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Comment by kylebrown | Hacker News Reader

How about median valuation?

The trouble with median valuation is that even for the most successful incubators it will approach zero, because I doubt any of us are going to have a success rate over 50%.

Hmm. But isn't that getting at the point they're making here?

But VC investing is a hit-driven business. One big hit, like a Dropbox, funds all the rest. Unless you're really good at picking horses, you'll have the same median as everyone else.

That's why I liked dan shipper's (rather timely) blog post the other day about choosing to build a sustainable business instead of swinging for a homerun, and striking out.

If you're an entrepreneur, this is indeed the way you want to be thinking. But these are investors discussing outcomes for different startup creation vehicles. If you're an investor, you need to focus on the skinny tail of the outcome distribution, if only because it's where the liquidity is.

While I applaud his motivation, what he's suggesting is an intrinsically unsound way to go about it. A startup = a chemical reaction with extremely high activation energy. In such circumstances, the best thing you can do is get one or more catalysts. YC or any other VC/incubator is just a catalyst to lower your activation energy & let the chemical reaction happen sooner/faster. Without the catalyst, the reaction will most likely not happen, period. Whether you get a catalyst or not, you most definitely don't want inhibitors in your reaction. "Holed up in Philly for $650 a month working 14-hours a day" - that's a bigtime inhibitor right there. Why not spend $6500 in sv and work 8 hours a day - its a lot more sustainable, that $6500 comes out of some vc's pocket in exchange for equity, nobody's burnt out and everybody's happy. Let the capital markets work in your favor. Don't handicap yourself.

Why not spend $6500 in sv and work 8 hours a day

Because your VCs will go crazy if they found out you were only working 8 hours a day. I've interviewed with both TechStars and YC startups - and they've told me that 55-60 hour work weeks are the norm. Damned if you do, damned if you don't.

But success for purposes of a median is a low bar. It's half your companies having any valuation at all.

Median is arbitrary. Why not 90th percentiles? Profit pays the bills.

The whole point is that a very great fund will still have 60%+ with valuation of 0, and that's completely ok.

You'd hope not, because that would be a silly point to make. No reasonable observer expects the majority of any portfolio of startups to succeed.

What about comparing the 85-95 percentile companies? Is there any point to comparing the companies that have modest success?

One thing that is interesting about looking at both mean and median is getting a feel for the shape/variance of the returns.

One huge winner could randomly happen in an otherwise low-quality program and that incubator would appear higher on rankings forever after that unjustly since the result is very much not reproducible. In other words measuring by average could mask getting lucky.

"One huge winner could randomly happen ..."

One would think that. The article states that 45% of programs have not had any graduate that raised venture funding. That boggles my mind. But this data helps explain the uneasy feeling I get when I see niche accelerators following a cargo cult mentality.

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