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Paul Graham's Letter to YC Companies

news.ycombinator.com

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Re: Paul Graham's Letter to YC Companies

#191

Post by lucianomt »

pg wrote: post #189
rst wrote: post #158

Earlier quoted context omitted.

Or perhaps Mr. Market thinks it's a solid, say, $25 or $35 billion company that was just way overvalued at the IPO valuation of $100 billion plus. There's certainly a whole lot of commentary along those lines in the financial press, like this example from a few days before the IPO: http://marketday.msnbc.msn.com/_news/2012/05/15/11702548-is-... That's certainly a defensible position: the company is stable and profita…

Mr. Market sounds pretty reasonable the way you describe him. But just 7 days ago he thought Facebook was worth 25% more than he thinks it's worth now. So he looks to me like the familiar Mr. Market portrayed in Benjamin Graham's book.

That's just framing. Had the IPO come out at $20 and popped to the very same $26, everybody would be celebrating it as an amazing success.

But Goldman Sachs and DST had to get their money back somehow...

Re: Paul Graham's Letter to YC Companies

#192

Post by lightyrs »

snikolic wrote: post #155
lightyrs wrote: post #21

This seems ethically dubious.

I don't agree with the parent comment that I'm replying to, but I think this is a healthy skepticism to have. I don't think it deserves a downvote...

I appreciate the reasoned reply. I respect pg immensely, which is why I spend time on this site and why I found the post surprising.

Re: Paul Graham's Letter to YC Companies

#193

Post by jwerlin »

jmspring wrote: post #65

I have been mixed on this, and I think it will have an interesting impact on the IPO markets. But, one area that I am still waiting to see play out is the intersection of secondary markets and IPOs. People have raised the examples of Groupon, Yelp, and FB (Zynga is another that comes to mind). All social, yet all different. Groupon has had some interesting accounting practices along the way, FB was richly priced by t…

DWRE? BV?

Re: Paul Graham's Letter to YC Companies

#194

Post by _dps »

pg wrote: post #189
rst wrote: post #158

Earlier quoted context omitted.

Or perhaps Mr. Market thinks it's a solid, say, $25 or $35 billion company that was just way overvalued at the IPO valuation of $100 billion plus. There's certainly a whole lot of commentary along those lines in the financial press, like this example from a few days before the IPO: http://marketday.msnbc.msn.com/_news/2012/05/15/11702548-is-... That's certainly a defensible position: the company is stable and profita…

Mr. Market sounds pretty reasonable the way you describe him. But just 7 days ago he thought Facebook was worth 25% more than he thinks it's worth now. So he looks to me like the familiar Mr. Market portrayed in Benjamin Graham's book.

Seconded on the framing comment from lucianomt, and I'd also keep in mind that the people buying and selling 7 days ago were not the same people buying and selling now. At the IPO you had two special classes of participants. One the sell side: insiders and the underwriting investment bank. On the buy side: IPO speculators (i.e. people who specifically try to play IPO events, as opposed to people motivated by fundamentals and technicals).

On the technical side, the bulk of algo and technicals trading above a 1-2 day timescale would presumably not have been trading at the IPO. I'd venture a guess that these algo and technical traders provide the bulk of day-to-day price stabilization so their opinions matter, rightly or wrongly.

Ratio-driven fundamentals investors often look for, e.g. quarter-to-quarter metrics (changes in margin and so on), so they too lack the information to participate in their preferred manner until the next earnings report. I'd guess that the bulk of big pension and mutual funds operate in this fashion.

In short, the people transacting 7 days ago were not particularly representative of the market in general.

Re: Paul Graham's Letter to YC Companies

#195

Post by rst »

pg wrote: post #189
rst wrote: post #158

Earlier quoted context omitted.

Or perhaps Mr. Market thinks it's a solid, say, $25 or $35 billion company that was just way overvalued at the IPO valuation of $100 billion plus. There's certainly a whole lot of commentary along those lines in the financial press, like this example from a few days before the IPO: http://marketday.msnbc.msn.com/_news/2012/05/15/11702548-is-... That's certainly a defensible position: the company is stable and profita…

Mr. Market sounds pretty reasonable the way you describe him. But just 7 days ago he thought Facebook was worth 25% more than he thinks it's worth now. So he looks to me like the familiar Mr. Market portrayed in Benjamin Graham's book.

Graham doesn't think Mr. Market is always reasonable to begin with. But I'm not sure it's fair to attribute that valuation to "the market" as a whole. It was set by the underwriters, who might have been expecting a flood of "greater fool" buyers as in the late 1990s. They did exist (I'm sorry to say I know a few), but obviously not in sufficient numbers to generate the classic "pop"...

Re: Paul Graham's Letter to YC Companies

#196

Post by rehack »

hackinthebochs wrote: post #167
rehack wrote: post #109

Earlier quoted context omitted.

