Scaling YC
blog.ycombinator.com
blog.ycombinator.com
Because I don't need it. Unless you're in an industry which is fundamentally capital intensive, or you absolutely need to hire staff very early on, capital limitations are actually a good thing. My first startup (which failed) was funded, but now I find I make better decisions on a shoestring budget. You really are forced to be creative and cut the fat to make things work. It's also a natural inhibitor to growing too fast. I find my thinking is clearer when I know I cannot spend more than I earn.
True "networking" is done on the basis of trust, merit, and warmth of the intro, not on having more people in your batch to spam. This article gave the example of finding a contact at Apple to get something done. But the larger the batch size, the less warm the intro you can get/offer. Why should I provide an intro to a random other YC member whom I have no relationship with? At some point it becomes about as valuable as LinkedIn.
If I actually felt that getting into YC would help me grow faster or better, or I really needed access to capital, then I would do it. But so far I feel like it would just be a distraction.
Unless of course they rejected you again.
That said, I think the value of yc is twofold. (1) it's the best possible way to get to a first round of funding and (2) the partners give exceptionally good advice, even for experienced founders.
(1) is useful even if you don't think you'll raise round after round after round of funding. Some of my favorite YC companies took no extra funding. They did yc, raised a normal sized seed round, and are off building fun things and living delightful lives. Seed rounds buy a lot of time and flexibility. In my case, a seed round has let me make big decisions to move our company closer to what I want, even when it meant turning down revenue or firing a bunch of customers. There's nothing more freeing than the ability to escape boat anchor customers.
Even still, yc will help most any company grow faster. That's pretty much what it's designed for. Not all companies should grow faster.
The value I see in YC is the network, not the money nor the advice. The money is poorly priced for the equity and the advice is all online. Knowing people who can help you do things you need to do is basically all business is. Knowing higher quality people helps you get done things faster without it feeling like as much of a grind.
Back to the question of scaling YC. IMO, scaling YC isn't really about the quality of companies but the quality of people. I'm honestly not sure. Maybe, but it's a risk. Staying the same size and focusing on refinement is less of a risk. Why YC as an organization needs to take a risk as opposed to staying the same is probably more a reflection of the ambitions of the partners and investors more than anything.
Now to me is obvious if you start a business of value with revenue and you can sell yourself, you can easily raise funds, build a team, get early b2b customers, etc. just like everyone did before accelerators were considered a career move. The Rockefellers and Carnegies of the world were voraciously independent business builders and I really do love meeting the types who were able to make it to seed on their own.
A Unified Theory of VC Suckage
March 2005
http://www.paulgraham.com/venturecapital.html
Got to love the title, like the grand unified theory of everything that is physics's holy grail.
Bon mot, considering the title of PG's essay :)
Not all foundrrs are interested in growing a successful business. In fact, what with all the brainwashing that has been going on for years by VCs ("go big or go home", "10-bagger" - old, now it is "unicorn", or is there another more current mot du jour, ha ha?, "lifestyle business" passive-aggressive shaming, etc.), it's a wonder that anyone exposed to that shit still has the balls for doing a traditional business that relies on, you know, just honest sales, customers and profits. But there are still many who do (have the balls for it).
Who do you think bags the 10(x their investment)? VCs, not founders or emps.
Meant founders, and I messed up the HN asterisk formatting stuff.
I should have added: by VCs, to founders or prospective founders, for their own selfish vested interests, of course. The more dupes join the startup lottery, the more the "house"[1] (a.k.a. VCs) stands to gain, because it is a numbers game.
[1] Think Las Vegas.
In fact, top VC Fred Wilson wrote a blog post about this "lifestyle business" passive-aggressive shaming business a few years ago, and it had a ton of discussion in the comments. You can find it by a Google or blog search.
Ma, look at our revenue! Lets do another raise! Investors will eat it up!
If social capital is mostly fixed, then this is a zero-sum situation and increasing batch sizes is bad for each company, even if it's better for YC as a whole.
Another mental model is that social capital is generated by YC companies themselves, as they e.g. network with one another, trade advice and other resources, and otherwise collectively learn how to build better startups.
