Paul Buchheit on Lessons Learned from Investing in 200 Startups(blog.ycombinator.com)
blog.ycombinator.com
Paul Buchheit on Lessons Learned from Investing in 200 Startups
https://blog.ycombinator.com/paul-buchheit-on-lessons-learned-from-investing-in-200-startups/
123 comments
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.
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.
> Patents aren't worth the paper they're printed on unless you have money to defend them
Exactly. This is something I think most don't understand. Patents give you the right to sue. That's it. They don't provide any "protection" beyond that.
It's like freedom of speech. You have the freedom to say whatever you want but the first amendment does not offer any protection from the consequences of your speech. In other words, say the wrong thing at the wrong time in the wrong place and you might just get beaten into a pulp. You had the absolute right to say whatever you wanted but no protections beyond that.
Exactly. This is something I think most don't understand. Patents give you the right to sue. That's it. They don't provide any "protection" beyond that.
It's like freedom of speech. You have the freedom to say whatever you want but the first amendment does not offer any protection from the consequences of your speech. In other words, say the wrong thing at the wrong time in the wrong place and you might just get beaten into a pulp. You had the absolute right to say whatever you wanted but no protections beyond that.
>Exactly. This is something I think most don't understand. Patents give you the right to sue. That's it. They don't provide any "protection" beyond that.
They give you the ability to credibly threaten to sue as well and reach a big settlement without a lot of expenditure. You can also sell a patent to a competitor who needs it.
They give you the ability to credibly threaten to sue as well and reach a big settlement without a lot of expenditure. You can also sell a patent to a competitor who needs it.
I have a feeling you've never spent a significant amount of time dealing with IP and patent attorneys.
You can't threaten to sue. That can backfire in a major way, having lawsuits filed against you.
The idea of reaching big settlements with minimal expenditure's does not align with reality. This simply don't work that way, particularly if you are up against a large or well-funded company.
The first thing an attorney is going to ask for is a retainer somewhere in the range of $100K to $250K to get started. Whatever they ask for, they are likely to tell you they will not move forward unless you can commit to $250K at a minimum to pursue a case.
They don't do this because they are greedy, they do it because this is expensive and they don't want you to burn through $100K and then discover you'll need more, don't have it and you got nothing for your $100K.
Selling IP is an entirely different conversation. Yes, patents can be worth millions, tens of millions, even without a real product behind them.
You can't threaten to sue. That can backfire in a major way, having lawsuits filed against you.
The idea of reaching big settlements with minimal expenditure's does not align with reality. This simply don't work that way, particularly if you are up against a large or well-funded company.
The first thing an attorney is going to ask for is a retainer somewhere in the range of $100K to $250K to get started. Whatever they ask for, they are likely to tell you they will not move forward unless you can commit to $250K at a minimum to pursue a case.
They don't do this because they are greedy, they do it because this is expensive and they don't want you to burn through $100K and then discover you'll need more, don't have it and you got nothing for your $100K.
Selling IP is an entirely different conversation. Yes, patents can be worth millions, tens of millions, even without a real product behind them.
well assuming you have something to demonstrate the value you are trying to provide for that $50k ramp, you should be putting time into attracting organic (non-paid) interest in your product from people who suffer from the problem you are trying to solve. You may need to also be searching for a technical or marketing co-founder depending on your skill set.
but still, the heavy vc money only comes if they smell a chance at forming a monopoly with your idea - either thanks to patents, user lock in or having a plan that includes high barriers to entry after one gets the market
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.
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.
Agreed; I've witnessed this first-hand with a person spending years and years on their invention. One with a real-world application + personalisation (branding) tie-ins. If the "providing value" metric adds up (cost, production/deployment, scalaing, etc) then a good model should be kind of evident on paper following initial market tests.
Whether it's a "Service" or "Item" do have different paths, the demand and revenue potential to feel things out just kind of seems natural to me. The person I know spent years, which is yes different than "start-up" but he is the absolute definition of boot-strapping while maintaining a full-time job. Dedication and investment and, yes, money.
Whether it's a "Service" or "Item" do have different paths, the demand and revenue potential to feel things out just kind of seems natural to me. The person I know spent years, which is yes different than "start-up" but he is the absolute definition of boot-strapping while maintaining a full-time job. Dedication and investment and, yes, money.
> 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.
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
Edit - Added some more meat
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
I heard Zuck give a talk where this came up. If I remember correctly, his board said he should take the money. He replied that all he'd want to do after selling FB would be to start another social network, so why not just keep working on the one he'd already got?
It wasn't amount the money.
It wasn't amount the money.
Would the contract not define a non-compete clause, though? I mean, much less reason to buy it if the ones buying it from just do the same thing again, under a new name.
He has famously said he would have sold FB if yahoo kept the $1 billion tag.
If he indeed said that to someone, it was not famously; the prevailing mythology is definitely that he was uninterested in selling at that price. Would love to see your source if that isn't true.
Yahoo did famously miss out on acquiring Google early on because of a lowball offer ... maybe you're thinking of that?
