YC Annual Letter 2017

If you don't sell, then the big companies don't get bigger. Unfortunately in that case if you do get big enough despite that, they will just target you and take a chunk of your market (Instagram Stories vs Snapchat) so that you can't dominate.

Look, it's brilliant and exactly what every firm should do. The question is really, if it's a net positive to have 5 companies run everything* in consumer technology. I don't know but history seems to not like that.

And for most founders, taking that offer is a rational move, even when the company is quite mature. For a non-diversified human, a 100% chance of $50m is worth enormously more than a 10% chance of $500m.

What fascinates me is the strategy, pioneered by Facebook, of pushing that logic as far as it will go, and spending hitherto-inconceivable amounts of money to acquire any social networking or communication product that could possibly compete with it, long after they achieve product/market fit but before they're so big as to be a sure thing. I remember when $1bn for Instagram was a lot...

I think he says what he means here; these largest companies "have powerful advantages that are still not fully understood by most founders and investors." And it's compounding. Given that, I think being a bit more cautiously considerate and unpresumptuous about these issues as well as on any views or insights one might have makes a lot of sense.

Basically this is a shitshow still in progress. There are startups that in hindsight had a too early, under-valued liquidity event. And there are many many startups that turned down acquisition offers never to see that many zeros offered again (I think Pebble just sold under these conditions). Whoops.

Also don't forget how a startup's risk profile and internal planning changes dramatically when/if an acquisition offer is turned down. Too early is not the problem here. If Amazon or FB wants to buy you and you say no, well good luck. Competitor risk is a real business cost and it can weigh you down no matter how fast you may be growing. If anything I see uneasiness more than complaint as the playing field has warped where hills are now mountains only giants can cross. The rulebook has changed too, startups aren't even playing the same game as large tech companies anymore. As the letter suggests, startups can play at the fringes and margins, then maybe try to sneak into grown-up business land but this is increasingly, laughably unlikely if you model it. What is more likely is startups miscalculating how big and lucrative their idea is and they are screwed, or they miscalculated how fast and easy Google can crush their prospects once Lar and Serge notice what you're up to. The options are lose now or lose later, with only the rarest of startups as exceptions unless someone or something steps to address the underlying structural realities.

The competition is too high now to be friendly.

That assertion may be correct regarding purchases, browsing habits (especially for Google) and places you visit via their respective map applications, but it doesn't compare to the staggering amount of raw data [0] that Tesla has on drivers.

[0] https://qz.com/694520/tesla-has-780-million-miles-of-driving...

This is simply historically false; vertical integration has been a central focus of antitrust law from day one (it was a key consideration in the drafting of the 1890 Sherman Act and the 1914 Clayton Act.)

The infinite pie theory is for all practical purposes impossible. Growing pie theory works on beyond lifetime scale, but not for decade level scale. So it does matter because a startup can't last for two decades to try and gain market share against an incumbent.

Edit: Amazon, Facebook, Google, Apple, Microsoft

For a specific example: Lets say you are a PhD computer vision team and you want to create a machine vision API, where anyone can upload an image and return a list of objects in that image. Your product will be less capable than the Google Vision API or the Microsoft Vision API to start with, simply because they have orders of magnitude more data and personnel they can train their networks with. Now lets say you have a novel technique that is faster or needs less data. Ok, well more than likely Google or Microsoft would come to you with $XXM and offer to buy you out. You say no, we're gonna win this space. Well unfortunately, Google/MSFT personnel go to the same vision conferences, recruit equally if not more competent personnel and they just recreate your solution, even if slightly less capable. They also have a much bigger sales staff so they can always beat you at BD and support etc...

So the question in my mind is: Is the bar to compete unreasonably high such that you effectively need hundreds of millions of dollars to compete?

I use Machine Learning examples because they are literally where the biggest competitive gains and fastest growth are happening - also what I know the best in this case.

However I see this happening in almost every market, home furnishings (the market we play in most) is seeing the same thing, but with logistics/fulfillment instead of machine learning - such that the big retailers/manufacturers can take advantage of more efficient fulfillment than smaller ones can.

The founder of Rails saying he would fire any of his employees that supported Trump was sickening and that kind of attitude will never allow us to move from bloodshed and war to one people.

Of course, it's because of money, since Thiel is powerful -- any other guy would have kicked out immediately, but nevertheless considering SV is a liberal echo chamber I give them some respect.

Now only if they has protested against Obama wiretapping the whole world as well...

