Arrington: Y Combinator Thinks Small
At TechCrunch disrupt Arrington just said that VCs don't like Y Combinator because it sucks up talented entrepreneurs who then think small and don't go for big growth or a big exit. Do you agree? Any YC alums want to comment?
7 comments
Professional, independent observers think otherwise. VCs will not do a series A investment in a company unless they believe it has the potential to be really big. So far over 20 YC-funded companies have done series A rounds, and more surely will.
VCs are in it to make money, not just to help people realize their ambitions. For them it's better to push companies towards the explosive growth path, because it means a better payday for them. And in a place like silicon valley where promising startups staffed by the best engineers in the world rain from the sky like manna this sort of strategy is eminently feasible.
However, it's not necessarily the best strategy for the average startup, which may find itself destroyed as grist for the VC money mill.
Fortunately, there's a place for both "next big thing" companies as well as "next little thing" companies. And there's nothing wrong with doing bread-and-butter business helping entrepreneurs realize their dreams even if it doesn't result in gigadollars and news coverage on CNN.
However, it's not necessarily the best strategy for the average startup, which may find itself destroyed as grist for the VC money mill.
Fortunately, there's a place for both "next big thing" companies as well as "next little thing" companies. And there's nothing wrong with doing bread-and-butter business helping entrepreneurs realize their dreams even if it doesn't result in gigadollars and news coverage on CNN.
Doesn't that support pg's argument vs. Arrington's?
Yes.
It also provides some context to the conversation. If only the companies most likely to become giga-corporations ever received investment capital how many opportunities would be passed up? More so, would a world populated mostly by gigacorps be a world you would want to live in?
It also provides some context to the conversation. If only the companies most likely to become giga-corporations ever received investment capital how many opportunities would be passed up? More so, would a world populated mostly by gigacorps be a world you would want to live in?
I think that's as close to "fuck off Arrington" as pg's gonna get.
I think the expression you are looking for is "the proof is in the pudding".
Well, you already said it. I subscribe ;)
The VCs are not unbiased, objective observers of YC. It may be that some VCs have that particular issue with YC, or it may be that they don't like YC for other reasons, and their stated reason is just the professionally acceptable rationalization they've come up with.
Clearly, some VCs do like YC. Didn't Sequoia invest a few million dollars in them?
Clearly, some VCs do like YC. Didn't Sequoia invest a few million dollars in them?
On one side we have Paul Graham who has started two successful businesses in disparate industries. On the other, we have Michael Arrington who started one successful business in another industry and launched a complete clusterf*ck of a partnership in another (CrunchPad). The old saying about "data not being the plural form of anecdote" applies. But I know which person has a lot more evidence to suggest that he's an expert about business. In fact, one could argue that by being a VC, Paul Graham has his hand in a lot more successful and unsuccessful businesses than Arrington. He could probably teach him a thing or two about both.
YC is meant to be beneficial to founders. It may not always benefit VCs. Complaining about it is a bit self centered in my book.
Extreme example: Wealth also prevents quality people from pursuing aggressive startups (yes, there are plenty of exceptions). And it would be incredibly self centered to complain that you can't fund entrepreneurs because they're satisfied with their savings account.
Extreme example: Wealth also prevents quality people from pursuing aggressive startups (yes, there are plenty of exceptions). And it would be incredibly self centered to complain that you can't fund entrepreneurs because they're satisfied with their savings account.
Large opportunities/businesses are often found at what are considered as the fringes today. Like PG has said in a talk (on trends in future), seemingly frivolous stuff could be big tomorrow.
From what I understand, YC encourages its startups to focus on a specific/core problem - which might misunderstood as thinking small. But thats exactly where large opportunities can be found.
Also, obviously big ideas (that all agree will show big growth & big exits) will also be heavily competed by existing established and entrenched players with a lot more resources (not to mention, other startups). If VCs ignore YC (and others like it), they do it at their own disadvantage
From what I understand, YC encourages its startups to focus on a specific/core problem - which might misunderstood as thinking small. But thats exactly where large opportunities can be found.
Also, obviously big ideas (that all agree will show big growth & big exits) will also be heavily competed by existing established and entrenched players with a lot more resources (not to mention, other startups). If VCs ignore YC (and others like it), they do it at their own disadvantage
And in other news, someone on Hacker News commented that someone who sold out to AOL in 2010 should, perhaps, think a bit before taking a swipe at someone who sold out to Yahoo in the late 90's...
there are big plays in the ~200-company portfolio