If he indeed said that to someone, it was not famously; the prevailing mythology is definitely that he was uninterested in selling at that price. Would love to see your source if that isn't true.
Yahoo did famously miss out on acquiring Google early on because of a lowball offer ... maybe you're thinking of that?
source?
It is everywhere and part of history now. I got a link for you -
http://www.businessinsider.com/all-the-companies-that-ever-t...
Details are little bit down in the page. You can also search the page with "In June 2006, Yahoo decided it had to have Facebook"
http://www.businessinsider.com/all-the-companies-that-ever-t...
Details are little bit down in the page. You can also search the page with "In June 2006, Yahoo decided it had to have Facebook"
This article says they dropped it to $850M. It also says they turned down a B$1.5 offer from Viacom around the same time.
I don't think your claims are correct.
I don't think your claims are correct.
This article says that Zuck rejected the $1b offer because he thought it was too low and that the board later rejected a lower number. Not exactly what you said. It specifically says that Zuck believed Facebook to be worth more than $1b. Which is directly counter to the statement "He would have sold for $1b."
Just having a conversation. M & A is one of my favorite topics. Zuck kept changing his mind. Following lines are also from the article. This story is now almost 10 years old so kind of hard to find related stuff.
"Yahoo lowered its offer to $850 million after announcing horrible Q2 earnings. Facebook's board took 10 minutes to reject the lowered offer"
"Yahoo lowered its offer to $850 million after announcing horrible Q2 earnings. Facebook's board took 10 minutes to reject the lowered offer"
You still haven't provided a source for "He has famously said he would have sold FB if yahoo kept the $1 billion tag.".
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
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
This fight will get interesting very soon.
The new EU data directive requires companies to provide users easily with the canonical representation of all their data, and any and all data derived from that (including probabilistic models).
This data portability law will change quite a bit, once people notice it exists.
I’m looking forward to it.
The new EU data directive requires companies to provide users easily with the canonical representation of all their data, and any and all data derived from that (including probabilistic models).
This data portability law will change quite a bit, once people notice it exists.
I’m looking forward to it.
That is extremely exciting if it's true, as I believe this is one of the major things that has held online competition back. Can you post some articles that describe the details, and the dates that those measures become effective?
Check out http://www.eugdpr.org/
This doesn't seem correct.
FB provides an 'export all my data' function. See https://www.facebook.com/help/131112897028467
The conventional wisdom is the network nature of FB is it's strength.
FB provides an 'export all my data' function. See https://www.facebook.com/help/131112897028467
The conventional wisdom is the network nature of FB is it's strength.
Caveat: IANAL
In cyberspace, such barriers are basically imaginary. "Network effect" originally referred to physical phone lines, i.e., hardware that can't be modified/upgraded remotely. Within the internet itself, there is no such limiting factor.
People could decide to switch to another social client easily if they could access the same data, and the only reason they can't access that data is not an incontrovertible "network effect", but our own conception of intellectual property and server access rights.
Facebook's provided personal data export is slow and designed for use in relatively-rare periodic backups. It is noisy and difficult to access. Users cannot use an alternative client to trigger this on their behalf afaik (I don't see an API function for it) and programmatically controlling a web browser to access Facebook's site is explicitly forbidden by the ToS, making it a CFAA violation as well as a breach of contract.
If we're being realistic, the functionality of the data export represents an impractical barrier for Another Social Client to overcome, but let's say they try to go with it, exporting your user data every 24 hours so there is only a one-day lag time between the networks.
It would probably be illegal for this Alternate Social Client to process the files output in this archive, as they likely constitute a copyrighted work owned by Facebook, and copying content owned by someone else without authorization, even if you just copy it into RAM for processing/modification, is likely to be infringement. This is known as the "RAM Copy doctrine".
Thirdly, the Alternate Social Client is unable to provide a competitive window into the user's social graph because every other user would also have to go through this contrived process before their data would be visible within that network, because the CFAA makes it illegal to gather this data out of Facebook directly.
This is mostly not theoretical. Check out Facebook v. Power Ventures, where a small entrepreneur who tried to provide a better Facebook export interface, only collecting data which the user owned, was sued into the ground by Facebook and left holding a bag of $3M in personal liability. This entrepreneur violated the CFAA by contacting Facebook's servers in a manner that was contrary to their wishes, and he violated the Copyright Act by loading their HTML into his software for the purpose of extracting data owned by his knowing users who had purposefully asked him to perform that function on their behalf.
We need to divorce data from applications, such that Facebook is a Social Graph Browser, and users are free to move around and select a different Social Graph Browser, as they wish, just as My Word Document Collection can be viewed without legal penalty in either OpenOffice or MS Word (though this is probably legally dubious too and just hasn't been pressed; lmk if there's been a case about interoperability between proprietary file formats).
Using a remote browser to access the Social Graph shouldn't be any different than using a local browser to access the larger network that Graph lives on, the Internet.
In the earlier days of the internet, where everything was a document without a login barrier or remote database lock, users were free to select the browser of their choice to present those documents; they were free to decide how that data would be processed and presented to them.