I'm not sure which mental model is correct, but if you think the value of the YC ecosystem scales at Θ(N²), then a bigger batch can better for each YC company, even if they're get less 'direct' support from YC itself.
Even just 'networking' doesn't always have value.
The correct scaling for social networks is almost always n log(n). See http://www.dtc.umn.edu/~odlyzko/doc/metcalfe.pdf for a collection of arguments using various measures that all conclude that that is the right scaling laws.
We shouldn't, it's the exact opposite. As the network grows, the ecosystem of high quality advisors goes up, not just because better people join, but people are learning to become better advisors through being a part of the network. Not only that, but as the network grows so does the YC economy of potential partners. Instead of YC companies purchasing goods and services from outside the network (and thus bleeding valuation of the network) keeping money flowing in the YC economy only accelerates the value of the entire network. As this monetary flow through the network grows and accelerates so does the quality of the people managing the companies in the networks and thus potential future advisors to new companies joining the network.
Granted YC is probably more aware of these downfalls than most companies, and are trying to mitigate them, but to act like YC can only get better as it expands is really short sighted.
I'm sure every person on this board can think of dozens of companies that failed because they got too big and could no longer deliver value as well as smaller companies. The tech space is littered with them every year.
>I'm sure every person on this board can think of dozens of companies that failed because they got too big and could no longer deliver value as well as smaller companies. The tech space is littered with them every year.
Yes to both points. And so is the business (management) consulting and literature space littered with stuff, a.k.a. work and talks and books and confs about all that. Throwing out a few words that give a flavor:
Disruption (ha!), Clayton Christensen, Tom Peters, reengineering, innovator's dilemma, the HP way, Lou Gerstner, Teaching Elephants to Dance, Jack Welch, the HP Way, the IBM Way, the Toyota Way, Made in America, Made in Japan, etc. Tip of the iceberg.
Really?
If it is bad for those companies, isn't it bad for YC too? Those companies are how YC makes its money, right?
But I don't think there has to be much alignment at all. One unicorn every couple of years is all that YC needs to "make their fund" since they don't have LPs to satisfy. And one every few years will also keep the applicants coming.
Serious question: "Who" exactly are they? I could have told you 10 or even 5 years ago, but now? There are a lot more hands in the cookie jar.
All the group partners and management are people who have been with YC for many many years.
True, but there is no ongoing guarantee of that, no matter how many times it has happened in the past, and no matter who claims it[1], be it a Midas-list VC or a serial founder or whoever.
Past performance is not a sure predictor of future performance. Just see any company's statutory annual report, and the ifs and buts in the legalese therein.
[1] If anyone claims that, just ask them to put their money where their mouth is. E.g. by paying the predicted unicorn future value for the stock, but now. And then see the disclaimers and caveats flowing fast and freely from their mouths.
This is most people's first reaction - they assume that if YC is getting bigger, some limited resource must be getting diluted. But that's actually not the case: there is no limited resource that isn't being increased. And it also misses an important trend that works in the opposite direction: the network effects that make YC more valuable for companies when the batch is larger.
These network effects aren't obvious to outside observers (actually some of them weren't obvious to us at first!), so here are some of them.
1) The larger the batch is, the more companies there are that are similar to you. The author of the parent comment described this as a "cohort of folks going through the same thing as you".
Suppose you're building a fintech company in India. In an earlier batch where we only had 75 companies, you might well have been the only India fintech company in the batch. Now, there are probably 4 other companies in the batch that are also India/fintech. Those companies are likely to be the ones that can be most helpful to you.
2) Related to (1), having more scale in each vertical has allowed us to specialize our program and deliver more specific advice for different kinds of companies.
We now have specialized advice, content, and events for devtools, fintech, saas, consumer, enterprise, bio/healthcare, hard tech, & hardware companies. Much like AWS's large scale allows it to offer more and more specialized products, our larger scale allows us to offer more specialized programming.
3) For a large percentage of the YC batch, other YC startups and YC founders make up an important customer segment. The more YC companies there are, the more potential customers they can get from this community.
