Graham writes an article about Livingston’s’ role in Y Combinator, saying she should have more credit.
So although Jessica more than anyone made YC unique, the very qualities that enabled her to do it mean she tends to get written out of YC’s history. Everyone buys this story that PG started YC and his wife just kind of helped. Even YC’s haters buy it. A couple years ago when people were attacking us for not funding more female founders (than exist), they all treated YC as identical with PG. It would have spoiled the narrative to acknowledge Jessica’s central role at YC…Jessica knows more about the qualities of startup founders than anyone else ever has. Her immense data set and x-ray vision are the perfect storm in that respect. The qualities of the founders are the best predictor of how a startup will do. And startups are in turn the most important source of growth in mature economies.
Graham talks with Cloudant’s Miller about the new role developers play in society:
Programmers are becoming more powerful. It used to be that programmers had their tools chosen for them by managers. Now increasingly the can pick their tools and the managers have no choice but to go on with it. Everybody knows this phrase BYOD –Bring Your Own Device. But there’s another phenomenon happening, where you bring your own tools — BYOT.
Graham interviews Conway for the Y Combinator event. He says founders must have a dedicated work ethic, get along with their co-founder, and not be afraid to make changes like laying off people who aren’t performing. Conway:
You can’t learn to be ambitious and driven.
Graham responds to criticism that being a Y Combinator alum gains companies twice the valuation they would have had without participating. He tells Bloomberg Television’s Studio 1.0 with Emily Chang:
That means we can take people into YC, and even if we did nothing else, they would be able to get twice the valuation they would have otherwise. Either the company’s worth a lot or it’s not. If it’s worth a lot, then it was a bargain anyway, even if it was overpriced. And if the company ends up tanking, who cares how much you paid for this now worthless stock, right?
Graham and Livingston are interviewed together for the first time. They talk about the selection process for Y Combinator companies, how the best founder teams are genuine friends rather than people who are just working together, and why Graham stepped down. Graham on how to initiate a startup:
The best way to start is not to start. Don’t even start a startup. Start a project.
Livingston on whether the firm would consider follow-on investments in successful projects:
We never say never, but the problem is that is that there’s a signaling thing. Follow-ons would hurt the founders who are probably a great investment but that we just didn’t choose to do a follow-on with.
Graham says in Lecture 3 of the Stanford course that startups are counterintuitive in many ways, including that many founders don’t know the mechanics of investing or fund raising. He says founders also can’t game the system:
They always want to know, since apparently the measure of success for a startup is fundraising, another noob mistake. They always want to know, what are the tricks for convincing investors? And we have to tell them the best way to convince investors is to start a startup that is actually doing well, meaning growing fast, and then simply tell investors so.
Rose interviews Graham at Disrupt about how to pick successful founders, what Y Combinator does and how it got started, and whether a startup is easier to create now than it was in the past. Graham:
It used to be that what cost money was getting a computer, now everybody has a computer, you needed money for a fast internet connection but now everyone has one
He says the mechanisms for providing funding from investors to startups have also become much smoother.
Graham announces that he is stepping down from his day-to-day role at the site. Kat Manalac and Garry Tan will be take over responding to individual comments, and others will be responsible for design, code and community management.
I’ll still be around as a user, but less frequently than when I felt I had to check the site every hour or so to make sure nothing had broken.
Blecharczyk talks with Graham about his advice for growth for Airbnb as it grew:
It was a piece of advice that he gave us that was our turning point in starting to grow our marketplace. He told us that it is ok to do things that don’t scale. Prior to that we’d been working on Airbnb for a year and, despite everything we did, we couldn’t earn more than $200/week. He gave us this piece of advice, we really took it to heart. We went to New York. Photographed people’s properties and met every single user. Invited them for a beer. Told them our story, and really built evangelists out of them. And that was the beginning of how Airbnb grew, first in New York and then cross-pollinated globally.
