How Y Combinator Solves The ‘Credentials Trap’ Problem | Hacker News Reader

How Y Combinator Solves The ‘Credentials Trap’ Problem

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40 pointsnpguy46 comments

I faced the credential trap and the biggest problem in overcoming it were my ex-peers. When I decided to be an entrepreneur and leaving the traditional path of gathering strong brands on my CV all my peers -- employees striving for 'big' job titles at popular corporations -- derided me. The last sentence of any conversation with them was a pitiful 'Good luck man!' and this made me angry.

The best thing I could do was to stop seeing or meeting them since it crushed me everytime and I was questioning what I was doing. Once I succeeded being an entrepreneur and building my own brand looking back was much easier and you know that you chose the right path and pity you ex-peers sticking on the same crappy job titles, doing stuff nobody cares about.

YC solves that problem since it's now a huge brand and people tell you in the first sentence that they are YC alumni but actually any angel or VC who invests in you (or even cofounders) is gradually solving your credential trap. Being with other entrepreneurs helps too. So you shouldn't chase the 'YC dream' too much since it could defocus. As an entrepreneur you have to learn to be confident without the need of external brands, anyway. Just build something great, get traction and the rest will come by itself.

For those without the YC credentials, this description of YC is exactly the credentials problem in a nutshell. In fact, it sounds exactly like the "old boy's club" mentality that still pervades companies run by Ivy league graduates. In both cases, once you've acquired the credentials your string of success (or failures) is not meaningfully taken into account because people are willing to accept the credentials (rather than your actual track record) as a proxy your chance of success.

The difference between the two cases is that in a startup, your customers determine whether you're successful, and they are not in fact "willing to accept the credentials."

The only thing being funded by YC automatically gets anyone is a first meeting with most investors. It won't close the round for you (if only we could promise that), and it certainly won't get you customers.

But the majority of YC companies close their round, right? It wouldn't make much sense for you to leverage them into a great position, just to have them shot down.

YC is another credential. It's more closely related to the dreaded college (dun dun duhhhhh) than it is to something like an MSCE.

Let's compare the US college experience with YC:

Admission is based on a mix of objective and subjective factors: [✓]

Temporary Poverty: [✓]

Build a network of professional contacts: [✓]

Graduate owing somebody somewhere a big chunk of your potential lifetime net worth: [✓]

Put it on CV regardless of whether you do well: [✓]

(In Australia it's not as clear. For one thing, Australian admissions used to be entirely about high school examination scores. No interviews, no essays. Just the single number, please. Basically like every university requiring the SAT and only the SAT.)

I realize people aren't supposed to care about their own credentials, but we've noticed at least one legitimate use of them: to convince third parties. E.g. if your cofounder's parents or spouse had previously been pressuring him to stop working with you on your crazy project, getting funded by YC can fix that to some degree.

Though come to think of it, it may not be entirely bad if people are influenced by their own credentials. Morale is a huge factor in a startup. If getting some credential boosts someone's confidence, even though in principle it shouldn't, it may make them more likely to succeed.

Sounds reasonable. Just a personal point of view, but if I were to start a start-up right now it kind of feels easier, or better less scarry, to do with YC backing than without.

Not that it actually is easy but the mere fact that you have been approved to a certain degree by someone who knows better than you boosts selfconfidence a lot.

Getting into YC is not easy - I had applied about two years back, and it's not just me, a LOT of my friends had applied too, individually, either as sole founders or as teams, so I am not making up stuff. Some teams that applied, were composed of some of THE BEST hackers (REAL hackers, not marketers) programmers, and the best designers, with loads of experience running start-ups. But they never got in. Neither did I.

Atleast, I applied as a sole founder, so it's reasonable that I didn't get in. But I was surprised (shocked) to see that even the top hackers/designers never got in. I wondered why. And then I discovered, it was all about credentials. None of us were product managers from Facebook/Google/etc.

Here's the thing - This article is irony at best. I want you to understand that no matter what you do, what skills you have, YC looks into

1) Where you come from.

2) What credentials you have.

