The Post-YC Slump

http://blog.samaltman.com/the-post-yc-slump

by moritzplassnig • 11 years ago

328 169 11 years ago

blog.samaltman.com

ceejayoz5• 11 years ago

The main problem is that companies stop doing what they were doing during YC—instead of relentlessly focusing on building a great product and growing, they focus on everything else. They also work less hard and less effectively—the peer pressure during YC is a powerful force.

I'm curious about why there's no consideration of the possibility that perhaps such a high-intensity pace is simply not sustainable on a personal level for most people.

fortes• 11 years ago

Agreed, it's like expecting someone to run a marathon at a sprinter's pace.

dorkrawk• 11 years ago

A lot of people can't run a 4:45 mile, but if you expect to be competitive at a world class level in a marathon, you'd better be able to hold that pace for 26.2 miles.

gyardley• 11 years ago

If they considered that, they'd also have to consider whether the ridiculously high-intensity pace during their incubator directly contributes to that post-YC slump.

There's no reason why Y Combinator can't simultaneously be great for the businesses of those capable of working sixteen-hour days indefinitely, and toxic for the businesses of everyone else.

dhaivatpandya• 11 years ago

If the pace isn't sustainable for a given person, that person probably shouldn't be trying to do a startup. This might seem a bit blunt, but I think it's probably true. There are many other options to bring the same financial and "impact" success that a startup provides and the expected value of these options is probably higher than creating a startup given an aversion to the high-intensity pace.

CardenB• 11 years ago

Yes and hindsight is 20-20. They may not know if the pace is sustainable until after the fact.

jkestner• 11 years ago

If 'startup' is defined by the pace, then you're correct. But do we all have the goal of making a successful startup, or of earning more money from your own idea? If the latter, there's an argument for a business model that allows a more humane pace. It may just not be compatible with many investors' models.

mrkurt• 11 years ago

The intensity isn't really hours worked. It's intense focus and ruthless decisions about what's worth the time.

untog• 11 years ago

This seems like a failure of YC - if companies that have gone through the program are consistently forgetting the lessons it has taught as soon as they leave, maybe they're not being taught correctly?

That said, I'm not surprised. YC is a rare opportunity, and people will absolutely punish themselves for the duration of their stay in YC to get the most out of it. Few people can maintain that kind of pressure longer term. I don't think that's a weakness, I think it's just being human.

tptacek• 11 years ago

Of course it's a failure of YC. There is a 0% chance YC has all this stuff right. It would be depressing to them if they did: that would mean there were no further opportunities to improve the outcomes for YC companies.

roseburg• 11 years ago

I think it comes down to discipline. Not doing what you know you need/should do is a discipline issue. There is probably a lot of incentive to do what needs to be done during YC when everyone is watching, and preparing for demo day.

arasmussen• 11 years ago

Agree. And it seems like the YC team has noticed this and is starting to do something about it via sama's blog post!

toomuchtodo10• 11 years ago

"At the end of a YC batch, the general consensus among the partners is that about 25% of the companies are on a trajectory that could lead to a multi-billion dollar company. Of course, only a handful of them do. Most go on to be decent or bad."

"You have to keep up a high level of intensity for many, many years."

Don't take this the wrong way /u/sama, but could it be that perhaps business models are the problem and not founders not grinding away for years on "real work"? 90% of startups fail [1] [2]. I am highly suspect of the idea that this is caused by teams not being committed or working on "fake work". More likely, markets shift, business models aren't viable, and so forth. This is not a case of people "not giving it their all".

[1] http://www.quora.com/What-percentage-of-startups-fail?share=...

[2] http://www.forbes.com/sites/neilpatel/2015/01/16/90-of-start...

EDIT: Its been proven scientifically that people encounter diminising returns past 40-50 hour work weeks. [3] Don't encourage grinding harder. Encourage finding where to exert the most leverage, and hiring best people you can hire today. Quality people + automation leverage (your software) + quality marketing is a solid formula (but not a guarantee) for success. Luck, while no one wants to admit it, is a non-insignificant component of success ("right place at the right time").

[3] http://www.lostgarden.com/2008/09/rules-of-productivity-pres...

mattmanser• 11 years ago

1st article relies entirely on startup accelerators for stats, which means 92% of companies that enter startup accelerators fail, which is a totally different statistic.

2nd article just links to other articles on fortune which don't have anything to back them up.

So I'd be dubious of those figures.

toomuchtodo10• 11 years ago

I'm open to a debate on this. What's the failure rate only of startups that go through YC?

