Did Sam Altman make YC better or worse?

https://techcrunch.com/2019/03/09/did-sam-altman-make-yc-better-or-worse/

133 49 7 years ago

It takes a long time for companies to mature and allow YC to cash out so we will wait and see. (At least from a retrurns perspective ).

sokoloff2• 7 years ago

What would you have to believe to think that Sam didn't make YC better? What evidence do you have to think that?

During his tenure, YC got much bigger, funds many more startups per year, has made initial seed funding much more available, and perhaps most importantly, planted in the heads of many more people that it is even possible to start a startup.

In a very real sense, the president owns much of the success and failure during their tenure. I'd say YC has become an increasing relevant player and that that relevance is overwhelmingly good for hackers.

JumpCrisscross2• 7 years ago

What would you have to believe to think that Sam didn't make YC better?

Stage- and cycle-adjusted returns, average outcomes for founders and first employees and metrics of social impact pre, intra, and post tenure (internally and relative to industry). The neat thing, with YC as Altman’s built it, is we’re relatively able to compile such metrics. That’s tough with other VC firms.

ryanwaggoner4• 7 years ago

YC got much bigger, funds many more startups per year

It’s not clear that this is better from YC’s perspective (or more importantly, from their LP’s perspective)

tyingq• 7 years ago

The muted tone of the YC blog post probably fueled the speculating. No recognition of contributions, thanks, for example. It read like a less than happy departure.

skilled• 7 years ago

I'm not a fan of these opinionated articles.

At1C• 7 years ago

Top Marks hit the nail on head. Can't upvote you enough (:

dang• 7 years ago

We often downweight them off the front page, unless they contain unusual or significant information. But we do that less on stories about YC because otherwise people perceive it as censorship.

https://hn.algolia.com/?sort=byDate&dateRange=all&type=comme...

nahimn• 7 years ago

Regardless of YC per se, I think he's made startups better. The content produced for free for startups (StartupSchool) has been key

dpwm• 7 years ago

investing $150,000 in exchange for 7 percent of each company

The article makes this sound like these are unfavourable terms that come back to bite founders. But surely at the stage YC invests these are higher-risk startups – where 7% for 150k seems somewhat more fair.

In any case, I thought the whole thing with YC was that it invested at a stage when VC funding wasn't typically available for things that can't be bootstrapped – where 93% of something is a lot better than 100% of nothing.

ElBarto• 7 years ago

"investing $150,000 in exchange for 7 percent of each company — a stake that it can maintain throughout the company’s life it it so chooses, per its pact with its founders."

I think the issue might be the second part as, if I understand correctly, it means that YC is insulated against dilution without having to invest a penny more.

Considering how many startups apply I would say that more than enough people are happy with those terms, though.

wjossey3• 7 years ago

I’m not a YC company founder but that’s not how I understand their terms to work. They can follow in subsequent rounds to maintain their percentages but they aren’t “locked in” at 7%.

—-Edit——

Yeah. They have pro rata rights to follow in their agreement.

sjbp• 7 years ago

I think that refers to standard pro rata rights, which gives the right to invest in subsequent rounds of funding to maintain their ownership.

So they would have to invest their pennies :)

ganeshkrishnan5• 7 years ago

I think the issue might be the second part as, if I understand correctly, it means that YC is insulated against dilution without having to invest a penny more.

No this is incorrect. They have the ability to top off their investment to maintain their stake. Implicitly this investment would be at lower valuation.

This is a standard procedure for most 'early stage' accelerators although yc is hardly early stage

ganeshkrishnan5• 7 years ago

YC doesn't seem to invest in higher risk startups anymore (except exciting moonshots). They used to invest like an accelerator but recently they are more like a VC (More traction required before they even consider you) AND also has to be billion dollar target market.

If you want bootstrap money you are better off applying to local accelerators or incubators.

That said, with their signalling , 7% for $150k is a generous offer and not at all un-favourable.

ryanwaggoner4• 7 years ago

Hmm, that’s not my impression. I’m constantly seeing YC startups “in the wild” that seem pretty damn niche. Maybe they did pitch with some path to a billion dollars but it’s not at all clear how that would ever realistically happen.

DamnYuppie• 7 years ago

I don't agree with the notion that you need lots of traction to get into YC.

