sethjohn

Flash (and other) video compression uses a similar algorithm to look for parts of a video that are more static. (To avoid re-sending information about a static background, for example.) I'd guess it's a modification from compression technology.

to avoid re-sending information about a static background for example. I wonder if they built theirs from scratch or just modified

With all the coverage of Justin.tv, it's surprising that this is the first time I've seen anyone raise the issue of Justin (et al)'s personality. Of course, valleywag (being valleywag) brought it up in a gossipy obnoxious way, but still, shouldn't that have been one of the first and most obvious questions to ask?

I've often wondered whether you could make a lot of progress by bringing together hackers with, for example, doctors or lawyers. These are people who use computers every day but probably don't spend much time thinking about how to hack a solution to their computing problems.

As a scientist I've had a lot of success looking for the simple yet groundbreaking problems that occur at the boundaries between very different disciplines. It can be difficult not to make 'stupid' mistakes in a discipline with which you are unfamiliar...but it's a lot easier than trying to work faster and smarter on the exact same problem as everyone else!

Surely interdisciplinary collaboration could be just as valuable in startups.

I wonder if there's going to be a change in traffic (# or composition) at the end of the YC application process.

Again, it depends on how exactly you imagine the situation. If the choice was acquisition by Google for $2 million, or probable destruction by Google in a year...certainly I would take the former.

On the other hand, if I was passionate about the product and thought there was great potential for growth over the next few months and years, I wouldn't want to walk away for anything less than a fantastic deal.

I appreciate your focus on excellent people rather than returns and dealmaking. The profitability of YC strikes me as an interesting question simply because it's an important aspect of a model that is unique and interesting in many ways.

Perhaps the question is meant to be read as sort of a Zen Koan.

You are asked to present a rational analysis of a situation that, if you think rationally about it, cannot occur!

That comment was intended to be read somewhat tongue in cheek, but for the sake of argument:

1) What's the point of having money if you aren't going to spend it and have fun? I suppose you could throw a smaller party and write a big check to the Google Philanthropy...but either way money is meant to be used.

2) If you actually had the skills and personality to turn $20K from YC into $3M in three months...you've clearly got entrepeneurism in the blood and shouldn't ever have trouble finding a lucrative job that you enjoy.

A good way to start might be the rule of thumb that startup investors typically want a 10x return on their money (for companies that succeed). If YC invests $20K in your company in return for 6% of the company, and the company sells for 3.3 million, they get 200K.

Our three founders came up with a number in our own heads, then we agreed on something in the middle...which turned out to be pretty close to 3 million.

As to the question of whether to sell so soon, my personal feeling is that selling soon in a case like this would be a fantastic deal. Each founder would walk away with $1M, and the experience of being a successful entrepeneur. Next, take 100K and throw a tremendous party, take another 100K on go on a ridiculous vacation...then get back to work with the $800K you have left over and start up your next company!

Also, when total investement doubles from $406 M to $844 M...that's a huge change in the market. It's hard to believe that a change in valuation from $6.63M to $6M is an independant variable that should be taken seriously.

Also, also, the charts are for all VC money not just 2.0 (i.e. networking etc.) companies.

My favorite piece of evidence on the demise of 2.0 is Your election to person of the year. By time a trend makes it to the cover Time, it must be over!

Prediction: At least two of the first ten .tv-stars will attempt a Borat style character.

My guess is that the real money here is in a product placement advertising model, rather than licensing the platform.

They'll get some valuable patents for technology they develop, and a few hundred bucks each off the few hundred people who want to broadcast their life 24/7/365. But a big .tv-star will be able to bring in $K a day just to test a Segway, show up at the right restaurant, attend the launch party for a new startup, etc.

Whaddayaknow, maybe Alexa is the problem! Compete.com shows exactly the opposite trends with increasing 2007 traffic to all the 2.0 sites mentioned. (http://snapshot.compete.com/techcrunch.com+technorati.com+gigaom.com+)

Is there any consensus on which of these sites (Alexa or Compete) is more reliable? Or at least...less unreliable?

Very interesting, turns the market upside down.