Cockroaches mean founders whose are unkillable. Their startup is unkillable because they can survive on nothing. Cockroaches survive nuclear winters. Cockroaches survive everything. You guys were coackroaches at the time.
Graham is interviewed by Calacanis at Launch Festival 2014, and talks about his decision to hand over the running of the accelerator to Sam Altman.
Y Combinator’s gonna have to grow. We grow as the number of startups grows and the number of startups has been growing. You saw how it started up – it was in my kitchen. Now it’s got 10 full-time partners…maybe 20 people. 632 startups we funded. It’s turned into this giant thing. I’m no good at running this giant thing. Sam, however, is going to be good at running a giant thing.
Graham gives the keynote speech, and talks about how a successful idea has to start with a small consumer base:
It’s impossible to make something that a large number of people want. You’ve got to find something that a small number of people want, a lot…you’ve got to know who those first users are and how to get them…you sit down with those 500 people and throw a huge party and make them super, super happy.
Graham announces that he is stepping down from his day-to-day role, and Altman will take over.
It has nothing to do with the current startup environment. I started trying to recruit Sam to take over back in 2012…I’m just not much good at running the sort of (comparatively) large organization YC is going to have to become. Sam will be much better at that.
He will stay on as an advisor and will work with startups at Office Hours.
Graham talks about the connection between risk and inequality, and says that economic inequality should be tackled at the stage where wealth becomes power, as decreasing the financial reward for taking risk decreases creativity:
Risk and reward have to be in proportion…if you lop off the top of the possible rewards, you decrease people’s willingness to take risks
Graham clarifies his remarks about women in tech, saying that the article was stitched together from a conversation and published as an interview:
I didn’t say women can’t be taught to be hackers. I said [Y Combinator] can’t do it in 3 months.
I didn’t say women haven’t been programming for 10 years. I said women who aren’t programmers haven’t been programming for 10 years. I didn’t say people can’t learn to be hackers later in life. I said people cannot at any age learn to be hackers simultaneously with starting a startup whose thesis derives from insights they have as hackers.
After a comment he made in a TheInformation interview about how fewer women lead tech startups receives press coverage, transcripts show that Graham’s remarks focused on getting students interested in programming from a younger age to involve more women in the industry, something he says will take time to achieve:
What we should be doing is somehow changing the middle school computer science curriculum.
Graham is interviewed for TheInformation.com and talks about women in technology, how working at startups makes people tougher, and what he says is resentment from investors towards Y Combinator:
You could say, if you think we’re actually good, then envy. If you think we’re not actually good, then it’s because they think we don’t deserve all the deal flow we get. That’s what investors all want. They want deal flow.
Graham is interviewed on stage at the conference about emerging trends in technology. Asked whether he thinks there will be a ‘year of the wearables’ where gadgets like Google Glass take off, he advises ignoring individual trends and looking at commercial uses for wearables:
Never mind these fads…Just think about all the industrial applications, all the people who can’t carry a computer in their hands, mechanics who are climbing around in airplanes, or emergency workers, it’s going to be so useful to just display all the information.
He says there probably won’t be a point where wearables suddenly become widely used:
It will probably be this gradually rising curve.
Graham and Altman host a chat with three Y Combinator startups: George Saines and Nick Winter of Code Combat, a way to learn code though gaming; Karen Cheng and Finbarr Taylor, of giveit100.com, a site where users share their progress at different skills, and Ryan Petersen of Flexport, a digitized customs brokerage.
Graham interviews Conway about what has changed in tech. Conway:
What’s not changed…is you have to have determination, and conviction. You have to be a leader.
He says that in the Altos days, workplaces were less formal, for instance the employees would drink to motivate themselves to stay until 9 p.m.
I think the startups today know how to segment a little better
His assessment is that software companies have to deliver:
What’s not changed is the fact that you have to focus on growth. Back in the hardware days you didn’t have to focus on product or consumer satisfaction as much…Customers were happy just to get it
Zuckerberg discusses writing the first code for Facebook, and says his experience writing games and a music player for himself while young helped.
