It's a terrific metric for founders who would like an exit. Statistically, a smaller exit works out much better for a founder than an IPO. Doesn't work for the VC so much. Maybe YC is anti founder?
I am the founder of Zip Phone (S14), the only company from that batch to have had an exit so far according to yclist. This is my quick story - joined YC in the summer of 2014 with a product that I had been working on in my spare time. Spent my 3 months in Mountain View, but just did not have the traction to make an impact on demo day. Discussed it with my group partners (qasar, pb, dalton etc.) and they recommended that I defer my presentation to the next batch. Came back to India to continue working on the product, and meanwhile got an acquihire offer from a local company. The offer wasn't impressive by YC standards at all, and I reached out to the partners for more advice.
This is what they basically said - Do whatever you want, we'll back you up. No ifs and buts. No conditions. Pretty much unconditional support.
The acquisition finally did go ahead, and YC essentially just got their money back. But at no point did I feel pressured to do anything. Even when things weren't rosy, YC was always there for support, but never any undue pressure.
Needless to say I suppose, but I'm a fan. I'm working on a new startup now, and hopefully will apply soon again to YC!
A metric that counts failures as successes and successes as failures is a bad metric. That's all Paul was saying.
Ok, point made below, possibility is that environment has got more startups in general and more competitive.
If anyone could inform us more about these pre-exit liquidity events, such as conditions and amount for different roles, many people would be interested.
There's a pg essay that I can't find, but in essence states: Our rule is that it's up to the founder. If they want to aim small, that's fine. We ourselves aimed small with Viaweb. We didn't want to work on it the rest of our lives. It would be pretty lame to push founders into doing something that we didn't want to do. (EDIT: Found it: http://www.paulgraham.com/swan.html#f1n)
Contrast that with the recent Paul B interview: https://blog.ycombinator.com/paul-buchheit-on-lessons-learne...
> Jasper: Sam Altman has said that the only criterion Y Combinator uses to evaluate applying companies is, “Can this be a $10 billion plus company?” like Airbnb and Dropbox. While this model works great for a fund, there is an Early Exits movement that suggests individual entrepreneurs have a much higher likelihood of success when they raise less capital and target exits in the $20 million range. What do you think this view?
> Paul: The math does not support this strategy but if other investors want to try it that’s fine. Also, it is not just returns we are looking for but really impactful companies. When you sell too early you don’t realize the full potential.
> For example, Facebook had an offer from Yahoo for a billion dollars, which everyone told Zuck to take. Fortunately, he said no. Had he said yes, it would have been another failed Yahoo acquisition and Facebook would not have nearly as much impact. The reason we have these big and influential companies is the founders believed in a long- term vision.
I think all YC companies have always aimed big, but some, like Zenter, were fine with being acquired by Google for a smaller amount. And YC was fine with that outcome in the sense that there weren't any institutional forces set up to discourage founders from pursuing it.
YC's signals now seem to say, "A small exit is equal to failure." And while that's true for YC as an investor, I'm not sure it was true for YC's institutional forces until the last few years. If you're in an environment where all of your peers consider you a failure if you sell for a few million, are you going to want to resist that peer pressure? Especially when they're your friends and mentors?
I want to be very clear that all of this is an outsider's perspective. Hopefully someone in YC will issue a smackdown if it's mistaken. I was just giving some supporting data for why people are feeling this way.
As a founder of a YC company, I can tell you there's no signal from YC that "a small exit is equal to failure".
From personal experience, I can tell you that YC holds the wellbeing of the founders it funds as a top priority, even if it might seem to be against YC's own short-term interests.
It's true that YC's economic model is to fund companies that can be $10B+ successes, because having a few companies that make it into that league enables them to fund all the other companies that don't make it that big.
But they're still happy for founders who don't achieve "unicorn" status but make an exit that yields them a life-changing amount of money, or indeed any outcome that leaves them better off than they were before.
Still, they'll encourage all their founders to try to build a breakout company, because by doing that, even a "small" exit will often be much bigger than the exit you'd make if you started out with deliberately modest ambitions.
I have said it before and I will say it again: this nonsense is going to be the death[1] of YC. Airbnb/DropBox/Stripe/Twitch would not stand a chance getting funding from YC today.
They fell into the same trap that kills innovation like everyone else: as they grew bigger they started taking less risks.
[1] In the Yahoo/IBM sense
Agreed with the rest, though in 2017 gaming ecosystem business is more of a thing than it was in 2009.
They succumbed to credentialism. They traded hackers for MBAs. The proverbial John Sculley has fired Steve Jobs and taken over.
Loopt was effectively dead in the water when it got bought. It was a geo location app. But it got bought by Green Dot. A frequently despised (look at their reviews) finance/prepaid card company. Loopt and Green Dot happen to share connections like Sequoia. Once Loopt is acquired, nothing is done with it. Or its tech. I highly doubt they would want to spend $40M+ to acquihire however many people came over, and not even the founder. Unless Sam did?
I hate turning this into a rant, but YC's treatment of Maciej [Cegłowski]/Pinboard and the way they took back their word..eh I could say harsher things, but I'll regret it. But their handling of the community supposedly choosing a few people for F3 last year was not cool. YC seemed just like the rest of SV. https://news.ycombinator.com/item?id=11633270 is an example of the incident.
That makes me think even more firmly that the Loopt deal was done by connected people exchanging hand shakes and favors.