I would say that it's more likely your life is over when you get accepted to YC--slaving for peanuts with little chance of success, when the expected value of other opportunities are much higher. It's all a bit exploitative, but in every realm of human endeavor, you see people making huge sacrifices with little chance of success:
* Actors hoping to make it in Hollywood
* Singers hoping to get famous (see: American Idol)
* Bands hoping to sign a record deal
* Restauranteurs hoping to open the hot new restaurant
* Gymnasts hoping for an Olympic medal
* Ballerinas hoping for the starring role
* Drug dealers hoping to one day become the kingpin
99% of these people will strike out, and yet we try. I guess it's built into human nature.
The median outcome is low, but the expected value is pretty high for starting a startup.
Mark Zuckerberg is worth $20 billion after 7 years. That's about the same as 25,000 engineers working for 7 years. There aren't any singers or ballerinas with that kind of outcome.
That's part of why seed-stage startup investing exists even though the capital costs for startups are so low. The investors are paying the founders' salaries for a couple years in exchange for a small chance at seeing a huge return. No one invests in ballerinas like that.
Expected value is a function of both value and probability. Sure, $20 billion is a lot, but Zuckerberg's success is as likely as winning the state lottery.
Even with Y-Combinator, not every accepted startup raises funding, and dies without a congratulatory TechCrunch post.
> but Zuckerberg's success is as likely as winning the state lottery.
I'd say it's even less likely than that. How many state lottery winners have we seen since Facebook went huge? How many grand slam successes have we seen?
How come investors give money to startup founders but not state lottery ticket buyers? Isn't their entire job to professionally evaluate these expected values?
Being accepted to YC actually means being funded. With YCVC it's ~$100k.
Investors give money to organizations that either they perceive as having a significantly above-average chance of "winning the lottery", or that have basically already "won".
I wouldn't be at all surprised if there's a bunch of people out there offering to loan money to people who have already won the lottery. :-)
The median outcome is low, but the expected value is pretty high for starting a startup.
Mark Zuckerberg is worth $20 billion after 7 years
This is such a fallacy, though. And not just on the maths. Financial incentives don't drive artists and hackers.[1] Your one empirical datapoint even demonstrates that. Financial incentives drive the second or thrid generation of followers, sure. But the creators and the momentum players are often cut from different cloth.
[1] because as pointed out, they are on average flawed.
It's a bit of a stretch to say becoming one of the wealthiest people in the world is the 'expected outcome'. If I'm not mistaken the most common outcome for ventures such as this is not even a sustainable business that lasts a few years and is profitable. I'd say the expected outcome for the confident and capable with good ideas is lucrative self employment and/or a lucrative exit within a few years - probably a lot less than 20 billion dollars.
In my experience what drives great entrepreneurs is not a desire for wealth, power, or fame; it's a burning desire to make a small change in the world, usually in the form of bringing their product to market. Whatever success may come next is a byproduct of that drive, not the source.
In my experience what drives great entrepreneurs is not a desire for wealth, power, or fame; it's a burning desire to make a small change in the world, usually in the form of bringing their product to market.
This is silly. Entrepreneurs are no more (and not necessarily any less) virtuous than anyone else who works. People have the whole gamut of motivations. In general, humans need something to do-- to keep fed, and to keep their spirits high.
There are plenty of entrepreneurs (even many quite good ones, in terms of effectiveness and moral character) who have the same pedestrian motivations as average people going to work: wealth, security, esteem, et al. Don't put them on a pedestal.
It has nothing to do with virtue, and I'm not suggesting that entrepreneurs aren't ambitious, I just think you're confusing ambition and drive. If your goal is wealth and security, then starting a company is a terribly risky way to pursue those goals, and statistically you'd be better off taking a job at an established company that can afford you a nice salary and job security. That's where drive comes in. Entrepreneurs who hope to make it to the finish line are going to end up being uncomfortable, anxious, overwhelmed, and afraid (not to mention underpaid) more than 50% of the time for however long it takes to achieve success, which generally seems to take 7-10 years. If the source of the drive to start the company is wealth and security, then why persevere?
Entrepreneurs are no more virtuous than anyone else who works.
Of course not. They're not driven to selflessly improve the world, they're driven to make a change in the world that has their name on it. In fact, that change often has a negative impact on the world at large.
Many have no choice. Entrepreneurs tend to split between the unemployably good and the unemployably bad.
The problem with Silicon Valley VC is that it has become so superficial. Unemployably good are 4-sigma creatives who tend to come with ADHD, mental health issues, unusual backgrounds and socialization, and (if they spent adolescence in the US) low-grade PTSD. Those are socially limiting. Unemployably bad people are great at making first impressions because their problems are deeper character issues. So guess who gets funded in shallow bubble times?
There are also plenty of employably good people as well.