YC solves the credentials trap by looking at your credentials on behalf of the rest. YC is not interested if you have a good idea. YC is interested if you are a good executer of ideas. And it's a very fair metric. But, the way they do it is scary at best - Much of the people they select are only top dogs - (ex) product managers from Google, Facebook or someone from a well-known company. NO, they don't select everyone this way, but for the majority of the people they select, this is how it works. And as for the rest that they select, the ones without credentials, its a small percentage, which means you have to really compete hard to get in, if you're not from a well-respected company like Google or Facebook or Twitter.

Worse is the fact that the applications are filtered by the alumnii, hence you never know what metric they use to select people. But eventually post selection, you notice that these people who were selected are from some hot company like Google, Facebook etc.

Paul Graham is a great man, and I have great (enormous) respect for him. It's because of him that this start-up industry is receiving proper attention. But, if someone is going to tell me YC solves the credentials problem, etc. then I'm not stupid enough to buy it. It's simply not true.

If you've watched Ratatouille, you may recall the quote:

"Anyone can cook";

Which means (What it means is what the movie's about):

"Not everyone can become an artist, but, a great artist can come from anywhere.."

There are so many mistakes here I don't know where to begin.

For example, we're actually very skeptical of people from Google, and in fact of people who've worked at any big company for more than about 18 months.

The question I care about most on the application is the one where we ask about something impressive the founders have achieved. Not credentials, but something they've done.

Why are you so eager to finance J.K. Rowlings second book? The new Airbnb is always the first book.

Do you have anything real to cite for a statement like this?

You sound more like someone bitter than someone who actually has a clear head and some level evidence to leverage a negative point about Y Combinator's selection process.

This might have been about average for an HN troll if YC hadn't in fact funded Airbnb.

But mightn't it still be a good point? I'm not sure what the Airbnb founders had achieved prior to Airbnb, but anyone with a substantial enough success mightn't need to go through YC next time. For example, once the Airbnb founders move on, would they go through YC for their next venture? They probably wouldn't need to, right?

That's not how I read his comment. I read it as insinuating that YC are only eager to fund derivative companies, as opposed to, say, Airbnb – which they did fund.

PG, do you ever sleep ; )

We are three nobodies from a public university in the midwest that were working at a mortgage company.

I doubt our credentials were what impressed the YC partners.

Even if this were true (and I highly doubt it is), my response would be, "So?"

It's admirable that Y-Combinator doesn't do all those things, but I wouldn't blame them for it either. Yes, Paul Graham does this because it is his passion and because he's damn well good at it.

But these are also investors. There is more of a sense of community than you will get from any VC in the game, but they are still looking to profit. This isn't a charity. Paul has said himself that they turn away many "pretty good" applications each year simply because others are better.

If a cofounder of another startup applied to Y-Combinator, they'd be a very safe bet and a good candidate for admission (assuming they still needed some kind of guidance). Just because you're beat out by people with superior credentials doesn't mean there's a credential bias.

This is just like the argument that flew around for some time that there's a bias in favor of 20 something dropouts applying to Y-Combinator in Silicon Valley. No, there isn't. You hear about those cases more, but that's sampling bias.

Drew Houston is worth almost half a billion dollars now. He applied as a single founder with nothing to show for himself but a neat little poker bot and an SAT prep service. He was also rejected once, and made a better application the next time around. Determination is the single greatest indicator of success.

I guess the point of the post IMHO was that YC solves the credential trap by becoming a widely accepted credential, not by not looking at other credentials.

Agree, that was the point of the post - from the post - "The fact that “I am doing YC” fits into that group of statements (“I am going to college”, “I got a job at Google”) is huge for someone with an idea and is actually taking a risk." It is an external validation that makes it look 'less crazy' to the outside world.

To stay with your Ratatouille analogy, how does YC know that "someone (anyone) can cook"? Either they eat something that you have cooked, or they look at your past achievements to see if you can cook (chef at a Michelin star restaurant maybe?). Barring these two, YC doesn't know that you can cook.

If you build a site which gets 10 million visitors daily, YC will know that you can "cook", and won't care about what your background is.

simply because you and your friends are not ffrom google/facebook and did not get in does not mean they only accept people from google/facebook. did the founders of the most successful yc companies have that pedigree? i really dont think so. you can rationalize your own rejection however you want, but you cannot make such a sweeping generalization about something with so little support

>did the founders of the most successful yc companies have that pedigree? i really dont think so.