I was part of the W18 batch and I can only think of a few of the 100+ companies who had revenue streams. Some had $1M+ Annual Re-occurring Revenue but the vast majority were under $5k Monthly Re-occurring Revenue most were at $0. It was fun to watch many of them really ratchet up their sales in the 3 months of the program. As I recall there were quite few in the bio/pharam/med space and they were mostly dependent upon grants at the time of joining YC and were still years away from true profitability.

My exposure and knowledge of all local accelerators/incubators is obviously limited. Yet I have not seen or head of any local accelerators or incubators that have anything that comes close to YC's demo day. It is a value unto its own and quite the spectacle.

projectramo• 7 years ago

YC is different.

Consider: "YC’s terms, which see it investing $150,000 in exchange for 7 percent of each company — a stake that it can maintain throughout the company’s life it it so chooses, per its pact with its founders."

If this is true, it can afford to do different things. Picking the wrong company does not matter. Picking the right company matters a lot. In other words, false negatives are much worse than false positives.

With that type of structure, the more they take on the better.

Sam's philosophy -- from his talks and such, I don't know him personally -- seems to align perfectly with this reward structure. He has grown it in the right direction.

Now, the hit rate will necessarily be lower, and that might hurt another organization but because of their unique structure, I think it helps YC.

subfay• 7 years ago

This is normal, people come and go and Sam is a superb guy.

The communication about his leaving though, was subpar (to use a polite wording) and seems just off. No strong appreciation/thanks for his time neither from YC's LPs nor Graham. Also his next challenge sounds not like something significant, rather like a rushed filler.

So, this feels like an overnight decision from whomever and doesn't leave a good taste on YC either. That's just not the way to say goodbye (after five years of being together).

However and again: this happens everyday but Sam should have had a communication pro on his side framing the situation properly.

Sam, I wish you all the best and hope to hear from you soon again!

JumpCrisscross2• 7 years ago

people come and go

Given the murkiness of GP-level VC economics, it’s often tough to evaluate departing managers. Altman, by running YC more like a company or institution than traditional VC firm, offers a unique opportunity to examine that part of Silicon Valley.

I also think his tenure raises valid questions of what early-stage investing should look like and aspire to be. Operationally limited and difficult to access but de-centralised, i.e. friends & family and angels? Or involved and more accessible but centralised?

jamestimmins• 7 years ago

Given that Sam has acknowledged that he spends most of his time on OpenAI already, and this article mentions that he hasn't been involved with the operations at YC for a while, this sounds like a case of the org chart catching up with the existing structure.

I wouldn't be surprised if this indicates few, if any, changes other than formally removing the CEO title. In light of that, it's possible that they tried to downplay the public message because internally not much has changed and it truly isn't a big deal.

This is pure speculation, of course.

sokoloff2• 7 years ago

$150K for 7% is one of the best deals available for early stage companies, IMO. I really do agree that (for early stage companies at least), it's basically a judgment or IQ test. If you're offered it and turn it down, you're overwhelmingly likely making an error.

https://news.ycombinator.com/item?id=21791 (note that it was 7% for $15K + a small amount per extra founder at the time; at that point, it was probably still a good deal for most teams that were applying)

leroy_masochist• 7 years ago

Perhaps unsurprisingly, the article doesn't really answer its own question, it's basically "wow a lot sure has changed in the last decade, some of it good and some of it bad".

I think if you apply standard CEO metrics to Altman he did pretty damn well. YC has grown tremendously under his tenure and its reputation is still great, its startups are still making money as investments, and organizations the world over are copying one facet or another of what YC does.

ryanwaggoner4• 7 years ago

Isn’t it way too early to say? You’ll probably be proven right but isn’t almost all of the value of YC from a handful of startups funded before Sam’s tenure? They could have wasted every single investment dollar for the five years and still be worth billions thanks to Dropbox, Stripe, Airbnb, etc.

supermw• 7 years ago

I could keep throwing money into my stock portfolio, did I make it better, or worse?

The only metric that matters here is ROI.

Did YC increases its ROI and produce a higher percentage of successful startups during Sam Altman’s time? This is the question to answer, and the one upon which he shall be judged. Everything else is pure vanity.

ganeshkrishnan5• 7 years ago

Stocks are very different from startups. For one, if YC invests even in something absurd like "Tinder for Potatoes", the value of the startup goes up.

You can't achieve the same effect for stocks unless you are investing millions in low cap stocks to prop up it's values and even then short sellers will squeeze you out.

thetrumanshow2• 7 years ago

I'm just an outsider, but I was lured to HN and the idea of YC by the cult of personality around PG long ago (we even applied for the first batch).