Through some legal sleight-of-hand involving moving this stuff onto server backends and accessed remotely instead of being installed locally, the tech conglomerates have taken that data and put it under lock and key, within a walled garden, in a closed web atop the normal internet, or whatever you want to call it, and the people who attempt to liberate it are prosecuted under laws such as the CFAA (see: Aaron Swartz). In doing this, they have taken away our ability to choose how we access that data. [Sidebar: this approach has also negatively affected copyleft licenses like the GPL, giving rise to the AGPL.]
We won't have competitive SaaS until we get to the point where choosing our own client experience is possible again. Many entrepreneurs have already done the plumbing to make it possible without incurring any development overhead on Facebook or any other data source; the legal system prevents them from realizing that commercially.
Facebook, Craigslist (see Craigslist v. 3Taps), et al are terrified at the prospect of losing their monopoly on user data, because they know that means they could lose users to people who provide better clients with friendlier user experiences, less spyware, or whatever. They won't have their mechanism of lock-in anymore (other than the conventional arms race thing where they try to screw up the format so that competitors have a hard time reading it).
Reminder caveat: IANAL
In cyberspace, such barriers are basically imaginary. "Network effect" originally referred to physical phone lines, i.e., hardware that can't be modified/upgraded remotely. Within the internet itself, there is no such limiting factor.
People could decide to switch to another social client easily if they could access the same data, and the only reason they can't access that data is not an incontrovertible "network effect", but our own conception of intellectual property and server access rights.
Facebook's provided personal data export is slow and designed for use in relatively-rare periodic backups. It is noisy and difficult to access. Users cannot use an alternative client to trigger this on their behalf afaik (I don't see an API function for it) and programmatically controlling a web browser to access Facebook's site is explicitly forbidden by the ToS, making it a CFAA violation as well as a breach of contract.
If we're being realistic, the functionality of the data export represents an impractical barrier for Another Social Client to overcome, but let's say they try to go with it, exporting your user data every 24 hours so there is only a one-day lag time between the networks.
It would probably be illegal for this Alternate Social Client to process the files output in this archive, as they likely constitute a copyrighted work owned by Facebook, and copying content owned by someone else without authorization, even if you just copy it into RAM for processing/modification, is likely to be infringement. This is known as the "RAM Copy doctrine".
Thirdly, the Alternate Social Client is unable to provide a competitive window into the user's social graph because every other user would also have to go through this contrived process before their data would be visible within that network, because the CFAA makes it illegal to gather this data out of Facebook directly.
This is mostly not theoretical. Check out Facebook v. Power Ventures, where a small entrepreneur who tried to provide a better Facebook export interface, only collecting data which the user owned, was sued into the ground by Facebook and left holding a bag of $3M in personal liability. This entrepreneur violated the CFAA by contacting Facebook's servers in a manner that was contrary to their wishes, and he violated the Copyright Act by loading their HTML into his software for the purpose of extracting data owned by his knowing users who had purposefully asked him to perform that function on their behalf.
We need to divorce data from applications, such that Facebook is a Social Graph Browser, and users are free to move around and select a different Social Graph Browser, as they wish, just as My Word Document Collection can be viewed without legal penalty in either OpenOffice or MS Word (though this is probably legally dubious too and just hasn't been pressed; lmk if there's been a case about interoperability between proprietary file formats).
Using a remote browser to access the Social Graph shouldn't be any different than using a local browser to access the larger network that Graph lives on, the Internet.
In the earlier days of the internet, where everything was a document without a login barrier or remote database lock, users were free to select the browser of their choice to present those documents; they were free to decide how that data would be processed and presented to them.
Through some legal sleight-of-hand involving moving this stuff onto server backends and accessed remotely instead of being installed locally, the tech conglomerates have taken that data and put it under lock and key, within a walled garden, in a closed web atop the normal internet, or whatever you want to call it, and the people who attempt to liberate it are prosecuted under laws such as the CFAA (see: Aaron Swartz). In doing this, they have taken away our ability to choose how we access that data. [Sidebar: this approach has also negatively affected copyleft licenses like the GPL, giving rise to the AGPL.]
We won't have competitive SaaS until we get to the point where choosing our own client experience is possible again. Many entrepreneurs have already done the plumbing to make it possible without incurring any development overhead on Facebook or any other data source; the legal system prevents them from realizing that commercially.
Facebook, Craigslist (see Craigslist v. 3Taps), et al are terrified at the prospect of losing their monopoly on user data, because they know that means they could lose users to people who provide better clients with friendlier user experiences, less spyware, or whatever. They won't have their mechanism of lock-in anymore (other than the conventional arms race thing where they try to screw up the format so that competitors have a hard time reading it).
Reminder caveat: IANAL
In cyberspace, such barriers are basically imaginary. "Network effect" originally referred to physical phone lines, i.e., hardware that can't be modified/upgraded remotely. Within the internet itself, there is no such limiting factor.
No, that's wrong.