If you want to be able to connect with the people around you you have to start building software that other people want to use as well.
At Harvard, he wrote a scraper to extract information from the course cataloge and ran the site from a laptop in the dorm room. He says he met Chan at a going away party after Harvard threatened to kick him out. People involved in Facebook focused on developing it for fellow students, and talked about how someone else like Microsoft would likely build the service for everyone to use:
We thought, we’re just college students, what do we know about building software that hundreds of millions of people are going to use?
Graham talks about why startups fail, $1 billion valuations, and how Y Combinator weeds out candidates. On whether the accelerator is underselling the challenges of entrepreneurship:
I’ve written a lot about what a bitch the start-up world is. So, maybe the other incubators are underselling, but we’re not. That being said, everyone is surprised by how difficult it turns out to be, because it’s not the kind of difficulty people have experienced before… Start-ups are hard but doable, in the way that running a five-minute mile is hard but doable.
Graham clarifies a comment he made in Inc. magazine about how Y Combinator chooses candidates, and that a founder with a strong foreign accent can be a bad sign:
The case I was talking about is when founders have accents so strong that people can’t understand what they’re saying. I.e. the problem is not the cultural signal accents send, but the practical difficulty of getting a startup off the ground when people can’t understand you.
In an interview with Ryan Lawler of TechCrunch, Graham discusses the value of the YC investments, how the accelerator dealt with too many companies in a previous batch, and why venture capitalists should move quickly:
Well VCs have financial models for how much they need to invest, and what percentage of the company they need to buy for it, in order to get positive returns. And they’re really nervous, somewhat justifiably so, because if you’re going to lose money as a VC firm you wont know it til about six to eight years later. So these models, they become sort of religious about them. But, they really feel like they can’t buy less than 20% of the company in the Series A round…and in a competitive deal since that number can’t move, then the only number that can move is the valuation.. That means that the amount invested increases, arbitrarily. These companies would like to sell half as much stock for half as much money, but that’s not one of the options. If there was a VC that broke ranks and said they would give companies the money they actually need instead of it being determined by random external forces, they would get all the good startups.
Graham says that 37 Y Combinator companies have valuations of, or have sold for, at least $40 million.
The newspaper profiles the firm’s Demo Day, speaking with Graham, Altman, and Livingston about the company’s strategy for picking startups to support. Graham:
Imagine an assembly line where Facebooks and Googles come along every few years. You can either pick that cookie off the assembly line or not. If you pick it off, it’s market price, which varies. But if you don’t pick it off, you’re out of the game.
Graham joins the board of Watsi after spotting the crowdfunding non-profit on Hacker News and funding it through Y Combinator. Watsi:
We’re thrilled to have PG as our first board member.
Graham interviews Zuckerberg about the flexibility that being in college allows, and he says that remaining flexible can help a career:
You’re going to change what you do.
Conway stops providing funds to companies in the program as the firm reduces the size of its funding to $80,000 from $150,000. Part of this is due to conflict between startup co-founders. Milner, Andreessen Horowitz, General Catalyst, and Maverick Capital continue to supply funding. Conway will still be involved in the program. Graham says his decision is likely due to SV Angel’s small size relative to the other parties providing funds:
[It] actually didn’t make a lot of sense for [Conway] to be doing it in the first place
Graham brings a second person on board to the site, after he spends three to four hours a day just on moderating duties.
It was becoming my life
Ohanian tells the magazine about his conversation with Graham after Y Combinator rejected his initial pitch:
The next morning, on the train back to Virginia, hung over, somewhere in the middle of Connecticut, I get a call from Paul. He says, “I’m sorry, we made a mistake. We don’t like your idea, but we like you guys.” We got off the train, and I was able to sweet-talk the Amtrak lady into not charging us to turn around. In our conversation, Paul said, “You guys need to build the front page of the Internet.” That was all Paul, and that became Reddit. We built Reddit in three weeks.