You could run it like a startup model combined with the recent doritos campaign (big cash prize for the winners). Throw around small (seed) money to anyone with a half decent idea...give out "A-round" funding to campaigns that focus-group well to expand their ideas...and entice everybody onwards with a big cash prize (acquisition!) for the campaigns that succeed.

You would need a very solid plan for determining "effectiveness" of the campaigns. Something that the advertisers trusted enough that they are willing to guarantee payment when you determine their campaign has been "successful".

Pretty simple site with a client side where advertisers can submit the broad outlines of what they're looking for, user side for submissions. Sit in the middle and skim off a little cash as the money flows past...

Very scalable. Advertisers are desperate for creative new approaches. Billions for the taking.

Product placement will get them generating cash pretty quick. Could be difficult to scale up though, presuming there's only one Justin. What's the chance they've managed to file a patent for this as a 'business concept'?

Higher percentage of success seems like a plausible outcome of the YC model. Everyone involved is clearly committed to something more than the 15-20K. Perhaps that's the advantage of recruiting hackers instead of b-school graduates...it's easier to endow hackers with good business connections than it is to endow b-school types with smartness!?

In the black already...with more companies in the pipeline...seems like a great place to be!

What's so new about this model? Tapping into an under-exploited resource (hackers)? Or the economics of micro-seed funding?

Is YC a force to reckon with?...a model to replicate? I'd love to hear some guesses about how well they've done so far.

I tried to estimate their return on Reddit (http://news.ycombinator.com/comments?id=4474), but couldn't find even a ballpark number for the sale (paul? ;) ). My best guess is that they did great, but not stratospheric. With Kiko selling for 200K, they can't have done much more than break even.

Perhaps seed money has different economics than later stage VC money, which traditionally looks for 10x return on 10%(+) of companies. Are they getting in early in hopes of getting 100x return on 1%(+) of companies?

If you have an idea and a management team that's good enough to make it with the help of YC, it's hard to believe you couldn't get the funding and make the connections that you need to succeed in another way.

I don't know a whole lot about the success of YC companies, but it looks like Reddit is their big success so far. Reddit sold for a reported 65 million (according to The Google), and they needed relatively little additional funding after the seed money. So let's say YC retained 3% of the company, they make 2 million which is a 100x return on their investment. Wow, I just did the math now...that's pretty impressive.

Update: A new search on The Google (link) suggests that the purchase price may have been much lower. Proponents of the "50-million my ass" school of thought are suggesting 5 million is closer to the mark. At 5 million, YC gets a 10x return on investment which is what all VC money is shooting for among successful (non-broke) companies.

http://reddit.com/user/bmatkin/

Larger point, if you're in it to win it you should be able to pull it off with or without YC. Sure YC connections and advice are tremendously valueable...but 5x to 20x better than the other smart VC/angel/seed money out there? No way!

"On average, Y Combinator will increase your expected outcome by at least 5x. They usually take 2-10% of your stock in exchange. That's a great deal!"

That seems like an optimistic way to phrase the proposition. Sure, they increase the outcome by 5x(+) for the 20%(+) of companies that eventually get sold...as all VC funding hopes to do. Or, I suppose they can increase your outcome by 5x compared to sitting at home...

YC sounds like it can be a fantastic deal, but it can't really be 5-20x better than your other options.

Well, yes, the 12-month selloff strategy is probably uncommon for good reason.

I suppose most ideas require more than a few months to create real value.

'Build to flip' is a fine idea. Of course you still need to make a good product, but I don't think 'build to last' is right for every company or every idea. A world with 100 new HPs every year would be top-heavy.

The ecosystem needs a few big companies with billions of capital and global reach, but there's nothing wrong with building up a good small idea and selling it off after a year or two to be integrated into something larger.

When you sit down with VCs to set terms for a few million in A-round funding, it will be a question of whether they take 25% or 50% of your company.

Between connections, advice, and time, the extra strength you'll have at the bargaining table at this stage (the increase in the ratio of what your company is worth/how much money you need) should allow you to more than make up for the 6% equity...assuming your idea is good!

I'll be 'attending'...via podcast.

When I first got involved with a proto-startup (redundant?) I came across a podcast of some previous year and it was by far the best crash course in startup business I've seen.

Has there only been one previous year? Other online?