"Y-Combinator’s success is undeniable: the program has produced 37 start-ups worth over $40 million each in the past five years. In its first six years, 72 percent of Y.C.’s 249 start-ups raised money after Demo Day, and today, the average value of a Y.C.-financed start-up is $22.4 million. However, these statistics also reveal a grimmer reality: 93 percent of the 511 companies accepted by Y-Combinator have failed. Even more alarming, only 3 to 5 percent of the companies that apply to Y-Combinator are even accepted, meaning that only one in every 200 companies that applies to Y.C. eventually succeeds."

Emphasis mine.

[+] http://koltai.co/notebook/the-risky-business-of-entrepreneur...

EDIT: Please disregard this post. Left for historical purposes. sama notes that the stats are inaccurate.

EDIT 2: The citations in that link I mention above are from nytimes and business insider. They might be accurate, if a bit old, but require verification. Treat them appropriately.

sama5• 11 years ago

Sure--the vast majority of ideas just can't support a multi-billion dollar business.

But a lot can, and poor execution is why they don't.

teacup505• 11 years ago

Don't you feel the least bit of reservation selling young kids on the idea that they're likely to create a "multi-billion dollar business" by running through a grist-mill of a program that -- by your own admission -- isn't sustainable for most of them?

The vast majority will not achieve that goal (you don't need them to, either -- for sustainability, all you need is a few winners), and in the process, I can't help but feel that they're stunting their career, technical, and personal growth by approaching critical period of their lives with the belief that your economic model of the universe applies equally to them.

thethethe• 11 years ago

You say a vast majority can't, but then go on to say that a lot can.

What do you define as "a lot"? What do you define as a "vast majority"?

harryh• 11 years ago

It would be interesting to put together a list of these "good idea, but poor execution" ideas. It would probably be a good list of things to try again.

larrys• 11 years ago

"and poor execution is why they don't"

Luck and timing no doubt play a very important role in addition to simply poor execution. Also even excellent execution doesn't take into account how the market will respond to what you are making or trying to sell which can't always be determined prior to actually going through the motions.

GrinningFool3• 11 years ago

Comparing those numbers to the 5 and 10 year survival rate of more typical small businesses (50% and 33% respectively[1]) puts this into perspective.

This suggests that creating a business with the intent of not exiting, but retaining and growing it gives better odds. While a more typical small business has its own stressors and certainly can have long hours, in my experience the level of intensity is much more sustainable.

The down side - you're much less likely to walk away with large sums of money. On the up side, you're much more likely to create a sustainable venture that has a lot more success paths than the binary 'get acquired or go public' routes available to vc-funded startups.

[1] pdf - https://www.sba.gov/sites/default/files/FAQ_Sept_2012.pdf

sokoloff• 11 years ago

Many of those small businesses that survive are simply the founder buying themself a job of some sort.

It's no surprise that someone who starts a landscaping or property management company, where the prime thing being sold is hours of labor, would have a higher 5/10 year survival rate than a company selling bits, ads, or other types of digital engagement.

adventured• 11 years ago

It's also arguable that Internet businesses tend toward a few winners take-all scenario and that drastically increases the tech start-up failure rate. Whereas there are 150,000 convenience stores and 72,000 pizza restaurants in the US.

The number of businesses that can be supported in the physical world is dramatically higher than for Internet services. Why? Geographic restriction and franchising.

There are going to be two dozen major cloud hosting companies, and maybe 50-100 smaller players. There are 7,000 frozen yogurt shops.

bisRepetita• 11 years ago

you're much less likely to walk away with large sums of money

It would be great to have data on this. How many SMB owners make a few hundreds $K a year, for many years, ending up making a lot more than a very successful/lucky early employee making a couple of $M in one shot after many years. Especially in the software field.

obstacle1• 11 years ago

Its been proved scientifically that people encounter diminising returns past 40-50 hour work weeks

In the average case.

People who build billion-dollar businesses are not the average case.

That isn't to say everyone should grind super hard. People should, however, have the self-awareness to recognize whether or not they are capable of high levels of achievement. Few people are.

toomuchtodo10• 11 years ago

Travis Kalanick is grinding super hard. Are people going to call him average when Uber fails? Elon Musk is grinding super hard, but he has different market and regulatory forces to contend with (no one stops you from going to space or making batteries and electric cars, everyone is going to stop you from breaking transportation and labor laws).

Being "superhuman" doesn't make you terribly more likely to succeed.

AJ007• 11 years ago

How many hours can someone, average or not, work before they start making more bad decisions than good ones? The problem with 50 hour+ work weeks is at some point, depending on the individuals outside life, they enter a period of sleep deprivation.

Is it a characteristic of most successful founders that they can make good decisions in high stress situations while sleep deprived?