Related to that, the YC network is also a powerful tool for getting introductions to non-YC companies. Suppose you want an introduction to a key person at Apple. Apple isn't a YC company, but the YC network of founders who used to or currently work at Apple will be very helpful for reaching the right person. And that gets better when we have more founders.
4) The YC companies effectively collectively bargain for a large variety of things: discounts on services (worth over $1M / company now), press exposure, investor attention, etc. The more companies in the pool, the stronger our bargaining position becomes.
5) The more highly successful companies YC has, the more brand recognition YC's name has. That's obviously good for YC, but it is also good for YC companies. One of the hurdles new companies have is getting other people and particularly big companies to take them seriously. The YC brand name is now pretty helpful for accomplishing that in the tech world; we're still getting to the point where it works in every other industry and that requires more scale.
6) With more YC companies, we're now able to run https://www.workatastartup.com/ to help YC companies hire. From the standpoint of someone who is looking for a job at a startup, the more (successful) startups there are on Work at a Startup, the more useful the site is.
7) Most of the advisors who work with companies (we call them "group partners") are YC alumni who started a successful company. Because of this, when we fund more successful companies, it expands the pool of potential great group partners we can hire. To scale to the next level, we need more group partners (a.k.a more expert advisors). The trick of hiring our own alumni allows this seemingly limited resource to actually scale more-or-less proportionally.
8) As YC becomes better known, more great founders become interested in applying. YC is well known in silicon valley but still has a long way to go to be well known everywhere in the world. We've consistently noticed a trend where after we fund our first company in a new country, we get a surge of applications from that country. When we have more companies in each country, we make YC more accessible and useful to new companies in that country as well.
Interestingly, some of these network effects have just become apparent to us in the past couple of years - we had to reach a certain scale to even see them. This makes me think there will probably be other network effects that kick in as we reach even larger numbers.
1) Regarding getting other YC companies as your customers, I don't think there is a really great mechanism for that yet. With a network of thousands of founders, it is hard to pitch your company to the YC network without it becoming spam.
2) I agree that we learned most from companies relatively similar to ours. But it is also clear now that there is a lot of direct competitors within the YC network. I don't see a way to avoid that, but it feels important to think about at this scale.
Thanks for running YC, and thanks for scaling it!
I would never view other small startups in the space as competitors. I would view them as 1) people that will help lower our r&d costs b/c you can watch them 2) potential companies that could acquire you if they turn out to be executing better 3) potential companies that you could acquire if you turn out to be executing better.
For founders, the reality is that the scaling of YC, fairly or not, does change the perception of being admitted into YC, in that having a larger class size gives off the impression (whether true or not), that the program is no longer as highly-selective/elite. For what it’s worth, I don’t think YC is at that stage and I don’t think the expansion dilutes the YC name (this isn’t like TEDx). There is a big gulf between admitting everyone and expanding class size the way they have been expanded now. Still, as I said, an increased class size can absolutely change the perception, amongst applicants, alumni, or outsiders, that the program is no longer as “elite.”
This isn’t unique to YC. Elite colleges and universities are often artificially limited in their admission figures (Harvard College has about 6600 undergrads whereas Harvard University has like 14,000 graduate students across the different schools and programs) and while some have attempted scale through either extension schools or online programs, there is a not insignificant social construct surrounding the idea of keeping something deemed “elite,” selective.
So everything you write is true. But it’s also true that the perception of scaling can be negative in some ways, even if the program isn’t actually diluted.
People should apply to YC because they believe it would them them build a successful startup, not because they want prestige. If expanding YC leads to a decrease in prestige (alongside an increase in real value to startups, as Jared explained above), that's a win for everybody: more business-builders get access to YC, YC gets to fund more successful companies, and status-seekers can find something else that will look better on their resume.
In this sense YC is very different from the elite colleges whose brand depends on their exclusiveness. The upper bound on YC's expansion is how much startup opportunity exists in the world.
That being said, it’s not clear to me that YC is lowering it’s acceptance rate. By accepting companies from all around the world, it’s pool of potential applications exponentially increases. If YC accepts 100 more companies from 10,000 more applicants that still feels like a pretty exclusive acceptance rate.