Network effects refer to Metcalfe's Law[1]:
Metcalfe's law states that the value of a telecommunications network is proportional to the square of the number of connected users of the system (n2). First formulated in this form by George Gilder in 1993, and attributed to Robert Metcalfe in regard to Ethernet, Metcalfe's law was originally presented, c. 1980, not in terms of users, but rather of "compatible communicating devices" (for example, fax machines, telephones, etc.).[2] Only later with the globalization of the Internet did this law carry over to users and networks as its original intent was to describe Ethernet purchases and connections. The law is also very much related to economics and business management, especially with competitive companies looking to merge with one another.
This (the value of the network being because your friends are there) is exactly the value of FB.
[1] https://en.wikipedia.org/wiki/Metcalfe%27s_law
No, that's wrong.
Network effects refer to Metcalfe's Law[1]:
Metcalfe's law states that the value of a telecommunications network is proportional to the square of the number of connected users of the system (n2). First formulated in this form by George Gilder in 1993, and attributed to Robert Metcalfe in regard to Ethernet, Metcalfe's law was originally presented, c. 1980, not in terms of users, but rather of "compatible communicating devices" (for example, fax machines, telephones, etc.).[2] Only later with the globalization of the Internet did this law carry over to users and networks as its original intent was to describe Ethernet purchases and connections. The law is also very much related to economics and business management, especially with competitive companies looking to merge with one another.
This (the value of the network being because your friends are there) is exactly the value of FB.
[1] https://en.wikipedia.org/wiki/Metcalfe%27s_law
I'm not sure if you just read the first four words of my post and stopped or what (and I don't necessarily blame you, as it's long), but I address this supposed "value of FB" in the parent comment.
FB is "where your friends are" not due to an inherent physical limitation, as in the connected hardware that network effects originally described, but due to our willful dispensation of those rights to internet companies by legal means.
The only reason your friend's data is stuck in Facebook is because our laws allow Facebook to enforce a monopoly on it by allowing Facebook to block any real access by potential competitors. Unlike Ethernet, fax machines, or telephones, there is no physical constraint that would impede compatibility. It's all in our heads. The developers of the competing service(s) can and have made adapters to make that junction transparent. The law does not really allow them to be used.
There is no more reason that users should be forced to use Facebook to view such data than there is reason that users should be forced to use Internet Explorer to view web pages. There is no reason that Power Ventures should be illegal and Firefox should be legal; they are both browsing programs made to display, present, and interact with data.
FB is "where your friends are" not due to an inherent physical limitation, as in the connected hardware that network effects originally described, but due to our willful dispensation of those rights to internet companies by legal means.
The only reason your friend's data is stuck in Facebook is because our laws allow Facebook to enforce a monopoly on it by allowing Facebook to block any real access by potential competitors. Unlike Ethernet, fax machines, or telephones, there is no physical constraint that would impede compatibility. It's all in our heads. The developers of the competing service(s) can and have made adapters to make that junction transparent. The law does not really allow them to be used.
There is no more reason that users should be forced to use Facebook to view such data than there is reason that users should be forced to use Internet Explorer to view web pages. There is no reason that Power Ventures should be illegal and Firefox should be legal; they are both browsing programs made to display, present, and interact with data.
FB is "where your friends are" not due to an inherent physical limitation, as in the connected hardware that network effects originally described
No, network effects was never about the hardware, it was a formula which valued a network by the number of connections on it.
Networks become more valuable the more connections you have.
The content is often orthogonal. See Snapchat, where the content is literally thrown away,
No, network effects was never about the hardware, it was a formula which valued a network by the number of connections on it.
Networks become more valuable the more connections you have.
The content is often orthogonal. See Snapchat, where the content is literally thrown away,
First, whether the observed "network effects" phenomenon originally referred to hardware connectivity or not, the argument stands because there are ways to transparently bridge that connectivity gap which we can't use only due to legal fiat. There is nothing except law standing between getting the data out of Facebook and into a competing client. That client will still have an uphill battle to fight, but at least they'll be allowed on the playing field, instead of just left screaming from the sidelines "Hey, come over to my playing field instead! One at a time!"
Consider telephony. You don't have to say "Wait, is this an AT&T or a T-Mobile number?" when you get someone's cell phone number, because AT&T and T-Mo have equipment behind the scenes that works together (much to AT&T's chagrin). That should be equally applicable to the digital world, but the CFAA and other laws allow incumbents to shut down any attempt to provide compatibility. That's the issue.
----
Secondly, I didn't want to nitpick this because it's tedious, but since you've reiterated it, the very portion of the Wikipedia article you quoted indicates that Metcalfe's Law was originally about hardware connections, in multiple places!
Here's the quote:
>First formulated in this form by George Gilder in 1993,[1] and attributed to Robert Metcalfe in regard to Ethernet, Metcalfe's law was originally presented, c. 1980, not in terms of users, but rather of "compatible communicating devices" (for example, fax machines, telephones, etc.).[2] Only later with the globalization of the Internet did this law carry over to users and networks as its original intent was to describe Ethernet purchases and connections.[3]
(See emphasized portions, which, again, repeat that network effects originally referred to "Ethernet purchases and connections" and "fax machines, telephones, etc."; that is, physical hardware that needed to be compatible with the physical telecommunications network. I haven't read the source documents or done tons of research into this, so if the WP article is incorrect, by all means please edit and correct it.)
