Right, PG's advice is not useful for all founders, just the 1 out of every 10 that makes it big. The others are supposed to nut up and get over it.
His advice does, however, benefit every venture capitalist.
His advice does, however, benefit every venture capitalist.
I'm pretty sure they're wrong about a couple things --- particularly the stuff that comes from some of the earlier PG essays. That's not the same as being corrupted. I'm wrong about a lot of stuff too.
YC can have founder interests at heart and still give out VC biased advice because of the type of startup they encourage. The two aren't mutually exclusive.
Historically YC has given more power to entrepreneurs vs the VCs. JL & co. founded YC mainly because VCs sucked even more at the time. Given what YC has accomplished, I'm sure a lot of people can say that they've made things better.
Can the current VC environment be improved? Yes. Has it gotten much better ever since YC's influence has grown? Yes. Will Sam change one of YC's core missions of giving founders more equal footing? It's possible but I really I doubt it.
They have the best interests of founders in mind only insofar as their pocketbooks and reputation benefit from it. That's at best an intersection that doesn't contain all the elements in both sets.
Disclaimer: I'm a pretty cynical and skeptical person by nature. I'm especially suspicious when people with a lot of money at risk say, well, just about anything. My experiences have lead me to believe that it is an extremely rare individual who will not go to great lengths to protect and accumulate his wealth, even to an extent that many would consider sociopathic, and further that this trait is amplified geometrically as wealth is accumulated.
Have a read over this [1], one of countless studies which supports the original commenter's assertion that wealth and status accumulation tend to the be prime directive of every individual who has even a modicum of either asset.
If PG and YC truly cared about entrepreneurship in spite of their own best interests, they would be working tirelessly for a worldwide basic income which frees talented individuals from the whims of VCs, incubators, and employers alike and allows said entrepreneurs to fully focus their energies on bootstrapping their ideas with maximum freedom over their time, equity, and strategic decisions.
So can a "big picture" view: a 90% probability of failure might not seem nearly so bad to someone who can hedge by investing (not necessarily just $) in hundreds of companies. Expectation maximization is much more appealing when you have enough trials to get one of them off the ground. Whereas a founder "starting from 0" might reasonably prefer a ~maximin approach. Neither objective is wrong or corrupt, but advice that suits one and not the other might as well be.
PG and everyone in YC know this and I'm sure they all make honest efforts to work around the tension, but we should be realistic about the fact that tension exists.
Also, what if some companies held out. So now 80% of the YC companies are in this hedge fund. Wouldn't the most successful companies disproportionately come from the 20%--the ones who had enough confidence to reject the deal? Would the smart people in the 80% then defect as well, bringing the cabal down to 60%?
But the characteristic we're looking for here is employee aligned. Founders can make out like bandits whilst the employees find out the hardway what their contracts really mean.
Quite contrary, the opposite is true: the "1 out of every 10" companies you hear about are the companies where founders resisted opportunities to sell early, which grew to a size where millionaires continued to be minted even after the IPO.
Some VCs have even refused to permit early sales that would have made the founders comfortable (i.e., 1-5mm per founder): while top-tier VCs _won't_ do that (that would make founders who have their pick of VCs be reluctant about accepting their funding), it's probably not the best idea in the world to take substantial amount of VC funding without even considering the possibility of building a public company.
There's a lot that one can accuse pg of, but pushing founders to take long odds to make VCs rich is not one of them.
Why? If the odds really are 1 in 10 (I suspect they are lower than this) and you only have a couple of chances to do a start-up in your life then why risk it all on the chance of getting big? The hedonistic value of money has a pretty steep fall.
Across all VC-funded startups which received first-round funding between 1985 and 2009, 55% were terminated at a loss, and only 6% returned more than 5 times the original investment. But this 6% group generated more than 50% of the gross return across all ventures.
At a "single large and successful" (but, for obvious reasons, anonymous) VC firm which invested about 1 billion over the last decade, about 5% of the total money invested generated a return of 10x or more; almost 60% of the money was invested into companies that terminated at loss.
Source for both assertions: Kerr et al., 2014 (http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2473226)
You may also want to take a look at Figure 2 in Hall and Woodward (2008), which shows the distribution of exit values over 22,000 VC-backed startups founded between 1987 and 2008. About 5% of these startups had exit values of $50 million or more. (http://www.nber.org/papers/w14219)
It would be nice if people on Hacker News would not use phrases like this.