Facebook To Begin Giving Y Combinator Startups VIP Treatment | Hacker News Reader

Facebook To Begin Giving Y Combinator Startups VIP Treatment

techcrunch.com

Interesting strategy.

Devils Advocate: basically encourage many of the best and brightest to lock them selves into using facebook like Zynga originally did?

Only question, does this welcome offer include the frid.ge :)

"basically encourage many of the best and brightest to lock them selves into using facebook like Zynga originally did?"

Yeah, god forbid YC companies make bets that let them become 5 billion dollar companies.

My guess is that Facebook wants to sell personalization and credits as a service.

Once a few YC startups become successful, Facebook will showcase them to legitimize their "product". Big companies will want to join in, and then Facebook will start charging for it.

Yeah but 30% is a big cut. Thats what they want for their credits correct? Basically they want to become the de-facto APP store for web apps?

For example:

A user has a Facebook account with his credit card attached to it and now every YC startup has a button that says buy Plan A for 8.95 a month.

In single click the FB user is now a user of the the YC funded App (He doesn't have to fill in any email or password, or his Credit Card number) and the App is able to bill the FB user 70% of $8.95 a month.

Its a win for the the YC startup because this new button takes all the friction out of buying the App ( having to make an account and open your wallet to type your credit card number in). FB wins because they control web 3.0 and get a 30% cut.

If I didn't think this was a really boring way to make money I was going to submit this idea about a year ago as a YC application.

Ugh what a frightening future you picture there. =(

Let me put my MBA hat on - don't back out of a good money-making idea because you think it is boring way of making $$$. Spend a couple of years making an awesome product, then either sell it and do something interesting or live off the profits and do something interesting.

On the last point, startups have a pretty high failure rate, so you also have to factor in the possibility that you'd spend a couple of years doing something boring that you hate, and still not end up any richer. I wouldn't go for something unless either you found it actually interesting to work on, or you somehow knew you had a 90%+ chance of succeeding.

Awesome products tend to come from enthusiastic developers. If the GP couldn't believe in his idea he was not wrong to discard it.

Isn't PayPal in a pretty good position to undercut that sort of thing? While everyone complains about their fees, they're nowhere near 30%. And while their penetration isn't as great as Facebook's, Facebook's penetration-of-users-who've-entered-CCs is also likely to take some time to ramp up.

But Facebook has a killer distribution platform, which Paypal doesn't.

The Chrome Appstore is another competitor (which, ironically is complementary to PayPal because of Google's complete incompetence in not rolling out Google Checkout world wide)

I have yet to link up my credit card to the Android app store. I'm definitely not going to trust Facebook with that information.

(And especially among Facebook's first users, I don't think you'll find many willing to trust Facebook as a money handler.)

What this basically means is this: if facebook is this aggressive, and pg et al have done the due dilligence and still gone into the deal, then we on the outside should copy them and follow a similar path, because it's probably going to end up as the standard.

What I find interesting is how this is going to change the types of YC companies that will be funded, especially in the short term. One of the things I've noticed about past YC companies is how diverse they've been in terms of the markets/industries they're going after. This will largely change the focus of certain companies already funded as well as the types of applicants. Presumably YC has an upper limit of companies they can fund due to human capital restrictions, and if this means that they fund or focus more on companies focused on "transformative social experiences" this will mean that other incubators and angels that don't have the brand of YC may be able to market themselves/differentiate themselves from YC better.

Why would it change what's accepted? I could simply provide more access to those social applications that are already accepted/would have been accepted anyway.

It's not just more access. This is a case where FB has, for some reason, signalled that they want to work with YC companies, and specifically YC companies. As some people pointed out already, maybe this is them outsourcing R&D. So let's accept that for a second, that this is a way to get them to outsource R&D b/c the FBfund isn't working. If that's the case, that means that they're looking to acquire companies. And not just any company, though that's always the case with any company anywhere with sufficient resources and an eye on growth, but specifically YC companies.

If we presume that the odds of an exit of a YC company before this interview were even across all industries (i.e., that no matter whether they were into working in travel or B2B or whatever a company's odds of being acquired/going public where the same) that is certainly not the case anymore. The odds of an exit for a YC/FB company probably just went up dramatically. In actuality, it seems like it went up dramatically; it's too early to tell if it actually did. And maybe not just b/c the YC company is not going to get acquired by FB, but b/c the YC company can get revenue quicker with preferential access to FB's revenue making methods.

But here's what the cynic in me thinks: based on the RFS[1], this seems really like a way for a cheap and easy way for FB, which has has major credibility issues with Connect, etc. to get good publicity for Facebook Instant Personalization. Since YC is super, super hot right now and just came off their demo day, the tech news was all about them. I don't know if money switched hands -- after all, if YC took a million (cheap for this buzz) that would be enough for them to invest in 66 companies at $15K a pop but with absolutely no risk to them since it's other people's money. If so, it probably wasn't enough.

In addition, YC's other RFS have been generic and in fields that have been buzzworthy enough that they didn't need YC entrants to attack the problem. In other ways, "The Future of Journalism," "Things Built on Twitter," and "iPad applications," -- these are not solving obscure but lucrative problems[2]. It's simply a way for YC to signal their interest in a hot space and that they want to work with the best of the breed in this space. Now, I presume, they're getting paid for it.

[1] http://ycombinator.com/rfs7.html

[2] I'm assuming that there was no similar deal announced with Twitter or Apple, which I feel like I would have heard about, but I could be wrong.

it sounds like a wise strategic decision by facebook. since it's likely there would be YC startups which address facebook deficiencies and eat away at their marketshare. although it looks impossible for any challenge to facebooks position, all it takes is one huge outlier which could change the game, and YC seems like a probable source of such an outlier. but for YC startups it seems like a tradeoff.... short-term boost at the expense of long-term dominance.. but i don't know the details of the deal so can't be sure.

What is FB's consideration in this deal? Is it simply preferred access to acquisition targets and promotion of their platform, or does this relationship preclude (formally or otherwise) YC from funding startups that want to compete with FB?

I'd be guessing it's about promotion of their platform

I think it's about doing outsourced R&D a little more explicitly than big software corps have been doing it already. Plus Zuckerberg prob likes the filtering aspect of YC and so wants to benefit a little more directly from that filter.

I wonder if this means the fbFund is shut down.

Sounds terrific for YC companies. Looks like getting into YC just got that much more competitive.

Reply on news.ycombinator.com