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I understand business plans, but balance sheets? It seems like you'd want to know the financial picture of a company. What else to you look at to, even at the most basic level, determine if the startup is going to be able to pay it's AWS bill and payroll that month?
Because it makes complete sense that a balance sheet doesn’t tell you anything about how a business will do. But assuming it’s not falsified it helps identify red flags.
I suspect any due diligence almost certainly has someone reading a balance sheet.
Earlier quoted context omitted.
Why does it matter? You are changing the financial picture, probably by an order of magnitude or more. The question should be what the company will look like after the investment, not before.
Ummm...in order to know what the company looks like after the investment, you need to know what the company looks like before the investment.
To your point: when YC interviews companies, they are mostly very early stage and pre-revenue. What YC cares about is how much money they could make if everything goes right, and whether the team is capable of making everything go (close enough to) right over the long term. The current financial picture has minimal bearing on that. Obviously, to the extent that it does have a bearing, YC is smart/experienced enough to consider that. But again, you can glean this from a conversation better than an accounting document.
He invests in seed rounds where those often go down the drain. The things that matter at this stage are: Founders and general market size. So sure, ignoring the noise of those two makes sense.
People really struggle to recognize context. I assume most people who are getting so upset about pg’s tweet are reading it as “business plans are stupid. Balance sheets are stupid. No company should ever make one because no one should ever read it. Anyone who reads one is stupid.” It should be implied that his advice is only relevant the type of investing which pg does. pg tweeted later on that his solution is someth…
I don’t see the value in a formal business plan at all and so I would almost agree with your made up quote there.
I mean obviously you need to have a plan for your business. But writing it down in some formal way seems like a waste of time.
Perhaps there is value in writing one in order to coalesce your own thoughts if you are that way inclined, but it’s certainly not going to convince anybody of anything that wouldn’t be convinced by the conversation you would have instead.
Suspect that both Buffet and Paul’s real methods rely heavily on instinct, context, relationship networks, combination potentials, personality and pattern matching which can’t be fully documented or quantified or imparted.
I remember having a conversation with my brother once about a protein powder being recommended by some bodybuilder or another. His response: “Yes, he says that he looks that way because of this powder, but what does he actually do?” Answer: Steroids.
Suspect the same is true of many great success stories in business.
Can’t read what he says as I was blocked years ago. I had expressed the mildest degree of cynicism one can possibly express in response to a straight up lie.