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Comment by pg | Hacker News Reader

I'm impressed with Jason's posts. He seems to be methodically working through all the misconceptions of inexperienced founders. This is an important and subtle one. Investors assume that if they're hearing about you first from you, you can't be any good. If you were good, they'd already have heard about you, because you'd have found a way to get introduced to them by someone they trust.

Even if investors didn't start out with this bias, they'd soon learn it from experience.

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There is a perception issue every consumer asks themselves when encountering a purchase decision, "if you're so smart why aren't you rich?"

This applies to every situation. For investors it's "if you are so good why couldn't you find a way to get someone I trust to vouch for you?"

For a cheap product, it's "if it's so good why is it so cheap?"

If you can't find a way answer the variation of this question in your situation, you will undoubtedly hit a brick wall in selling to that person.

For startup ideas its ," if its such a good idea why doesn't it exist." This is actually why questions like "why now" or "what makes you different" or "how do consumers solve this problem now, without your solution" are commonly asked...

If your so...why aren't you...

This applies to all selling situations. Social validation solves the biggest emotional hurdle in selling, "convincing the buyer that they have a defensible position and won't look foolish if they make the purchase."

Also, what are your thoughts on the implications of this tendency of VCs as it pertains to teams outside the Bay Area or outside the US, who may have just as much talent and hustle but are forced to work that much harder and longer to get the same intros and connections (at the opportunity cost of spending more time on product & customers)?

Is there a way to bridge that gap and make the process more equitable in different geographies and networks?

EDIT: Removed the first part of my original two-part question because it was less relevant to the OP.

I think that's a bigger problem for finding angels than finding VC. A little angel seed fund can give a startup enough traction to register with the VCs (and afford a trip or two to Silly Valley). But in Silly Valley itself, angels are easy to find and quick to commit.

Those of us out in flyover country have to deal with no local angels at all, or tire-kicking committees that want traditional 50 page five year business plans and take six months to make up their minds. And I'm sure the situation is far worse in places like India.

While this makes sense logically...logic has a funny way of being built on false premises and anecdotal evidence.

You wrote,"Even if investors didn't start out with this bias, they'd soon learn it from experience."

Considering the core value proposition, and biggest driver of YC's success is it's introductions it promises... I feel a need to question this second part of your statement purely from a potential bias perspective.

It may be true, but can just as likely be built on a false assumption from anecdotal evidence.

Now that YC has worked with at least one nonprofit, do you have any suggestions about how this post might translate to that field?

Why do accelerators like Ycombinator have online application forms while VC firms require intros?

There are lots of great engineers who don't have a strong network. YC invest early so they care more about your ability to code. They'll happily hook you up with their network if you impress them. It's easier to teach an engineer business skills than teaching a business guy to code.

Investors assume that if they're hearing about you first from you, you can't be any good. If you were good, they'd already have heard about you, because you'd have found a way to get introduced to them by someone they trust.

So you're admitting that they're social-proof whores who refuse to think for themselves, even about the subject matter of their own jobs?

VCs should be mortally humiliated by the fact that the game they're running is, after all is counted, a feudal reputation economy-- all flashes, no substance.

Yet people are surprised that VC, as an asset class, has been a stinker for the past 13 years.

It's not an entirely unreasonable heuristic. The supply of startup pitches is vastly greater than the demand for them. Investors have to filter somehow. Getting a first meeting with any VC is pretty easy, even for someone with no connections whatsoever. There are hundreds of possible paths you can take to get that intro. It's not a big stretch to assume that any entrepreneur with a good chance of success should be able to clear that low hurdle.

Building a successful startup is 1,000 times harder than hustling your way into a VC meeting. If you can't do the latter, it's pretty likely you won't be able to do the former.

It's also 1000 times harder than playing the national anthem on a recorder. But that's not a very useful filter.

To some extent, being able to work a social network (or cold call a contacts friends, and get them to introduce you) is an advantage to a start-up. But it's not really sufficient, and may not even be necessary (since it's something founders will learn as they go).

If it's an enterprise sales company, it's certainly a requirement though.

Turns out most men are social proof whores. They are much more likely to date somebody who has been introduced to them by a friend they trust.

Oh, and women too.

C'mon. Weak argument here man. Newsflash: We trust the people that... we trust.

Weak argument here man

You're explaing why people are basically racist and xenophobic. Congrats. Unfortunaely, this makes your posture politically untenable / incorrect and dangerous. It also paints VCs with guilt by association. Because, ya know what? they are certainly sexist and racist based upon the data. Unfortunately. Bad news for this argument is tha VC cash comes from Public Pension funds and other LPs which politically cannot support such institutionalized bias against protected classes. Of course, the loophole is that VCs are not employers. So they are legally entitled to be as rascist, mysoginistic, and otherwise discriminatory as they damn well please. But don't go around publicising it.

Uhh.... Sure?

Suffice to say I find your comments so absurd that they don't even merit a rebuttal. Consider yours the last word, congrats.

Its no more absurd then the appeal to authority from dating advice. Because if you look at the quantitative analytics on dating, they are pretty strong. They show rampant/pervasive casual racism and obvious self-segregation. The value of trust should not be underestimated, but if you're not going to go through the bother of thinking through the implications you need to hedge any sweeping proclamations.

They are much more likely to date somebody who has been introduced to them by a friend they trust.

That's more of an availability problem, though, not a trust problem.

I mean... pg kinda wrote an essay on this very topic: http://paulgraham.com/herd.html

What? This is no different than any filtering in any domain. Who to hire? What movie to go see? You want someone who personally knows you, whose opinion you trust, to vouch for someone rather than going on a cold guess.

Now this is what I don't get, because usually, that doesn't work. At all. I know from experience that imdb score is a much better predictor of how good a movie will be than a recommendation of a friend, who might have a completely different taste than me. Same with electronics - I know I can make a much more informed decision by doing my own research than most - if not all - people I know, but maybe I just don't know the right people?

Ok, so what's the equivalent of an IMDB score that VCs could use to judge a startup pitch?

This makes me wonder what social network analysis for VCs and start ups would look like. It sounds like this model ensures that the well-connected founders get funded despite the merits of their ideas & implementation efforts.

I don't think it ensures the funding of well-connected founders. It just makes it easier for them. And how do you get to be well-connected, anyway? In a strong meritocracy, previous success is the best. You can become "well connected" by a previous successful (or even unsuccessful) startup, or to be an early employee at multiple successful startups, or to build a reputation on a popular open source project or book or website or etc.

Someone who is well-connected due to their previous successes and demonstrated hard work and talent is a much safer bet. And I'd argue you don't get well-connected just by showing up. That'll buy you a friend or two, but not a network.

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