What could be going on is that people are comparing the batch sizes now to the batch sizes in the past and assuming the same rate of company applications. I’m not sure if YC publishes their application data, but without it I think it’s tough to say based on batch size alone whether or not YC is statistically becoming easier to get into.
The more unsuccessful companies YC has has the opposite effect and reduces YC's status as a kingmaker.
The bigger the batches the less close the relationships.
Watch out for big fraudulent companies though; they can do real damage.
This is only part of the story though. THe size of the network doesn't mean nearly as much as the quality of the connection; i.e. edges over nodes.
Every other point is true to some extent but addresses the accidental vs. essential aspects of a startup. Collective bargaining for services? hiring pool? potential customers? These all seem like nice-to-haves vs. must-haves.
Call me jaded but I see a VC machine that hires it's friends, associates and good-but-not-great investments, and then needs to fuel the machine with startups at scale. This could work but I can't see how it's better than smaller batches for anyone but YC.
a) NASDAQ in 2000 had a ton of companies selling to other VC backed companies. When the flow slowed, even profitable companies failed because they sold to unprofitable ones. They fell like dominos. And this was in the public markets!
b) Any investor in a YC B2B company should ask the percentage of customers that are YC backed. It’s good for a cold start in sales, but ultimately see #1.
c) I hope hundreds of companies don’t want to talk to the SAME person at Apple. Otherwise, I agree.
In this sense, YC acts as an index fund on startups. Traditionally the IPO process weeds out the fraudulent businesses, and YC's application process is supposed to function the same way (with obviously less diligence) so that the efficiency of passive index returns aren't exploited.
In the limit, YC would be essentially investing in the equity of the totality of the younger technology workforce (who have majority of their earnings and talent and capital lying in the future). This is a good investment.
Where it differs slightly from a "indexing" model is that YC is allowed to encourage portfolio companies to buy and sell from each other, much like how Berkshire Hathaway does the same for its portfolio companies.
I wouldn't be so sure about that last part. YC has a small army of alumni and they're pretty clever, I would happily bet that their diligence capabilities far outshine anything applied to businesses during the IPO phase in all but the financial department.
But it seems as if no one is bold enough to do so. YC is.
This quote from Sama echoes through my head constantly: “The central learning of my career so far has been that you can and should scale up things that are working. The power of scale, and the emergent behavior that sometimes comes from it, is tremendous. I think about the potential energy of future scale for every investment I make. Most people seem terrible at this, so it’s another bug you can exploit.”
For example, the artisan workshops of Paris worked really well at making things but it turns out that they couldn't be scaled up to produce at an industrial scale.
That may be, but I think another bug is not knowing when to stop scaling. Few things (if any) can sustain unbounded growth.
If you extend the time horizon to 20-50 years with the right system, policy, and protocols in place to allow an exponential growth path - then you'll be "laughing to the bank;" Elon Musk is on this path because he understands the holistic, foundational principles, and the only limitation of how much he'll guide or lead success is his organizational and emotional regulation skills (stress management etc).
YC sees the path and has been working on organizational structures, created a great funnel for themselves. Elon similarly built up his nest egg through the work he's done and subsequent sales and paydays he's had - to then invest the substantial necessary investments into Tesla and SpaceX. It's really incredible to study to find the insights and nuances of how these seeds form and out of all the seeming chaos and pressures they can sprout, start blooming. The odds seem impossible, they however make it through the rigidity and conservation of the status quo - creativity seeming to lead the way for progress.
Great quote, thanks for sharing.
Thinking back to MHacks 2013, I know of more companies started by people who could have, but chose not to attend MHacks, than came out of the hackathon. And that's assuming company creation is even a good metric! I also don't know of _any_ company that thinks they have a good ROI on recruiting.
Perhaps no one is bold enough to do larger hackathons because they've realized hackathons are sham to inflate the organizers resumes.
As a prospective YC applicant, I see every batch size increase as a dilution to the value of the incubator. Most of YC's content is already free online; the key value is the personalized insights from partners, access to a professional network, and co-experiencing starting a company with other early stage founders. These sorts of things scale linearly, at best.