Plough_Jogger• 11 years ago

Its been proved scientifically that people encounter diminising returns past 40-50 hour work weeks.

Sure, but I don't think there have been any studies that find negative returns after 40-50 hours.

If we are optimizing for maximum returns, rather than maximal efficiency, you would advocate for increasing hours worked until the result of one hour of work was zero.

Many activities have diminishing returns after a certain amount of work (oil drilling, distance running, mining bitcoin, etc.), but it doesn't mean that the rational decision is to stop when the point of diminishing returns is reached.

cynicalkane• 11 years ago

The diminishing returns affect all future hours, not the marginal hour. If you're tired all of your work will suck until you recover. That marginal hour might damage your ability to work more than the gain from working that one hour.

Swizec• 11 years ago

Programming in particular has negative effects after the point of being tired. You make mistakes, you commit bad code, you have to maintain bad code for the lifetime of hte product.

That one grind where you kept pushing could keep affecting the productivity of the whole engineering team for the next 2 or 3 years. I've seen it happen. A lot.

I would assume doing strategizing or negotiating when tired could equally have devastating long-term effects on the business side.

Work as long as you want, just don't work tired. It isn't worth it.

jimbokun• 11 years ago

That's exactly what has been found, as cited on another comment in this discussion:

http://www.lostgarden.com/2008/09/rules-of-productivity-pres...

The cited research claims total overall productivity of working 60 hours a week starts showing a deficit to working 40 hour weeks, after about 4 weeks.

toddmorey• 11 years ago

I agree. Perhaps some of the root cause here is a faulty premise. The idea that "25% of the companies are on a trajectory that could lead to a multi-billion dollar company" feels wildly optimistic to me. (And I say that with full respect of YC and the top-teir companies in the program.)

Strong early growth is a very positive sign. But growth is a funny thing and can be hard to sustain. The true market test may come later... from when you are trying to grow a $50 million dollar business into a $500 million dollar business.

acchow• 11 years ago

Relevant xkcd: https://xkcd.com/605/

teh_klev• 11 years ago

The idea that "25% of the companies are on a trajectory that could lead to a multi-billion dollar company" feels wildly optimistic to me

The key word in that sentence is "could", not "will". I'm pretty sure after all these years YC have enough experience and data to identify the "could"'s. But they're still just "could"'s. Doesn't seem "wildly" optimistic to me, just optimistic, based on previous track records.

kyleashipley• 11 years ago

I don't want to put words in Sam's mouth, but I read his point as referring to the patterns of thinking and behavior applied by the founders more than hours worked. I equate "intensity" with "focus," as I've seen (and been a part of) many startups that have lost focus after achieving a modicum of success and taking their foot off the gas.

blairanderson• 11 years ago

He's not encouraging grinding harder, but smarter.

Did you read beyond the first two paragraphs?

jashmenn• 11 years ago

I think it's super interesting to hear that they're developing software to automate traction updates. It would be so cool to be able to "gem install yc" into your Rails app (or whatever) and then have hooks that will automatically keep them abreast of user growth and engagement.

It provides really interesting opportunities for them to be proactive about giving help at the right time. For instance, they'll be able to setup rules for notifications e.g. when you're having a slowing rate of growth, or to send congratulations when you've had a strong month etc.

I imagine one of the problems in investing in so many companies is that you aren't always aware of problems before it's too late. By using software to collect metrics about their portfolio companies, they can systematize how to become aware of and help out companies where they can make a difference.

aacook• 11 years ago

What if it were a daily and weekly internal email that hooked into your existing analytics or database?

I'm working on an alpha for a product called Growth Report that does just that. It's not "gem install yc" but it's pretty close. Interested to try it out with FieldDay?

gtrubetskoy• 11 years ago

"I tell founders to consider how directly a task relates to growing." - but is it really all about growing?

angersock2• 11 years ago

Yes. Next question?

More seriously, if you're taking a company through the investment/VC pseudo-Ponzi pipeline, you have to grow. Otherwise, early investors don't get an exit.

jamiesonbecker• 11 years ago

investment/VC pseudo-Ponzi pipeline

ouch. :) And yet what you're saying is true, even for those who are avoiding said pipeline as long as possible! @sama is right... growth and momentum are inextricably linked, and I've found @ userify that days with good numbers (and there are more of those these days!) keep us plugging through the harder days.

With momentum and growth, all things are possible. Without either, nothing is possible, and it messes with your mind. These are the days that you start messing with side projects and taking your eye off the ball.

It's all about building a growth machine on some meaningful axis (users, server, revenue, whatever) and figuring out what makes it grow fastest. Cashflow is derived from that. That's really all it is. Funding, hiring, even the technology itself: all just sideshows. Growth first.