PG seemed like someone who didn't have all the answers, but was on a journey to find them and he was happy to take you with him.

By contrast, my first take on Sam was that he came across as more matter-of-fact and confident which was a slight turnoff for me. But, I think he was a fine choice to take the helm.

I do miss the cult-of-personality days :).

omouse2• 7 years ago

Same here, there's a huge difference between YC in the early days and now.

the Series A program, which coaches seed-stage alums on how to nab follow-on funding

Pushing startups further into the hands of VCs who'll get rich whenever they're acquired or IPO.

YC China, a standalone program that will be run out of Beijing once it gets up and going

Lots of ethical questions about this that are just never answered. Is it okay to funnel capital into another country that is vastly different from the US in terms of politics, market, etc.?

“We’ll fund a lot of people doing a lot of things that sound really dumb, and most of the time they will be. And some of the time, it will seem like a bad idea and be jaw-droppingly brilliant. The very best startup ideas are at the intersection of the Venn diagram of, ‘sounds like a bad idea,’ ‘is in fact a good idea.'”

This particular quote from Altman just reminds me of PG's essay on why smart people have bad ideas: http://www.paulgraham.com/bronze.html

It just makes me see OpenAI as suspect now because they just opened a for-profit branch? And they are keeping some of their research hidden? I mean, where's the openness in that?

bcyn• 7 years ago

Lots of ethical questions about this that are just never answered. Is it okay to funnel capital into another country that is vastly different from the US in terms of politics, market, etc.?

Why would it not be? What are the ethical questions here?

The US is certainly not on some ethical highground such that considering funding companies in different countries is questionable.

titanomachy• 7 years ago

I don't think I'd read this essay before. Interesting quote:

"We expected the most common proposal to be for multiplayer games. We were not far off: this was the second most common. The most common was some combination of a blog, a calendar, a dating site, and Friendster. Maybe there is some new killer app to be discovered here, but it seems perverse to go poking around in this fog when there are valuable, unsolved problems lying about in the open for anyone to see."

It sounds like a lot of people were trying to make Facebook in 2005.

ballooney• 7 years ago

This might seem cynical but I mean it quite honestly: I don't miss them.

I think the cultural winds have changed anyway, post Jobs, as the wider perception of SV has gone from tech utopia to bro dystopia etc, where there's less collective naiveté and appetite for cult-worship (though still enough for a steady stream of people to throw their best years at someone else's get-rich gamble). PG probably left at the right time when he sensed the winds changing. I don't think the trajectory would have continued if he had stayed. This might all the wrong, of course.

petercooper• 7 years ago

This question comes from a position of good faith and mere curiosity, but I've always been intrigued how Sam became prominent in YC so quickly (part time partner to running things in 3 years)? I know he founded Loopt but that's all I knew about him before he became a partner. Did PG just really get on well with him and saw someone capable to help take things over? It sorta feels like an inspirational story worth knowing more about.

(As I say, this merely comes from a position of curiosity. Sam seems to be a very capable guy and seems to have done a good job.)

rmobin• 7 years ago

PG holds Sam in very high regard:

"Honestly, Sam is, along with Steve Jobs, the founder I refer to most when I'm advising startups. On questions of design, I ask "What would Steve do?" but on questions of strategy or ambition I ask "What would Sama do?"

What I learned from meeting Sama is that the doctrine of the elect applies to startups. It applies way less than most people think: startup investing does not consist of trying to pick winners the way you might in a horse race. But there are a few people with such force of will that they're going to get whatever they want."

http://paulgraham.com/5founders.html

basch• 7 years ago

"The guy I picked to run my company belong in the same sentence as Steve Jobs." Of course you would say that while handing over the reins, to build confidence in him, and in your choice to choose him.

Im not saying its not true, just that their is other motive.

nodesocket• 7 years ago

Altman also diversified the types of founders that YC admits (though it could do better

And there it is, the omnipresent pushing of equality of outcome from TechCruch.

awwstn2• 7 years ago

Certainly, it is much changed. When Altman was handed the reins, YC had just graduated 67 startups, all of them from the U.S

This is definitely wrong. Don't know how many companies had gone through YC by 2014, but my guess is it's nearly an order of magnitude larger than 67.

dgemm• 7 years ago

It reads to me as 67 startups graduated in that year.

awwstn2• 7 years ago

ohhhhhhhhhh

my bad...although that still reads a bit unclearly to me

Did Sam Altman make YC better or worse?

Related Stories