Optimizely's application video: http://dsiroker-private.posterous.com/private/FCAGetIemw

YCombinator does not solve the credentials trap, it simply replaces one arbitrary set of credentials (i.e., test scores) with another (social hacking skills).

That is, after all, the point of credentials--having credentials indicates a safer risk but it does not guarantee the likelihood of success.

YC is only arbitrary to the extent we are stupid, and though we certainly do make mistakes in deciding who to fund, we have some fairly smart people expending a lot of effort on the problem; I don't think we simply fund whoever's best at tricking us into funding them.

True, but an equivalent statement can be made by a decision maker at any other reputable credentialing institution as well. How is this substantively different from what an admissions officer at MIT would say?

I think the GP's point is that, for the credential obsessed, "getting into YC" is just the "getting a Rhodes Scholarship" or "getting a Supreme Court clerkship" for our milieu. I don't think that is an indictment of YC in the least.

Ultimately the OP's argument boils down to the claim that YC solves the credentials trap by ... transforming starting a startup into a credential, as long as it's done with the YC imprimatur. Hardly a solution at all.

(Ironically, there is a solid argument to be made about how your essays have done a huge amount to legitimize the act of founding a startup and embolden erstwhile credential seekers to take that risk, even if it doesn't come with a name brand institution attached to it. The author fails to make that point, though.)

You answered your own question in the next sentence. If we were bad at picking people, how could we have become the equivalent of getting a Supreme Court clerkship in 8 years?

"If we were bad at picking people ..."

I'm not saying you're bad at picking people. And, for partially self-serving reasons, I don't think MIT is bad at picking people, either.

I'm saying that your ability to pick people is orthogonal to whether or not YC solves Chris Dixon's credential trap. The "trap" is a pathological behavior in the seeker, not a claim that credentials are meaningless or that the people who award them are incompetent.

Moreover, one can't arbitrarily claim that graduating from a top program in one's field is merely a credential, but completing the top accelerator isn't. They're both valuable, but neither of them is "solving" the credential problem.

Couldn't one say the same thing about the Stanford admissions board or the Google hiring board? They're extremely smart people expending a lot of effort on the problem of selecting the most likely to succeeds from a group of candidates.

I guess it's an issue of defining the ultimate goal. If the ultimate goal is being a co-founder of a successful startup then YC is likely the key penultimate step in the ultimate achievement whereas Google and Stanford are potential credential traps.

But if the ultimate goal is a PHD at Stanford or a research fellowship at Google, then maybe YC is the credential trap erroneously viewed as a step on the path?

I can only speak for the batch I was in (s12), but there's a lot more skill in my batch than just social engineering. Although a good portion of my fellow batchmates have academic credentials there would be no better way for myself to have a similar situation to a college's alumni network without Y Combinator, as I haven't attended college. The same is true of two of my other cofounders.

The article isn't saying what your comment implies. Your comment implies the credentials are useful as a form of external validation for others... the article implies it's a form of external validation which is useful for the credentialee... sort of a social 'hey, way to go to college!'

In this way, 'hey i'm dropping out of school!' is frowned upon... but perhaps 'hey, I'm dropping school for yc' is a different external validator. Again, for the person seeking the credential.

I've been personally experiencing the credentials trap pretty recently in a manner tangential to the OP. I get hardballed to hell when it comes to internships because I don't come from a good school and don't have a great gpa.

It really bugs me that despite programming an order of magnitude more often than my friends, they still have an easier time obtaining internships because they come from a decent college or waste all their time obtaining a 3.5+ gpa.

Even loading up my resume with all of my programming projects/github is of no aid, it's like HR doesn't give a damn about how competent of an engineer you really are, they just hire based off of sorting all the applicants by gpa/school.

</rant>

You're completely correct. This is how corporate works. There is a very well defined system that has been created over decades or centuries of networking. You're not going to break into the corporate system on merit alone after all these years of 'by the book'.

Startups - especially your own - are the best method for getting 'around the system'. Startups are nearly always very heavily based on what you can accomplish and ship in the first couple months you start there, and you will quickly build a name for yourself if you can succeed.