The corollary: build something that helps you track your numbers. My thing literally just emails me a CSV with a new line appended every day. If it ever gets too unwieldy, I'll do something more sophisticated but for now it's a few hundred lines of python that helps me track trends etc in a spreadsheet. (I'd love to see a startup that can do API POST'ed metrics for $10/mo!)

Userify is growing at 50% monthly, but it's still not fast enough. Growth is everything, and the measurement of that growth is critically important. It doesn't need bells and whistles.. just get it done.

codingdave2• 11 years ago

OK, lets break that down more though - Imagine this scenario: You are a founder, you go YC, you grow a bit, but end up with a company that is settling down into a lifestyle company, while it still satisfies you personally. The early investors (YC) push for an exit, but they are a minority of the shareholders. Certainly, you are grateful to them, and have learned much. But at the end of the day, the growth and big exit is a goal of a minority, not you personally.

I understand completely why this is a problem for YC. I just don't see it as being such a problem for the founders.

beatpanda• 11 years ago

Y'all are some cowards with the downvotes on this. The failure of startup people to recognize that the entire VC complex is a machine designed for making a tiny sliver of people even wealthier is embarrassing given how smart the world thinks they are.

snake117• 11 years ago

I would think at this stage it is all about growing. In fact, even well established companies like Facebook are still trying to grow. I can't imagine Zuckerberg's Internet.org movement was created for the sole purpose of bringing internet to underprivileged areas of the world; he wants to spread Facebook's influence to those regions as well. And at the very end all investors want to see is growth and a high ROI.

nashashmi2• 11 years ago

The article should have been titled "never lose momentum". Burnout is always a big thing. And distractions are even bigger. And complacency is fall of many.

lanstein• 11 years ago

One common theme from the YC CEOs I've talked with (maybe 8-10 - small sample size, etc.) is that post-YC they don't know the basics of sales (what a purchase order is, etc.). It would not surprise me if this was part of the reason.

bsbechtel3• 11 years ago

Could you expand on this? I'm curious.

marrone12• 11 years ago

Basically everything that's important to running a real business beyond coding. Accounting, finances, HR, etc are all real challenges.

7Figures2Commas• 11 years ago

At the end of a YC batch, the general consensus among the partners is that about 25% of the companies are on a trajectory that could lead to a multi-billion dollar company. Of course, only a handful of them do. Most go on to be decent or bad.

Pure hubris.

The main problem is that companies stop doing what they were doing during YC—instead of relentlessly focusing on building a great product and growing, they focus on everything else. They also work less hard and less effectively—the peer pressure during YC is a powerful force.

No, the problem is that it's difficult to build a large company. High growth is easy in the beginning when you're going from 0 to $100,000, but try going from $100,000 to $100,000,000. "Fake work" isn't what prevents the vast majority of companies from doing this.

grndn• 11 years ago

Couldn't this just be a form of the "Sports Illustrated cover jinx", that is, regression to the mean?

rokhayakebe• 11 years ago

My favorite fake work is "I am doing research." It is also the most important work one can do prior to making decisions, however it just gets to one point where you have to admit to having enough data to move forward.

powera2• 11 years ago

I know that Sam knows 100 times what I do about failing startups, and that some probably do fail for this reason. But I think this meme that "your startup probably failed just because you stopped trying hard enough" is awful.

Even Sam says IN THIS ARTICLE that "Also, very small startups can grow by sheer force of will, even with a bad product." Looking at the TechCrunch reviews, I think probably half of these companies will turn out to be pretty bad products in hindsight that could never have gone anywhere.

sama5• 11 years ago

That's why I said:

"instead of relentlessly focusing on building a great product..."

But I think it's probably very difficult to tell a great/bad product from reading a paragraph on TechCrunch.

powera2• 11 years ago

I wouldn't say that any of these are bad based on TechCrunch; I mean more that there were something like 3 products that sell machines that sell food, and there's a chance in 10 years we'll say "there was no way that a food-machine product could have become a large business". And regardless of how hard they all work, I don't think it's possible that there will be 3 different "billion-dollar businesses" here.

the-dude• 11 years ago

Actually this is the standard feedback in MLM and pyramid schemes. It can never be the system because we are rich already: it must be you.

dewitt• 11 years ago

This post is probably the best reason I've seen yet to be a YC startup. The investor who can call you out on stuff like this is the investor you want.

ceejayoz5• 11 years ago

I, too, can tell you to work harder.

I, too, won't pay your therapy bills after you burn out from working 16/7 work weeks for months/years on end.

dang4• 11 years ago

This is emblematic of many cynically dismissive comments in this thread.

