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Fred Wilson's response to "Paul Graham's Letter to YC Companies"

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Re: Fred Wilson's response to "Paul Graham's Letter to YC Companies"

#71

Post by michaelochurch »

mrshoe wrote: post #48

Personally I love to see Facebook's stock languish. Not because I dislike Facebook, but because it's great to see the market react rationally to an over-hyped tech stock. FB is arguably the most hyped IPO in history. There was a blockbuster movie made about it. If ever there was a positive sign that we are not in a bubble, the poor performance of FB on the open market is it. It's great to not be in a bubble. That mea…

The bubble isn't in valuations, which are reasonable. Rather, the bubble is in the high value that some very talented people are giving to subordinate positions in startups that "seem" cool, not based on business or career considerations, but irrelevancies like whether there's an XBox on site. They're doing themselves a disservice by taking positions that tout themselves as the "startup experience" but involve none of the investor contact, mentoring, or career development that they'd actually need in order to become founders for real (I.e. with enough contacts and resources to do it right and without risking personal financial ruin). They'd be better served if they took technical positions at more established and traditional companies, whether these be larger corporations or "lifestyle" businesses.

Of course, there are a lot of great startups out there, where a person can learn a lot very quickly, but those are not all of them and joining a company because "it's a startup!" is, without more knowledge, a bad idea.

That's the bubble I see: people taking jobs in dodgy startups for ridiculously low equity slices based on information that's either biased or only validated by the ridiculous echo chamber, thinking that their position as Employee #57 is going to make them real founder material in 8 months (because the CEO will just give them investor contact). It don't work that way.

Re: Fred Wilson's response to "Paul Graham's Letter to YC Companies"

#72

Post by _sh »

eykanal wrote: post #49
arturadib wrote: post #30

Earlier quoted context omitted.

As much as I think FB's valuation was high, they have the advantage of having a Product That People Really Want. This means that they have a lot of room to adjust their business model (so long as they don't screw up the UX/product while at it). Contrast this with GroupOn, whose product IS the business model...

Are you familiar with the following phrase? > If you're not paying for it, then you're not the customer; you're the product. Facebook's product is it's database of user information. If the actual customers, which currently consist mostly of ad companies, aren't interested, then they have a serious problem indeed.

This god-awful meme assumes 'payment' is made only in cash, fails to grasp the nuances of marketing, sweeps aside the subtleties of non-cash transactions, and is such a silly oversimplification that it is almost entirely meaningless.

Re: Fred Wilson's response to "Paul Graham's Letter to YC Companies"

#75

Post by spullara »

AznHisoka wrote: post #43
dxbydt wrote: post #37

Earlier quoted context omitted.

I see this attitude all the time in SV techies - lets just ignore the finance because its all chatter anyway. Frankly, this line of thinking is counter-productive and quite dangerous. Macro matters much more than slapping together some code to build widgets people will want & will pay for. For one thing, most of those people who want & will pay are getting their dough from boring non-tech ventures affected entirely b…

Well our country and economy is already over inflated with debt, so it wouldn't be such a bad thing if discretionary spending halted. really, would that be such a bad thing to the overall economy? People tightening their spending, instead of recklessly borrowing debt, and buying nice things that ultimately aren't necessary? I guess if you're a company that targets discretionary spenders, you're doomed.

It would be horrible. Most people's jobs are producing things and experiences that are discretionary.

Re: Fred Wilson's response to "Paul Graham's Letter to YC Companies"

#76

Post by temphn »

michaelochurch wrote: post #71
mrshoe wrote: post #48

Personally I love to see Facebook's stock languish. Not because I dislike Facebook, but because it's great to see the market react rationally to an over-hyped tech stock. FB is arguably the most hyped IPO in history. There was a blockbuster movie made about it. If ever there was a positive sign that we are not in a bubble, the poor performance of FB on the open market is it. It's great to not be in a bubble. That mea…

The bubble isn't in valuations, which are reasonable. Rather, the bubble is in the high value that some very talented people are giving to subordinate positions in startups that "seem" cool, not based on business or career considerations, but irrelevancies like whether there's an XBox on site. They're doing themselves a disservice by taking positions that tout themselves as the "startup experience" but involve none o…

> in order to become founders for real

The first 1000 people at Facebook are millionaires. http://www.washingtonpost.com/business/technology/facebook-1...

Any early Facebook employee has both the money and the name brand to be a credible founder.

By contrast, have you founded a successful startup? Have you raised money from investors? If not, why would you feel qualified to offer advice on the matter?

