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Y Combinator's Message to Founders

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Re: Y Combinator's Message to Founders

#161

Post by tharne »

matwood wrote: post #149
tharne wrote: post #138

Earlier quoted context omitted.

Even a 20% cut tells you that management is incompetent. If you're a CEO and you can cut 20% of your staff without destroying the business, why on earth did you hire all those extra people and add all that expense in the first place? Put another way, if you couldn't staff right in the good times, why would remaining employees trust that your "one big cut" will work now? Hint: they won't

Cuts are done because the business has changed. Some part of the business was destroyed by external factors, and now the company needs to adjust to the new reality. It could be that VC money dries up or that customers stop spending. It doesn't mean that 20% wasn't required in the past, only that they are not required now. This is also why a company should cut a little more than needed, so they have some cushion for t…

I think what you're saying is true in the best run businesses, but that's not what we're seeing right now. We're seeing cuts from business that were hiring like crazy a few weeks ago.

Re: Y Combinator's Message to Founders

#162

Post by timr »

tharne wrote: post #136
jimhi wrote: post #108

Earlier quoted context omitted.

> If you even think about doing 70% layoffs you clearly over hired and are not making good leadership decisions leading up to the layoff. 100% agree with this part. Going default alive was not the cause of whatever this company was dying. At best, it would slow or kill your growth, not your company. It sounds like it was mismanaged and prioritized something else over fixing their product. It is not bad for a company…

> More employees also does not mean faster product development, every developer knows this is often the complete opposite. This is only true up to a point. Otherwise, every startup would be a one man show.

That's true, but the intrinsic bias of...well, pretty much everyone...is to overhire, so that's what you need to fight. I don't think I've met anyone who was suffering from under-hiring, unless it was a situation forced upon them by lack of resources.

People feel important and "arrived" when they lead a big organization, and also, it can feel like you're doing the right thing, because it alleviates some stress. Even if you're otherwise allergic to large teams, you're so busy as a founder that any help feels like good help.

Re: Y Combinator's Message to Founders

#163

Post by lumost »

CalChris wrote: post #80
corrral wrote: post #70

Earlier quoted context omitted.

I'd just assume the company's already dead and someone's trying to suck some remaining value out of it or make a hail-mary acquisition deal to bail out their investor pals (at no return to employee stock holders, I'm sure) if that happened. I'd be working on my résumé on the "work" day when that's announced, for sure.

The CEO should be able to spreadsheet an argument at the all hands meeting to the remaining employees that they are now profitable and/or have 48 months of runway. Of course, employees are always unrestricted free agents. They can weigh this with the prevailing economic outlook and make their own decisions. Remember, YC's letter is to founders and not employees. I believe Ben Horowitz made a similar decision and a si…

If your talking to employees who care at all about the supposed equity they were given, then you need to be prepared to reset the employee equity pool to be meaningful.

In particular, many of the employees will have options that are obviously underwater. Any belief they had in dreams of billion dollar valuations will be gone.

Re: Y Combinator's Message to Founders

#164

Post by [deleted] »

sbierwagen wrote: post #128
irthomasthomas wrote: post #123

Bleak. "No one cannot predict how bad the economy will get, but things don't look good." Clif notes: - Plan for the worst ... cut costs within 30 days... get to Default Alive[0] - Get money if you need it, and if you can - With or without money you must survive 24 months - VCs are people too, and subject to the same downturn. Adjust your fund raising expectations in the same direction. Expect lower valuations, lower…

>- If you get a meeting, don't take that as a good sign, we still take a lot of meetings. They don't explicitly spell this out, but this is because being a VC is still a job. Even if they're not actually making any deals, management doesn't want to see everyone sitting at a desk scrolling twitter for 8 hours, so instead they do pointless meetings. Matt Levine had a fun Great Recession story which I cannot find right…

[deleted]

Re: Y Combinator's Message to Founders

#165

Post by somewhereoutth »

quadcore wrote: post #114

Layperson here, I didn't know we were in an economic crisis that bad, is it global? What are the reasons?

