It's pretty clear in hindsight that taking note of who PG was hanging out with was a very investable strategy. In fact, one of my batchmates had some money to put into other companies in our batch, and when he asked me for my opinion of who to invest in, that's exactly what I told him. I just did some quick math and would estimate that his ROI today is somewhere in the 1,000x range.
I am not the only who figured this out - while this wasn't quite as much of a factor during my batch, nowadays there is an entire cottage industry of YC-only funds who invest only during YC demo days. As you can imagine, the way they differentiate from each other is by how much insider knowledge they are able to accumulate leading up to demo day (I am not implying that the partners ever leak anything, but these funds are very motivated and they look for all sorts of signals). One such signal is to track all other investors around you, and a well-connected angel can single-handedly increase the valuation of a startup (which explains why they manage to get in before demo day and at a discount).
I have to say though - while the success rate of these YC-only funds is likely good enough to make them quite profitable, none of them come even close to what I observed with PG's ability to pick the winners (which makes sense, since a lot of other people have tried to build accelerators and none of them come even close to YC).
That’s hilarious. Cheers! I never thought of a person’s movements as an investment signal, but in hindsight it certainly must’ve been.
This is nonsense. VCs do not have that kind of power to will something into existence. They can pour money into it, but they can't make a company successful. And if they continually spend more than they make...they don't get to stay VCs for very long.
Looking at the list of "Former Unicorns" on this page [1], I can't see many that fit your description. Sure, there's a handful, inevitably, but it's far from the norm. Most of them have grown into real businesses making real revenues. And sure, some of them may be still making losses but that's a valid strategy where there is still growth potential in the market.
Granted, Uber is a big question mark; it remains to be seen whether they will ever turn out to be profitable. But everyone knows what the strategy and the bet is, it's just a matter of waiting to see if the bet pays off. But no serious commentator could dispute that Uber's founders and present executives are talented people, building a company of substance.
So, if the claim is that it's commonplace for unskilled/disingenuous founders to build huge, successful-seeming companies just through huge sums of VC money being pumped in, then exiting and fleeing the scene before they get found out - there don't seem to be many real examples of that happening as far as I can tell.
[1] https://en.wikipedia.org/wiki/List_of_unicorn_startup_compan...
If you need mathematical proof for this, just ask yourself how many net new customers would you have to add to a business every year if you are at $100m in revenue and have an annual churn of 10%. Yep - you'll be running out of your TAM pretty quickly at that rate. And then add to that the fact that each new net customer will likely keep getting more expensive to acquire [1]. To get to $100m and stay there of even grow beyond that figure, the business fundamentals (first and foremost: churn) need to be good.
You can also think about it from this angle: why is it so rare for the same founder to continuously churn out one IPO after another? With each next attempt, they should be getting better at it and have more people willing to support them. The answer is - it takes a ton of stars to align correctly, and money alone won't fix your unit economics at a moment in time, let alone over many years and 100x growth in revenue.
Which - to be fair - might have scuppered the company if it had happened early on by chance.
Ps Chris was my favorite speaker - he’s the only one who made sure to tell everyone to chill out, take care of your health, sleep, etc.
People are actually far more benevolent than people think. The number of actual murderers and other miscreants is such a small number as to be negligible for the purposes of renting out your home, your car, getting food delivered to you, etc.
In total the parent comment exemplifies how Chris values and honors life over profit. That’s a tough internal struggle in this industry and is probably why he dipped out a few years ago.
[0] https://www.independent.co.uk/news/world/americas/airbnb-ban...
But you have to remember that his business depends on raising money from people that must buy in to the myth that he does have that special ability to spot a winner on day one.
Ironically though, successfully making people believe that you are able to pick winners actually does make the people you pick more likely to win. Being selected by YC not only allows you to raise truckloads of money more easily, it also gives you a boost when making connections or deals with other companies, hiring the best talent, etc.
And it's certainly possible that an experienced builder and investor like PG learns some heuristics and tricks along the way to increase the odds of landing on those few winners.
That's basically what this article is about, recounting some of those of heuristics that led to YC investing in a startup whose idea they originally didn't even like.
It's not about spotting that one survivor, it's about spreading enough bets with effective enough heuristics to ensure a high positive overall EV of the aggregate of all your bets.
"Survivorship bias or survival bias is the logical error of concentrating on the people or things that made it past some selection process and overlooking those that did not, typically because of their lack of visibility. This can lead to false conclusions in several different ways. It is a form of selection bias"
Here's the sad truth: for every one hard-working, hard-cranking, in the right-place-at-the-right-time, never giving up "cockroach" companies like AirBnB that happen to make it, there are a hundred also hard-working, never-giving-up, never at the right-place-at-the-right time people with charisma who people look at and just say "why won't they just give up??"
Because you can't spot an AirBnb out of a crowd of look-alike startups or pick the winner just by sensing the energy of the founder. Good products, great tech, great founders only get you so far on the crazy path of entrepreneurship. There's a million variables and factors that prevent you from successfully completing that path. There are the spectacular flameouts. The great founders with great tech who can't find market/fit. The iterators who can't make spaghetti stick to the wall.
And no, not even a PG can spot that one survivor out of the batch of many, despite how much self-congratulatory survivor bias would say otherwise, even if he did indeed spot the winner from the get-go as he claims in this essay.