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I have never read a business plan or balance sheet

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Re: I have never read a business plan or balance sheet

#211

Post by biorach »

darksaints wrote: post #128
tomhoward wrote: post #114

Earlier quoted context omitted.

“telling prospective startup founders that they shouldn't ever worry about the balance sheet” He said nothing of the sort.

He just told them that he isn't ever gonna look at it. Not sure how you could interpret that in any other way.

He said _he_ is not going to look at it. That's all.

Tax authorities, YC's due diligence team and others will want to look at it. Anyone competent enough to start a company will know this.

Interpreting this as "pg says balance sheets don't matter at all to anyone" is.... weird. Repeatedly pushing this point is weirder. Maybe take a break from the internet for an hour or two

Re: I have never read a business plan or balance sheet

#212

Post by jdougan »

tommilukkarinen wrote: post #156
alasdair_ wrote: post #98

Earlier quoted context omitted.

I found the process of writing a business plan to be a useful one. It’s really just a list of questions to ask yourself - who are the customers? What is the product? How will you sell it? etc. The plan itself was short enough that I could share it with a fee people for advice but I never showed it to any of my investors, other than perhaps as a way to give a pre-canned snippet of information on a specific thing. The…

Plans are not for reading but for writing. When you write stuff down you think about it = you plan. For others it should be enough that they know you made a plan. Unless they think they can deduce if it's a good one by reading it.

I always like to quote Eisenhower on plans: “In preparing for battle I have always found that plans are useless, but planning is indispensable.”

Re: I have never read a business plan or balance sheet

#213

Post by NoLinkToMe »

This really is just arguing semantics on the internet, one of the least interesting activities, usually.

I can almost guarantee that Paul Graham has read material produced by companies, which contain information on a business' plans and current status, including financial.

If you don't want to call that reading a business plan, that's fine. But it's really besides the point.

Further, he's denied that other people have read business plans or balance sheets for him. That's also very likely false. Reviewing a balance sheet is an elementary part of due diligence, I'm sure that many startups have been funded based on a conversation over coffee, but at the scale of PG's investments I don't believe he's never been involved in a transaction where his side has had someone due the most elementary due diligence to confirm founders' statements, e.g. by reviewing a balance sheet / income statement, which he has denied.

I mean hell, he's been director of various companies, typically you're required to co-sign at least annual financial statements as a regulatory obligation, sometimes audited, which always include balance sheets. Come on. Just restate your point: I don't focus investment decisions on traditional balance sheets at all, but rather on conversations with founders.

Re: I have never read a business plan or balance sheet

#214

Post by dubcanada »

tener wrote: post #190
pfortuny wrote: post #184

Earlier quoted context omitted.

As a teacher, I would rather examine my students orally. Shorter and to the point. Much fairer. In that sense, what he says is normal.

Fair? Some people do much better in writing due to anxiety etc.

You need a certain level of charisma to run a business. At least at the start up phase when all you’re doing is trying to convince people to use you.

Re: I have never read a business plan or balance sheet

#215

Post by notahacker »

onion2k wrote: post #133
guynamedloren wrote: post #106

I’m surprised the YC application hasn’t been more of a focus in this discussion. The following questions are pulled from the application (perhaps an older version): What is your company going to make? Why did you pick this idea to work on? Do you have domain expertise in this area? How do you know people need what you're making? What's new about what you're making? What substitutes do people resort to because it does…

These questions cover product description, value prop, market analysis, financial projections and more, all of which are the core of a “business plan”. There is a key difference though - none of the YC questions are about the planning bit of a business plan. None of them are about what you're going to do in the near term future. It's all about what you've done so far and where you believe you could be when you exit.…

Lots of business plans are quite vague about what is to be done in future, and but I'm pretty sure, YC will ask questions on customer acquisition routes and costs, [planned] revenue model, development priorities, long term growth aspirations, when the product will come out of beta and what they'd spend the cash on.

