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Venture Firms Fret as Y Combinator Soars

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Re: Venture Firms Fret as Y Combinator Soars

#21

Post by jroseattle »

chaostheory wrote: post #13

This is what happens when (as an industry) you don't treat people well, when you feel have the power to do as you please. Let me explain: pre-Ycombinator a lot of VCs would routinely either abuse or just simply ignore a lot of entrepreneurs. Someone can correct me but YC was a response to that. One reason everyone flocks to YC is because everyone knows that YC is fair and trustworthy. That's not the case anywhere els…

> One reason everyone flocks to YC is because everyone knows that YC is fair and trustworthy.

Another reason is that YC is the gold standard, and having that endorsement opens all kinds of doors.

But simply put, YC is a better mousetrap compared to the old-boy capital firms.

Re: Venture Firms Fret as Y Combinator Soars

#22

Post by alain94040 »

nostromo wrote: post #2

I don't use Rap Genius often, so I almost missed sama's responses. Be sure to click on the annotations to see them.

if I were a VC, I’d worry much more about Angel List than YC when it comes to A rounds

-- SamA

Completely agreed. Which pretty much kills the entire point of the article.

Re: Venture Firms Fret as Y Combinator Soars

#23

Post by ChuckMcM »

chaostheory wrote: post #13

This is what happens when (as an industry) you don't treat people well, when you feel have the power to do as you please. Let me explain: pre-Ycombinator a lot of VCs would routinely either abuse or just simply ignore a lot of entrepreneurs. Someone can correct me but YC was a response to that. One reason everyone flocks to YC is because everyone knows that YC is fair and trustworthy. That's not the case anywhere els…

Actually angel investing was the response to that, individuals who weren't wealthy enough to join a fund and become an LP but had enough disposable assets that if they put $50,000 - $1M at risk it wouldn't ruin their retirement if they lost it all.

One of the things that I haven't read about is what is the 'YC' of movies? In many ways the money in Hollywood is there but there isn't nearly the organization like there is at startup incubators. There are so many corollaries between the two environments I would expect something between the studios and Kickstarter to have emerged by now.

Re: Venture Firms Fret as Y Combinator Soars

#25

Post by bellerocky »

ChuckMcM wrote: post #23
chaostheory wrote: post #13

This is what happens when (as an industry) you don't treat people well, when you feel have the power to do as you please. Let me explain: pre-Ycombinator a lot of VCs would routinely either abuse or just simply ignore a lot of entrepreneurs. Someone can correct me but YC was a response to that. One reason everyone flocks to YC is because everyone knows that YC is fair and trustworthy. That's not the case anywhere els…

Actually angel investing was the response to that, individuals who weren't wealthy enough to join a fund and become an LP but had enough disposable assets that if they put $50,000 - $1M at risk it wouldn't ruin their retirement if they lost it all. One of the things that I haven't read about is what is the 'YC' of movies? In many ways the money in Hollywood is there but there isn't nearly the organization like there…

Individuals have a lot of sway in Hollywood. It's all star power. Money and talent flock to the stars, and by stars I include producers, writers and directors in addition to actors and actresses. They make money and are prestigious to work with, especially if the movie is successful. In addition to individual behavior there are also the various unions like the Writers Guild of America, the Screen Actors Guild, the Directors Guild of America and organizations like the MPAA and AMPAS and in television ATAS which all wield considerable influence and money. Though it is TV and not movies, Netflix succeeded because it played by their rules.

You can't just disrupt this because it's more than wealth, it's a culture that has been around many generations now and created film making what it is today. There's an incredible gravitational well that sucks all the incredible skill and talent found in the world right into Hollywood. It's not going anywhere.

Re: Venture Firms Fret as Y Combinator Soars

#26

Post by agwa »

jacquesm wrote: post #7

Network effects at work. VCs will probably not find it amusing if - and of course when - they realize that they have been disrupted. But it is a funny kind of poetic justice. Everything, even capital markets can be disrupted (or at a minimum greatly shaken up) by a dedicated player with a technological advantage. And once the network effects kick in you're going to have a very hard time gaining back lost ground. I pr…

> They'll be so flush with money that the only reasonable way to use it will be to do their own series 'A'.

The other way to use that money would be to have gigantic batches. Remember, pg and sama have said that they're trying to build something akin to a university with Y Combinator. Using their money to do series A's instead (which is what other accelerators are already doing) would just be so conventional, and not what I'd expect from an organization as innovative as YC.

Re: Venture Firms Fret as Y Combinator Soars

#27

Post by ericvorheese »

This “signaling issue” is a huge problem, by the way—accelerators that do the Series As for their top 3 companies deeply wound all the rest. - Sam Altman

How is this different from a VC firm like Andreessen doing Series As for their top 3 seed companies? Isn't signaling part-and-parcel of the startup economy? Why should YC be worried about signaling when a firm like Andreessen isn't?

Re: Venture Firms Fret as Y Combinator Soars

#28

Post by coffeemug »

I don't think traditional VC firms are competing with YC at all.

There are two "black holes" in venture capital right now. One black hole is YC + angel investment. When you're getting started, it's pretty much standard practice to go through YC and/or raise seed capital from angels to get your startup off the ground.

The other black hole are a few top VC firms (off the top of my head, a16z and Sequoia). These firms pretty much figured out that it's impossible to predict success, so they're putting large amounts of capital into companies that are already succeeding. They've essentially eliminated guessing; they can get away with it because they established themselves as the VC firms you go to if your company is succeeding (so they have no issues with deal flow).

Then there are traditional VC firms in the middle, who can actually operate by perpetually losing money due to a slightly weird wider financial climate and the incentives of their LPs (see http://pmarchive.com/truth_about_vcs_part1.html, http://pmarchive.com/truth_about_vcs_part2.html, http://pmarchive.com/truth_about_vcs_part3.html).

So everything is much more complicated (and much more interesting) than the original post would lead you to believe!

Re: Venture Firms Fret as Y Combinator Soars

#29

Post by vasilipupkin »

alain94040 wrote: post #22
nostromo wrote: post #2

I don't use Rap Genius often, so I almost missed sama's responses. Be sure to click on the annotations to see them.

if I were a VC, I’d worry much more about Angel List than YC when it comes to A rounds -- SamA Completely agreed. Which pretty much kills the entire point of the article.

why not do A rounds? I agree regarding the signaling issue ( if you do A round for 3 companies, you are sending bad signal for the remaining ones ) - but what if you address/ mitigate the signaling issue?
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