There are also a number of ways to get 'back into the system' regardless of your age, such as the numerous degrees and diplomas offered directly at someone like you. Choice is up to you, but the reality is: there is a system to corporate HR and it is not based very heavily on merit. Decrying reality won't help you here.

your friends are obviously not wasting their time keeping their grades up.

Yes, the theory/practice divide can be strong, but you really will need both.

And I say this as some one on the practice side ('I can do it!') who's working very hard to get the theory side up to scratch ('but I can't articulate why as well as I should!').

I think when he says "wasting their time" he means that the time wasn't spent becoming a better engineer. If the end goal was to get a job then, no, they didn't waste their time. If the goal was to be the best engineer possible then perhaps they did.

"I got into YC" is the equivalent of "I got into google" in the spectrum of startups. It is a form of credential and carries all of the negative connotations, with the added downside of opacity (at least with standardized tests, the rules are known ahead of time)

Keep in mind that the hardest lessons of entrepreneurship are only exposed to those who are taking the biggest risks (staking out on your own or with friends) and are lost upon those who don't have to take a significant risk.

In many ways, you see the differences in the behaviors of VC-backed companies versus bootstrapped companies.

There is another downside to the YC credential, which is the paltry funding in return for a huge chunk of a startup's equity. Is the program worth such a substantial cost? YC uses its reputation and an almost cult-like glorification of the startup to create a factory farm for newly minted college grads to toil away in, each in their own niche. All of these startups come from the same school, and so they work the same way, using the same ideas, shared among them--so when the majority of these startups fail, the many graduates leave with the same monoculture of thought, which lessens the value of their experience.

I believe the pool's antecedents and ideas are much more diverse than that. I recommend the recent book 'The Launch Pad' (http://www.amazon.com/dp/1591845297) as a good introduction to YC.

Personally, if I were in a peer group any of whose members managed to succeed, I'd be much more motivated to give it another try even if my own effort had failed, compared to having made the effort alone.

edit: But I agree with you in another way. Hurting for the lack of such a credential is a self-confidence issue. If you managed to hunker down and make something on your own, you're already ahead of the unwashed masses. Surely making a case for that is not so difficult in comparison (to the effort itself).

Thank you for this book recommendation. I have ordered it and can't wait to read it.

(YC) create a factory farm for newly minted college grads to toil away in, each in their own niche. All of these startups come from the same school, and so they work the same way, using the same ideas, shared among them--so when the majority of these startups fail, the many graduates leave with the same monoculture of thought, which lessens the value of their experience

That seems like a profoundly naive opinion. If you have the chance to meet any random sampling of yc founders you'll find that they come from extremely diverse backgrounds and leave yc with just as diverse experiences

huge chunk?

That is a solid observation. What YC has done to the world of startups is a massive study - if PG would open up the data (founder issues, funding, what the founders are up to today etc) we can get some really great insights.

Getting into YC does not solve the problem cdixon outlined.

Most startups still fail. Sure if you spent 3 months at YC and then left you have credentials. What about the next 1-5 years you spent toiling away to make your startup work with possibly nothing to show for it except experience. At a certain point, the glow of YC fades and you will be judged on your company's merit.

The problem is similarly being solved by Venture for America (ventureforamerica.org) which gives recent college grads the opportunity to work for startups while being able to put something prestigious/career building on their resume.

VFA requires a college transcript (though an unofficial transcript is acceptable if an official transcript is not available). http://ventureforamerica.org/faqs/. Ergo, it is using credentials as a weeding mechanism.

VFA selects the startups their fellows work for based on recommendations of people they know. Ergo, they are using credentials as a weeding mechanism.

VFA may be doing something commendable, but it is most definitely not eliminating the credentials problem.

EDIT: Furthermore, VFA requires a bachelor's degree (or more advanced), a 3.0 GPA or higher in college (but grad school does not count), and green card or residency status. Unlike the factors originally discussed (pre-edit), these are mandatory requirements. All of these are standard credentials filters for companies hiring students straight out of college.

These seem like pretty made up numbers for a blog that claims to be about statistics:

"And that changes perceptions. 1 out of 10 people with an idea would have pursued it in 2004. Now, maybe 3 out of 10 would."

Fixed that with a 'let us say' in the article. Thanks for pointing that out.

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