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Comment by edent | Hacker News Reader

Am I missing something here? You can get $$$ and top quality advice for an _idea_ and then just turn around and say "bored now - let's do something else"?

And then, so it seems, when that idea runs out you just say "uhhh... let's do this instead!"

So, what are the YC people investing in? Two guys who seem pretty smart?

I appreciate that you might need to pivot from "a social network for dogs" to "a social network for pets" or even "a dog training forum" - but this just seems like they were given investment for one idea, then immediately dropped it to do something else.

Or, like I say, have I missed something vital?

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I had similar questions based on this: "In college I had started an ed-tech company, ClassOwl, that raised nearly a million in seed funding. My two cofounders and I attended StartX, an incubator affiliated with Stanford, but ultimately decided to finish our degrees instead of pursuing the startup dream."

Am I understanding that right? Twice in two years this guy took other people's money for something and then quit?

I know we are in another bubble, but this really worries me. What, as an industry, are we doing if recent graduates see their basket of choices as "a) go to grad school, b) work at a big tech company, or c) attend a prestigious startup accelerator"?

On the one hand, I love entrepreneurs, and think that anybody who feels the calling should be supported in doing it. But on the other, I really feel like it is a calling, like being an artist or a religious missionary. People who are the kind of people who will be happy taking one of life's default choices should probably just go do that. If people are becoming entrepreneurs because they see it as another convenient, high-status, high-reward option, then I think we're doing something pretty wrong.

And kudos to Charlie Guo for being honest like this. It's sure not easy, but it's very valuable to the rest of us.

Unless there's some kind of actual contract (leave before X years and you have to return Y% of the funding), I don't think that should be very surprising. People start on something (even a funded something) and then change to other things all the time, if their interests change or another opportunity arises.

For example, a portion of the people who win $30k/year National Science Foundation graduate research fellowships take a year or two of the funding, and then decide a PhD isn't for them. Some of those people, after taking $30k or $60k in PhD fellowship funding, leave grad school to start a company instead. I don't think it should be that surprising that people might go the other direction as well, taking $30k in Y Combinator funding, trying a startup for a bit, and then deciding to leave the startup and go to grad school instead.

A research fellowship is not seed funding, though. YC doesn't "give" people $30k, it invests $30k in their business.

It's not identical, but it's not like the NSF "gives" people $30k of the taxpayer's money just as a gift ether. The goal is to invest public money in future researchers. In both cases there's a clear intent that you will use this as seed money to jump-start a project that will achieve the funder's goals (monetary return and positive PR for Y Combinator, production of research & PhDs for the NSF GFRP). But there's no requirement that you continue to do it indefinitely, and no ban on bailing out if you decide it's not for you after spending $30k of the funder's money. I don't see this as any more morally binding in the Y Combinator case than the NSF case.

In addition, it's not like leaving a PhD funded by an NSF GRFP leaves zero net positive impact. Funding research leads to papers (hopefully with valuable insights) and to knowledge and training passed down to other researchers. I don't think it's a very good analogy to startup funding in that sense. (Although I suppose one could make the argument that alums of failed companies have hard-earned experience so some of the value is still there, diffused out to wherever they go next.)

In the best case I think that's possible, but in the usual case someone who leaves a PhD program after a year does very little research. US-style PhDs don't typically require a master's degree first, so first-year PhD students are doing mainly course work and "figure out what I want to do for my PhD" project-shopping. If you do that for a year and bail, it's pretty common that you wrote zero papers and did very little research. If you leave after two or three years, it's more likely you will leave some kind of research contribution, although it's also pretty common for people who realize they are going to leave to just "pivot" to full-time MSc coursework, so they can leave the program with a master's degree. In that case, the NSF basically funded someone to take MSc courses, which is arguably not useless, but isn't what the NSF intends to fund.

I think with this amount of money it's just a risk of funding people. Putting in strings requiring repayment if the person changes areas, when you're giving someone <$100k, is pretty heavyweight for either the NSF or Y Combinator, so they just try to pre-screen for people they think are going to use the money as intended and stick with it, and accept that some percentage of people will instead use the money to flail around for a year or two and leave. If the percentage gets too high, then I guess reconsider the screening process.