People assumed the extrapolation held as they observed similar "network effects" on things like Facebook, but this is misleading, because there is no real physical limitation keeping people on Facebook. There are real physical limitations locking people into the hardware they buy. The thing that makes Facebook's network effective is that the government has made it illegal to try to break their lock-in, not because that lock-in is natural as it is in the case of hardware. It's an underground extension of IP rights.
---
I'm not saying an FB competitor wouldn't have an uphill battle getting people to switch, but they'd at least be welcome on the same playing field.
Imagine the consequences if we told phone companies that they could start suing anyone who tried to dial one of their numbers without the company's explicit permission. Imagine if we told them that in some cases, we'll even send people to federal prison for it! Overnight, you'd have to switch to AT&T to call people on AT&T; it wouldn't matter that you personally preferred T-Mobile, Project Fi, or any other carrier. You'd have to go to whoever the people you most wanted to call had, or maintain two separate cell numbers.
That's what the CFAA does for companies like Facebook and Google. If I want to "dial" Bob's social feed and Bob happens to have chosen Facebook as his social carrier, Facebook tells me I have to play by their rules. If someone tries to say "We made it so you can view Bob's social feed under conditions you may find more amenable", that person gets sued into oblivion.
Consider telephony. You don't have to say "Wait, is this an AT&T or a T-Mobile number?" when you get someone's cell phone number, because AT&T and T-Mo have equipment behind the scenes that works together (much to AT&T's chagrin). That should be equally applicable to the digital world, but the CFAA and other laws allow incumbents to shut down any attempt to provide compatibility. That's the issue.
----
Secondly, I didn't want to nitpick this because it's tedious, but since you've reiterated it, the very portion of the Wikipedia article you quoted indicates that Metcalfe's Law was originally about hardware connections, in multiple places!
Here's the quote:
>First formulated in this form by George Gilder in 1993,[1] and attributed to Robert Metcalfe in regard to Ethernet, Metcalfe's law was originally presented, c. 1980, not in terms of users, but rather of "compatible communicating devices" (for example, fax machines, telephones, etc.).[2] Only later with the globalization of the Internet did this law carry over to users and networks as its original intent was to describe Ethernet purchases and connections.[3]
(See emphasized portions, which, again, repeat that network effects originally referred to "Ethernet purchases and connections" and "fax machines, telephones, etc."; that is, physical hardware that needed to be compatible with the physical telecommunications network. I haven't read the source documents or done tons of research into this, so if the WP article is incorrect, by all means please edit and correct it.)
People assumed the extrapolation held as they observed similar "network effects" on things like Facebook, but this is misleading, because there is no real physical limitation keeping people on Facebook. There are real physical limitations locking people into the hardware they buy. The thing that makes Facebook's network effective is that the government has made it illegal to try to break their lock-in, not because that lock-in is natural as it is in the case of hardware. It's an underground extension of IP rights.
---
I'm not saying an FB competitor wouldn't have an uphill battle getting people to switch, but they'd at least be welcome on the same playing field.
Imagine the consequences if we told phone companies that they could start suing anyone who tried to dial one of their numbers without the company's explicit permission. Imagine if we told them that in some cases, we'll even send people to federal prison for it! Overnight, you'd have to switch to AT&T to call people on AT&T; it wouldn't matter that you personally preferred T-Mobile, Project Fi, or any other carrier. You'd have to go to whoever the people you most wanted to call had, or maintain two separate cell numbers.
That's what the CFAA does for companies like Facebook and Google. If I want to "dial" Bob's social feed and Bob happens to have chosen Facebook as his social carrier, Facebook tells me I have to play by their rules. If someone tries to say "We made it so you can view Bob's social feed under conditions you may find more amenable", that person gets sued into oblivion.
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.
But why is this?
And is there a way to crack them open?
And is there a way to crack them open?
Or Google + would have taken off and there would be even less competition.
Google + was a reaction to Facebook's success and its ability to keep Google off its data. If Facebook had not existed, Google + would not exist either, at least not before another big, entrenched incumbent.
Google created Orkut, an initially successful social network years before the rise of Facebook. Orkut died from scaling issues, something Google is really skilled at dealing with, had they really wanted to.
I agree with your main point that something else could have been Facebook if not for Facebook.
Google created Orkut, an initially successful social network years before the rise of Facebook. Orkut died from scaling issues, something Google is really skilled at dealing with, had they really wanted to.
I agree with your main point that something else could have been Facebook if not for Facebook.
And that something could have been Google, meaning less competition.
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.
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.
Love this:
>>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-...
>>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-...
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.
>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...)
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.
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.
The truth is youre more likely to find the skills within a talented team and not individual.
Someone with a knack for product AND great engineering chops is extremely rare.
Not disagreeing with you, if anything bolstering your point.
Someone with a knack for product AND great engineering chops is extremely rare.
Not disagreeing with you, if anything bolstering your point.
> 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'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.
What was wrong with "for profit couchsurfing clone"? That's still a good chunk of airbnb's listings today, and it was a big part of the site in the early years when it was gaining traction.
