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Y Combinator often backs startups that duplicate other YC companies, data shows

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Re: Y Combinator often backs startups that duplicate other YC companies, data shows

#161

Post by frigidnonce »

anthomtb wrote: post #143

Have we forgotten how venture capital (VC) is supposed to work? A new technology comes out. The new tech has high startup costs and low marginal costs. You invest in 10 companies developing this new tech. 8 go bankrupt, one hangs on by a thread, the last one returns 1000x on what you invested. Last I checked, Y-Combinator is still considered a VC firm. Investing in a bunch of firms doing the same or very similar thin…

> Last I checked, Y-Combinator is still considered a VC firm.

There was a time when pg would come out swinging and say that YC invests their own money which is very different from a VC firm.

Well, it did make YC different in the past: they took bets no one else would, which they could afford because of such a position. Is that still true? I’m not sure.

Re: Y Combinator often backs startups that duplicate other YC companies, data shows

#162

Post by ginkgotree »

Besides YC investing in founders first (which I do believe is correct, having gone thru 2 batches), to quote the fictional S. R. Hadden from the book and movie "Contact," by the late, great Carl Sagan: "First rule of government spending, 'Why buy one when you can buy two at twice the price'." In other words, I believe this is also a strategy in maximizing investment exposure to great ideas. YC Invested in _both_ Box.net and Dropbox.

Re: Y Combinator often backs startups that duplicate other YC companies, data shows

#163

Post by MichaelZuo »

onion2k wrote: post #154
MichaelZuo wrote: post #153

Earlier quoted context omitted.

Why can’t IBM just sell a watered down “DOORS-lite”?

They could, but it's IBM so any 'lite' version wouldn't stay lite for very long. They mostly excel at making huge, complicated things to sell to other huge, complicated businesses. They aren't very interested in, or very good at, making small things they need to sell lots of (and, to their credit, they recognize that and stick to what they're good at.)

Well they clearly have the potential to sell the same but without any of the add ons, or most of the support or guarantees, and with functionality restricfed.

Wouldn’t they do so once they notice there is a serious challenger?

Re: Y Combinator often backs startups that duplicate other YC companies, data shows

#164

Post by garrickvanburen »

light_triad wrote: post #49

> YC startups don’t have to be unique. Far from it. Slow news day. YC has made it clear over the years it's almost all about the founders not the idea. It's almost impossible to know if an idea is good at the early stages, and ideas change, startups pivot, often the timing is wrong, and the market unproven etc. More often than not most of what startups do is not unique, otherwise there's no market for it. A new take…

Theoretically, if I as an investor, believe strongly in a given thesis, it would be prudent to place bets that address it from multiple angles.

Re: Y Combinator often backs startups that duplicate other YC companies, data shows

#165

Post by SpaceManNabs »

Investors diversifying into your competition should not be a surprised. And that adversarial reason isn't even the reason YC does this it seems.

I think YC is a bit glorified (for good and bad reasons), but "even I" admit a hit piece when I see one.

Re: Y Combinator often backs startups that duplicate other YC companies, data shows

#166

Post by joshdavham »

debacle wrote: post #140
joshdavham wrote: post #104

Earlier quoted context omitted.

Any idea why mergers aren’t more common? The article doesn’t really seem to have an answer to that.

How much should one company with a 40mm valuation and no revenue pay for another company with a 25mm valuation and no revenue?

Great point.

I guess to say it more explicitly, the problem is that the companies are likely over-valued at the early stage and investors would see a merger as a sort of failure?

Re: Y Combinator often backs startups that duplicate other YC companies, data shows

#167

Post by josh2600 »

pilingual wrote: post #99

"Y Combinator seems to be the perfect place for mergers. Every winter for the past three winters, Y Combinator has funded a podcasting company. In winter 2017, Breaker. In winter 2018, The Podcast App. And in winter 2019, Brew." https://dan.bulwinkle.net/blog/there-should-be-more-mergers/

Mergers in business are like dating. You can't just throw random people in a room and expect that they're going to like one another. It's about establishing shared context.

Mergers happen because there is a shared vision that is greater than the two separate companies. Smart entrepreneurs look at the mission and identify the roadblocks to that. Business is a collaborative endeavor.

There are very few times in business where there is no way out (and in those moments, it's simply that a thesis was incorrect). You can always run a new experiment.

I am reminded of this fine line from Sasha Shulgin "There are no casual experiments."

Too often startup folk seek the easy way out instead of the path of least resistance.

Be like water.

Re: Y Combinator often backs startups that duplicate other YC companies, data shows

#168

Post by notatoad »

itsoktocry wrote: post #124
light_triad wrote: post #49

> YC startups don’t have to be unique. Far from it. Slow news day. YC has made it clear over the years it's almost all about the founders not the idea. It's almost impossible to know if an idea is good at the early stages, and ideas change, startups pivot, often the timing is wrong, and the market unproven etc. More often than not most of what startups do is not unique, otherwise there's no market for it. A new take…

> It's almost impossible to know if an idea is good at the early stages But identifying the "right" people is easy?

i don't think it is either. at least not for me.

but YC has always been pretty vocal that they can identify the right people. And their results seem to bear that out at least to some degree (or maybe it's all just scale, and giving opportunities to enough people means you'll give opportunities to the right people often enough to balance out the cost of the wrong people)

Re: Y Combinator often backs startups that duplicate other YC companies, data shows

#169

Post by lmm »

MichaelZuo wrote: post #163
onion2k wrote: post #154

Earlier quoted context omitted.

They could, but it's IBM so any 'lite' version wouldn't stay lite for very long. They mostly excel at making huge, complicated things to sell to other huge, complicated businesses. They aren't very interested in, or very good at, making small things they need to sell lots of (and, to their credit, they recognize that and stick to what they're good at.)

Well they clearly have the potential to sell the same but without any of the add ons, or most of the support or guarantees, and with functionality restricfed. Wouldn’t they do so once they notice there is a serious challenger?

That's the famous innovator's dilemma. It's very hard for a company to sell a product that undercuts a product that makes a lot of revenue for them, even if it's the "right" play. So that wouldn't be a risk I'd worry about in practice.

Re: Y Combinator often backs startups that duplicate other YC companies, data shows

#170

Post by conductr »

snarf21 wrote: post #70
typeofhuman wrote: post #55

Earlier quoted context omitted.

> Execution matters, not the idea. Execution matters _as much as_ the idea. A good idea executed poorly produces bad results. A bad idea executed well produces bad results. This is what YC is hedging (was it the execution or idea) by investing in duplicative startups.

I disagree. True "good execution" will not produce bad results over the medium and long term but that is what good execution is actually solving for. Good execution should recognize when/how pivots should be made to produce value.

So is it possible for good execution to fail? Is it only good in hindsight?
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