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Why There Aren't More Googles

paulgraham.com

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Re: Why There Aren't More Googles

#51

Post by aswanson »

run4yourlives wrote: post #16

Comparisons to Google are worthless, primarily for 2 reasons: 1. Every logical mind (even within Google) in 1999 would have seen that Google was heading for failure - there was no money in search. They got lucky in finding one -adwords - that worked. 2. Had the timing of their discovery been off, or had the dot-com bubble busted a few months earlier, they would have died. In saying that, they are useless as a measure…

Every logical mind (even within Google) in 1999 would have seen that Google was heading for failure

From a make something people want theory of value, they were worth way more than anybody back then. I used to jump from engine to engine trying boolean queries, metacrawlers, keyword mixing, etc, coming up snake eyes.

I think most engines were on the 'portal' kick, which I think meant beating people over the head with banner ads and trying to force them to go to content partners. I think if those sites just stopped for a second and histogrammed what users used rather than what they were trying to force them to do, it would have been absolutely obvious that search was the key.

Re: Why There Aren't More Googles

#53

Post by aswanson »

smalter wrote: post #34

this article makes the good point that the mba types who are running vc funds are fundamentally ill-suited for identifying and investing in technology startups. paul graham identified this as true for managers of startups as well; and this is a defining feature of yc--investing in technology people vs. investing in mba types who hire programmers. of course, the logical extension is that the people doing the investing…

whatever value mba vc types did bring to the table

I still don't understand how they are valued at all. They don't invent anything, don't know how to help people who do, and are often bad at caretaking what has been built.

This is not meant as a swipe at them, but I honestly do not understand why they are highly valued.

Re: Why There Aren't More Googles

#54

Post by ericb »

pg wrote: post #46
muerdeme wrote: post #41

Instead of making one $2 million investment, make five $400k investments... If you're investing at a tenth the valuation, you only have to be a tenth as sure. I don't agree with this. The investors have to be just as sure of the risk involved in each valuation as before in order to have the same expected value for the overall portfolio. However, investing $400K in 5 companies instead of $2M in a single company will r…

Suppose your threshold for investing in a startup is an n% confidence that they'll one day have a market cap of a billion dollars. Suppose instead you split that investment between 10 companies at a tenth the valuation. How confident do you have to be that any given one will become a billion dollar company? You have the same percentage in all these companies that you would have had in the case of a single, big invest…

I enjoyed the essay.

VC's likely believe lowering the dilligence and involvement level lowers the likelihood of success. If VC's believe, rightly or wrongly, the success rate drops from 10% to 5%, then by lowering selection criteria and involvement, they've lowered the rate of return by diversifying into a pool of lower quality. The key is whether those things really matter. In justifying their paychecks, however, they are vital.

Re: Why There Aren't More Googles

#55

Post by aswanson »

pg wrote: post #33
huhtenberg wrote: post #14

> VC firms present an image of boldly encouraging innovation. Only a handful actually do. pg, can I ask for examples ? I am genuinely curious.

Sequoia as a firm is significantly bolder than the others. They really don't care what other VCs think. I also like David Hornik and Fred Wilson.

Any in the Boston area stand out? I know the east side is a lot more conservative as a group.

Re: Why There Aren't More Googles

#56

Post by aswanson »

Alex3917 wrote: post #32

"The low cost of starting a startup means the average good bet is a riskier one, but most existing VC firms still operate as if they were investing in hardware startups in 1985." I don't understand the idea behind this sentence. In this context what is a good bet, a company with certain traits or does this refer to a certain type of portfolio strategy, say one that expects most startups to fail and a few to win big?…

as if they are capital intensive with low risk?

Hardware companies are not inherently low risk because they involve hardware. They are often, in fact, capital intensive and high risk. See early PC makers, telecom bust, pen computing, etc...

Re: Why There Aren't More Googles

#57

Post by rms »

aswanson wrote: post #51
run4yourlives wrote: post #16

Comparisons to Google are worthless, primarily for 2 reasons: 1. Every logical mind (even within Google) in 1999 would have seen that Google was heading for failure - there was no money in search. They got lucky in finding one -adwords - that worked. 2. Had the timing of their discovery been off, or had the dot-com bubble busted a few months earlier, they would have died. In saying that, they are useless as a measure…

Every logical mind (even within Google) in 1999 would have seen that Google was heading for failure From a make something people want theory of value, they were worth way more than anybody back then. I used to jump from engine to engine trying boolean queries, metacrawlers, keyword mixing, etc, coming up snake eyes. I think most engines were on the 'portal' kick, which I think meant beating people over the head with…

I remember my search engine of choice was hotbot, because they had advanced search on the front page. And you sure as hell needed advanced search then.

Re: Why There Aren't More Googles

#58

Post by aston »

pg wrote: post #42
run4yourlives wrote: post #16

Comparisons to Google are worthless, primarily for 2 reasons: 1. Every logical mind (even within Google) in 1999 would have seen that Google was heading for failure - there was no money in search. They got lucky in finding one -adwords - that worked. 2. Had the timing of their discovery been off, or had the dot-com bubble busted a few months earlier, they would have died. In saying that, they are useless as a measure…

Every logical mind (even within Google) in 1999 would have seen that Google was heading for failure I didn't think that. I remember telling the powers that be at Yahoo in 1999 (I worked there then) that they ought to buy Google, and it was the only company I ever suggested they buy.

Yahoo's MO at the time was to swap in the current "cool kid" of algorithmic search to fill out Yahoo's own search results. Google didn't really have much of a business outside of selling their results to folks like Yahoo, so I think many logical minds would've agreed that Google was heading for failure--short of being acquired by Yahoo or something other big guy in search.

At the least, you'd have a hard time making a believable argument that they'd be making billions of dollars a year in less than a half decade. And, truthfully, an even harder time trying to make that same sort of argument if they were actually acquired by Yahoo.

Re: Why There Aren't More Googles

#59

Post by ph0rque »

So far, the "design spec" for the next-generation vc seems to be:

1. Invests $250-500k

2. Gets back to the applicants with a yes/no decision in 24 hours (can't find the pg essay).

I'm thinking there should be some kind of software, an algorithm, to help such a vc make decisions... what kind of factors would be part of it, and what else would be needed?

Re: Why There Aren't More Googles

#60

Post by cperciva »

lg wrote: post #39
cperciva wrote: post #37

Earlier quoted context omitted.

I'm curious: Where does the $15k number fit into that? At one point it was explained as "this should be enough money for you to live off for three months" -- if you're funding groups which take 2 years to launch, how are they supporting themselves for the remaining 21 months?

you'd figure they can get more money (from angels/vc's) before they launch if what they've got so far is impressive.

yeah, that's one possibility -- I was hoping to find out if that was what happened or not. :-)
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