Yes, that's true. For full disclosure, I left a PhD after 4 years to work in industry (I was frustrated by some aspects of academia), having spent three years on an NSF fellowship, so I may be biased here :-) I absolutely didn't go into it thinking I would do that, and I try to bring a researchy perspective everywhere I go now. I also think it depends on the school and the field. Where I was, it was common for first-years to get on a project right away and help churn out results. Probably guided closely by older students or advisors, but still doing productive work.

I think you're right re: clawbacks, though. I can't imagine the mental pressure were the scenario to be "you MUST stay in academia or you owe the government $XXXk". I actually know a PhD student on a (non-US) government scholarship who has a clause like that. He calls it his "slave contract".

Getting back to the original topic, I think that for any venture with a high rate of failure (startups or grad school or...), there has to be some room to allow the funded person/people to say "this isn't working" in good faith and pivot or leave. That's totally different from someone taking funding without the intention to use it properly, or just deciding they're bored or whatnot.

Contracts are to business what skeletons are to people. They explain something of the raw structure, but little more. (Also, if you find yourself looking at it, something has gone wrong.)

Every time I have taken investment, I have seen it as a commitment to see a venture through. Maybe it works, maybe it doesn't, but I am going to give it all I have. So no, I don't think, "gosh, I found something more fun to do," is a legitimate reason for walking away from a startup. If that's how somebody thinks, then they are not cut out for starting a company, because there are always points where almost anything else will be interesting or appealing.

Fellowships are different. I'm advising a new fellowship program right now and, like all education, it's seen as an opportunity to help someone learn. We expect a certain percentage of people to go on to do the thing we want people to do, but if not they'll be taking the knowledge and doing something else, which is also fine.

My concern here is really with the system. If we are pressing money upon people who aren't suited for it, then something's pretty wrong. Nobody should be "trying a startup for a bit".

How about the "I had countless friends who were nearly finished with their computer science (CS) degrees and had an idea for a company, but they struggled to move from concept to finished product. I wanted to help them bridge that gap", says they 21 year old that never launched anything.

Something is fucked up here. I don't blame Charlie Guo, he's just a product of the environment, but why would anyone invest in him doing this idea? There's no knowledge or experience. It's like investing in my idea for in home brain surgery. It doesn't make any sense, and the article thing raised multiple red flags to me.

The app still exists, so it hasn't vanished off the face of the earth.

I'm concerned that graduates have the expectation that you an sit in a room, brainstorm and come up with a killer idea which will get millions in seed funding. That doesn't show that you're interested or knowledgeable in the field/problem area you're trying to solve. It sounds like the gold rush.

That's not to say that you shouldn't sit in a room and brainstorm, but sitting down and listing currently-hip ideas is a quick way to crash. Sit in a room and list current big problems that you have a lot of knowledge about!

> So, what are the YC people investing in? Two guys who seem pretty smart?

The fully loaded market rate for "two guys who seem pretty smart" in Silicon Valley is somewhere between $200,000 to $300,000 per year -- at regular day jobs. Even boring regular employers invest a ton of money in people just based on an interview.

Remember this, when thinking about all of the investors who are always demanding tons of up-front proof and traction from founders. Regular day jobs generally require you to do nothing up front, except showing up to an interview. Firing within the first year is relatively rare. In many ways, regular day job employers are a lot less risk averse than investors!

> The fully loaded market rate for "two guys who seem pretty smart" in Silicon Valley is somewhere between $200,000 to $300,000 per year

Each

Bullshit.

Recruiting costs, signing bonus, salary, health care, insurance, taxes, equipment, office space, software subscriptions, expenses. I've been at 5 startups, and we always budgeted 200-250k per hire per year

Well of course! The hiring managers at "Regular day job employers" aren't dispensing their own money, and the company they work for is already established and likely doesn't have any shortage of money with which to "take risks."