I used to do couchsurfing and I've used airbnb a lot, and there's a lot of overlap in the experience when renting a room.
(The whole apartment rentals are different of course, which are a unique hybrid, not even really like a hotel. More like short term furnished apartment rentals, of the kind that formerly worked on a monthly basis for corporate travelers)
I used to do couchsurfing and I've used airbnb a lot, and there's a lot of overlap in the experience when renting a room.
(The whole apartment rentals are different of course, which are a unique hybrid, not even really like a hotel. More like short term furnished apartment rentals, of the kind that formerly worked on a monthly basis for corporate travelers)
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.
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.
Also the website back then was airbedandbreakfast.com, way too long and complex of a domain. Couchsurfing was huge, and I guess investors didn't think a paid version of it would take off if a free version existed. At least that's how I thought about it when I rejected Joe's offer to work on the site in 2008.
But my point is that there was plenty of evidence at that time that lots of people were willing to rent out "non-professional" private accommodations.
Maybe a big part of the reason is that investors and VCs are rich. I wondered about this too.
yeah, if you've never ever had to couchsurf, you will never figure out the appeal of airbnb.
I've used airbnb once - to rent a serviced apartment for several months. i'd never use airbnb to rent a room.
I've used airbnb once - to rent a serviced apartment for several months. i'd never use airbnb to rent a room.
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.
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.
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.
Does it really make financial sense though? If there are two founders, some outside equity and a few employees I'm not sure $20 million is better than working in a big company and the risk is surely larger. It might be a lot more fun though, and you will learn a lot so if they payoff is comparable I would say go for the startup if you can afford it.
$20 million is $5 million if you just own 25%. thats almost 40 years of working at a dayjob.
Except after taxes and expenses you're lucky if you're saving $1000/month at that day job. After 40 years, assuming 5% annual compounding on your investment, which requires to be almost entirely in risky investments like stocks, you could end up with 1.5 million. On the other hand, 3 million after taxes out of the initial windfall of 5 million, at 5% return would let you pay the exact same expenses while still growing by over $5000/month. You'd end up with $30 million at the end of 40 years. Huge difference.
Your numbers are way off.
In the US a young, single developer who follows a budget should be able to save at least $2k/month.
$80k/year income less 25% for payroll & income taxes leaves $60k/year. $1.5k/month in housing & $1.5k/month in food/utilities/cell phone/clothes/etc. is $36k/year in spending, leaving $24k for savings. (This also ignores the tax advantages of retirement accounts, which allow for more room to save or spend)
The average nominal returns of the stock market are over 10% per year: a very simple & conservative investment portfolio of 60% S&P 500 index fund & 40% US Treasury bonds yields about 8.7%/year. If we assume 2.7% inflation we get 6% real return/year.
In the US a young, single developer who follows a budget should be able to save at least $2k/month.
$80k/year income less 25% for payroll & income taxes leaves $60k/year. $1.5k/month in housing & $1.5k/month in food/utilities/cell phone/clothes/etc. is $36k/year in spending, leaving $24k for savings. (This also ignores the tax advantages of retirement accounts, which allow for more room to save or spend)
The average nominal returns of the stock market are over 10% per year: a very simple & conservative investment portfolio of 60% S&P 500 index fund & 40% US Treasury bonds yields about 8.7%/year. If we assume 2.7% inflation we get 6% real return/year.
add a few kids and you'll end up with debt instead of savings...
FWIW, a founder with an 83b election will almost certainly be paying the long term capital gains rate on their $5m: 15% federal.
(add another 13% if California though)
(add another 13% if California though)
wait, why 13% if California?
But if targeting a small exit doesn't allow for investors that means individuals trying for small exits won't find investment.
"suggests individual entrepreneurs have a much higher likelihood of success when they raise less capital
Maybe angels?
Maybe angels?
Angels are often as not more headaches than their money is worth. You get almost all of the downsides of having investors and none of the upsides.
Angel investments can make sense but usually only if you know you will be going for a larger round later.
Angel investments can make sense but usually only if you know you will be going for a larger round later.
>> When you sell too early you don’t realize the full potential.
[deleted]
The company that sold too early probably lost out on more than the ten companies that should have been sold, combined.
But how do you know? I know on hindsight a lot of companies that peaked about the time of their offer. Soon after the investors realized that the potential market wasn't as big as hoped and they pull. (some of the companies still exist, they serve their niche well which makes for some profit and keeps a few people on the payroll)
General economic principles? There's typically a risk premium for things. If a company is worth a billion dollars 10% of the time and nothing the rest, it's fair market value is typically under $100M.
That, and there's a power law distribution of start-up results. The majority of returns come from the minority of companies that end up doing really well.
That, and there's a power law distribution of start-up results. The majority of returns come from the minority of companies that end up doing really well.
That isn't the question I meant to ask. What I mean is say you have a company and get an lower offer now. Should you take it? (assume that maximizing money is your goal) If the company is at the peak of course you should, it isn't the big offer you hoped for, but it is the best you can ever get.
There are a lot of startups that fail. Then there are a fair number that do okay, but never really get big. Then there are a tiny number that gets big.
