Paul Graham's Letter to YC Companies • Hacker News Board

Re: Paul Graham's Letter to YC Companies

#71

Post by sroussey » Tue, Jun 05, 2012, 5:55 AM UTC

Facebook waited too long. Part of the psychology on joe public's love of Apple has to do with APPL -- they got to invest in the stock while investing their time (and $) in their products.

Facebook decided to have all that growth in value for insiders only. And it's not like they wanted to be a private company, so the outcome is planned.

By not leaving any money on the table, and having joe public not share and invest in their success, when the government starts to beat down on them, there won't be much public support for FB.

And pg is right: nor will there be much support for those following in their footsteps. Scorched Earth. Those investors did well (and many HN peeps on SecondMarket). So well in fact, it won't happen again. Not for a long while.

Re: Paul Graham's Letter to YC Companies

#72

Post by nl » Tue, Jun 05, 2012, 5:56 AM UTC

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.

Growth and profit are not mutually exclusive

True.

But if you are constrained by your team (ie, you can't work on everything at once, which Facebook says is their biggest constraint) and you have plenty of easy money from investors, why would you try and profit now and risk another service taking your audience when you could possibly build something that can profit for years to come?

Re: Paul Graham's Letter to YC Companies

#73

Post by jorgeortiz85 » Tue, Jun 05, 2012, 5:56 AM UTC

Smerity wrote: post #45

jayzee wrote: post #32

So here is an idea for an email feature/gmail plugin: 'Semantic Scramble' Basically, any sensitive email that you send to a bunch of people is automatically scrambled (retaining original meaning/correct grammar, just a small shuffling of words) so that each person gets a unique email. Easy to find out who leaked it. You could add a similar unique jitter for sensitive photos/images...

Considering PG didn't strike down the story I presume to think he expected it to leak out or didn't ask it to remain confidential. Re: "Semantic Scramble", this was/is used quite successfully in a university course I tutored. Students are supplied with Java code featuring a unique comment style (/ * */). So many students blindly copied code out of another student's assignment and submitted it as their own that we cou…

Or pg realizes that once the cat is out of the bag, you can't put it back in. If he takes it down here, it will be posted elsewhere.

Re: Paul Graham's Letter to YC Companies

#74

Post by diego » Tue, Jun 05, 2012, 5:56 AM UTC

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.

The investors in the initial round usually have some sort of anti-dilution provision, so the founders get diluted much more. See this, for example:

http://www.businessweek.com/smallbiz/content/jan2009/sb20090...

Re: Paul Graham's Letter to YC Companies

#75

Post by [deleted] » Tue, Jun 05, 2012, 5:56 AM UTC

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.

[deleted]

Re: Paul Graham's Letter to YC Companies

#76

Post by hncommenter13 » Tue, Jun 05, 2012, 5:56 AM UTC

rdl wrote: post #57

limeade wrote: post #24

Can someone explain the perception that Facebook's IPO was a disaster? Doesn't the fact that the stock has not risen mean that the offering had the correct price?

Opening at 38 and staying in the high 30s/low 40s would be reasonable. Maximum value for FB, Inc., stable price. Dropping to 26, not so much.

Remember that 26 includes the value of $9B of additional cash on the balance sheet from the IPO. So the valuation of Facebook as a business is actually lower still, once you back out the cash.

Re: Paul Graham's Letter to YC Companies

#77

Post by pbiggar » Tue, Jun 05, 2012, 5:57 AM UTC

When I saw PG's email, I thought this was a self-fulfilling prophesy, even if it was only seen by YC founders. But now that every has seen it - it will be in Forbes and TechCrunch soon no doubt - it seems almost certain.

If just YC founders see it, then they'll take less money, and get lower valuations, etc, leading the tone of the valley. But if everyone sees it, investors will close their wallets, people will declare the bubble is now popped, and the prophesy will fulfil itself.

Re: Paul Graham's Letter to YC Companies

#78

Post by khanmanka » Tue, Jun 05, 2012, 5:59 AM UTC

But... but... but... isn't it really about the idea? I guess not. It's really all about the hype - which means it's true, Y Combinator IS a stupid idea. http://mankabros.com/blogs/onmedea/2010/11/03/y-combinator-i...

Re: Paul Graham's Letter to YC Companies

#79

Post by hef19898 » Tue, Jun 05, 2012, 6:01 AM UTC

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…

One reason why the FB IPO can drive down valutions can be the following:

When VCs are worried that they won't ever get a multi-billion dollar IPO to cash in and thus generate returns they will be forced to get the same junk of any given start-up for less money in order to create the the same return factor.

Anyone correct me if I'm wrong.

Re: Paul Graham's Letter to YC Companies

#80

Post by cperciva » Tue, Jun 05, 2012, 6:02 AM UTC

diego wrote: post #74

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.

The investors in the initial round usually have some sort of anti-dilution provision, so the founders get diluted much more. See this, for example: http://www.businessweek.com/smallbiz/content/jan2009/sb20090...

Ah, thanks for explaining. I thought such anti-dilution provisions would have gone out of style a years ago.