Comment by Alex3917 | Hacker News Reader

Comment by Alex3917 | Hacker News Reader

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> Too often it seems like organizations become victims of their own success precisely through this sort of "inbreeding".

This is definitely a concern with organizations like Teach for America, where they are selecting the students with the best grades to teach at schools and eventually be responsible for creating school policy. This sort of selection has the potential to have a huge negative impact on students that are already being poorly served by the system.

With YC it's less of an issue, since it would be hurting YC itself more than the entrepreneurs. E.g. if YC is funding bad startups then it's going to hurt their returns, but if YC doesn't fund your specific startup then it's not going to prevent you from going out and being successful.

I have no doubt that Daniel is going to do an awesome job as partner. But regardless, let's not forget that it's at least 10x if not 100x harder to be a good VC than a good entrepreneur, so don't go too hard on YC. :-)

> let's not forget that it's at least 10x if not 100x harder to be a good VC than a good entrepreneur

Why do you say that?

Because every year as an entrepreneur you might need to be in the top five or ten companies to have founded a unicorn, but realistically you probably only need to be in the top 500 or 1,000 companies to have a good life outcome. E.g. if it's only you and your cofounder and you haven't raised any money, even if you get literally zero users you can still potentially get acqui-hired for $5M if you're both high-level devs. Obviously not what you were going for, but still a great life outcome for something that only took a year or two. (Unless you had an unusually large opportunity cost in starting the business or are coming from a large previous success or something.)

Whereas for a VC, in order to be successful you really have to invest in one of the ten unicorns that gets created every year. But that's not the bad part, the bad part is that 9 of those 10 are probably going to raise their series A from the same firm (Sequoia). Which means that you either need to invest before there is any evidence of traction and gamble on getting super lucky, or else first spend decades building up your reputation to the point where the biggest startups will consistently let you into their rounds as additional capital.

When investors all talk about how much better it is to be an entrepreneur they're not just blowing smoke up your ass. There is way more capital than there are good startups, and it's a brutally efficient market where the odds are very much not in their favor. YC is consistently taking a good percentage of the best seed-stage startups that exist, and think about how much everyone complains about how shitty they all are every six months.

Agree with certain aspects, but the risk-reward is clearly easier for VCs who can hedge their bets across multiple startups and earn nice salaries regardless(even after ignoring the carry). As an entrepreneur, you can't hedge bets and unless you have a had a huge B round are probably work at 50% of your market salary.

> the risk-reward is clearly easier for VCs who can hedge their bets across multiple startups and earn nice salaries regardless

That's only a small percentage of investors who have basically already won though. Right now there is a local startup accelerator for pretty much every city worldwide with more than 250k residents, plus at least one for every major college town (e.g. Madison or Ithaca). So there are easily 500+ total, maybe even a couple thousand at this point depending on what you count. The vast majority of those have made dozens of investments without even a single major exit.

Most of the folks drawing a salary are getting paid far less than you'd make as a decent developer, and many aren't even getting paid at all. The folks on 20-minute VC talking about how they got started after making a few million as hobby investors are about as representative of the average investor's experience as Mark Zuckerberg is of the average junior PHP developer's experience.

> it's a brutally efficient market

I disagree. You're assuming that every startup gets funded. I think this is wrong. Just because there are lots of terrible startups that get funding, doesn't mean there aren't great startups that never get funded. I'm sure you're familiar with the story of how AirBnB wouldn't exist if it weren't for Y Combinator. Or how Y Combinator stopped operating out of Boston because DropBox couldn't get funded there.

I understand why VC is the way it is, and I think it's a big problem (unless you're Sequoia). Everybody is focused on derisking, which makes sense. But most take it too far, and look for external signalling and develop a herdlike mentality. There is absolutely an opportunity for investors to take on bigger risks with bigger upsides - that is part of Peter Thiel's strategy. And I think Marc Andreessen largely made a16z into what it is today by doing one thing extremely well - thinking for himself.

The rules for startup investing are very different for hardware than they are for software. And the world is looking for the next Apple. Who is going to fund it? I'll bet good money it's not Sequoia. I also bet Sequoia won't invest in the next big energy company, or the next big space company, or a company that wins a sizable market for self-driving cars. There are plenty of opportunities for a new VC to make money, you just need to think outside of the box.

Edit: Just wanted to add I think you make a lot of good points, but I think there is an opportunity for more great VCs to exist.

Since you seem to measure the difficulty by the odds only(ignoring the sweat/time put in by the entrepreneur), then I'd argue that being a VC is 10x to 100x easier than being a good Powerball (lottery) player. :)

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