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Comment by robfitz | Hacker News Reader

I got into the fifth batch (s07) and remember my other startup friends staging an intervention to dissuade me from accepting because "the valuation is really bad."

Interesting to see how long even the industry insiders failed to take YC seriously. And then once it was working, they flipped immediately to complaining that YC was too powerful and too influential (unbeatable network effect, seed/A valuation inflation, and so on).

I also remember the constant naysaying about scalability and batch size. Our batch was ~19 companies. People kept naysaying, "Well this model is fine for now, but it will never work past 20 teams."

PG would always reply with something like, "Yeah, they said that when we had fewer than 10 teams also. We aren't thinking too far ahead; each batch, we just find the next bottleneck and solve it, and we'll see how far that gets us." Which evidently got them pretty far. A lovely example of doing things that don't scale.

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I was in the S12 batch “the batch that killed the YC model” with 80+ teams I think. After that they switched to the group model where the batch is divided in to groups and each group has specific partners. In our batch is was definitely challenging when you often got a randomly assigned partner each week and most of the time they didn’t know who you are or what you do. However, Coinbase, Instagram, Zapier etc came out of that batch.

For me as first time founder YC was super helpful and they really drill the right kind of mindset for you. Build product, talk to users. The stuff they tell you is often very simple but I think lot of founders naturally complicate the startup building and focus on the wrong things because they think thats what should do. YC cuts through all the bs and just makes you focus on the few actually important things

> However, Coinbase, Instagram, Zapier etc came out of that batch.

(By Instagram, I imagine you meant Instacart?)

Yes Instacart, although Kevin Systrom did visit us for one of the weekly YC dinners to share his wild startup story.

Easily the most memorable summer of my life. I agree that even though we were told everything was falling apart at our batch size, it was arguably the best batch of YC, there was some real magic.

Yeah, meant Instacart. Autocorrect

Your success and the success of YC doesn't make your friends wrong. YC has improved over time, both in valuations and processes. Even today, it is not perfect, and there is a significant survivorship bias used to describe its success as the unicorns are called out, but I don't hear much talk about how all the founders do - what is the median result of all YC companies, for example? (I honestly don't know that answer... I would love to see it because don't see such overall stats.)

YC absolutely has accomplished something, as have some of its companies. I don't want to be dismissive of that. But we should acknowledge that it embraces and encourages the high-risk/high-reward model, which should be entered into with open eyes.

What? The entire industry of venture capital is based on a tiny percentage of companies absolutely exploding. The point is, compared to everyone else, YC does it much better - the gulf between YC (which is on track to have multiple $100b portfolio companies) and second place accelerators like Techstars (who have, at best, a couple of single digit unicorns) is astronomical.

> The entire industry of venture capital is based on a tiny percentage of companies absolutely exploding.

Exactly. Which means the risk level to founders is high. Because it is a roulette wheel where the VCs are the house, and the founders are the gamblers. With TechStars vs. YC being akin to the difference of the wheel having one zero or two. Founders are still gambling... even if YC gives better odds than others.

Again, VC has it place, as does YC. I'm not saying nobody should do it - I'm saying they should do it as a fully informed decision.

This is very wrong. VCs don’t control the game at all and their economics come from the few huge outcomes where founders also have a life changing outcome. Also, gambling has a negative expected value, while a good team starting a company has a positive expected value.

Startups are a high risk game but no one says you have to play it.

> [VC] economics come from the few huge outcomes where founders also have a life changing outcome. Also, gambling has a negative expected value,

VCs get more shots on goal, so the typical outcome of a VC could approach that of the average of the industry. (It doesn't, but that's for other reasons.)

Founders can't because they have too few shots on goal.

Suppose that I'll give you a 10% chance at $100k if you pay me $1k.

If you can take that offer "enough" times, you have reasonable odds of making 5-12x on your money.

However, if 100 people take that offer once each, around 90% of them will lose their $1k. (They should pool.)

https://www.nature.com/articles/s41567-019-0732-0.pdf

>> I got into the fifth batch (s07) and remember my other startup friends staging an intervention to dissuade me from accepting because "the valuation is really bad."

> Your success and the success of YC doesn't make your friends wrong

His friends weren't telling him to leave the startup world. His friends were in the startup world themselves, and felt that there were better options out there compared to YC. In this context, his friends were absolutely wrong

Given that his startup didn't succeed, his friends weren't absolutely wrong.

Classic outcome bias

https://en.wikipedia.org/wiki/Outcome_bias

> we should acknowledge that it embraces and encourages the high-risk/high-reward model, which should be entered into with open eyes

We were W21. I would argue one of YC's main goals is to reduce the risk to founders, and enable starting startup more accessible to those with the right skills, regardless of circumstance.

Getting into YC guarantees a certain minimum amount of funding and essential support, which not everyone outside SV has access to. It's commonplace to see people quit high paying jobs, and start businesses whilst married with children (the old narrative of 20-something male dropout is no longer the norm). This all happens because YC creates a platform that reduces risk for founders.

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