Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

Paul Graham's Letter to YC Companies

news.ycombinator.com

Post reply on HN
Print view View original

61–70 of 204 posts

Re: Paul Graham's Letter to YC Companies

#61

Post by staunch »

anon808 wrote: post #54
pg wrote: post #35

Earlier quoted context omitted.

I don't think they've even tried to make money yet. They've just been focusing on growth. But they have so many users now that they could do whatever they want. Ideas that would entail a chicken and egg problem for anyone starting from scratch (e.g. marketplaces) do not for them. Plus Mark himself is such a fearsomely effective person. And so young; he's only a little older now than Larry and Sergey were when they st…

Ahhhh yes the famous cash faucet that just needs to be turned on. Why would anyone that could have been making more money not made it before? Growth and profit are not mutually exclusive.

MySpace did what you suggest. They monetized heavily, harming UX, and creating space for a cleaner modern user-friendly competitor. That's part of why they failed.

I think they're just waiting until they've completely solidified their #1 position to concentrate on making more money. It will seem obvious in hindsight that they make $20+ billion, the way it does for Google now. It may never be quite as good as Google though, but max potential is especially hard to predict.

Re: Paul Graham's Letter to YC Companies

#62

Post by nl »

Alex3917 wrote: post #33
pg wrote: post #22

Note incidentally that I'm talking about the performance of the IPO, not the performance of Facebook itself. I think Facebook as a company is in a strong position. The problem is simply that Mr. Market ( http://en.wikipedia.org/wiki/The_Intelligent_Investor ) doesn't think so at the moment.

Out of curiosity, why is it that Facebook's IPO would hurt early stage valuations, when all of Facebook's early investors made hundreds of millions or billions of dollars? I could see it getting harder to IPO at a good valuation for a few years, but that shouldn't drive down early stage valuations all that much. Also, to me the most interesting thing to watch (beyond Spain) is these new crowdsourcing laws going into…

The bad performance of Facebook will cool the attitude of institutional investors towards online investment.

That will make it harder for the B-Grade VC companies to raise money, which will reduce the valuations anyone else has to pay to invest.

That has the potential to drive hundreds of millions of dollars into the angel space overnight, sending valuations through the roof or at least keeping them propped up for a while.

Not really. The crazy valuations were typically occurring when VC's got involved at the A round or later - not when early stage investors are working. A lot of early stage investing is done using convertible notes anyway.

Re: Paul Graham's Letter to YC Companies

#64

Post by rehack »

9oliYQjP wrote: post #55
rehack wrote: post #44

Earlier quoted context omitted.

But I think, its now going to be all the more tough for them to figure out how to improve their ARPU dramatically, as they don't have the benefit of obscurity. For example, even slight change to the feeds, like inserting what vaguely seems like an Ad, raises a huge uproar from people. In contrast Google had got Adwords figured out (but it was not as widely known) before their IPO.

Changes to Facebook are like fluctuations in gas prices though. People grumble and complain, then just go ahead and don't change their habit. I'm pretty conspiracy-theorish on the whole Facebook thing. A part of me wants to believe Mark managed to hack the entire system. He got the maximum amount of money out of the IPO to build up a huge cash reserve for his company. He made his big acquisition before the IPO; futur…

>Changes to Facebook are like fluctuations in gas prices though. People grumble and complain, then just go ahead and don't change their habit.

IMO, its like this. We spend a lot of time here on HN. Just like a whole lot more people do on Facebook. But we come to HN for a specific purpose to engage in these kind of discussions. Just like it will be difficult for PG to convert this into something else which makes more money (PG gave the example of a market place), I think it will be no simpler for Mark Zuckerberg.

PS: This was my take on FB, before the IPO http://news.ycombinator.com/item?id=3949048

Re: Paul Graham's Letter to YC Companies

#65

Post by jmspring »

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 the secondary markets.

I have yet to see any big name, non-social, companies really test the markets, and I mean when they are in a position to do so -- strong product, strong revenues, and strong path moving forward.

Given what is happening in Europe and the world markets in general, there will be an impact on investment.

There have been basically 3 downturns (as I believe cdixon mentioned) in the last 12 years, is this the 4th? Or is this a by product of new avenues like the secondary market?

I have no idea, but it will be interesting to see how it plays out.

Re: Paul Graham's Letter to YC Companies

#67

Post by _dps »

cperciva wrote: post #59

because "down rounds" not only dilute you horribly... I'm missing something here. What makes "down rounds" so dilutive? I'm assuming we're talking about a larger effect than the obvious "lower valuation = handing over more stock to raise the same amount of cash" effect.

I'm not sure what PG's intention was, but I bet that "under-the-table dilution" in the form of liquidation preferences, board seats, and veto rights on sales below Y% return is much more common in down rounds.

These investor privileges often drastically change a founder's control of the company, and their payoff vs valuation curve, even for a nominal valuation that is "at par" for the founder's nominal equity value.

Re: Paul Graham's Letter to YC Companies

#68

Post by [deleted] »

Smerity wrote: post #12

To those having fun saying "pop", contribute value not onomatopoeia. The clearest message in PG's letter is simply "The startups that really get hosed are going to be the ones that have easy money ... So don't be that startup." If you have a viable business then you can either a) proceed without venture capital or b) prove yourselves enough that you'll get the terms you need. Yes, (a) may make you move slower, and (b…

[deleted]

Re: Paul Graham's Letter to YC Companies

#70

Post by po »

Alex3917 wrote: post #33
pg wrote: post #22

Note incidentally that I'm talking about the performance of the IPO, not the performance of Facebook itself. I think Facebook as a company is in a strong position. The problem is simply that Mr. Market ( http://en.wikipedia.org/wiki/The_Intelligent_Investor ) doesn't think so at the moment.

Out of curiosity, why is it that Facebook's IPO would hurt early stage valuations, when all of Facebook's early investors made hundreds of millions or billions of dollars? I could see it getting harder to IPO at a good valuation for a few years, but that shouldn't drive down early stage valuations all that much. Also, to me the most interesting thing to watch (beyond Spain) is these new crowdsourcing laws going into…

I suspect it's because investors think that one of the few routes to 'exit' a company and cash out your investment just got closed down, at least in the short term. That increases the risk of investing and therefore lowers the valuation.
Post reply on HN