I say this having heard, while debating the potential of various startups, probably 10000 arguments for or against something being able to scale. In the end, no amount of wisdom makes you very good at predicting it. Everything doesn't scale until someone figures out how to make it scale. So you bet on smart, energetic founders to figure it out.
Often the scalable version looks different than the initial version. Maybe the million-person hackathon looks more like Repl.it than a room with laptops and teetering stacks of half-empty pizza boxes.
2-5 people is a conversation
5-15 is a dinner party
15 - 200 is a party
200+ is an event
You aren't guaranteed to be able to scale things and maintain fundamental dynamics.
Large hackathons are worse for the participants
< 50 people actually feels like having fun hacking around
The huge ones feel super commodified these days, like it’s just an advertising/recruiting opportunity for the sponsors.
It’s like if you were interested in Chess, would you want to join a 2000 person chess club or a 30 person one?
Quite a few people reduce that 7% to the price of the stage on demo day which I’m sure is less valuable if shared with many more people. I’m sure YC is happy with the same size chunk of more companies!
For the founders, is the YC network going to stay worth 7% of every company that joins it? Will founders get as much value from the network as before with much less spotlight?
That 7% is not at all a single number. Effectively, it is 7% of the valuation of each company in YC, which can vary from very low, zero or maybe even negative, to Dropbox-like highs.
The question is whether increased participation will dilute the pool of VCs who come to demo day with their checkbooks, or if the network effects will scale.
I don't think anyone knows the answer to that.
I hope YC can keep scaling, because the number of startups is not fixed. I would like to live in a world where a startup is going public every day, where YC funds tens of thousands of startups every year. Maybe we can get there.
The early value of YC as I recall (I got rejected from the first three batches IIRC) was that it pulled back the curtain on the VC ecosystem, and transferred some power from the VCs to fledgling entrepreneurs.
Over time the value has shifted to 1) signalling credibility and 2) membership in a powerful network. That is very similar to something like and MBA from Harvard - you definitely learn tons, but the value of Harvard versus other mechanisms to learn the material.
In this market it is easier to raise money. $125k might have been ok 5 years ago but is that true now?
If you are an established company it would be logical to see what the market will give you first.
There are also more YC advisors. When I first went through YC in 2010, it was Paul Graham giving advice to everyone. Nowadays it's more like each company has a few partners that are focused on their industry, along with some generic advice from the weekly events. I actually think each startup gets more attention now, since there are more people giving out attention.
Maybe in Plato's Academy every student could be taught by Plato himself. But a modern college gives you a much better education by hiring many educators with different areas of specialty. Things have to change as they scale, but if YC scales right, things can actually get better.
Is that empirically true?
I'm glad you brought this up!
It would be very easy for us to expand the YC batch by being less selective in the companies we accept. However, we wouldn't knowingly do this because it would run directly against our own financial incentives, and also degrade the quality of the experience for founders.
The hard thing is to increase the batch size while also keeping the quality of companies the same or better. To do that, we need to attract more great applications every batch. That's what we need to do.
For a lot of people, it's hard to imagine how that would be possible, but actually YC still funds only a modest percentage of all the successful companies started every year, so there is a lot of room to grow.
It seems that we're doing it. By every metric we can measure, the YC companies we fund today seem more successful on average than in previous years. They're more likely to raise a Series A, more likely to make $1M / year in revenue, more likely to be worth $1B, etc.
Many people outside YC for years have thought that because we are growing, we must be becoming less selective. But actually within YC, we're more concerned about the opposite: that we risk becoming too selective and need to constantly fight against that.
You need to illustrate the path from tech employee -> founder for more people in some sort of go to resource. Why should an intelligent, capable person drop their $300k TC career when it looks like their chances of failing are 90%, and an opportunity cost of at least $1M, even if one gets into YC? What is one in for: hours, health insurance, managing employees, difficulty competing against entrenched companies, etc?
Unless you want to specifically filter out all candidates with a hint of risk-averseness or something else not explicit...
I agree, there are lots of things where you say "why would YC invest in that??" particularly with so many SAAS companies, but then they take a flying leap on things like Boom, Flirty, Coinbase, etc etc.