They might not require a bullshitty chart of next year's P&L, but if you already have a clear idea what the metrics that are supposed to lead to it are (growth rate, CAC vs CLV, untapped market size) you'll be at an advantage and if you can't tell a plausible growth story about your most likely route to growth you won't (not even if your deck has the chart!)

Re: I have never read a business plan or balance sheet

#216

Post by NoLinkToMe »

tomhoward wrote: post #112
darksaints wrote: post #94

Earlier quoted context omitted.

How much you were making: seen on income statements as revenues and on balance sheets as accounts receivable . How much you were spending: seen on income statements as expenses and on balance sheets in accounts payable . How much cash in the bank: seen on cash flow statements as starting/ending cash position and seen on balance sheets as cash assets . Paul graham didn't care about your poetry, he just wanted to see y…

You keep throwing barbs around but missing the important point. He specifically didn’t want to see balance sheets or income statements as he knows they can be full of bullshit (FWIW my only university qualification is in accountancy, so I know what he means). All he cared about the bank balance and whether it was going up or down, because that’s what indicates whether the company would survive or not. He still cared…

> Balance sheets or income statements as he knows they can be full of bullshit

Agreed.

However, I do have a question for you: what do you think can be more full of bullshit, an oral financial statement by the founder during a conversation, or his audited financial statements?

Yes, the notion that balance sheets and income statements don't tell the whole story and can be misleading is a fact. It's also a fact that they're useful tools, part of elementary due diligence, in combination with conversations with founders.

He asked financial questions that are in audited financial statements. Asking a founder and assuming it's all true is fine, but when making the investment he's surely having someone do due diligence on the finances to confirm. Yet he's denied that anyone else reads these documents for him, too.

Re: I have never read a business plan or balance sheet

#217

Post by tomhoward »

ant6n wrote: post #153
tomhoward wrote: post #53

Earlier quoted context omitted.

Please don’t start comments in that patronizing way. This field is highly counterintuitive. It’s easy to feel smart by parroting the obvious-seeming positions whilst being utterly wrong. 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 (c…

> What YC cares about is how much money they could make is everything goes right, and whether the team is capable of making everything go (close enough to) right over the long term. Isn't that what a business plan is? In some sense, it's a description of what your cash flow looks like in a couple of years.

By "business plan", he means a multi-page (usually at least 10 pages but often many many more) document with detailed predictions of what the company will do and how they will do it over the long term. That's what he's saying he doesn't ever read.

What he does read (or did, when he was still working), is the YC application form response, which is designed to glean the important information in a very succinct format.

If he likes what he reads, then he'd have a 5-10 minute conversation with the founders, and decide whether or not to invest based on that.

So, yes he wants to know what the founders' general plans are. That's very different from reading or recommending lengthy business plan documents.

Re: I have never read a business plan or balance sheet

#219

Post by heisenbit »

guynamedloren wrote: post #106

I’m surprised the YC application hasn’t been more of a focus in this discussion. The following questions are pulled from the application (perhaps an older version): What is your company going to make? Why did you pick this idea to work on? Do you have domain expertise in this area? How do you know people need what you're making? What's new about what you're making? What substitutes do people resort to because it does…

There is a different quality to the information you receive when reading a piece of paper vs. talking to people. Depending on who you are you may gain more one way or the other. Then there is the gap between plan and execution. A plan is only worth as much as the execution behind it. And with written plans you don't know the real authors and reviewers while when talking to someone you may be able to force them to original statements and can see their ability or lack to deliver them. Last but not least plans aim at completeness outlining the overall picture while when you talk to someone the dialogue develops a certain direction and has a thrust revealing understanding of the key building blocks of the plan.

Re: I have never read a business plan or balance sheet

#220

Post by dimitar »

It's like exams and Europass CVs. At some point taking exams can be a separate skill from learning the material. CVs in Europass format, force all candidates at filling a form and the CV fails at it's purpose of differentiating candidates.

I imagine if business plans, balance sheets and pitch decks become established formats, the risk of people focusing too much on them.

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