Paul Graham's Letter to YC Companies • Hacker News Board

Re: Paul Graham's Letter to YC Companies

#91

Post by pedalpete » Tue, Jun 05, 2012, 6:49 AM UTC

philwelch wrote: post #87

po wrote: post #70

Earlier quoted context omitted.

I suspect it's because investors think that one of the few routes to 'exit' a company and cash out your investment just got closed down, at least in the short term. That increases the risk of investing and therefore lowers the valuation.

Certainly the path to IPO is so long that someone seeking VC funding today won't be in a climate defined by Facebook. For all its faults, SOX did kill the "retail VC" style of IPO popularized in the last bubble. Getting to IPO now is a very long road.

If people investment was purely logical, you'd be right, but I suspect it is the negative news surrounding the valuations of Facebook and Zynga that will put a bit more fear into the investors willingness to take risks.

Re: Paul Graham's Letter to YC Companies

#92

Post by gojomo » Tue, Jun 05, 2012, 6:52 AM UTC

The FB IPO sends a signal that certain exits are about 35% less lucrative than the most enthusiastic might have thought. And, the IPO wasn't the 'starter pistol' for another frenzy. I think the memory of 12 years ago hasn't faded entirely yet, and there's so much other uncertainty in the economic world no one can be a runaway optimist.

But the IPO results might actually boost certain kinds of deals. For example, would you rather sell your company to FB for $X million of FB stock when that stock is at 45 or when it's at 26? (Of course X is larger when FB is flush, but I doubt X goes down linearly with FB market-cap when there are other bidders. And psychologically, it may be easier to think FB grows 50% back into its peak, than 50% more above its peak.)

If there had been an indiscriminate frenzy, everyone knows that ends in a crash. When everyone's instead been reminded that companies are different -- FB isn't GPRN isn't AAPL isn't LNKD -- and the particulars of value and model matter, that's better for a sustained boom at a more measured pace.

Re: Paul Graham's Letter to YC Companies

#93

Post by betterlabs » Tue, Jun 05, 2012, 6:53 AM UTC

po wrote: post #70

Alex3917 wrote: post #33

Earlier quoted context omitted.

Out of curiosity, why is it that Facebook's IPO would hurt early stage valuations, when all of Facebook's early investors made hundreds of millions or billions of dollars? I could see it getting harder to IPO at a good valuation for a few years, but that shouldn't drive down early stage valuations all that much. Also, to me the most interesting thing to watch (beyond Spain) is these new crowdsourcing laws going into…

I suspect it's because investors think that one of the few routes to 'exit' a company and cash out your investment just got closed down, at least in the short term. That increases the risk of investing and therefore lowers the valuation.

I believe investors and startups that are / were looking for Facebook as an easy exit were not building a company / business anyway. Such a situation is better overall for everyone - only the teams that are focused on building a real business survive and create value for everyone involved.

Re: Paul Graham's Letter to YC Companies

#94

Post by sameerp1 » Tue, Jun 05, 2012, 7:09 AM UTC

A post like this probably only helps push along the vicious cycle :) Not saying it shouldn't have been posted, but it's ironic.

Re: Paul Graham's Letter to YC Companies

#95

Post by felipepiresx » Tue, Jun 05, 2012, 7:19 AM UTC

word up pg. Let the winter come and lets see who can ski.

Re: Paul Graham's Letter to YC Companies

#96

Post by felipepiresx » Tue, Jun 05, 2012, 7:21 AM UTC

unimpressive wrote: post #17

rubyPLAYWITHME wrote: post #14

Who is emilepetrone? Did pg really write this? Also why did this disappear from the front page, and then reappear?

If he didn't, then business insider was certainly fooled. [0] [0]: http://www.businessinsider.com/facebook-fallout-y-combinator...

funny how people copy paste stuff

Re: Paul Graham's Letter to YC Companies

#97

Post by kawera » Tue, Jun 05, 2012, 7:24 AM UTC

rehack wrote: post #44

pg wrote: post #35

Earlier quoted context omitted.

I don't think they've even tried to make money yet. They've just been focusing on growth. But they have so many users now that they could do whatever they want. Ideas that would entail a chicken and egg problem for anyone starting from scratch (e.g. marketplaces) do not for them. Plus Mark himself is such a fearsomely effective person. And so young; he's only a little older now than Larry and Sergey were when they st…

But I think, its now going to be all the more tough for them to figure out how to improve their ARPU dramatically, as they don't have the benefit of obscurity. For example, even slight change to the feeds, like inserting what vaguely seems like an Ad, raises a huge uproar from people. In contrast Google had got Adwords figured out (but it was not as widely known) before their IPO.

Many ebay users also use FB. And a lot of FB users use Paypal. Think about it.

Ads, movies, music, even games aren't really what will help then make huge amounts of money. Transactions will.

Re: Paul Graham's Letter to YC Companies

#98

Post by SkyMarshal » Tue, Jun 05, 2012, 7:31 AM UTC

cdixon wrote: post #43

rdl wrote: post #39

Earlier quoted context omitted.

Three? 2001-2002 was basically nuclear winter in my experience. 2008-2009 wasn't actually that bad except outside tech (although, I was in Iraq and Afghanistan during all of it). Before that, you'd have to go to early-1990s, when I was...12, and some HN readers weren't born.

I was thinking of 2001-2002 (genuine downturn) and then separately 2003-7 (great time to invest - e.g when I invested in Skype). Obviously 2008-ish (RIP good times) was the 3rd. Maybe I shouldn't have called them "downturns" but instead "depressed VC periods".

I was working in banking 2007-20010, and wasn't so wired into the startup scene then. What was good for startups and tech during that time? (Disclaimer - expecting a repeat of it in the next few years, want to be prepared).

Re: Paul Graham's Letter to YC Companies

#99

Post by mbreese » Tue, Jun 05, 2012, 7:32 AM UTC

pbiggar wrote: post #77

When I saw PG's email, I thought this was a self-fulfilling prophesy, even if it was only seen by YC founders. But now that every has seen it - it will be in Forbes and TechCrunch soon no doubt - it seems almost certain. If just YC founders see it, then they'll take less money, and get lower valuations, etc, leading the tone of the valley. But if everyone sees it, investors will close their wallets, people will decla…

I don't know how much this will affect investors. It's not like the lackluster performance of the Facebook IPO is insider information. This just seems like a way to tell companies what they might expect when they need to fundraise. Without more data, it's impossible to know exactly what this will do to valuations. And the advice to run lean isn't exactly new advice from pg.

Founders will still try to get the best deal that they can, regardless of the market.

Re: Paul Graham's Letter to YC Companies

#100

Post by sanxiyn » Tue, Jun 05, 2012, 7:32 AM UTC

limeade wrote: post #24

Can someone explain the perception that Facebook's IPO was a disaster? Doesn't the fact that the stock has not risen mean that the offering had the correct price?

I'd agree with you if the price has not risen. In reality, the price has fallen, more than 20%. It may be good for Facebook, but the price was not correct.