Altman is interviewed by Chang on Bloomberg Business.
It’s been a really fun job. We’re sort of the flagbearer for this movement towards more innovation, and more startups, and it’s a particularly fun time to be in that place. We’ve really been able to scale up the organization and the number of startups quite a bit. The best part is that we get to work with the most incredible startups each day…We think that generally our role is to increase the innovation in the world as much as we can, and we are not tied to any sector, or stage, or startup. We see a lot of new ways to do that. If we can fund 10,000 companies over the next decade with our fellowship that would be incredible.
In an interview with TechCrunch, Atman talks about YC’s Fellowship program:
I think we all get a little screwed up in the way we think about money in Silicon Valley sometimes; $12k is actually a lot of money to most people. It should be enough to live on, build a product, and get initial users. I think it’s fair to say that YCF is targeting people with low personal burn rates. These are often younger, but certainly not always. And I’ve met some 24 year old Google engineers that get their personal burn rates up pretty high…
On giving advice to startups:
We usually (but certainly not always!) give good advice. This is surprisingly hard to get for startup founders… The general principle is to identify the startup’s single biggest current problem, and help them figure out how to solve that. This is hard because a) most startups have a lot of problems and b) most founders are bad at knowing what actual problems vs fake problems are. For example, most founders worry a lot about competitors, but not much about users not staying engaged.
In an ask-me-anything session with the Hackathon Hackers public Facebook group (link) Altman talks about YC, investment and his daily routine:
When considering a startup for YC, would you say you spend more time getting to know the team, or getting to know the product? The team, but the product is important evidence that the team is good. I need to believe in all 3 of the the team, the product, and that the market will be big in 10 years.
What is your morning ritual: I get up late, have an espresso, and immediately start work. I try to get roughly caught up on email before I leave the house, then if I need to write anything or review a complex deal I do that, and then I head to the office and work on my top few priorities for the day. I try to schedule my meetings in the afternoon.
Altman announces the launch of YC Fellowship, a program aimed at prep-seed ventures that have not received any prior funding. The eight-week program will give out advice to participating startups and $12,000 in grants — although regular venture investments could become the standard in the future. Companies will not have to move to the Bay Area. Applications open July 27. Altman writes in a blog post:
Ten years ago, Paul Graham said there could be ten times as many startups if more people realized they could try. Thanks to the work he, Jessica, Trevor and Robert helped do, that’s become true. We think there is still room for another ten-fold increase in the number of (good) startups. But even now, a lot of good founders never get started because they can’t scrape together a relatively small sum of money at the idea stage. So we’re going to try a new experiment, which we’re calling the YC Fellowship. This is targeted at teams that are very, very early…Although this is an experiment, if it seems promising we’ll iterate quickly just like any good startup. Our goal at YC is to enable as much innovation as we can. Someday if it works, we’d love to fund 1,000 companies per year like this.
Pao resigns from Reddit (statement). She will be replaced by Huffman, but will remain as an adviser to Reddit’s board for the remainder of 2015.
It became clear that the board and I had a different view on the ability of Reddit to grow this year. Because of that, it made sense to bring someone in that shared the same view.
I just want to remind everyone that I am just another human; I have a family, and I have feelings. Everyone attacked on reddit is just another person like you and me. When people make something up to attack me or someone else, it spreads, and we eventually will see it. And we will feel bad, not just about what was said. Also because it undercuts the authenticity of reddit and shakes our faith in humanity.
Reddit board member, Altman:
Ellen has done a phenomenal job, especially in the last few months.
Altman is interviewed by Entrepreneur magazine,
We don’t have any preconceived notions. We don’t know where the next $10 billion company is coming from. They’re all non-obvious. We try to have a totally open mind. I tell the partners our goal is to find as many $10 billion-plus companies as we can, and because that is so restrictive, we have no other restrictions. If we believe a company can be huge, then we’re going to fund it, no matter what their business is…I don’t invest in companies where my mental model is that they need to get themselves acquired in the next few years, or ever,” he adds. “I suspect the companies we’re investing in will go through multiple down periods between now and when they become $100 million companies. Because I think that way, I don’t worry about the cycle.