There are a lot of startups that fail. Then there are a fair number that do okay, but never really get big. Then there are a tiny number that gets big.
It's interesting to contrast this with the PG era of YCombinator:
http://www.paulgraham.com/swan.html#f1n
http://www.paulgraham.com/swan.html#f1n
[1] I'm not saying that the big winners are all that matters, just that they're all that matters financially for investors. Since we're not doing YC mainly for financial reasons, the big winners aren't all that matters to us. We're delighted to have funded Reddit, for example. Even though we made comparatively little from it, Reddit has had a big effect on the world, and it introduced us to Steve Huffman and Alexis Ohanian, both of whom have become good friends.
Nor do we push founders to try to become one of the big winners if they don't want to. We didn't "swing for the fences" in our own startup (Viaweb, which was acquired for $50 million), and it would feel pretty bogus to press founders to do something we didn't do. Our rule is that it's up to the founders. Some want to take over the world, and some just want that first few million. But we invest in so many companies that we don't have to sweat any one outcome. In fact, we don't have to sweat whether startups have exits at all. The biggest exits are the only ones that matter financially, and those are guaranteed in the sense that if a company becomes big enough, a market for its shares will inevitably arise. Since the remaining outcomes don't have a significant effect on returns, it's cool with us if the founders want to sell early for a small amount, or grow slowly and never sell (i.e. become a so-called lifestyle business), or even shut the company down. We're sometimes disappointed when a startup we had high hopes for doesn't do well, but this disappointment is mostly the ordinary variety that anyone feels when that happens.
Nor do we push founders to try to become one of the big winners if they don't want to. We didn't "swing for the fences" in our own startup (Viaweb, which was acquired for $50 million), and it would feel pretty bogus to press founders to do something we didn't do. Our rule is that it's up to the founders. Some want to take over the world, and some just want that first few million. But we invest in so many companies that we don't have to sweat any one outcome. In fact, we don't have to sweat whether startups have exits at all. The biggest exits are the only ones that matter financially, and those are guaranteed in the sense that if a company becomes big enough, a market for its shares will inevitably arise. Since the remaining outcomes don't have a significant effect on returns, it's cool with us if the founders want to sell early for a small amount, or grow slowly and never sell (i.e. become a so-called lifestyle business), or even shut the company down. We're sometimes disappointed when a startup we had high hopes for doesn't do well, but this disappointment is mostly the ordinary variety that anyone feels when that happens.
"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. :-(
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. :-(
Potential is defined pretty loosely as "1/200 chance of being worth 10 bil plus" based on their track record so far.
You might be able to do that if you had enough amazing people / companies offering you equity.
You might be able to do that if you had enough amazing people / companies offering you equity.
I think what he's saying is that there are a subset of companies that no matter how successful they get, they are not in a market to ever be worth 10 billion.
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?
I think the answer to that is yes, in terms of potential. The global wine market from just the quickest Google search seems to be north of $300B. The cooking appliances market is massive as well.
Sure and the global food market is even bigger, but that doesn't make me want to fund a hot dog cart.
I mean they literally funded a company that opens bottles of wine and sells it by the glass through the mail.
It's hard to reconcile that behavior with his stated investment approach is all I am saying.
I mean they literally funded a company that opens bottles of wine and sells it by the glass through the mail.
It's hard to reconcile that behavior with his stated investment approach is all I am saying.
How about a robot hot dog cart you just drop off and it makes people's dogs?
Stealing - locks, cameras, alarms.
Stealing - locks, cameras, alarms.
But, every niche is part of a bigger market.
The problem is the focus on exit. Entrepreneurs can live quite well on seven to eight figure businesses, provided they enjoy the work they do.
IMHO The real meaning of the question "Does the market support a $10Bn company?"
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.
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.
But let's say hypothetically to took that company and say it does a million year and throws off 300k could you hire a small team to say do more parts. Then maybe a whole custom bike. then a mass produced bike. then autonomous bike. which to me seems like a better path than Elon Musk's payments to high cars, to roofs, to space etc.
well that is basically my business model, :) . I don't feel like chasing money around, so I fund my own silly ideas. Sooner or later one idea/product will pay off (or not). I am trying to enjoy myself in the process. In the meantime we are adding equipment to the factory, and adding customers to our distribution network
I wish I could up vote this several times.
I feel like a nice interactive JS widget letting you play around with portfolio variables (duration, %win, company size distribution, etc) would dissuade so many fledgling company founders.
I feel like a nice interactive JS widget letting you play around with portfolio variables (duration, %win, company size distribution, etc) would dissuade so many fledgling company founders.
[deleted]
Paul's thoughts after his first three years angel investing (2011): http://paulbuchheit.blogspot.com/2011/01/angel-investing-my-...
Great way of putting things: "I’ve discovered that most people are really good at finding obstacles."
> I wrote the first version of Gmail in a day!
I hadn't heard that before; does anyone know of sources with more on this story?
I hadn't heard that before; does anyone know of sources with more on this story?
From the man himself - http://paulbuchheit.blogspot.com/2009/01/communicating-with-...