The article is about the difference between real work (that moves a startup forward) and fake work (that does not). People often work very hard at the wrong things, so Sam's advice has nothing to do with "work harder". "Work smarter" might have been closer, if we're going to pick a half of that cliché. To take a post that is clearly trying to help save founders from a lot of unnecessary work, and twist it into something sick, is pretty uncharitable.

I keep thinking about adding the Principle of Charity to the HN guidelines. What good comments would be ruled out if we did this? It would certainly rule out many bad ones.

http://philosophy.lander.edu/oriental/charity.html

dreamdu5t2• 11 years ago

Be careful drinking that koolaid.

hyperion2010• 11 years ago

YC is a coaching environment. Imagine if you took a professional soccer team and removed the coaches for a month. They would start loosing and if they didn't you would find that one of the players had taken on the role of a coach. This is almost certainly what is happening here.

jonlucc• 11 years ago

So maybe YC isn't long enough to turn players into coaches?

krlkv2• 11 years ago

It might be long enough for some, but not the others. Startups need to have majority of things right even before getting into YC and then improve more under YC mentoring.

wbeckler• 11 years ago

This pre-investment spike for startups reminds me somewhat of the pump and dump marketing tactics of a more mature company looking for a sale or an IPO. I've been in companies that have done this: go overboard trying to game some unsustainable metric, such as top line traffic, until you don't have to anymore. If you have done digital marketing for awhile, you can come up with dozens of ways to "grow" your metrics that appear sustainable on the surface but have some kind of catch that makes it impractical long term.

bsbechtel3• 11 years ago

I believe this could be a problem in general, but I keep thinking about a recent high profile failure from YC - Homejoy. They had a number of problems with their platform, but from what I've gathered through the press/blogs is that they focused too much on (geographical) growth after their $38mm round at the expense of fixing issues with quality and their business model (costing them retained users and continued local market growth). I think this is an outlier to Sam's theory, but it also provides some food for thought.

steven2012• 11 years ago

"So how can startups avoid this slump? Work on real work."

Simply working hard does not guarantee any path to success, at least in the world of startups. You can work extremely hard, do no "fake work", and have really great product and the vast majority of startups will still fail. You need a great deal of luck as well, ie. #rightplacerighttime, and that's something that isn't admitted by VCs whatsoever.

tlogan• 11 years ago

This is an excellent blog: "Focus on growth and never lose momentum. Momentum cures everything. "

I have one question: What to do if your growth flatlines even if you work super hard? How to approach that problem? (I know that there is no simple solution for this - but what would general approach to solve lose of momentum).

espitia• 11 years ago

"Stay focused on building a product your users love and hitting your growth targets."

How can you grow without a product users love? Say your retention rate is nowhere where it needs to be yet, isn't it counterproductive to work on getting more users when you those users won't stick around?

webmasterraj• 11 years ago

I have to disagree with a lot of people who seem to be saying that "working hard" necessarily means torturous 100 hour weeks.

I don't think the measure of working hard is counting how many hours you're at the office. I think the signal of working hard is how often you let yourself get into your comfort zone and coast.

I think working hard means pushing yourself out of your comfort zone - continuously. It means forcing yourself to ask the hard questions about your business you're scared to ask. It means figuring out how to do things you're not good at, like hiring or selling. It means identifying the most important problem for your company today, and tackling it, even if it's not what you want to be doing.

I'd guess that during YC, the partners and the community act as a force to keep people asking the hard, honest questions about their business. And I'd guess that after YC, without those outside forces, people revert to their default comfort zones, with things that feel nice. Getting press feels nice. Going to conferences feels nice. But what's true early is true later too: it's the work that doesn't feel nice that usually matters most.

You could spend 40 hours a week in the office doing the right things, or 100 hours doing the wrong ones. One of those will lead to growth, the other one won't. And it doesn't have to do with the hours.

mreiland3• 11 years ago

but you won't compete with someone spending 60-80 hours/week doing the right thing.

Which is why people talk about it the way they do. The doing it right is assumed.

rexignis• 11 years ago

What a contentless article, "Work harder! Grumble grumble grumble." We all know that none of these VC "gurus" are actually cleverer than the rest of us, but yet we give them an audience for empty posts like this because their job is (hilariously) to maintain the VC guru image.

I just don't get why these "insightful advice" posts ever gain traction.

mindcrime3• 11 years ago

Momentum is definitely a big thing. When you get a little bit, everything seems to feel a little bit easier. Your morale and confidence peak, it's easier to stay motivated and focused, and the sky even seems bluer. OK, maybe not that last bit, but you know what I mean.