In an interview in the Wall Street Journal, Altman says hardware could yield more $10 billion startups, but finding them means looking beyond companies that just want to make “little things that get sold at Best Buy”.
It’s the software-ization of hardware. All the reasons that have made software so successful are beginning to happen with hardware. So much can be done so quickly, prototyped so rapidly, and the costs are so low…The two things I look at most in a startup are cycle time [building a prototype] and cost. When those come down I think an area is now ripe for disruption. And I believe that’s really now happened in hardware.
Altman discusses recent talk of a bubble in Silicon Valley valuations:
I’m tired of reading about investors and journalists claiming there’s a bubble in tech. I understand that it’s fun to do and easy press, but it’s boring reading. I also understand that it might scare newer investors away and bring down valuations, but there’s got to be a better way to win than that…Investors that think companies are overpriced are always free not to invest. Eventually, the market will find its clearing price.
He then opens a bet saying that, to win, he must be right on all three counts by Jan 1, 2020: 1) the value of the top six “unicorns” will rise from $100 billion to $200 billion 2) Some mid-stage YC companies will rise in value from $9 billion to $27 billion and 3) the Winter 2015 batch to rise in value from $0 to $3 billion.
This bet is open to the first VC who would like to take it (though it is not clear to me anyone who wants to take the other side should be investing in startups.) The loser donates $100,000 to a charity of the winner’s choice.
Thiel joins YC on Altman’s invitiation. Altman says Thiel won’t be able to invest in any companies while they’re in YC, or for 3 months after they present at Demo Day. Altman:
I’m delighted to announce Peter Thiel is joining YC as one of the (now 10!) part-time partners…He already works with a number of YC companies, and we’re very happy he’ll be working with more…We generally won’t bring on people that are involved with other investing firms given the obvious conflict, but Peter is so good we felt like we had to make an exception. We’re pretty paranoid about potential conflicts, and we’ll continually evaluate this and change it if it’s not working…On a personal note, Peter is one of the two people (along with PG) who has taught me the most about how to invest in startups. I am confident that Peter joining will be great for YC.
Altman is interviewed at Startup Grind. He talks about how YC has yet to miss picking a unicorn company in the application process.
We track this obsessively through. We have custom software that just tracks this. There are a few companies that are doing pretty well but we have not yet missed a billion dollar company…The thing that makes me sad is I’m sure there’s someone that we would have funded that we didn’t, that had we funded, would have been a multi billion dollar company. Probably many of those. There are a lot of companies that we fund that if we didn’t fund them, they just would never have happened.
On raising capital:
Generally you want to raise capital either when you have to or when it’s really easy. If the company desperately needs money and they can’t figure out any other way, then they need to raise money. Or if someone’s offering you easy money on good terms, you should take it because you can use it for good things…We are the most successful when we fund things that other people don’t yet think are going to be a really big deal but two years later become a big deal,” Altman says. “And it’s really hard to predict that.
Altman warns that superhuman machine intelligence (SMI) is a danger to humans and should be regulated (original blog post here):
The U.S. government, and all other governments, should regulate the development of SMI. In an ideal world, regulation would slow down the bad guys and speed up the good guys — it seems like what happens with the first SMI to be developed will be very important. I think it’s definitely a good thing when the survival of humanity is in question.
Altman wants regulations to have a system for measuring the benefit of use or training of machine intelligence as well as external review of its capabilities:
For example, beyond a certain checkpoint, we could require development [to] happen only on airgapped computers, require that self-improving software require human intervention to move forward on each iteration, require that certain parts of the software be subject to third-party code reviews, etc.
In an op-ed for the Financial Times, Altman describes how Silicon Valley supports startups.