Note that he also scoped it so that he'd be able to finish it in one day. The first version of gmail only searched his own email.
Another story about Gmail's beginnings: http://blogoscoped.com/archive/2007-07-16-n55.html
Was Google cooperating with the Chinese government that controversial? Cooperating with the NSA seemed to make bigger waves.
> 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.
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.
Great advice:
"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."
"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".
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".
Yahoo screwed up literally every acquisition in the social space that they made.
After Google spanked them in search, generally they had ideas of somehow pivoting to social media, but they never executed. They had all the good fledgling social products, but wanted them to operate like media aggregation portals (the strategy that had always worked for them). Some people within Yahoo did see the shift that was coming, but their plans all got lost in corporate politics and architecture astronautery.
Source: worked for acquired social startups within Yahoo around the same time.
After Google spanked them in search, generally they had ideas of somehow pivoting to social media, but they never executed. They had all the good fledgling social products, but wanted them to operate like media aggregation portals (the strategy that had always worked for them). Some people within Yahoo did see the shift that was coming, but their plans all got lost in corporate politics and architecture astronautery.
Source: worked for acquired social startups within Yahoo around the same time.
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...
Best quote:
> 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!
> 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.).
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.).
Also those big projects might not have made billions for those who invented it, but it did enable many others make billions standing on shoulder of those giants. They created trillion dollar computing and associated software market.
Yes, the Bell Labs transistors gave us cheap digital computing, and the Bell Labs work on solid state lasers to light optical fibers gave us cheap data communications of the Internet. I'm still not fully clear on what gave us the much higher disk recording densities, but IBM's giant magneto-resistive disk heads may be all or nearly all of it.
But, now, with cheap, powerful digital hardware, lots of powerful software, from BIOS booting to operating systems, relational database and much more, e.g., mobile, the cloud, maybe IOT, there should be some really good opportunities for solid, low risk, high value projects from small teams, even solo, sole founder-developers.
But, now, with cheap, powerful digital hardware, lots of powerful software, from BIOS booting to operating systems, relational database and much more, e.g., mobile, the cloud, maybe IOT, there should be some really good opportunities for solid, low risk, high value projects from small teams, even solo, sole founder-developers.
basically just keep working and don't look to the past as a predictor of the future.
> I was interested in making [Gmail] freely available and came up with the ads system.
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.
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.
I don't see how you avoid some company reading your email and still have automatically indexed, infinitely scalable email in-boxes. Gmail is still the best game in town for this reason. The AI features are getting increasingly good--Gmail automatically creates calendar entries based on email content which is a pretty nice feature.
More generally most cloud services are going to have the same properties. It would be more useful to define clear bounds of what companies can do with your data and back them up with workable legal protections.
More generally most cloud services are going to have the same properties. It would be more useful to define clear bounds of what companies can do with your data and back them up with workable legal protections.
I welcome our new robot overlords.
The data mining and the ads are the price I pay for such incredibly useful services, that don't cost me anything but a small bit of attention. And even the ads are good, because they're so nicely targeted.
The data mining and the ads are the price I pay for such incredibly useful services, that don't cost me anything but a small bit of attention. And even the ads are good, because they're so nicely targeted.
I think that if the tradeoff were privacy vs automatic indexing, I'd be on the fence. And scalable doesn't require them to read our email; storage is nearly free. And the AI assistance features could run on a machine I own, without El Goog needing to be able to read my email.
However, I really appreciate Google's ability to block spam, and I don't know of any way to make that work (at this level of quality) without a centralized service sharing spam-flagging between millions of users.
However, I really appreciate Google's ability to block spam, and I don't know of any way to make that work (at this level of quality) without a centralized service sharing spam-flagging between millions of users.
> I don't see how you avoid some company reading your email and still have automatically indexed, infinitely scalable email in-boxes.
It's possible to with encrypted search.
It's possible to with encrypted search.
[deleted]
Great insights, better said than most, but nothing new here. Definitely not unique insights from investing in 200+ startups vs 20 or 2.
>> 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!”
What's baffling is how people who can come up with such a silly idea can also come up with such a great idea as AirBnb. Without the immense help from YC, I'm sure they wouldn't have gone anywhere.
What's baffling is how people who can come up with such a silly idea can also come up with such a great idea as AirBnb. Without the immense help from YC, I'm sure they wouldn't have gone anywhere.
Renting out your own apartments to strangers was arguably a "worse" idea than some airbed concept. The whole point is you never know, no one knows what catches until it happens.
> The biggest one is made-up ideas. The best startups come from personal experience. It was something you or someone you know needed.
My cofounder and I chose our idea as a result of reading research papers. We were so prescient with our analysis that we found many people within our circles who needed what we built. I became a user myself -- it ended up saving me!
Guess I'll have to pass on getting funding from pb. :-)
My cofounder and I chose our idea as a result of reading research papers. We were so prescient with our analysis that we found many people within our circles who needed what we built. I became a user myself -- it ended up saving me!
Guess I'll have to pass on getting funding from pb. :-)
I wrote the first version of Gmail in a day!! #damn
AMP is pretty evil.
>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.