The buyout also happened partly by chance:
The acquisition by Condé Nast basically started with a Halloween party, where we met a reporter who introduced me to a freelancer for Wired who told her boss about us. That editor’s husband was the biz-dev guy at Condé Nast. He worked on a licensing deal with us, and everything worked great. So we started talking money. Founders are supposed to be not at all interested in selling. But there is a price at which a founder can’t help being interested.
Graham suggests creating a search engine that could challenge Google, replacing universities with other types of education, and writing code that could make several CPUs look to developers like one fast CPU.
The way to win here is to build the search engine all the hackers use. A search engine whose users consisted of the top 10,000 hackers and no one else would be in a very powerful position despite its small size, just as Google was when it was that search engine.
Graham gives the keynote speech to Pycon, the annual conference of Python programmers. He later reworks the speech as an essay, Frighteningly Ambitious Startup Ideas.
One of the more surprising things I’ve noticed while working on Y Combinator is how frightening the most ambitious startup ideas are. Any one of them could make you a billionaire. That might sound like an attractive prospect, and yet when I describe these ideas you may notice you find yourself shrinking away from them.
He discusses seven ideas: A new search engine, replacing email, replacing universities, movie content on the net, the next Steve Jobs, bringing back Moore’s Law, and automated medical diagnosis.
Graham says Y Combinator is now focusing more on people than ideas, as a team of founders who have been friends for some time will keep what seems like a difficult idea alive in order to not let each other down:
At the stage we’re funding people, at the beginning, the founder is more important than the idea…We’re looking for people who have been friends for a while and worked together on things…Almost every startup has some point where it seems like the startup is doomed, the startup is worthless
Graham talks to Tech Crunch about how demographic shifts mean founders have more power:
That means basically investors have to do things the way the founders want
Asked if that is good for business:
He adds it is more socially acceptable to start a startup, and costs less money, shifting more power to founders and away from investors.
Graham interviews Andreessen about Netscape and how the tech industry has changed. Andreessen:
All of us who were lucky enough to be involved back then were completely unaware of what was going to happen
Graham announces on Hacker News that companies that support the Stop Online Piracy Act will not be invited to Y Combinator’s Demo Day:
If these companies are so clueless about technology that they think SOPA is a good idea, how could they be good investors?
It’s not clear exactly which companies with venture capital arms have supported SOPA. Comcast/NBCUniversal’s Comcast Ventures has a stake in Y Combinator company CarWoo, and listed companies like CBS Disney, GoDaddy, News Corp., Sony, Time-Warner, and Visa have made tech investments in the past.
Graham sits down with aspiring founders at the Y Combinator event, and talks them through their business ideas. He talks about how Wozniak and Gates both got their ideas from solving problems that they faced:
A lot of people decide, I want to start a startup, I need to think of an idea for a startup…The best startup ideas don’t come from people trying to think of startup ideas, they come from people trying to solve problems…All the biggest startups, they tend to come from problems that the founders themselves have.
Sources say Dropbox is close to raising $200 million-$300 million in a round that would value the company between $5 billion and $10 billion. The sources say it has had multiple offers north of $2 billion and informal discussions around $8 billion.
Graham sits down backstage at the TechCrunch event to talk about what makes a successful founder. Determination is key:
People’s determination does change. Some people discover some kind of inner Bill Gates, other people are the sort of people who’ve always had things easy…people think they’re determined and then they see other founders who are even more determined.
On whether flexibility is an advantage or disadvantage:
The right kind of flexibility is to have high variation in flexibility, when you’re sure of something, genuinely sure…then you should stick to that. And with other things, you should be willing to change.
In an interview with Bloomberg TV, Graham says, to succeed, startups must improve lives.
[Startups] have to make something that actually makes people’s lives better. It’s funny how straightforward it is. People often think that business requires some sort of trickery, or you have to corner the market or something like that, but actually you have to make people’s lives better.