Silicon Valley works because there is such a high density of people working on start-ups and they are inclined to help each other. Other tech hubs have this as well but this is a case of Metcalfe’s law – the utility of a network is proportional to the square of the number of nodes on the network. Silicon Valley has far more nodes in the network than anywhere else.
He also says that Silicon Valley can be replicated elsewhere and is “probably doable with a few thousand people and a reasonable amount of capital.” He says would-be Silicon Valleys should focus on two things: an area where the majority of people care most about start-ups and technology, and on long-term compensation.
A focus on making a lot of money in the long term at the expense of short-term opportunities is essential to building companies that have a huge impact – they take a long time.
Altman leads Reddit’s $50 million Series B round with Andreesen Horowitz and Sequoia Capital, as well as individual investors including Leto, Dogg, Kushner, Livingston, Kevin and Julia Hartz, Mariam Naficy, and Reddit CEO Yishan Wong. Valuation is $500 million. Altman:
I’m willing to be very patient. I don’t have any particular timeframe in mind. I believe that the community is very valuable and that the value will continue to increase. Up to the company if they want to share cashflow details, but they run the company efficiently.
Altman interviews Andreesen, Conway and Parker in the ninth How to Start a Startup lecture, How to Raise Money, at Stanford University.
Altman sits down with founders from Salary Fairy, which crowdsources salary information from LinkedIn, Pair Up, which connects retailers with unused food to buyers who will pay a discount, and two founders building an app that allows couples to split expenses more easily. Altman:
It’s really hard to try to do multiple things as a startup… You have to just focus on one tight little thing and then you can expand from there, but until you have users telling you, This is the best thing ever…you really can’t expand the service
Altman announces in an AMA that he and other investors in the latest round are giving part of their shares to users of the site:
We’re working on a way to give 10% of our shares from this round to the reddit community. I hope we can increase community ownership over time–I’ve always thought communities like reddit should mostly own themselves, and that it’s time for some innovation around corporate structure here. I’m giving the company a voting proxy on my shares.
Altman takes questions in a Reddit AMA. He discusses the investment in Reddit and various themes, including creating a work culture:
Founders should never expect employees to work as hard and care as much as they do, but still, if you join an early-stage startup, expect to work very hard. Most people at Facebook still seem to work very hard. Generally, I think companies should hold off the transition to feeling ‘corporate’ as long as possible, but transition to something with better work-life balance after a few years–no one can work around the clock forever. All of that said, I do think most startups need to get some basic HR in place sooner than they usually do.
Sites that rely on user-generated content should be owned by the users:
1) People take care of what they own. 2) It just seems fair–users create the value, they should get to capture some of it. 3) I do think more sites could benefit from this, and honestly I’m somewhat surprised others haven’t tried it.”
What companies need to focus on
Focus on getting a small number of super-engaged users that love you, and them spread the community. If you’re building it for an exit, you will probably be disappointed. That’s not a specific statement about a community site but a general comment about startups.
Altman delivers the first lecture:
…if you try to do these things in a lot of big companies or non-startups, it won’t work.
Altman announces Y Combinator will hold an online course through a partnership with Stanford University, where the class will be called CS183B, or How to Start a Startup. This opens up access to people who don’t make it into the program, and anyone else, including people in other countries:
At Y Combinator we are limited by class size, and in the people we can fund
Altman tells the investing conference that Y Combinator is going to continue its scale. Its focus:
The sort of core belief that there are a lot more people that could be starting these huge [startup companies] and that YC can help them and that we can give them this huge advantage and…help connect them to people
Altman tips tougher competition for early-stage food-and-beverage startups looking to raise money. Dow Jones data show F&B-related companies attracted $1.1 billion in venture capital worldwide in the first half of 2014, while in 2013 the sector received $1.59 billion, up 39% on year. Altman says that wherever there are three or four F&B ventures, there likely won’t be room for another one that…
…does something similar with a small twist
Altman talks with CNBC partner site Re/Code about working with Y Combinator, and how he pitched Loopt’s deal to Boost, which had already chosen a different partner:
I had one of the many heart-sinking moments in the history of Loopt. Whoever Boost works with, Sprint will work with. And whoever Sprint works with, Verizon and AT&T will as well. So, they told us on the phone — this one thing they really wanted, the partner they were working with was not going to build. To this day, I don’t know who the partner was. So we stayed up all night, and we built that feature. It was status messages. I think I went to sleep at four, I slept till six, I got on a flight at seven to Orange County where Boost was. And I just got to that office and sat there, and the guy was like, ‘Weird, you’re in my office.’ I said, ‘Just meet me for 10 minutes, and let me know what you think.’
