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I Am Sam Altman, President of Y Combinator. AMA

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Re: I Am Sam Altman, President of Y Combinator. AMA

#591

Post by RKoutnik »

tchock23 wrote: post #444
sama wrote: post #281

Earlier quoted context omitted.

We really prefer at least two founders, but it's not a deal-breaker. We funded Drew Houston of Dropbox as a solo founder, but he got a cofounder before the batch started. A bad cofounder is far, far worse than no cofounder. I'd spend maybe 20% of your time looking for a cofounder, and the rest on your business. But don't force a cofounder if you don't have a good, organic option. The more progress you make on the bus…

I help out as a mentor at an accelerator in upstate NY. Unfortunately, we see solo founders rushing to find a co-founder just to go through accelerator programs. I wish your reply was shared widely with anyone applying to any accelerator anywhere...

Would love to get in contact with you regarding Upstate NY accelerators - my email address is my username at gmail.

Re: I Am Sam Altman, President of Y Combinator. AMA

#592

Post by kzhahou »

AceJohnny2 wrote: post #504
downandout wrote: post #484

Earlier quoted context omitted.

>The more progress you make on the business, the easier it will be to get a great cofounder. I am not trying to be pedantic...but are they really a cofounder if you've hashed out the idea and made progress on the business prior to their involvement? It's an important question in my mind, because a cofounder typically receives far more equity than virtually anyone else that becomes involved with the business after it…

Convincing arguments have been made that it's usually a better idea that co-founders get equal equity than not, to prevent arguments about said split which are much more likely to doom your startup. It's like that point about arguments in a relationship: would you rather be right or be together? http://avc.com/2011/04/how-to-allocate-founder-and-employee-... Edit: I see you added that second paragraph after I wrote t…

Thanks for the link.

> The founders should end up with about 50% of the company, total. Each of the next five layers should end up with about 10% of the company, split equally among everyone in the layer.

This is the typical, and exploitative, arrangement in silicon valley! In today's climate, the founders often get money very early and start hiring right away. They have no real personal risk in the venture, and even if it fails completely their "founder" status will serve them well at the next go-round.

The founders had an idea and some rough prototype, but the product is built and the company direction is executed by the next 10 people, and the next 10, and so on. But while the first 10 Employees get to share 10 percent of the company, they sit side-by-side with the 3 founders who have 10-20 times as much as any one of them.

We all take it for granted that the founders' contribution should be worth so much more than mere employees. But who writes these blog posts on how to distribute equity, with 50% to founders and 10% to each "layer" after? Well, it's not the employees. It's the investors and founders themselves, who need to solidly stand behind the idea that at a company that faced failure every day and with every competitor launch and had to get every aspect right, in the end the people at the top should enjoy mega-riches and early retirement, while the lowly workers enjoy a nice bonus equivalent to a year or two salary.

----

If you believe in avc.com's guide of 50% to founders and 10% to each subsequent "layer", I would counter that the founding team is itself a layer, and each layer should be compensated equally. There is no justification for the first layer (founders) owning as much as the other layers combined.

Re: I Am Sam Altman, President of Y Combinator. AMA

#593

Post by pbreit »

freyr wrote: post #340

You have suggested that Silicon Valley is successful, in part, because workers accept a notion of "long-term compensation" [1]. Long-term compensation, perhaps better called maybe-someday compensation, requires SV software engineers to work for relatively less (factoring in cost-of-living) than many other skilled professionals, with hopes that they'll be rewarded with a big windfall in the future. With the rising cos…

You're missing a key reason why annual salaries are modest at the beginning. A key attribute of a founding team is intense resourcefulness and have considerable powers of persuasion. Both of these attributes result in lower salaries initially.

Re: I Am Sam Altman, President of Y Combinator. AMA

#594

Post by pbreit »

abeppu wrote: post #407
sama wrote: post #349

Earlier quoted context omitted.

It's a personal choice for workers. If you're an engineer and you want a guaranteed $250k per year, go work for a financial firm. Nothing wrong with that decision. Everyone gets to make his or her own. Engineers at startups make $100k+, sometimes much more. I don't think people are being asked to subject themselves to unreasonable financial strain. It is indeed "maybe-someday" competition. When you work at a startup,…

> When you work at a startup, you're acting like an investor but investing your time instead of your money. True, except: (a) An employee can probably only work for one startup at a time, and begins vesting after a year. That's like asking an investor to bet on at most 1 company per year. (b) Employers tend to give substantially less detailed information about their business, financials, etc to prospective employees…

But the employee has one massive advantage to the investor: the actual ability to influence the success of the company.

Re: I Am Sam Altman, President of Y Combinator. AMA

#595

Post by vasilipupkin »

msellout wrote: post #502
vasilipupkin wrote: post #442

Earlier quoted context omitted.

Sir/Madam, that is incorrect. Diversification can easily lower expected value, or raise it. It should maximize your signal to noise ratio, if properly done.