On the software side, people found that safety, scalability, and maintenance were important. They needed high-level languages that did things like bounds-checks or stack protection. They needed the ability to freeze and inspect errant programs instead of crash them. They needed the software interfaces to check for right data being passed. They needed to scale on multiple CPU's. They preferred their OS's to come with source code for easier fixes or extensions.

Im sure you know all about those two mainframes from IBM (1963-1970's) and Burroughs (1961) that did those things. Then came to power most large business and government institutions critical apps to this day. Anyway, I hear people made incremental improvements doing similar things with x86, Linux, and vastly lower cost-per-resource. Incremental improvements on capabilities that took off in the 60's. ;)

HN has no such rule.

That was not their original founding mission. It was

"Thefacebook is an online directory that connects people through social networks at colleges [Harvard only][2004]"

In 2006 that mission was changed to include other universities and colleges.

Which is a long way from their current stated mission. In other words, mission statements evolve - and the founding mission is seldom the final mission for many companies.

That's exactly the point. Google didn't start with that mission, it had to be refined. And Google, meaning Larry and Sergey working on algo's prior to actually starting a commercial entity. The parent's point is that many of the most successful tech investments have come from businesses that are generally dismissed as toys in their initial phases. YC invests in companies at their earliest stage, so it seems odd that the mission statement needs to be so well refined. This invariably means there's a disconnect between what pg has traditionally said and what sama is dictating now.

> Don't be discouraged if what you produce initially is something other people dismiss as a toy. In fact, that's a good sign. That's probably why everyone else has been overlooking the idea. The first microcomputers were dismissed as toys. And the first planes, and the first cars. At this point, when someone comes to us with something that users like but that we could envision forum trolls dismissing as a toy, it makes us especially likely to invest.

http://paulgraham.com/organic.html

Anyway, I think the reason that sama says this is because it is absolutely essentially for a company to get big, but that doesn't mean they need to have it right away. Also, let's be fair, determining something that is clear and important is very subjective.

> Uber isn't about "getting privileged people with smart phones and disposable income a sexy/cool ride home from the bar;" its mission statement is, "make transportation as reliable as running water, everywhere, for everyone."

I don't think that was from the get go.

> It seems you are viewing these products in a very negative light, and in doing so you're missing the forest for the trees. I would guess that all of the companies above will be wildly successful, and will have a wide range of products, all dedicated to achieving their stated mission. Rome wasn't built in a day.

Yes and no. I most certainly don't view Google in a negative light. I'll admit I view Facebook as largely existing to promote rampant consumerism. Snapchat...don't even know where to begin.

Nonetheless - the point of my comment, and why I found sama's statement interesting - was the assertion that lacking a large, important mission statement (or big hairy audacious goal, if you will) is an impediment to growth (or ability to "become very large".) When you look at the winners - they usually do have a lofty, all encompassing mission statement - but it would seem not to have been that way at inception. If anything, I thought the preaching in the startup world has been about finding a niche, an angle someone hasn't seen, make something people want...and then expand from there.

A final thought - even Y Combinator itself seems an example of this (at least in my eyes.) What started out as a fund/startup incubator is now truly trying to tackle and invest in very audacious things (such as Universal Health Care.) It's able to do that now that it has become a successful, large brand in and of itself.

When Larry and Sergey worked on their PhD thesis of an algorithm to rank pages relative to each other, went to a party, and received a $100k check in the garage, was the pitch really "to organize the world's information and make it universally accessible and useful" or did they arrive to that later?

Likewise, when Travis rolled off from Scour to connecting for hire cars that sit idle, again was the intention already "make transportation as reliable as running water, everywhere, for everyone" or did they arrive at that later?

And Mark in his dorm room figuring out how to scrape and upload his classmates photos to a PHP website, he was delightful with glee that he has achieved his mission of "making the world more open and connected" or did he and others figure that out when he moved out here to Palo Alto?

These things took off, they got more money, the money brought more help, more help created an organization.

Mission statements, like code, is refactored over and over then massaged by marketers and publicists and recruiters until it hits you.

https://plus.google.com/+VicGundotra/posts/gcSStkKxXTw

Sam, it's meant with the love of the art. I was going to make the same complaint. For those of us who work in a particular field, certain things just stick out and it feels very natural to point that out and make the world perfect in a way we are confident it can be perfect if some things are changed (I review grants, I convert double-spaces to single-spaces so much that I can spot one from a mile away and change it right away... sadly, I don't have access to change your writings :)).

Other possibilities, besides someone being untrustworthy, is that the journalist was bluffing. Or perhaps someone's account was hacked.