Altman invites the question-and-answer site to be the first late-stage participant:
I don’t know if [Quora] will develop a new product that they did not already have in the works as a result of being at Y Combinator…But we think we can help them with certain areas like hiring… And we think they can help our community a great deal.
Altman says in an interview with Arrington that Hacker News could be worth $500 million if sold, but he says that it is worth more to Y Combinator than to anyone who would potentially want to buy it. He adds:
Intermediate valuations are completely made up and silly.
Altman discusses whether Y Combinator has a monopoly on early-stage startups with former TechCrunch editor Michael Arrington. Arrington:
You consider yourself a monopoly
Altman announces the company is increasing the amount it provides to approved startups. In return, it will take a slightly larger equity stake of 7%.
$97k was about right at the time, but the cost of living in the Bay Area has gone up substantially. So we’re increasing the total to $120k, which we hope is enough for the founders to run their business and pay their living expenses for at least six months, and sometimes longer.
Altman talks about meeting Steve Jobs, working with startups in the risky early stages, and the challenge Y Combinator faces in convincing people to start their own companies instead of joining Facebook and Google:
How do we convince that brilliant engineer that has the idea he’s really passionate about, that can change the world, to start a startup and not go work as an engineer at a big company?
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 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.
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.
Altman discusses the $43.4 million cash buyout by Green Dot, which includes $9.8 million set aside in retention payments for key Loopt employees. Loopt’s services will be shut down and its Silicon Valley team will develop mobile services for the payments provider. Altman:
Many of the companies in the mobile location space are trying to figure out different ways to tie what they’re doing to commerce … We’ve all realized the critical piece is how you tie in commerce and payments.
Altman tells O’Reilly Media online managing editor Mac Slocum that Loopt is shifting from its focus on connecting people socially:
A big change over the last year has been an expansion of that to connect people to the places around them as well
Altman tells CrunchGear about Loopt’s plans, saying the company is aiming to focus on data over the coming year:
[…] we’ve really been focused more and more on [Facebook] Places, this hyper-specific data layer
He says the deals that work best for the company are things like free stuff being given away on a street corner for a limited time, or 50% off a restaurant for one night only:
The things that work the best are what we call flash deals, these are very, very time-limited, high-value, and they are pushed to the user.
The company raises $7.1 million from unnamed investors. (SEC filing here.)
Altman tells the Y Combinator event that technical understanding is key to getting a startup funded:
Technical founders…if you can understand what the product should be and how to build it, you are a force to be reckoned with
Loopt raises a reported $12 million from its two existing investors, Sequoia Capital and NEA. It is reported to call down $2.25 million from the funding.
It will allow users of the Sprint subsidiary to share location, status updates, and other information, and is aimed at young and social subscribers.
Boost’s tagline asks the question ‘Where you at?’ And now Loopt’s social mapping service can answer that question for every Boost Mobile user.
Sequoia and NEA participate in the round for a reported $5 million.
Loopt joins the inaugural batch and receives a reported $6,000. Altman says the money-saving culture at Y Combinator, which extends to things like readymade meals, helps develop the location-based mobile app company develop:
That culture of frugality and discipline is really important for the Y Combinator mindset. The start-ups that do well are the ones that are working all the time.