Not in my opinion :)

If an established entrepreneur like Joshua Schachter starts a company, then I'm going to invest no matter what, but for everyone else...

Watch the Facebook movie and imagine what would have happened without Sean Parker. (I think Zuck would have lost control of the company) YC provides that same kind of value (minus the drugs and women, unfortunately).

wait, you don't provide drugs and women? i was misinformed.

All the drugs are down the street at the institute of transpersonal psychology. I think Myron and Jean Stolaroff live within biking distance as well.

what is this i don't even

You ever read What The Doormouse Said? It's all about how LSD influenced the birth of the Internet. Basically the Stolaroffs introduced all the most important technologists in silicon valley (e.g. Doug Engelbart) to LSD. These folks picked up on the mystical ideas that 'everything is one' and 'we're all connected', and set out to recreate this metaphysical vision using computer hardware. And now YC is building software that runs on this platform. Just goes to show that reality is not only stranger than we suppose, it's stranger than we can suppose.

what's the unicode emoticon for bonghit noises?

LSD, you're doing it wrong.

Ever read "Just So Stories"? :-)

This comment is interesting to me. Does this mean you wouldn't invest in a company that YC rejected? Does it mean you wouldn't invest in a company that didn't even apply to YC? Are you going to be angel investing at all now that you've joined YC?

I still invest in non-YC companies, but there's a much higher bar (e.g. I already know the founders, or they have a lot of traction).

"That said, finding the next Google and buying a 1% stake is my current billion dollar plan :)"

Facebook, Google etc.. did not go through incubators and they were not started by "established entrepreneurs". If you are looking for a 1% stake in the next google do you think that your preference toward companies that go through incubators will cause you to miss the next big thing?

YC is not an incubator, and nothing like it existed when Google and Facebook were started. As I mentioned in the parent comment, I think the closest match is Sean Parker, and he owns a very nice chunk of Facebook :)

There's a very good chance that the next Google or FB will be part of YC, because YC is a smart deal for founders, and therefore it will attract the smart founders, and those are the people likely to start the next Google or FB.

paul - it sounds like you don't like to be the original investor going in with an unknown commodity -- that an accurate assessment? if not YC, what are other filters for you?

"Because YC is a smart deal for founders, and therefore it will attract the smart founders"

YC might be a good deal but that does not mean it will attract "the" smart founders. Yes it will and does attract some smart founders but just because you dont want to do YC does not mean you are not smart or that you are less likely to have the next big thing. If anything this "All smart founders will go to YC" attitude is one of the main reasons you are more likely to miss out on the next big thing.

Whoever is out there creating the next big thing might not even know that YC exists and if he does there are a plethora of other reasons (life and work related) which may cause him/her to not want to apply. Even if they do apply PG has said his strong suite is not picking who gets in and they pass on good people all the time so you are not only hoping that you see the next big thing but that YC sees them too. All these additional criteria make it less likely that you will find the next big thing IMHO.

Given that I have finite time and money, I need good heuristics for deciding who to talk to. YC is one very good signal, but obviously not the only one.

Well you're only making 10% using YC as your filter.

This is silly, and also mean. The man has put $1mm of his personal money into funding startups. I bet you that almost all of these startups had close to zero revenue. Furthermore, he's politely answering questions in this low-noise, low-traffic forum! I bet almost nobody got that kind of access to funders in 1999.

Secondly, if you actually parsed through the article, you're considering book value of his un-exited investments to be $0.

Do you have any investments like this you've made? I might be interested in taking them off your hands for an _excellent_ price compared to their $0 value.

Angel investing is not altruism, it's business. I don't do angel investing because I'm not comfortable with the risk profile, and to hear that a popular angel is only making 10% reaffirms my analysis.

While investing is business, the blog post is definitely altruism, which is why I encouraged you to be more polite.

I re-read the article to make sure my second point also holds: the 10% (over three years, so really more like 3% if you are looking at IRR) is only calculated on actual current exits.

About half his portfolio is still indeterminate. Barring seriously weird circumstances, he will do very well overall on this crop of investments, especially considering that he started in 2006.

That said, keep on with your current strategy. Everyone has a place.

"Only" made 10%, and starting in 2006 and proceeding directly through to the world bottoming out? I think the previous commenter you are responding to must have been joking.

Sadly, one cannot give trolls the benefit of the doubt.

http://news.ycombinator.com/item?id=1963971

This gives me an idea; perhaps PG could deliver some sort of anonymized hash of poster IPs to us so that a user can choose to ignore everyone from the anonymized IP.

I'm reminded of old-time slashdot -- I banned jonkatz from showing up anywhere on my slashdot pages. It was bliss.

Yes, but his real position isn't 10%. It's 10% plus a stake in Weebly, Wufoo, and a dozen other companies that are still alive. Discounting those to $0 isn't exactly accurate.

What's silly or mean about evaluating one(selve)s performance?

Off the top of my head:

  1. Incompatibility with current investors
  2. Unable to move to SF (long list of reasons)
  3. Incompatibility with YC philosophy

Regarding #3, YC has a certain way of viewing the world and doing things and I think it's definitely valid to just disagree with them enough that you wouldn't want to sell them 6% of your company.

I wouldn't participate in YC because I have a pregnant wife and young son, and I am not interested in leaving them alone while I take a semester of YC. YC doesn't provide that much money and YC isn't the only way an entrepreneur can find a support network.

I don't think Paul's point is that YC is incredibly valuable because of the support network, although that is definitely a factor. Its that you won't get screwed around by investors as much and simply in terms of seed/Series A valuation differentials between YC and non-YC companies (all other things being equal) you'd probably be getting a better deal (in terms of equity ownership) even if YC's average valuation was 50% what it is.

i can think of several reasons

   - startup is outside yc's sweet spot
   - founders already have a good network
   - timing is wrong

With respect to #2: Even if you have a strong network already (barring a previous exit) you could probably get at least a 6.4% (1/(1-.06)) bump in your Seed or Series A valuation just with YC's brand in this funding climate.

For me personally, I doubt it.

I think the article you are referencing has significant problems, but I won't go into them here.

He did say, "barring a previous exit", which excludes you.

Also, I'd guess that Josh would get a much better deal from YC if he did apply.

A 6.4% bump only buys you back the 6% of equity that you lost if you're selling the entire company during the Series A.

I wonder what areas are outside of that sweet spot. Hardware and enterprise software are a couple that immediately come to mind.

This thread: http://news.ycombinator.com/item?id=2054847 discusses WakeMate's recent safety recall of chargers. There was some discussion there regarding whether YC is a good match for hardware companies or not, given its small investment and YC's lack of experience with hardware.

At least from my understanding there's a relocation component to it. I've certainly been in startups where the non-financial cost of relocating is larger than the return one would be from being in YC.

In fact, I suspect that is probably one of the biggest reasons why many startups don't do it.

Also "enterprise" startups (those not targeting consumers) I think will gain a lot less from being in YC.

If you've already taken money and your investors wouldn't be cool with it.

Then you have bad investors.

No matter how much YC kool-aid you may be quaffing, there are probably legitimate reasons for existing investors in an angel round to think twice about giving up some percentage of the company (e.g. 6%) for chump change and access to a "network" that they probably think they can provide just as well.

Actually Id have thought geography (combined with family and work) would have been one of them, but I think I am just not ballsy enough to pack up and move across the ocean!

Here's one: YC is way too expensive for some startups.

Established founders is certainly a good reason I think.