We were in a place like that towards the end of last year. We got invited (finally, after several applications) to the CED Tech Venture Conference, which was an important chance to raise our visibility, meet investors, etc., and I had speaking engagements lined up at All Things Open, Tri-JUG and an NCTA event. In the span of 2 months we had 4 big chances to be "out there" getting our name out, and we had some really cool new stuff ready to demo... life was good.

And then two weeks after All Things Open, I find myself on the back of an ambulance, being rushed to the hospital with a heart attack. Talk about your momentum killers. :-(

After that, things went into something of a tailspin. Obviously there was a period of time when I couldn't have cared less about startups, business, or even technology. I was just happy to be alive, and was focused on bike riding, diet, and cardiac rehab. But all through that, I figured it would be easy enough - eventually - to step back into working on Fogbeam and get things moving again. As it happens, it hasn't been quite so easy.

I mean, don't get me wrong... I'm back. Definitely, absolutely, 100%, back. But I can only say that as of maybe sometime in the past month. But there was a 9 month gap in there where I really just wasn't in the right place mentally to focus on this. It's hard to explain, as I was back to normal physically within a couple of months, but the mental recovery was actually the harder part, and getting back to where I am excited about technology and excited about building a company took a LOT longer than I expected.

I had a little false start back in Feb., when I wrote some code, did some stuff, and thought I was back on the horse, but it didn't last. It's been discouraging to deal with all this, and even more so very exactly because all of this happened when we did have some momentum going. Now I find myself wondering what it's going to take to get that back.

I guess there are a lot of things that can kill your momentum: the "fake work" that sama talks about, dealing with fundraising, dealing with acquisition talks, whatever. But from my personal experience I'll just throw in "health issues".

I'm sure you guys get (or will get) tired of hearing about this from me, and I am generally not the preachy type but I'll reiterate this again: pay attention to your health. No, really, do it. It's super easy to assume you're indestructible and immortal, and to push aside concerns about health. I know, I lived that. And the younger you are, the easier it is.

But trust me, it's not a good idea to blow that stuff off, no matter how young you are. Don't say "I'll wait to get back in shape once we have our exit". I mean, there probably won't be an exit if you're dead; and if there is, you won't exactly benefit from it. And remember, on things like heart disease, the artery damage that leads to heart attacks and the like, can begin really young. Even as young as your teenage years. So no matter how busy you are, or how old you are, NOW is the time to start eating right, lose weight, quit smoking, whatever it is you need to do.

Sorry, I'll step off the soapbox now.

mreiland3• 11 years ago

I'm genuinely curious, how old were you when you had the heart attack?

mindcrime3• 11 years ago

I'm genuinely curious, how old were you when you had the heart attack?

I was 41.

sparkzilla• 11 years ago

Is it really the case that out of this startup batch that "25% of the companies are on a trajectory that could lead to a multi-billion dollar company"? I haven't really looked at this batch, but I highly doubt that 25 out of the current batch have that ability, just on common sense and past performance.

GiusCo• 11 years ago

Are there statistical differences in slumping rate between pure-software startups vs domain-specific startups that use software as a tool? Numbers, please. Thanks.

param• 11 years ago

Seems like it would be a simple inexpensive investment (probably completely outsourced) for YC to set up fortnightly (down from Tuesday dinners/weekly) dinners for founders of a single batch to come and report updates to each other.

I recall reading somewhere that YC batches are now split into clusters because there are so many companies in each batch. Maybe these dinners can be cluster specific as well.

As the companies grow in size, they can democratically decide to reduce frequency to monthly - I can see how changes would be slower as the companies become larger.

Edit: To clarify, this is purely a peer group - no YC presence needed. Have to do it this way to scale.

babababa• 11 years ago

I think there's also a theme around young founders, the ability to work as a team when the going gets tough, hubris, and the fame that comes with being in YC.

During YC, you're in a very controlled environment - everyone around you is working hard, you have a deadline, you don't have money, and you just focus on building, etc. Once you leave YC, suddenly, a few things happen (I've seen this with exactly 2 start-ups so apologies for extrapolating):

1. You suddenly have a lot more money, and simultaneously lose the very guided structure you had at YC

2. A lot of YC founders are young, haven't worked in teams with different personality types, etc before and they have to learn how to manage people and each other

3. Because growth is the only thing they've been taught to look for at YC, at the first sign of any slowdown in growth (which could be natural and acceptable, or due to some other reason), they start freaking out and churning. This further exacerbates point 2 and they start stressing out their team and each other

