[+] [-] jonbarker|8 years ago|reply
[+] [-] sfifs|8 years ago|reply