I've worked directly (as in, same team, interact with them day-in-day-out) with at least half a dozen people who have founded their own companies. Some of them ran these businesses for 5-10 years; a couple even exited for fuck-you money. They are back working at Google, because Google is doing things they can't accomplish working on their own. Oftentimes they make great employees in leadership roles, because they know what it takes to ship product and do it well, and they're well-versed in taking responsibility for their own actions.
> ... with little chance of success, when the expected
> value of other opportunities are much higher...
While I don't necessarily disagree with your point of view, certainly we can do better than hyperbole when we're talking about "chance of success". So I put it to the community: Can we put some numbers behind this? What data would you look at to determine whether doing something like this is a good investment/opportunity? (Certainly the opportunity cost can be calculated, as a starting point.)
The sell of founding a startup is that, yes, most fail, but your backers make sure you fail up (as long as you didn't break the law in some horrendous way). If your startup tanks or your investors replace you, they make sure you get a 250k+ position in a venture fund (if that relaxed job is what you want, after the 90-hour weeks of founding a startup) or an executive position in an existing software company. That's the implicit promise that's made to founders, but I don't know how often it's delivered.
I have no idea what the data say. It'd be interesting to see where people end up 15 years after failing out of a funded startup. The GovWorks guys did well, though. It's engineers that seem to eat the pain when startups fail.
It sucks to get rejected, but things are hardly over.
I got rejected 3 years ago. Shortly after I realized I didn't need an incubator. Since then I've created a few dozen startups even sold a few of them.
I'm sure there are people in your network that got into YC. PG has office hours with YC alumni, if you really wanted to meet him you could tag along during one of those meetings.
Not knocking PG, but there are tonnes of people with similar experience. If you really want to find a mentor like PG you can definitely find one if you work hard enough.
Are you sure these are startups and not just side projects? Was there any expectation that these would actually grow into larger companies, or were they just part-time mostly self running websites? Not any new business or website is a startup; a startup is specifically one that seeks a scalable business model, that can expand into a much bigger business with more investment, rather than something that is going to be limited by the output of of or a small number of people.
So, I'd be curious about what you are considering a startup such that you have created a few dozen in 3 years.
Great post Jesse, As someone who has been both accepted and rejected by YC I can say this is absolutely the truth, I made it to YC in one batch but I've been rejected both before that and since, I was always under the impression past founders had better chances of making it when applying again but that certainly isn't the case with me.
That said, I'm an entrepreneur, its what I do and if a YC rejection letter stopped me I would've probably quit before I ever got started multiple times.
I'm not a hugely successful guy, but I've had a seven figure exit without taking outside funding and I'm raising capital now for a new startup without the YC name behind it and that's going just fine.
The most important thing you have in your startup is DRIVE. If you believe you know where you're headed its not a matter of IF you can convince someone else to join you(this goes for VC's or employees) its WHEN you convince them to join you.
At my first company I sold cars on the weekends to make payroll, and if I had to do that again tomorrow to keep this new company running I would.
Not everyone succeeds because they're the best at something, a lot of people make it because they're the most stubborn at it.
Second, If one rejection letter is all it takes to derail you, you probably should not be in the biz.
YC is not the arbiter of success, you are, and getting rejected probably just means that you need to polish things up and spend more time on the product. I'm glad you didn't stop, looks like you guys are doing just fine.
Good post. For some reason people have trouble matching their understanding with their emotions. People who get rejected understand that their life isn't over, but they still feel like it is. Reducto ad absurdum (http://en.wikipedia.org/wiki/Reductio_ad_absurdum) arguments like this often help to bring your emotions up to speed with your understanding.
My intention for YC would be different from yours but you didn't start your project for YC, didn't you ? I guess that you started to working on it with motivation to achieve your goal or prove your concept besides becoming rich.
I got a rejection letter yesterday but I don't give up my idea until I prove the concept or I consider it's worthless. It's ok even though that YC rejects my concept.
I remember an interesting tidbit that I heard from the YC ambassador at a Commonwealth Club event. He said most companies in the history of the world never went though YC. I look at YC like college; It's an opportunity, not a guarantee.
Given that the overwhelming majority of YC applicants are young people and that the majority of successful startups are founded by people over 35yo, I would say that getting rejected from YC means that your life is just beginning. Now you are free to go get a real job, to learn about a real industry or two, and to acquire all the skills that you need to make a real success. And when you are 40 or 50 years old, then you can make a real go at it.
* Actors hoping to make it in Hollywood
* Singers hoping to get famous (see: American Idol)
* Bands hoping to sign a record deal
* Restauranteurs hoping to open the hot new restaurant
* Gymnasts hoping for an Olympic medal
* Ballerinas hoping for the starring role
* Drug dealers hoping to one day become the kingpin
99% of these people will strike out, and yet we try. I guess it's built into human nature.