4. There's a bit of a personality cult around YC founders right now - I recently attended a YC party in an apartment in a fancy high-rise in SF and it's amazing how many hanger-ons that were there fawning over the founders. It was a very SF start-up version of a celebrity night-club in LA/NYC. This unfortunately builds on the narrative of infallible YC founders who are building great billion dollar companies, etc

I guess where I'm going with this is that in addition to just growth, folks need to be taught how to work in teams, how to gear up to build a longer term, sustainable company, and to appreciate that they can and will make mistakes, but they need to handle that with grace and maturity.

orthoganol• 11 years ago

and it's amazing how many hanger-ons that were there fawning over the founders. It was a very SF start-up version of a celebrity night-club in LA/NYC

Lol... I think your YMMV on what you encounter here, maybe I just know the boring founders that could care less about social status. In fact I think the ones who care about social status are by and large the ones who don't actually get accepted.

Uptrenda• 11 years ago

So tl; dr: keep working hard.

eloff4• 11 years ago

Not hard. Smart. Work on the right things is what the article is all about. You missed the point.

lordnacho• 11 years ago

Make them stay for longer. That way the good habits are more likely to build. Have you considered that?

subdane• 11 years ago

Something about "startups fail because they simply don't listen to us, get confused, and stop working" feels wrong coming from the President of YC. It bothers me that there's no institutional or personal responsibility being taken. It also bothers me that the risk the founders took isn't being acknowledged - that all the failures are being placed back on the founders' shoulders. YC selected these founders from thousands in an incredibly selective process. Why is Sama crapping on alumni? Wouldn't you want your president going to bat for you and defending your efforts?

coffeemug• 11 years ago

Why is Sama crapping on alumni?

I don't think he's doing that at all. He merely observed a negative pattern that many startups tend to fall into by default, and warned people about that pattern. The tone of the post is clearly "it's easy to make this mistake, don't make it", not "if you make this mistake you're an idiot." The latter interpretation is perhaps the least charitable you could have picked.

I do think there is a kernel of truth in your comment. YC tests a lot of assumptions and tries a lot of things. Many of the tests work out, some don't. This means that at some point they've necessarily given founders bad advice that people then went on to execute on. I think that's something worth acknowledging explicitly (e.g. "hey, we thought this was right but it turned out to be wrong; sorry"). But there is a huge gap between that, and what you referred to as "crapping on alumni".

pesenti• 11 years ago

How about backing these assertions with real data? Can YC show that companies are more likely to flatlines post-YC vs. while being coached? Or is that simply due to fast growth being hard to sustain? A careful statistical analysis of the growth of their companies, given the large sample they have, could have made this an interesting post rather than just a smug one...

help_everyone• 11 years ago

Not sure how I feel about cleaning up a code base as doing "fake work".

nashashmi2• 11 years ago

It does not lead to the growth of a company directly. Better to work on more features than to work on cleaning up the desk.

baldajan• 11 years ago

I agree and disagree with this point. The absolute worse thing a startup can do is to "flip"/"redo" their code base, in an attempt to clean it up. We learned that the hard way last year. That said, going through code and occasionally cleaning a class or two in order to achieve a desired feature can save time while debugging, usually a lot.

This is like most things in life, taken in moderation = good for you, but the extreme might kill you (or in this case, your startup).

msellout• 11 years ago

One can easily gain momentum by simply adding mass, which is completely the wrong metaphor. Let's end the practice of misusing the word "momentum" in business. Use "velocity" or simply "speed".

imh• 11 years ago

Burnout seems to almost always affect founders whose startups are not doing well...

There doesn't seem to be an obvious causation here. I could totally see either causing the other, or there being a common cause of both. Seems weird to just assume burnout is a result of doing poorly.

trcollinson• 11 years ago

A lot of comments seem to be making a horrible comparison between "relentlessly focusing on building a great product and growing" and working long hours. There is no rule that says you must spend 120 waking hours in the office to be relentlessly focused on building a great product and growing the business. In fact, if anything sama is pointing out that people are wasting time with work that does not focus on building a great product or growing.

A member of a YC batch seems to have only a few obligations. There was occasional office hours which help to keep the batch on track with objectives to reach product or growth excellence. They have social events, which are good for learning and more general. They have a few demo type activities which are, again, around product and grown excellence. The rest of the time they work on... product and growth excellence. Do they have to work on things more than 40 hours a week? No. Is there a time clock where they share their hours? No.

Granted they are often out of their normal environment and very excited so they do work more than 40 hours. But that is a choice not a requirement. There are many examples of founders who bring spouses and children and find time during their batch for having great family experiences and good work/life balance.

The issue seems to be when they get home. They no longer spend 40 hours working on growth and product excellence. They work on marketing themselves. They work on raising more money. They work on PR. They lose the product and grown momentum.

