Unless you're a total hater, this is an amazing achievement no matter how you look at it.
I just have one concern, however.
Like most people on HN, I have a ton of respect for PG i.e. how smart he is, his willingness to share his knowledge with the world, and the way he has helped change Silicon Valley for the better.
However, what happens if/when PG decides to hang it up? OR if "God forbid" he's forced to hang it up like e.g. Steve Jobs?
Some cynics accuse YC of essentially being a (benevolent) cult with PG as the guru with his own cult of personality. I wouldn't go that far, but you can't deny that PG essentially IS YC and without him it may be very difficult to maintain this kind of success, much less scale it.
I have no affiliation with any of these accelerators and forgive me for overgeneralizing, but it seems like 500 Startups and/or TechStars, while not quite as heralded as YC, have done a much better job of hedging this kind of risk via a much more decentralized network with multiple mentors/"gurus" in multiple cities.
So I have two questions - (1) PG, do you ever see yourself "moving on" and starting something brand new that is not YC-related, and if so, (2) what is the "Steve Jobs contingency plan" for YC?
The difference between me and the other partners is mostly that I got to be publicly known by writing. On most topics there are other partners who can give better advice than me. PB gives better advice about hacking. Geoff gives better advice about b2b questions. Jessica is a better judge of people. Garry and Kevin are better on design. Sam Altman is better on fundraising. If I were hit by a bus tomorrow, YC would be pretty much as good as it is today.
This business is more naturally decentralized than a company like Apple. It consists mostly of individual conversations between founders and YC partners, and most of those conversations already don't include me.
I have no inside knowledge of YC, but I get the impression that "PG essentially IS YC" is just not true. He is the public face, communicator and prime founder; but the other partners, the people who support them, and the YC alumni network, at this point, I would wager, together contribute more value than he does.
However, as the public face of YC, the public perception of YC would be greatly affected if he left that role. And this could potentially have an adverse effect on attracting the best startups, and thus over time weaken the whole structure.
When it comes to venture capital investing, you take your "unfair" advantage and leverage it to the hilt. It doesn't make sense to hedge your bets with a decentralized network of partners.
Thanks, you are correct. I pulled the Feb 2011 10k, and it is clear -- $30M cash. No other acquisitions were mentioned, so that must be it. That being said, they show no earnouts for FY 2011 or 2012, but that could be because retention payments just got misclassified as comp. I stand by your >$40M comment as justifiable, likely accurate, and definitely more accurate than my estimation.
From the 10K > During 2010, except for the $50 million repayment of our line of credit and cash paid for an acquisition of $30 million, we were able to maintain a consistent level of cash and cash equivalents while growing our business by maintaining our disciplined use of capital.
The total valuation of those 511 is currently about $11.5 billion.
We ourselves don't know the percentage owned by founders. But considering that investors continually complain that YC companies are overpriced, it may be higher than the industry average.
I find it interesting that the current average valuation of a YC company is 22.5 million which is almost identical to what it was 2 years ago when there was 210 companys "the average value of startups we've funded is about $22.4 million" http://ycombinator.com/nums.html
That is interesting. The reason it hasn't changed is convertible notes. Now most of the fundraising immediately after Demo Day is on notes. Since a note doesn't establish a valuation, we add zero to the total valuation for those companies. So the number you get by dividing the total valuation by 511 ends up being pretty conservative; it's equivalent to assuming all the companies that have raised money on notes will go out of business.
The average valuation of the 268 of those 511 companies that have valuations (by being acquired, raising an equity round, or going out of business, in which case it's zero) is $43 million.
Why not use the valuation cap on the note (in cases where there is one) in place of the valuation? Is there a reason you wouldn't consider it equivalent to a valuation for the purposes of a rough calculation like this?
We ourselves don't know the percentage owned by founders.
Isn't it almost always going to be the case that the founders got diluted by the same proportion as you did? In which case, based on your comment below of YC being diluted from about 6% to about 3%, presumably the founders (who started out owning almost all the stock) would now be around 50%.
I feel like I must be missing something obvious here.
That's an estimate of what will happen eventually in the biggest companies, based on industry norms. But we don't know how much we've been diluted so far in individual companies.
Bah. They're not "overpriced" as long as someone is willing to pay the price. Startup pricing is about as close to a frictionless transaction as we're going to see. What they're actually complaining about is that the YC companies are getting better terms from investors, thanks to PG/YC's deliberate efforts to shift the balance of power in favor of the founders. I'm not crying tears for them. They don't like the terms, they're welcome to walk away from the table.
So arguably at least one of {pg, pb, etc.} could have made just as much value over the past ~10 years by starting another startup, instead of an YC, if that were the goal. 10 years is probably enough time to try/fail-fast at least 2 and maybe 4 times, each.