Re: Fred Wilson's response to "Paul Graham's Letter to YC Companies"

#77

Post by jaredsohn »

samstave wrote: post #64
startupfounder wrote: post #59

Earlier quoted context omitted.

I am saying that the bubble saw its reflection in the mirror with the Facebook IPO and is contracting to "reflect" that understanding of self. What this means for early stage startups is that they will have to be built upon solid small business cash flow business models while the market is contracting. If they do this and are dependent of investment they will likely attract the attention of investors. This contractin…

> ...the bubble saw its reflection in the mirror with the Facebook IPO and is contracting to "reflect" that understanding of self. Beautifully put. I'd imagine then, that the Instagram deal at $1B+ is the sweetest deal of this bubble era. Those guys got bought out when facebook was thinking their IPO was going to result in ~250 share price.

From some Google searching, it seems like Instagram got $300 million cash and 23 million shares (http://blogs.wsj.com/digits/2012/04/23/facebook-bought-insta...) and assumed the shares were valued at $30/each. So if they aren't able to sell the shares yet, then as of right now Instagram actually lost $100 million on the deal due to the declining stock price. (Although if they were able to sell right away, then they would have made more money.)

I'm not understanding what you mean by "~250 share price".

Re: Fred Wilson's response to "Paul Graham's Letter to YC Companies"

#78

Post by EternalLight »

DennisP wrote: post #36

I don't see why FB's IPO should be considered a failure, from the perspective of earlier investors. They sold stock at an IPO price even higher than the market could support. What's not to like? Of course institutional IPO investors don't like it, because they want to buy stock at a discount and sell it with a big bump the next day. But the early investors are the losers in that scenario. I guess you could argue that…

I agree completely with your view, can someone explain to me why this is a bad thing?

Re: Fred Wilson's response to "Paul Graham's Letter to YC Companies"

#79

Post by michaelochurch »

temphn wrote: post #76
michaelochurch wrote: post #71

Earlier quoted context omitted.

The bubble isn't in valuations, which are reasonable. Rather, the bubble is in the high value that some very talented people are giving to subordinate positions in startups that "seem" cool, not based on business or career considerations, but irrelevancies like whether there's an XBox on site. They're doing themselves a disservice by taking positions that tout themselves as the "startup experience" but involve none o…

> in order to become founders for real The first 1000 people at Facebook are millionaires. http://www.washingtonpost.com/business/technology/facebook-1... Any early Facebook employee has both the money and the name brand to be a credible founder. By contrast, have you founded a successful startup? Have you raised money from investors? If not, why would you feel qualified to offer advice on the matter?

Read the article. That 1000 figure is pure speculation. It might be that many, and it might not be.

Just being "early" at Facebook isn't enough to create credibility. A person also needs a track record of promotions. Millionaire or not, no one's going to fund someone who joined Facebook in 2007 and didn't get promoted in the interim.

Startups are a lot worse than people assume when it comes to internal promotion. The selling point of a position at a startup is the ability to get in early and have promotions be "inevitable" with growth, but it's equally common that as the company needs to scale, it has to bring on more established people, and those people tend to want leadership roles if they are going to join.

It does sometimes happen that someone joins a startup out of college and is a VP within five years, but that's not the norm. Just as common is for a person to end up a "paper millionaire" but languish in vesting twilight, not getting the raises and promotions that would be available in a more stable company with a better sense of career development.

Re: Fred Wilson's response to "Paul Graham's Letter to YC Companies"

#80

Post by theorique »

jaredsohn wrote: post #77
samstave wrote: post #64

Earlier quoted context omitted.

> ...the bubble saw its reflection in the mirror with the Facebook IPO and is contracting to "reflect" that understanding of self. Beautifully put. I'd imagine then, that the Instagram deal at $1B+ is the sweetest deal of this bubble era. Those guys got bought out when facebook was thinking their IPO was going to result in ~250 share price.

From some Google searching, it seems like Instagram got $300 million cash and 23 million shares ( http://blogs.wsj.com/digits/2012/04/23/facebook-bought-insta... ) and assumed the shares were valued at $30/each. So if they aren't able to sell the shares yet, then as of right now Instagram actually lost $100 million on the deal due to the declining stock price. (Although if they were able to sell right away, then they…

Facebook valued at $250 per share immediately after IPO would value them 800x earnings and $500B market cap (close to AAPL, 2x Wal-Mart,50% more than Exxon-Mobil).

In other words, total delusion on the part of anyone who thought that FB would pop 7x on the IPO.

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