We need to stop turning this into a conversation about how "start up founders must give up work/life balance to succeed". No one is suggesting that. What is being suggested is that you take what you learn in a 3 month period and use it after that three month period. Don't work longer, work smarter.

Edit: If the down voters would care to discuss why they object to this opinion, do feel free.

rwhitman2• 11 years ago

"But the list of fake work is long."

I would honestly really love to see a full list of tasks and activities that could be classified as 'fake work'.

bwilliams18• 11 years ago

Generating that list certainly qualifies as 'fake work'.

rwhitman2• 11 years ago

This immediately occurred to me as the reason why such a list is not easily found.

Nimitz14• 11 years ago

I'm surprised how many people here seemed to have missed the point of the article.

What the author is talking about is how there are a lot of fun things one can work on that could be useful at some point in the future. But probably not within the next week or month. Instead, the author is saying to focus on the things that will without a doubt be useful within the near future (<month).

JacobAldridge• 11 years ago

After the startup curve, the focus has to be about Revenue. And in a simple way, there's a formula, and activity outside of this formula is a lot of the 'fake work' Sam mentions.

Revenue = Value x Sales Activity x Conversion Rate x Retention

The specific approach will differ depending on your size, your vision, funding or bootstrapped etc, but the fundamentals are the same.

Value: Covers getting your business model right. Volume x Margin, Product-Market fit kind of thing. It's essentially a hypothesis you're taking into Sales activity and refining.

Sales Activity: Includes lead generation, but I don't like to put 'Marketing' as a separate heading because blogging and chatting to bloggers is the easiest way to feel busy and achieve nothing. Are you getting in front of clients?

Conversion Rate: And how many of your clients are actually buying? Track this! Segment it when you can! [channels the power of Danielle Morrill] "Know your numbers!"

Retention: Obviously depends on the business model, but ongoing or repeat clients are lovely. In a recurring revenue business, churning a client for every new one you bring on board wastes all the previous steps.

rdlecler1• 11 years ago

We felt this coming out of 500 Startups B12. We were a team of four, we had limited analytics in place, we were ranking horribly for SEO, accounting was a mess, and we were doing a ton of things that didn't scale which we needed to now scale. Post demo day we had to worry about fundraising, then recruiting, hiring, and now training--and in some cases firing, and starting all over again. If we get this iteration wrong we're doomed to fail. Basically we needed to add a whole new level to our pyramid and we need to find people we can delegate tasks to do that the process scales and so everything has come to a grinding halt for a few months. If you raise more money quickly it may be possible to attract more & better talent at the top of the funnel and run this process more quickly but it's been a massive growing pain for us.

vasilipupkin• 11 years ago

don't you think part of it is, startups that are not clearly hotshots that are going to raise a ton of cash quickly end up needing to focus on fundraising, and, as an investor, I would expect significant adverse selection on those startups that didn't land big time backers right away

rdl• 11 years ago

Bullshit fake work is way worse than strictly time-boxing work. A focused 20-40h/wk is a lot more effective than 100h/wk of working on 90% bullshit, particularly because the bullshit reduces your per-hour marginal productivity as much if not more than real work, so you're not even getting just 10h of real work. And because 90h of bullshit this week means, due to sunk cost fallacy, prior commitments, etc., you're basically going to have to spend at least 50h the next week on similar bullshit.

krlkv2• 11 years ago

Yep. Time tracking software is quite good at proving this. When one becomes disciplined in tracking "focused work", it becomes obvious that these mythical 60-100 hour work weeks are nonsense.

BatFastard• 11 years ago

"Raising money and getting press is fake work"

Raising money is not fake work if you don't know how you are going to pay your team in 6 months, or 3 months, or next month. Twice I have taken out a second mortgage on my house to pay my team, its not a good idea. Press seems to be a necessary evil, again I have made the best product on the market, only to go unnoticed because of lack of press coverage. Its not like 99.9% of the press are out looking for a great product, they are being lead by the PR agents.

I agree raising money and getting press are "non productive work" as far as product advance goes. But so are things like washing the dishes in your house, they don't help you get more work done that day, but it is a needed part of the system.

So maybe y-combinator should take those two VERY important survival aspects over for the 25% of companies that they feel are the unicorns. For another 10% they will make sure they have enough money for the next year, and that they will get the press they need. Seems like a natural extension....

Schwolop• 11 years ago

Agree with the first part, less so the second. YC is (rightly) worried about signalling risk. If they exposed who they thought the 25% were, the other 75% would struggle to get funding.

throwaway41597• 11 years ago

typo: "Many YC startups learns these lessons" (s/learns/learn/)

The Post-YC Slump

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