You're using a different definition than the one I learned in school. The purpose of diversification, as opposed to simply picking the best asset, is to decrease variance. Given a choice between two assets, or portfolios, one first maximizes expected value. Between two portfolios of equal expected value, you pick lower variance. That's the rational thing to do if you are managing a fund. The whole risk ratio thing ar…

My point is simply that diversification results in a different expected return of the final portfolio. Before diversifying your expected return was R1 and after it will be R2 where R1 != R2. So, for choosing startup vs big co, or one startup vs another, this is relevant as well.

Re: I Am Sam Altman, President of Y Combinator. AMA

#596

Post by nostrademons »

downandout wrote: post #484
sama wrote: post #281

Earlier quoted context omitted.

We really prefer at least two founders, but it's not a deal-breaker. We funded Drew Houston of Dropbox as a solo founder, but he got a cofounder before the batch started. A bad cofounder is far, far worse than no cofounder. I'd spend maybe 20% of your time looking for a cofounder, and the rest on your business. But don't force a cofounder if you don't have a good, organic option. The more progress you make on the bus…

>The more progress you make on the business, the easier it will be to get a great cofounder. I am not trying to be pedantic...but are they really a cofounder if you've hashed out the idea and made progress on the business prior to their involvement? It's an important question in my mind, because a cofounder typically receives far more equity than virtually anyone else that becomes involved with the business after it…

It would disqualify nearly all cofounders of famous startups if they had to form the company before one of them made progress on the idea. For example:

Steve Wozniak built the original Apple I attending Homebrew Computer Club meetings. Steve Jobs saw the prototype, realized it would be huge, and then talked Woz into founding a business around it.

Larry Page had started Google as a doctoral research project to download the web and make sense of its link structure. Sergey's original startup idea was to order pizza via fax machine, and he'd started work on it with some other friends before abandoning it to go work with Larry.

Mark Zuckerburg created FashMash and then Facebook and had some early traction among his house at Harvard before convincing his cofounders to join.

Drew Houston created DropBox as a solo founder and then convinced Arash to join after getting accepted to YC.

Apoorva Mehta started Instacart on his own and then got cofounders after YC.

The usual rule-of-thumb is to give close-to-even equity splits to cofounders here, because most of the work of building a company lies ahead of you, not behind you. You definitely do want to vet your cofounders for trustworthiness and have some idea whether they're interested in founding a company with you or whether they just want your idea. Usually the best defense to the latter is having something the former needs, either deep domain knowledge or technical skills or connections in the industry.

Re: I Am Sam Altman, President of Y Combinator. AMA

#597

Post by pbreit »

freyr wrote: post #547
jpmcglone wrote: post #415

Earlier quoted context omitted.

I was making $100k and was able to find a small apartment in SF AND save about $2k a month (granted, I've finished paying my student loans). Not needing a car, and the ability to walk / scooter / public transport everywhere for relatively cheap, is a huge money saver! My half of the rent each month, as of today in SF, is $1300 ($2600 for the whole apartment in SoMa), but you need to take into account the money I'm no…

So you get a small, shared apartment, dinners at work, no car, and $2k/month left to save. Honestly, that's not bad, but I'm guessing you're young. Consider you're slightly older and thinking of starting a family. Will your income cover: extra food and clothing for a child? day care or maternity leave? saving for college? saving for retirement? a larger apartment for your growing family? a down payment on a house or…

At that point you'll have dual income so even easier.

Re: I Am Sam Altman, President of Y Combinator. AMA

#598

Post by jfarmer »

sama wrote: post #81
tehansen wrote: post #71

Do you think that YC could ever invest or advise startups / founders that can't move to silicon valley for 3 months for one reason or another? Is there something inherent in the in-person experience that cannot be overcome by technology (in general too i suppose, rather than just the type of work ycombinator does)? Personally i believe we're not quite there yet. I have some hope, that within our life time communicati…

There is for sure something about in-person interaction that cannot be replaced by any current technology. Alan Kay recently told me he thinks it's something biological. Our model just doesn't work well for people that can't move to the valley for 3 months. Remote work is good in many cases, but early-stage startup advising is not one of them.

There's evidence that babies acquire phonemes when "taught" in-person differently than via video: http://www.ted.com/talks/patricia_kuhl_the_linguistic_genius... (this topic starts at about 7m08s)

Re: I Am Sam Altman, President of Y Combinator. AMA

#599

Post by ytzvan »

Hi Sam, I've been working in my Startup since December, with my co-founder and even we win a local entrepreneurship contest about ideas and innovation. We're very confident about our idea and we have a working prototype, but, we're in the travel industry and we aren't generating any revenue yet, should we apply to Y Combinator? Even if we aren't generating any bucks?

Re: I Am Sam Altman, President of Y Combinator. AMA

#600

Post by [deleted] »

sama wrote: post #408
lsllc wrote: post #390

There's a well known theory that non-competes stifles innovation and in particular CA's ban on these has allowed SV to flourish. There have been moves afoot in MA to enact a similar ban, although recently it seems to have been somewhat defanged through lobbying by the likes EMC (despite still being protected by copyright, trade secrets and patents!). What are your thoughts on this; if MA is able to pass a ban on non-…

I think it'd be good to do this, but that the startup scene is really broken in Boston for many other reasons. I'm not very optimistic this would be enough to fix it.

[deleted]
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