Recruitment is quite a different to investing. First of all, the upside-risk is pretty much eliminated from the employee, usually. And the employees can be fired. Yep, I guess that it is somewhat rare, but at least there is that possibility.

But the employer has to follow the manager's directions.

The only part you're missing is that PG has said many times in the past that they invest mostly in the team and that many teams that go through YC end up changing their idea slightly or completely. So the beginning of this situation doesn't seem very unusual, just that they never actually figured it out.

I can accept this rationale for investing in teams over ideas, but when did "pivoting" go from meaning "a modest change in direction" (e.g. switching the target market for your SASS product from consumers to enterprise, or making what was initially a secondary feature a primary one) to "start over from scratch with an entirely unrelated idea"? Seems like another term is needed--"flailing" perhaps?

A least in the YC model, that seems to be a common definition of "pivoting". A bunch of their companies end up pursuing products bearing very little resemblance to the idea they were accepted on. If anything they seem to view being too attached to your idea as the bigger negative.

Normally I use the term "leap" for the latter.

You're completely correct that the original meaning of the term was specific. Eric Ries originally wrote, "I want to introduce the concept of the pivot, the idea that successful startups change directions but stay grounded in what they've learned. They keep one foot in the past and place one foot in a new possible future. Over time, this pivoting may lead them far afield from their original vision, but if you look carefully, you'll be able to detect common threads that link each iteration. By contrast, many unsuccessful startups simply jump outright from one vision to something completely different. These jumps are extremely risky, because they don't leverage the validated learning about customers that came before." [1]

Sadly, the term is getting killed by Semantic Diffusion [2]. Precisely because people want to dignify their flailing with a fancy-sounding word.

[1] http://www.startuplessonslearned.com/2009/06/pivot-dont-jump...

[2] http://martinfowler.com/bliki/SemanticDiffusion.html

It doesn't seem that rare. The creators of Reddit joined YC with a pitch for ordering delivery food through your phone.

Yeah, that almost seems like a bait and switch scam.

pg called Soylent "the biggest pivot in YC history"

"Affordable wireless networks" somehow became a food company.

http://blog.soylent.me/post/51007573199/the-biggest-pivot-in...

That's an odd one, but still something with an empirical basis for the decision.

If I remember correctly, the creator of soylent invented it for his own needs, blogged about it, then was stunned by the amount of interest.

In this case, it seemed like the idea kept changing before they had even figured out much about it, or had any evidence to justify a different direction.

"So, what are the YC people investing in? Two guys who seem pretty smart?"

Yes, actually. Under the assumption that smart people can adapt and change as situations demand.

Someone with "a good idea" who is not smart is tied to that good idea. If it turns out not to be a good idea, or the environment changes and they need to adapt... I'd rather bet on the smart people.

It is a calculated risk, some end up like this and others make Reddit (who also pivoted), Dropbox or Twitch. Since you only need a few really big winners the net can only catch but a few and it can still be a successful process.

It is really timing as well, even if you have the right people at the time it might not work out. Personally it seems you would want more of a track record for investment, but it is a risk YC is willing to take for the big fish as they have a much bigger net + filter with smaller investments.

YC essentially pans for gold way upstream right in the blue stream before the blue ocean way before the red ocean.

CS degree from Stanford == clout in the startup community

Stanford is really a great school, but I hope that isn't generally the determining factor here. Many other universities have great CS departments with strong entrepreneurial programs on the side. (MIT, Berkeley, Harvard, Columbia, etc).

edit: I guess Stanford grads apply in much higher numbers than most other colleges.

> So, what are the YC people investing in? Two guys who seem pretty smart?

In a lot of talks by VCs, Seed funds and incubators posted on YT, they have said that they invest in people. It's been said that people with entrepreneurial spirit will keep coming with ideas & executions and the said VCs/Seed Funds/Incubators want to build relationships that span across these ventures.

> So, what are the YC people investing in? Two guys who seem pretty smart?

Standford CS grads.

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