Zero Interest Rate Policy.

Encourages resource mis-allocation, which means there is less stuff we actually need to go around.

We should have used fiscal policy more aggressively to fix the Great Recession, but that would entail taking money from rich people and giving it to poor people, and we can't have that can we?

Re: Y Combinator's Message to Founders

#167

Post by scarface74 »

S_A_P wrote: post #56
nopenopenopeno wrote: post #20

I am currently graduating with a CS degree and interpreting this as a warning to not accept the offer from the exciting startup and instead accept the offer from the big corporate fintech company. Is there any reason I could be wrong?

Take the safe job when you are old and have family/dependents. Take the long shot bets when you are young. You have the potential to learn way more way more quickly at a startup and if it folds you are still young and have experience. I wish I would have taken this advice when I was 25...

I’m by definition “old” at 48. But my “safety” comes from always being employable. Since 2008 and I was already 34 (I stayed at my previous job before then for 9 years), I’ve had six that ranged from startups to big enterprises to my latest BigTech company that has a reputation for PIPs.

I never worried about whether I wouldn’t be able to find a job.

Re: Y Combinator's Message to Founders

#168

Post by heartbreak »

bachmeier wrote: post #54
aresant wrote: post #18

Dagnabit. Here we go again - this is a fantastic, pragmatic amendment to those notes -> https://dalton.substack.com/p/letter-to-myself-in-late-2008?... For a taste: "Doing multiple small layoffs is a form of cascading failure. Do one layoff, but much much deeper than seems correct. Do it decisively. Do it so that you get profitable. In your case that is something like a 70% cut, not a 5-10% cut. Yes you read that rig…

> a 70% cut...Cutting once and cutting hard allows you to reassure the people that are still here that you are truly profitable If your employees are dumb enough that they interpret a 70% cut of the workforce as a sign that your company is stable, you're doomed. It's hard to imagine the dumbest person in the world interpreting that as a sign of stability.

It doesn’t take much research to verify the writer’s complete lack of business acumen.

Re: Y Combinator's Message to Founders

#169

Post by wolverine876 »

liuliu wrote: post #147
guerrilla wrote: post #127

Earlier quoted context omitted.

This comment seems crazy given that we just had COVID-19, a war causing a massive energy crisis and multiple systemic commodities problems and then climate change... Also you're assuming interest rate hikes have no effect? I have no idea how you could think what's coming isn't entirely material... How can you just ignore all that?

We had COVID-19 for 2 years. The U.S. is surging back with unique challenge of spending transition from goods back to services. It is a challenge. "A war causing a massive energy crisis" seems to be a good time to increase energy production with more investment in things like fracking, which from what I heard, people are reluctant to invest due to the economy and rates concerns (they borrow from banks too). Interest…

> "A war causing a massive energy crisis" seems to be a good time to increase energy production with more investment in things like fracking, which from what I heard, people are reluctant to invest due to the economy and rates concerns (they borrow from banks too).

Also a bad idea for climate change, which is becoming very expensive.

Re: Y Combinator's Message to Founders

#170

Post by liuliu »

wolverine876 wrote: post #169
liuliu wrote: post #147

Earlier quoted context omitted.

We had COVID-19 for 2 years. The U.S. is surging back with unique challenge of spending transition from goods back to services. It is a challenge. "A war causing a massive energy crisis" seems to be a good time to increase energy production with more investment in things like fracking, which from what I heard, people are reluctant to invest due to the economy and rates concerns (they borrow from banks too). Interest…

> "A war causing a massive energy crisis" seems to be a good time to increase energy production with more investment in things like fracking, which from what I heard, people are reluctant to invest due to the economy and rates concerns (they borrow from banks too). Also a bad idea for climate change, which is becoming very expensive.

Agreed. But unfortunately, nobody takes climate change (and related cost) seriously. You need a strong Federal government to enforce that cost structure (and hopefully globally, if strong enough), and the United States won't have a strong Federal government for decades to come.
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