He says that startups should not fear competition from companies like Apple and says that out of hundreds of companies he has funded only one (Kiko’s calendar app) was killed by competition.
I spend a lot more time telling people to stop thinking about their competitors, than I do telling them to think about their competitors as a way to work harder. People who are good have this inner drive that makes them work hard anyway. The really successful companies don’t spend a lot of time obsessing about their competitors.
Graham tells the magazine that startup ideas are often bad, and investing in them is investing in people. He says knowing the business and being concise also help. The most important quality Y Combinator looks for:
If you imagine someone with 100 percent determination and 100 percent intelligence, you can discard a lot of intelligence before they stop succeeding. But if you start discarding determination, you very quickly get an ineffectual and perpetual grad student.
Graham talks about the limitations of the VC model:
VCs, if they can get it, want a third of your company…there is a critical constraint in the VCs model, which is they take a board seat.
He says this constrains their ability to launch funding rounds:
[It] limits VC companies to two ‘classic’ Series A seed fund deals per partner per year
Graham appears on the front cover of Forbes magazine, and is profiled in an article as The Disruptor in the Valley.
We didn’t mean to invent this new model. It all happened by accident.
Graham responds to the controversy by detailing what Y Combinator does. He doesn’t directly address Angelgate but says that he ‘realized recently that a lot of people don’t understand very well’ what the firm does. He describes the funding cycles and Demo Days, and includes feedback from one founder:
Most of the practical advice is redundant, but there’s value in it even as such—if you hear the same things over and over again from different angles, especially from prominent people, it tends to sink in more.
Graham talks about starting Y Combinator and funding early participants like Reddit.
That very first summer, I mean, the reason we decided to invest in start ups in batches, all at once, was because we didn’t know what we were doing … For both the hirers and the employees, summer jobs are kind of like a throwaway thing. So, we thought, well, as long as everybody treats summer jobs as a throwaway thing, we’ll have this summer program, and if it turns out to be a disaster, no one will blame us.
Graham and Sequoia Capital’s Moritz are interviewed by Kawasaki of Garage Technology Ventures about how founders need to have a passion to succeed. At one point in the chat, asked what the next big wave of inventions will be, Graham says it’s hard to define, but a good way to tell where innovations will come is to look at the products people in the tech industry are using:
Look at the ones hackers themselves use….we [Y Combinator] have a ton of companies building stuff for the iPhone now because all of them use iPhones, not one is building stuff for Blackberries
Ohanian talks about how Y Combinator helped shape the idea for Reddit in the early stages:
We approached Y Combinator … with an idea that would transform the way you order food, specifically using a cell phone to do so. They didn’t really like the idea. They liked us, but they hated the idea.
They still didn’t have a firm idea, but sat down with Graham and talked about a site that would filter the most interesting web content.
…it was in that conversation with Paul where we developed this idea for creating a way to find out what’s new online.
The idea morphed into the final product:
All the actual mechanics of how that would work, basically happened in the next few weeks, while Steve [Huffman] and I were in a crap apartment, in Bedford, Massachusetts, playing a lot of Warcraft.
Graham lists Altman as one of the five founders he considers most interesting, along with Steve Jobs, TJ Rodgers, Page and Brin, and Buchheit.
On questions of design, I ask “What would Steve do?” but on questions of strategy or ambition I ask “What would [Altman] do?”
The vacation rental company is accepted into the winter batch and receives $20,000 in funding. Chesky, Gebbia and Blecharczyk sell 800 boxes of Obama O’s and Cap’n McCain cereal they designed themselves, raising $30,000 in seed capital, which is what convinces the firm to let them in the program. Graham:
When we funded Airbnb, we thought it was too crazy. We couldn’t believe large numbers of people would want to stay in other people’s places. We funded them because we liked the founders so much. As soon as we heard they’d been supporting themselves by selling Obama and McCain branded breakfast cereal, they were in.
Graham and Livingston marry.