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Why There Aren't More Googles

paulgraham.com

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Re: Why There Aren't More Googles

#61

Post by gojomo »

run4yourlives wrote: post #16

Comparisons to Google are worthless, primarily for 2 reasons: 1. Every logical mind (even within Google) in 1999 would have seen that Google was heading for failure - there was no money in search. They got lucky in finding one -adwords - that worked. 2. Had the timing of their discovery been off, or had the dot-com bubble busted a few months earlier, they would have died. In saying that, they are useless as a measure…

1. Every logical mind (even within Google) in 1999 would have seen that Google was heading for failure - there was no money in search. They got lucky in finding one -adwords - that worked.

Lots of "logical minds" invested in Google in 1998. In 1999, Yahoo was profitable; Excite was bought for billions; Compaq and then CMGI tried to relaunch AltaVista. The best ways to maximize search revenue were not yet clear, and many thought the existing search incumbents would be harder to displace, but many smart people saw there was "money in search" and clearly did not think Google was "headed for failure".

Google didn't "get lucky in finding" a model; they looked around for what was working for others. They first tried CPM ads -- "text banners" starting December 1999 -- and later in 2002 moved to Goto.com's wildly successful CPC formula. And they were making money outside of advertising before the AdWords rocket took off.

2. Had the timing of their discovery been off, or had the dot-com bubble busted a few months earlier, they would have died.

Google raised money in 1998 -- so even moving the 2000-2001 bust forward a year wouldn't have put them on thin ice. And the search-linked ads market didn't collapse post-bubble; Goto.com reached strong profitability on search CPC ads in 2001, a "bust year" of very low overall ad spending.

Anything as successful as Google is, at some level, sui generis. Survivorship bias also makes it hard to draw lessons from winners. But your characterization of Google as being just a lucky discovery and a few months' timing away from inexorable failure is inconsistent with the real events of 1998-2001.

Re: Why There Aren't More Googles

#63

Post by mrtron »

This has the sense of a ploy to spur on companies to buyout for huge amounts - furthering YC's interests. Also suggests VCs should take on more risk - furthering YC's interests. Urges entrepreneurs to hold out even longer - furthering YC's interests (if these entrepreneurs are in YC).

I don't disagree this message - but the motivation for writing this seems extremely transparent.

Not every buyout makes sense. Buying out Facebook for the valuation given to them roughly by the MSFT investment looks ridiculous considering Facebook's inability to monetize their traffic.

VCs fundamentally are trying to be risk adverse in a high risk environment. They all want to have a slightly higher success rate than average and do great.

Entrepreneurs always will hit a point where it makes sense to sell out and get rid of the risk on their end of holding on. If you have a portfolio of 100 companies, it makes sense to want each to hold out as long as possible. If you have one company you own a major stake of, it makes sense at a much lower value to liquidate.

Re: Why There Aren't More Googles

#64

Post by Alex3917 »

aswanson wrote: post #56
Alex3917 wrote: post #32

"The low cost of starting a startup means the average good bet is a riskier one, but most existing VC firms still operate as if they were investing in hardware startups in 1985." I don't understand the idea behind this sentence. In this context what is a good bet, a company with certain traits or does this refer to a certain type of portfolio strategy, say one that expects most startups to fail and a few to win big?…

as if they are capital intensive with low risk? Hardware companies are not inherently low risk because they involve hardware. They are often, in fact, capital intensive and high risk. See early PC makers, telecom bust, pen computing, etc...

My thinking was that it might be easier to judge the risks involved since starting a hardware company usually requires getting an EE degree and then spending several years learning by working for an established company. Whereas since it is possible do a successful web startup with no previous experience or credentials, VCs have less data points to evaluate the chances of success.

In any event, this debate only underscores my point about the clarity of the sentence in question.

Re: Why There Aren't More Googles

#65

Post by herdrick »

aswanson wrote: post #55
pg wrote: post #33

Earlier quoted context omitted.

Sequoia as a firm is significantly bolder than the others. They really don't care what other VCs think. I also like David Hornik and Fred Wilson.

Any in the Boston area stand out? I know the east side is a lot more conservative as a group.

David Hornik is in Boston.

Re: Why There Aren't More Googles

#66

Post by Mistone »

With so much activity on YC last week regarding FaceBook - it should at least be mentioned that one good reason FB is garnering a $15 billion valuation is they had the confidence/balls to turn down the early offers.

Microsoft noticed and placed their bet accordingly.

If you turn down one billion and keep growing, then you get a much higher valuation the next time around.

Re: Why There Aren't More Googles

#68

Post by paul »

parker wrote: post #23
boredguy8 wrote: post #15

"Any really good new idea will seem bad to most people." This is a very true statement. The danger that I've seen is so often people think, "My idea seems bad to most people, ergo it must be good!" How do you separate the seemingly bad from the actual bad? Figure _that_ out, and you'll make something of yourself.

I agree with your point here. Some ideas seem so radically out of touch, that they actually are out of touch. The founder of Intuit once said that 'your competition isn't other companies, but the way things are done now'. Some companies like to invent ideas about what people actually do. Therefore: observe how people spend their time, and make something that makes that better or more valuable. Then you can make sure…

That's a great quote, but I can't find the source. Do you have one?

Re: Why There Aren't More Googles

#69

Post by Mistone »

sanj wrote: post #49

How does CRV's QuickStart program fit into all this? They appear to be attempting to bridge the gap and be in a position to put in $250k. http://www.crv.com/AboutCRV/QuickStart.html It sounds like a savvy move. But I haven't heard of a single instance of someone using it, successfully or not!

I applied a while back they said "get some traction"

Re: Why There Aren't More Googles

#70

Post by startingup »

pg wrote: post #47
colortone wrote: post #38

It's great to hear discussion around Umair's thought patterns that add even more depth... I think what he was trying to say might be a little different from PG's interpretation... Umair might have said, "every company that had the potential to be economically revolutionary over the last five years sold out [to an acquirer devoid of strategic imagination or the capabilities to discontinuously continue their trajectory…

That clearly doesn't square with how you saw it These statements don't conflict. They didn't sell out to the highest bidder, because the highest bidder wasn't offering enough, but they had a number.

I disagree Google had a number. It was clear from many stories that they were really not interested in selling at all, so they would throw around some outrageous number (knowing it was outrageous), so nothing would happen.

Calling such a person a seller-but-for-the-price is incorrect, IMHO.

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