YC started in the early-ish days of the internet, so most of the outlier successes were in the internet space. The major internet companies have probably already been founded, so YC needs to focus on what's next. It seems to me their straddling both sides, like most VCs are attempting to do.
There has to be space for a YC like company which lends similar credentials, but provides more personalized support. (like YC when it first started)
tl;dr - yes
I feel like this is backwards. Back in 2010 Paul Graham could advise every YC company himself. But if anything that was less personalized. Back then YC didn't have experts in biotechnology, in hardware, or in the Latin American market. Nowadays there are many more YC partners, with different areas of specialty, so you can get more personalized support for your company.
COVID forced so many things, including an acceleration of a trend toward distributed advice. It's entirely possible (probable?) SF was the best place to start a company. It probably still is 2-10x better than the next startup hub for a complete outsider to break into startups. However, what I think is changing is that for insiders, ie ex big tech employees, or former founders, SF / SFBA at large are no longer requisite.
COVID really forced a shakeup of the status quo with remote work. We all saw that coming.
What I didn’t see coming was the massive amount of capital floating around in this COVID economy. Investors previously had the upper hand because they controlled a scarce resource, but now they’re all fighting to get allocations in interesting startups. Investors have to branch out of the usual startup cities to find deals.
Should be interesting for the startup world. I don’t see SF declining as a startup hotspot, but at least it’s no longer the only acceptable option.
This is not a new phenomenon and certainly not caused by COVID. For years now you could raise a few million by having Stanford/MIT/Berkeley/etc somewhere on your resume and a half baked idea about AI or Blockchain
People’s mindsets regarding investing and buying services from non consensus locations likely has dramatically changed.
1. Any YC advice does not apply to all companies, but only to startups.
2. YC has funded companies in many places.
3. YC is not in SF.
4. This announcement doesn't say anything about location.
The two definitions are equivalent though.
I believe it is primarily to maximize your immersion and focus on your startup. If this is true remote will definitely not work as well.
>> But if almost everyone in tech is remote.
This is not true now, let alone in the next 6-12 months.
What will be interesting is if we move back towards in-person meetups or keep doing them online.
> Has Y Combinator lost its way when the latest company is a Mac only widget? (March 11, 2021) [0]
> Y Combinator has lost its soul: A YC founder's perspective (8 months ago) [1]
Seems like by scaling YC, the brand itself becomes diluted. I am not sure whether companies like Airbnb, Dropbox etc will still be able to come out of YC except by mere chance that is not greater than the probability of coming out of other VC funds. And then at that point, why choose YC anymore?
Is that what this is saying? Or is YC saying that they are going back to on-site after the summer batch?
nevertheless, everytime YC does this, it makes every other accelerator program out there more valuable comparatively.
Then, how did successive batches do over time?
Just curious what the trade off is (if any) of quantity over quality.
I would rather they did overlook incredible founders. Getting a rejection shouldn't mean you were judged not to be ready. It was also nice when there could be only a couple Launch HN's a week, at most.
Ah, you've touched on something that I've been worrying about. Jared's made a great case (https://news.ycombinator.com/item?id=26557978) about how YC can grow the resources it provides to startups, but HN front page space is one resource with a hard limit. That means that as YC batches continue to expand, the percentage of YC startups who do a Launch HN is going to have to decrease.
When are we going to hit that point? We've probably hit it already. During W21 we've been allowing two YC startups to launch on most days—but I think that's too much. My gut feeling is that 2 launches a day is ok during the run up to Demo Day (i.e. a week or two before), but not during the entire batch. The question is what the criteria should be for deciding which startups get a Launch HN. In the past it was simply "email the mods and they'll schedule you". Now that (edit: close to) 150 startups are doing that in a batch, we need something else to narrow it down.
Show HN is a normal post tagged with "Show HN:" for the rest of us average joes who made anything.
This time they were forced to go 'all in' on remote and the result is, ”this will rank as one of the best batches we have ever funded"
So what is the lesson here?
Also, honestly, we didn't try hard enough before covid forced us to really invest in building a great remote experience. After covid started, we put all of YC's resources behind this, and built custom software and redesigned the whole batch experience to work well remotely. That's what it took.