Probably, but you're only counting the tangible value. In my mind what they've done is far greater in intangible value. What about HN and the community it has nurtured? And let's not forget being a sort of pointer to true north to most of the people thinking of creating something out of nothing. Sure, money is easy to count and imagine, but there's plenty of people that make that, how many PG's appear every 10 years? To paraphrase Michael Scott - you think PG's grow on trees; well they don't; there is no PG tree.
Absolutely - I think YC's overall "consumer surplus" is over $10b, since it somewhat changed the game for early stage startups in general, not just startups in YC.
I think it's safe to assume the sum of current valuations is nearly 2x the valuation of dropbox+airbnb, or essentially the 30*40 + known big exits (~$600mm in total) + airbnb + dropbox, as a first approximation.
There's enough uncertainty in how accurate the individual valuation numbers are for airbnb, dropbox, and the 30x40 club to dominate the error.
I met one of the founders around 6 or 7 months ago.
Honestly I felt like he was the first founder I'd met in NYC that wasn't a bullshitter. He was straight forward, and actually helpful.
Those guys have been working on Rap Genius for years and years -- before anyone in the tech industry had heard of it. They made it because they wanted it, and the site grew with the community.
They silently built an internet empire and didn't care about PR stunts or hype until they had REAL traction (because that's the only thing that really matters)... Which is a lot more than I can say for most NYC startups.
Honestly, I think there's so much potential in the idea -- it's a rocketship. If you're an engineer in NYC looking for a job, you should hit them up.
I was in the same batch of YC with them, so I saw them fairly frequently. We had a discussion about Gettier Problems ("justified true belief") entirely sober, as well as normal startup stuff, so they are obviously smart.
The "rapper/swag" thing is not all of their personality.
skipping through that video without sound gives me the impression that this is a video about all thats wrong with the startup scene.
Everybody on that stage looks like a complete douche, even the TC guy.
I know they probably want to portray a certain image, but gawd...Sunglasses WTF ?
It does look like and feel like Doucheville on stage. But if you hold your nose through the first part, there's some interesting stuff in there (like how they bootstrapped by finding a passionate niche and targeting them initially)
In academia there's an author metric called the H-index
> A scientist has index h if h of his/her Np papers have at least h citations each, and the other (Np − h) papers have no more than h citations each.
I wonder if you could apply this same methodology to VC (the v-index)
> A VC firm has index v if v of his/her Nc funded companies have had valuations of at least $v million, and the other (Nc − v) funded companies have had valuations of no more than $v million. (In some inflation adjusted dollars.)
Your metric uses the arbitrary unit of 1 million dollars/company. The h-metric uses the imperfect but substantially less arbitrary unit of a citation/paper.
A 'valuation' and a sale are completely different things. Silicon Valley VCs are annoying as all hell. They get lucky once and all of a sudden they're Warren Buffett.
The way you justify taking x% equity is by offering to improve the odds of success by at least x%. 40 million is definitely above any basic notion of success, so it would indeed appear that YC is delivering.
It's really amazing how well YC selects their companies, and how effectively they propel their startups forward. When talking to YC founders, you can just tell that there is something different about them.
Don't know. However, $40M valuation implies 7% of YC companies have revenue run rates greater than ~$2.7M per year (i.e. assuming a price of ~15x revenue) In other words, 93% of YC companies have not made it to ~$2.7M per year in revenue.
The circle jerk never stops, does it? Anyone want to post the visualization of various amounts of cash that front paged a couple months ago?
This kind of blind worship of money makes hackers look like wise-guy could-have-been doctors but instead were lazy and decided to make a business around popular markets for some dollars.
I just have one concern, however.
Like most people on HN, I have a ton of respect for PG i.e. how smart he is, his willingness to share his knowledge with the world, and the way he has helped change Silicon Valley for the better.
However, what happens if/when PG decides to hang it up? OR if "God forbid" he's forced to hang it up like e.g. Steve Jobs?
Some cynics accuse YC of essentially being a (benevolent) cult with PG as the guru with his own cult of personality. I wouldn't go that far, but you can't deny that PG essentially IS YC and without him it may be very difficult to maintain this kind of success, much less scale it.
I have no affiliation with any of these accelerators and forgive me for overgeneralizing, but it seems like 500 Startups and/or TechStars, while not quite as heralded as YC, have done a much better job of hedging this kind of risk via a much more decentralized network with multiple mentors/"gurus" in multiple cities.
So I have two questions - (1) PG, do you ever see yourself "moving on" and starting something brand new that is not YC-related, and if so, (2) what is the "Steve Jobs contingency plan" for YC?