Posts tagged with ycombinator

Many thanks to Sameer Al-Sakran for compiling the numbers.

Category	 Started Funded	 %F	∑Raised	 TC Posts
Advertising	 3972	 631	 16	 $8B	 996
Biotech	 	 2787	 1770	 64	 $42B	 43
Cleantech	 1302	 719	 55	 $33B	 192
Consulting	 3330	 176	 5	 $2B	 444
Ecommerce	 5383	 868	 16	 $10B	 1587
Education	 522	 60	 11	 $½B	 90
Enterprise	 2389	 652	 27	 $10B	 993
Games video	 3992	 910	 23	 $16B	 3625
Hardware	 1726	 613	 36	 $12B	 3274
Legal	 	 306	 23	 8	 $0.1B	 16
Mobile	 	 4101	 1099	 27	 $20B	 4263
Network hosting	 1782	 340	 19	 $8B	 1375
Other	 	 33068	 2022	 6	 $24B	 2501
Public relations 2531	 468	 7	 $7B	 765
Search	 	 1437	 226	 16	 $2½B	 4625
Security	 710	 218	 31	 $4B	 135
Semiconductor	 620	 381	 61	 $9B	 27
Software	 12405	 3039	 25	 $33B	 3733
Web              12830	 2401	 19	 $29B	 14356


Category	 Acqu	 %A	IPOs	%I 	% on TC	 Avg Funding
Advertising	 221	 5½	15	½	 6½	 $2M
Biotech	         332	 12	143	5	 ½	 $15M
Cleantech	 72	 5½	39	3	 5½	 $25M
Consulting	 107	 3	15	½ 	 1½	 $½M
Ecommerce	 188	 3½	16	⅓	 12½	 $5M
Education	 4	 ¾	1	¼	 3½	 $1M
Enterprise	 257	 11	41	1½	 9	 $4M
Games video	 285	 7	30	¾	 11	 $4M
Hardware	 139	 8	81	4½	 6	 $7M
Legal	 	 2	 ½	0	0	 1	 $⅓M
Mobile	 	 275	 6½	34	1	 13	 $5M
Network hosting	 154	 8½	22	1	 8	 $4½M
Other	 	 2325	 7	101	½	 2½	 $½M
Public relations 171	 18½	32	1½	 19	 $3M
Search	 	 57	 4	4	¼	 10	 $2M
Security	 96	 13½	12	2	 7	 $6M
Semiconductor	 119	 19	51	8	 3	 $15M
Software	 1101	 9	110	1	 5	 $2½M
Web 		 827	 	57	½	 14	 $2½M

My favourite number here is the number of companies started. 12,830 Web companies started up and got a Crunchbase profile. Forget about the Facebooks and Instagrams’ buyout package to the founder, that’s the max of the sample. If you’re looking at the lower-50% CVaR, it may be $0 or less.

 

My second favourite number is that, even among the crème-de-la-crème who play these games, they have less than one-in-five chance of either acquisition or IPO.

As you might expect, stuff that’s harder to do and takes more technical expertise (semiconductors, hardware, biotech/cleantech) has a higher rate of success than stuff that can be learned in a year or two by >1% of the population (build a Rails app!). Software seems to be at a disadvantage except enterprise has a one-in-ten acquisition rate, which is quite a gamble with your life but counts as good odds in this low-probability game.

On the other hand, the software companies are much cheaper to start than cleantech/biotech (cleantech has highest avg funding). Web companies are 1 order of magnitude cheaper to start.

P.R. is also a standout, I’m guessing the 18% acquisition rate is acquihires (Sameer Al-Sakhran alluded to this). But still, this reveals that public relations must be an important part of the SF business ecosystem, or else the market is mispricing PR. But I have enough stereotypes about geeks who can’t negotiate that I can explain away the high valuation of smiley PR folks filling the niche none of the cool hackers want to talk about.

Of course, these are “running tallies” not “final fail/success rates”. It would be good to know

  • for the subset that exited, what’s the year of founding and the year of exit?
  • for the subset that didn’t exit, what’s the year of founding?

That might help us guess at what companies have been abandoned. (Did a lot of Web companies—maybe unfunded ones—make Crunchbase profiles for themselves  to put themselves on display and then quit after a few months?) It would also give a more precise idea of the number of years it takes to develop a company to IPO-ability. (“Eating Ramen” is expected for a few months, but what about if it’s half a decade?) 

If I get around to doing my own scrape, I’ll add those things—as well as some ggplots of distributions for some parameters. I’d also like to compare some Crunch-based estimates of success rates with YCombinator and TechStars, etc. That would be hard because of selection effects but still nice to see a side-by-side.

In the meantime, big thanks to Sameer for doing it first.

(Source: TechCrunch)




After talking to a number of PhD students, I’ve come to conclude two things. First, that many (especially in “genius disciplines” like maths or physics) are motivated by the goal of being the smartest human who ever lived—“the next Einstein”, or Feynman, or Grothendieck—not like the humans themselves, but rather like the symbols: revolutionary rarities who personally transformed some small corner of the world.