It's also interesting to consider other areas where the cost-benefit ratio fluctuates depending on the level of effort - and that changes over time. For example, the US Air Force would probably say that drone aircraft are becoming important, but that the war in Afghanistan shows the US still needs aircraft with a pilot in the cockpit. However, if you gave the Air Force an ultimatum and said that in 12 months it had to fight a mock battle with only unmanned aircraft - and all officers would be demoted if they lost - then the US might develop a fighting capability far in excess of its current ability.
"Water runs downhill"?
It's vastly easier to build it and make it successful when there is sudden demand due to external market forces than to try to plead with people to try it when people aren't interested.
As long as the quality of the program remains high, and that is entirely dependent on the quality of the partners, then the program can scale.
It is weird to see.
Same VCs that a year ago "didn't feel like [they] could provide value" to remote companies, are suddenly flooding your inbox saying they only believe in remote companies going forward...
One of the things you see with gifted kids -- and this goes double with twice exceptional kids -- is that they tend to find their limits by metaphorically crashing into a wall at a hundred miles per hour. There is a cost to that and it leaves a lot of scars and results in a lot of baggage.
The reason they do that is because their abilities are so far outside the norm that pushing it to the point of failure is the only meaningful test for what their abilities and the limits of those abilities really are. Finding those limits can be enormously valuable.
If very talented kids only do as much as most people predict is possible based on averages, then those kids leave a lot on the table, so to speak, and they tend to have very frustrating lives. They long for more and they tend to become a case of "idle hands are the devil's workshop." They miss out on opportunities by underestimating themselves and their own capacity and end up, instead, aggravating the hell out of people around them and directing their brilliance and energies into petty and often unconstructive pursuits out of boredom.
But catastrophic failure can leave permanent limits that are more impairing than underestimating themselves. It can do so much harm that the person never really recovers and they will leave a wide berth around X because they never want to be that badly burned again.
So the challenge -- and this was something I was good at as a parent -- is finding ways to help extraordinary kids hit their own natural point of failure without it being catastrophic.
Metaphorically, you can think of it as putting a net below the high wire act. There's something to catch you when you fall. You learn from the fall instead of being broken and crippled because of it.
So startups, which grow rapidly, are kind of the business world equivalent of that and what I see in reading about how YC manages its own growth is that, most likely, they are doing for businesses what I did as a parent: Helping people with extraordinary potential to find their limits while avoiding catastrophic failure and mitigating the costs involved in actually finding their limits.
Learning to "Fail fast" but not catastrophically. To have smaller failures that teach you where you need to quit.
There's a book called Seeing like a state and it talks about recipes that say "Heat it until the smoke point" which means "heat it until just before it would burn" and this implicitly means you've burned it a few times. You know where the smoke point is and what that looks like without it actually burning because you have gone too far at some point.
Being too afraid of failure is actively problematic in designing functional systems. Being not afraid enough of the consequences of catastrophic failure can result in the business going bankrupt, never recovering and simply dying.
It's actually really, really hard to help people learn how to fail well. It's hard to teach people how valuable failure is to comprehending real world limits -- what flies and what doesn't -- while simultaneously helping them not learn that at such a high cost that they will never try again or never succeed again if they do screw up their courage to try.
For many people, having that modeled for them will, itself, be enormously valuable and it's something that is likely implicitly taught by example more than explicitly taught. I say that because the fact that I do that well as a parent is one of the reasons I began blogging and I've never really felt that any of my parenting blogs gelled and they didn't gel in part because people don't know how to measure the disasters that didn't happen, so if you tell people "I did X and I did it brilliantly well and the evidence is the lack of catastrophes." people respond to that dismissively. They don't give you credit for mitigating the catastrophes that should have happened but didn't.
I imagine that factors into why some people seem so willing to scoff at YC and be dismissive. Yes, you can succeed at a business without going through YC and if you can pull that off, you may even be better off having not given up any equity, etc.
But lots of people aren't going to succeed on their own efforts with no mentoring and it's the mentoring more than the money that is the make or break for a lot of YC companies.