90% of B2B YC companies have 50% of their revenue coming from other YC companies | Hacker News Reader

90% of B2B YC companies have 50% of their revenue coming from other YC companies

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37 pointsdvt18 comments

Is this actually true? It sounds more like a claim by a random person.

It's just a quip on pg's take. But the core idea is true, in that YC companies tend to make more money through dealing with other YC companies, before growing reputed enough to take in customers outside YC.

this is true for more than just yc, happens in a lot of vc.

if your saas becomes a customer of mine, and we share a common, well, let’s call it financier because that’s polite, then your helping me profit helps my helper, which is your helper. you might get some help for that.

now even more exciting is if my saas can become a customer of yours. we can both have better numbers, legitimately, and that makes our common master happy, twice.

I worked at a VC funded startup many years ago and we were essentially forced to do something like this for one of the other VC’s failing companies. We spent our limited funds on them, which we didn’t need, and it ended up sinking us. So in my opinion, the article is more about a shell game than anything positive.

It’s definitely true in spirit, and I think well acknowledged by Y Combinatorians.

When you think critically about this number, the level matters almost 0, the trend means everything. It could be 90% and I wouldn’t care as long as that was steadily going down.

So ultimately, while this could be interpreted as suspicious or fishy, it could also be interpreted as, wow, they've really built a flywheel for growth.

Years ago, I worked for a small outsourced IT company. Basically running networks and systems for small mom and pop size businesses. The owner was the only successful salesman, and nearly our entire client base consisted of his MBA program classmates.

They all say his super pushy sales job and thought it was perfect. Almost everyone else would agree in person and cancel a day or two later over the phone. He was too pushy and no one wanted to deal with him long term.

Went to work for his competition, still only the owner was good at sales, but at least could sell to anyone who needed services.

This is of course not an actual stat, but I don't think we should discount the value of being part of a network (any network) that can get you actual paying customers in the door.

I don't believe that the feedback of free users, or "friends & family" is worth even a fraction of what you get when someone's spent a four-figure sum on your software, while knowing that it's imperfect, and they need it to _really_ work.

Interesting assertion. None of our customers are YC companies but I do remember that being an anomaly during out batch.

Anecdotally the ones that sell outside of Bay Area startups overlap a lot with the ones that are still around.

This only seems plausible if most B2B YC companies in this set are still very early, because scaling B2B requires getting big companies to pay way more than a YC founder could ever stomach on a contractual basis.

And that's only YC. I suspect that if you do this calculation for all VC-backed companies, the percent of revenues coming from other VC-backed companies is even higher!

It's called "cross-pollination".

In fact, 100% of B2B companies have 100% of their revenue coming from other companies!

0% of B2B companies have sales to public entities like governments or municipalities?

B2B just means not B2C, which doesn't necessarily exclude government or education. B2M is to everyone.

The thing with VC-backed companies is that many, and maybe most of them, are burning money and depend on raising fresh VC capital to stay afloat. If the VC spigot is turned off, all these companies will cut spending and/or fail at the same time. In a drought of fresh capital, the faster a VC-backed startup can reduce its dependence on other VC-backed startups, the greater its chances of survival.

The statistic from Paul Graham reminds me of a time when I tried to bring my grade in a mathematical computer science course up during exam inspection. I explained to the very formal (mathematical formal; he was also friendly) that I should have gotten half the points for one of the questions because I got it partially right. Without much thinking, he responded with "No. It’s wrong."

It has been a great life lesson for me. You can come up with all kinds of nice stories about how right you are but sometimes you’re just wrong.

the whole startup scene is just a pyramid with extra steps

Trickle down!!!

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