Is YC a Monopoly?
every.to
every.to
A high value service realizing it delivers more value than it initially thought, and raising prices... is not a monopoly. That's just business, life, etc.
A monopoly would be if:
1) You can only effectively start a startup through YC (Not true)
2) YC actively did things to subvert competition (Not true, at all, from what I can see)
3) YC owned a significant majority portion of some market, and used its position to arbitrarily set prices (A la Apple for taking cuts of apps written by people other than them, to be installed on devices you own), or otherwise damage the market's competitive viability in some way. (Clearly not true)
Hence the nisdirect re:monopoly
It seems like any time there is an article at the top with the word monopoly in it, one of the first few comments is always someone trying to educate the author/other commenters on what a monopoly actually is.
If we do this, then we can all be on the same page when someone is intending to say that a service has become so mainstream/successful that it might feel like there are no alternatives.
It is not a monopoly, but it is a sign of an unhealthy market.
A simple example: say we have company QualityEars. QualityEars sells budgetBoom ($25), performanceBoom ($60), and premiumBoom ($100) speakers. However, their performanceBoom is so well-engineered, that it performs more like an $90 speaker and thus nearly invalidates the premiumBoom line.
In a healthy market, this now forces QualityEars’ competitors to create an equally valuable product, and QualtiyEars itself to increase the price-performance ratio of its premiumBoom and perhaps even budgetBoom line.
Instead, what I’ve mostly seen happen in the real world (whether it is products or services) is either the price of the performanceBoom and premiumBoom line get raises, or performanceBoom gets discontinued and worsevalueBoom takes its place.
This is a sign of not enough competition. Also known as an unhealthy market :)
[1] https://www.ftc.gov/tips-advice/competition-guidance/guide-a...
> Courts look at the firm's market share, but typically do not find monopoly power if the firm (or a group of firms acting in concert) has less than 50 percent of the sales of a particular product or service within a certain geographic area. Some courts have required much higher percentages. In addition, that leading position must be sustainable over time: if competitive forces or the entry of new firms could discipline the conduct of the leading firm, courts are unlikely to find that the firm has lasting market power.
The spirit of the post still remains true and I think we'd better off if we started a healthy conversation around it instead of forming straw man arguments.
Compare them to coke or McDonald's.. top of their industries but other brands exist offering a similiar product and they are not monopolies
Perhaps you do not have much experience here, but semantics matter, A LOT, when one makes accusations.
Were the blog framed more generously - for example, "Is YC's influence and impact crowding out other investors?", my response would be generous in kind.
YC IS an early stage investor. Early stage investing has been a cutthroat competitive market since before YC existed to become yet another a competitor. YC started from zero, as an unknown, underfunded startup not even in California, against well-entrenched, large incubators like IdeaLab (funded by billionaire Bill Gross) etc.
YC began to land deals and grow through innovation and risk-taking like offering better valuations, offering fixed terms that were standard on all deals, and by offering radical transparency. They probably weren't the very first to ever offer any of these but, as far as I know, they were the first to offer ALL of these innovations at once on every deal and to make that knowledge freely available to startups before they even made contact.
Today these kinds of terms have become almost common but I've been around long enough to remember that when I first heard of YC's terms in their early days (probably year 2 or 3) it not only sounded radical - it sounded downright crazy. Every one of their innovations was dramatically more attractive and beneficial to startups than the status quo at the time. They single-handedly created the niche they now lead and earned every bit of their success in the wildly free market of early stage startup investing.
Technical regulatory definitions aside, the idea that a true monopoly could even exist in startup investing is ridiculous on its face.
This quote is hilarious and actually proves that YC is moving farther from a monopoly than to one. YC had to make their funding terms much more competitive (better for founders) because of the insanely increasing competition and the flood of capital into VC.
It is clearly making their next fundraise MORE complex for founders.
I do think the new terms are YC trying to capture more of their advantage though.
I think we are always reaching for superlatives in our click-bait headlines.
I can get money anywhere. YC just happens to be a good option with lots of resources.
> Monopoly just increasingly seems to mean any successful company that changes its pricing structure.
I can only reach Americans with my software over web, App Store, or Play Store, and since most Americans only own one device (iPhone or Android) and web on iPhone is crippled, that means I'm stuck with App Store for reaching 50% of consumers. This opts me into the 30% tax, the review straight jacket, and forced buy in to the life-draining Apple ecosystem (no customer relationship, can't deploy when I need to, etc). I have no power here.