Agree transactions will make money for somebody. Let me take just take one example of 'movies' from your sentence. Would you think of Youtube or Facebook as a natural choice for watching paid videos/movies? Likewise, IMO, there will be specific things for specific purposes. I will proffer that the specific purpose for FB usage are things like vanity and managing one's image (how one wants to be seen in their social c…

>Likewise, IMO, there will be specific things for specific purposes. It would do techies a lot of good to realize this is not true for most people. People do not have "specific sites for specific purposes". To most people the web browser is the internet. The distinction between different pages is fuzzy at best. And at this point facebook itself is the internet to a lot people. If facebook offered a compelling X exper…

Replying to both your comments here.

Agree on your point that barrier to entry is higher for G+ than FB Search (if it launches).

Regarding Search: I would ask, how many people overall use Google search and how many use Facebook in the world. I would guess that the number is sort of equivalent, with google search users being slightly more than FB users.

And if that's the case, then what is to make people not use google search and shift to FB search (which is yet to be, BTW!), unless the quality is vastly superior. Which in my opinion is not an easy thing to achieve.

Also regarding any generic feature X, I doubt if people who are very new to Internet can start flashing their credit cards, if FB asks them to. Yes, they could be perhaps made to click on any thing, which again means just Ads. But, even in this, I think, we could be underestimating the intelligence of an avg. Internet user.

Also Google Adwords has a strong knowledge of user intent. And hence the Ads are useful for sellers. Over here, they are like TV Ads, but with a difference. And that difference is they can be ignored.

edit: minor rephrase

Re: Paul Graham's Letter to YC Companies

#197

Post by hackinthebochs »

rehack wrote: post #196
hackinthebochs wrote: post #167

Earlier quoted context omitted.

>Likewise, IMO, there will be specific things for specific purposes. It would do techies a lot of good to realize this is not true for most people. People do not have "specific sites for specific purposes". To most people the web browser is the internet. The distinction between different pages is fuzzy at best. And at this point facebook itself is the internet to a lot people. If facebook offered a compelling X exper…

Replying to both your comments here. Agree on your point that barrier to entry is higher for G+ than FB Search (if it launches). Regarding Search: I would ask, how many people overall use Google search and how many use Facebook in the world. I would guess that the number is sort of equivalent, with google search users being slightly more than FB users. And if that's the case, then what is to make people not use googl…

The reason that people would potentially shift to a facebook search would be for simplicity. Instead of having to go to google.com they can just search in a box that's on the page they're already on. Of course, this isn't so easy anymore as there are many ways to search google now. So I don't think just having an internet search box on the page is enough. But I don't think it has to be much more. Just the fact that you could search while remaining on facebook might be compelling enough for a non-trivial amount of users. Also a "socially informed" search could be a key feature, even if its trivially implemented. Just having a "trusted" friend's icon next to certain results could seem useful to a naive user.

The point is, I don't think facebook has to do anything fundamentally better than google to win many converts. The results just can't be obviously worse. And for what most people search for, I don't think this is hard. Celebrities, sports, products, etc; I'd say that's low hanging fruit considering the amount of brainpower facebook has on its payroll. The long tail search that google is famous for isn't likely to matter to the facebook user targetted here.

An obvious case study to a company leveraging their userbase to grow out of their original business model is Amazon with its kindle. It was a great product certainly, but the benefit having it advertised on the top of their landing page can't be overstated. So many people are intent on putting facebook in a social box and saying "well they can't monetize social so they're doomed" is short-sighted. Social is just the hook, there are literally endless ways they can monetize all those eyes.

Re: Paul Graham's Letter to YC Companies

#198

Post by lachlanj »

ppop wrote: post #188
jeffreymcmanus wrote: post #187

Earlier quoted context omitted.

If you do the arithmetic, yes there will. At any rate, you don't need to be a millionaire to do venture investing.

At the rate FB is falling, it will be worth less than 12 billion in 3 months.

It's these kind of forward projections that cause booms and busts, ie. people assuming that housing prices will increase at a steady/regular rate over time. Just as we saw that this doesn't happen in a steady way, nor will facebook steadily decline over the next 3 months.

Re: Paul Graham's Letter to YC Companies

#199

Post by rehack »

hackinthebochs wrote: post #197
rehack wrote: post #196

Earlier quoted context omitted.

Replying to both your comments here. Agree on your point that barrier to entry is higher for G+ than FB Search (if it launches). Regarding Search: I would ask, how many people overall use Google search and how many use Facebook in the world. I would guess that the number is sort of equivalent, with google search users being slightly more than FB users. And if that's the case, then what is to make people not use googl…

The reason that people would potentially shift to a facebook search would be for simplicity. Instead of having to go to google.com they can just search in a box that's on the page they're already on. Of course, this isn't so easy anymore as there are many ways to search google now. So I don't think just having an internet search box on the page is enough. But I don't think it has to be much more. Just the fact that y…

Okay, looks like we will continue to have difference of opinion on this one. But nice getting to know your thoughts. Hopefully continue later some time ...

Re: Paul Graham's Letter to YC Companies

#200

Post by heuristo »

FB is a healthy message. Before the IPO it has been noted that late-stage financings were feeling out of control in terms of valuation. BDC-based funds have sprung up to "invest" in the "pop" but don't really help build companies directly.

Smaller, more focused rounds at lower valuations are probably a good thing. So is using sites like kickstarter to generate funded ramps for new products.

The more capital efficient you can be the better.

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