Second, I’m tentatively concluding that base hits are “actually the way forward”—that is, that home-run projects become magnum opi that never get finished because they’re not perfect, or the passionate ego-drive weakens, or the idea of expressing the ultimate moral worth of one’s psyche through academic paper-writing does not lead to successful ideas. Maybe the cure to cancer doesn’t come from a flash of insight but from a more mundane process of trying this, then that, then another thing. The dissertation that gets done comes from a concrete plan, consisting of steps, which lead to a sequence of words on a page.

The revolution, if it happens, is more likely to come from a sequence of papers which actually get written, than from an unhatched geniusling that doesn’t get written. And let’s face it: most of us aren’t geniuses, nor would we want to be, but we’re still interested in being productive.

 

In business one can think about base hits as well. My first business was a base hit. I didn’t sell for a jillion dollars, I just gave myself and some other people jobs for a number of years and didn’t fail. Which was my goal at the outset: not to be unprofitable. My plan was to copy an idea I had seen work somewhere else, make a few tweaks, and do it.

OK, so maybe it turned out to be more of a bunt and I should go for a double next time. But at least I wasn’t trying to dream up a revolutionary mobile app that will change the world, justifying paying $250k to various programmers as justified on a massively outsized conception of the “genius” of my “idea”, and ending up with something looking suspiciously like a mashup of Foursquare, Linkedin, OKCupid, and airplane reservations.

I definitely keep my left eye on acquisition prices as a way to gauge interesting spaces to enter—but I’m also thinking about what are the things I can accomplish, with the team I could reasonably assemble, the skills & knowledge I actually have, and the hours I’m actually going to want to work. What are the high-probability base hits I could string together to get from here to there?

(Just to give an example, I will not be founding the next Heroku. That got a nice bid, but the founders were engineers who knew a lot about hardware. That’s not me.)

Maybe Citadel wasn’t built from a “genius” signal using all the latest machine-learning hoopla, but from a smart (and obsessive) kid making trades he thought he could win on, and not making the other trades. And then building from there. Learning what’s a good opportunity, how long it takes to scope out a trade, how much research can reasonably be done in a month, and so on.

In short, maybe all of the “homeruns” I can think of, are actually just a sequence of small steps definitively forward.

 

In writing I find myself looking more and more for base hits as well. When I first started isomorphismes.tumblr.com, I had very, very high hopes for how awesome the material would be. (I won’t admit how high.) But now after posting 250 short bits of mathematics, I’m much more focussed on

  • write everything down somewhere, perhaps for later;
  • publish 2-3 things a week;
  • try to make them not suck.

I still think that after some unspecified amount of time, I may be able to string together a more magnum-opusy kind of work—once the pieces (short blog posts) are mostly there on the cutting-room floor. But that’s much more like stringing together a series of base hits than genius-ing out the heartbreaking work I would like to imagine I’ll create.

But what’s my rush? I’m accumulating tumblr followers every day, I’m plugging away at the craft, I’m putting out material. Looking back over a year of following that formula, I’ve put out a surprising amount of text and have a surprising number of subscribers. It’s kind of like the short-term/long-term fallacy working in reverse (working in my favour). ∫short term adds up to more than I thought it would.

Maybe Elliott Smith or Conor Oberst didn’t succeed because they were inspired geniuses who one night invented one of the best songs ever. But instead, first they learned to play the guitar, then they wrote one song when it occurred to them, then they wrote another. That’s the way Phillip Glass describes his own journey in the biopic about him.

 

Elon Musk and Larry Summers take a contrary perspective. @elonmusk says “I don’t know why all these entrepreneurs are trying to solve small problems”. Larry Summers says “It’s just as hard for an economist to think about important problems as about unimportant problems. The intellectual effort is the same, it’s just the output that’s better.”

Well, maybe they know better than I do. I still suspect in the day to day it’s about “What is the paper I can write, rather than the paper I’d like to be able to write” or “What are the practical steps I can take today to get closer to my business goal?” rather than “What do I wish for?”.

I can’t prove I’m right, this is just where my thoughts are at the moment. I think there’s a cult around genius and a cult around business superstars. Both of which do harm by increasing people’s appetites for success—feeding ambition, feeding vanity, feeding swagger, feeding overexuberance, feeding bad investments—above what’s reasonably achievable in a succession of 3,500 days.




This is a suggestion for Reddit, Hacker News (ycombinator’s), and other Digg clones.

  1. Only count up-votes from people who have clicked through to the article.

The flourishing of voting communities is a blessing to the Internet. Members post links and everyone gets to vote up or down. It’s an improvement on Google’s PageRank, which has been maliciously exploited by spammers for a decade now.

In my brief time watching these communities, I’ve seen snappy titles with terrible content get up-voted. Things like:

  • 7 Ways to Amp Up Your Productivity
  • FOX News Has Done It Again…
  • Resources for Busy Professionals
  • Books You Should Read But Aren’t Really Going To But You’ll Upvote This Anyway Because You Feel Guilty For Not Reading Them

I’ve even sinned myself — up-voting or down-voting before I read the content. Sometimes I feel bad once I realize I’ve done it and go skim the article. But that’s not the point. Somebody should have stopped me before I voted on something I knew nothing about.

I diluted the votes of the informed people and that’s bad for the site.

PS I don’t think many people would game the system, do you?