Of Apple and YC, one of these is clearly a monopoly, the other is not.
but I agree with many of the points you made (and I understand that for some products, smartphones are going to be your primary target).
From cohort sizes in the teens in the first few years to several dozen in the next decade to now hundreds, the only constant has been two events a year.
I believe the logistics and support models for a 400 firm cohort are very different from one of 40 (in the same way 40 is distinct from a dozen). They cannot be analyzed in isolation as there have been many other changes in the venture funding and incubator models over the last 15 years.
I never did get an answer to this question from ten years ago (https://news.ycombinator.com/item?id=3711131)
"Initially we didn't have what turned out to be the most important idea: funding startups synchronously, instead of asynchronously as it had always been done before. Or rather we had the idea, but we didn't realize its significance. We decided very early that the first thing we'd do would be to fund a bunch of startups over the coming summer."
I wonder what the best batch size is: each cohort seems to be larger than the last. When does it makes sense to do three, four, or six a year as smaller batches.
Secondly, YC may very well be a "new age monopoly" much like Google or Amazon or Facebook i.e. the customers of those companies (in YC's case - founders) gravitate to them not because there is no choice but the value that they offer is so far above and beyond any competition that exists today. The point to note is - traditional definitions of monopoly abuse don't apply, unlike for example: Apple extorting 30% from app devs, which is a blindingly obvious case of abuse.
YC just put out a superior product for their customers who'd otherwise have to pitch to 20 other angels. If you consider YC like the Amazon marketplace, this new deal can be considered a new private label (like AmazonBasics). It is quite likely that this hurts the economics of some angels. But YC is still makings it primary customers happy.
And talking about superior products, by virtue of its early stage and program design, YC does in fact add substantial value when your company is most vulnerable and needs the most help. A16Z/Sequoia/etc founders, are happy with the money and the short lived legitimacy the branded money confers.
But most YC founders seem to owe their existence to YC i.e. they love YC like an alma mater, which is exactly how YC positions itself. No angel/fund can compete with that emotional connect with checkbooks. Soon YCG will be giving later stage VCs a run for their money.
Disclaimer: I am a yc alum. YC is far from a guarantee of success as my dying company can testify. And they are quick to remind that the Harvard analogy doesn't go very far because the median YC company is still a dead one.
This phrasing could imply that YC offer something that any entrepreneur can access - in other words, an unbiased funding source that is equally accessible to people regardless of background and experience.
Is that what you intended or could you find a better analogy?
The reason YC is so popular is that they cater for founders and startups.
YC terms are well-laid out, fairly easy to understand, and reasonable.
They also are huge for networking.
YC is neither the first nor the last, but as far as I can see it’s the only one have had any significant success (and I think it can quite reasonably claim to be successful).
They were always quite expensive, and, as the article says, now even more so. But I think for a lot of people it’s worth it. Not everyone, but many.
Also, why does the author examine YC’s interactions with its own competitors in a vacuum? Isn’t the litmus test for an abusive monopoly to examine if its decisions and negatively effect its target consumer’s behavior? Of course a company may make decisions which harms its competitors, but does that decision then increase overall cost or reduce the potential choices a consumer can make, or does the decision benefit the consumer (as most business competition should)?
In France, there is a fund which is also doing seed index investing [1] they invest in 100 companies a year. But they are not an accelerator, just a fund, and they consistently get good IRR [2]. And they are as much known in the French ecosystem than YC is known in the American ecosystem.
Does anyone have an example of a seed index investing fund that failed ?
I don't understand - YC doesn't own these companies does it? They just have a minor 7% investment? So YC isn't worth $400B. What is it worth?
Anti trust law, requires pretty significant market power. And even in places like the EU, "significant" means at least above something like 20-30% of a market.
And there is no way that YC has anywhere close to that, in basically any market.
the only potential trust concerns would involve exclusive dealings between portfolio companies, but even that is a stretch.
The monopoly issue, in that light, comes down to--well, not even brand, but history and identity.
https://en.m.wikipedia.org/wiki/Betteridge%27s_law_of_headli...
I wonder if the author chose this headline on purpose. I doubt it.
[0] https://en.wikipedia.org/wiki/Betteridge%27s_law_of_headline...
No.TLDR: Another trash piece of provocation driven content-marketing.