Yea, I’ve found it interesting reading about YC companies from this batch that include:

- A scam MMO

- Terminal autocomplete as a service

- A Splitwise clone

- An app that puts your next meeting in your menu bar (for $10/month!)

YC gets 5K+ applications/cycle, accepts 1-3%, so they rejected 4500+ companies for these?

I have some sympathy for the difficulty evaluating tech plays when "an RSS search engine" turns into twitter.

These ideas are the starting point, but it's difficult to tell what they might turn into. Quite possibly they evaluate the ability of the founders to shape the company into something interesting during the program.

But more than that, they're probability are trying to figure out how well the founders will perform at demo day, after they've helped them polish the play.

"Invest in the team" makes some sense when you're talking about bright people with a lame idea (RSS search engine, or whatever.) But in this case the idea isn't merely lame; it's a scam, and the team being invested in are a team of con-artists. What might they pivot to, if not another scam?

"Invest in the team" gets you Juicero.

Great ambition; they raised a bunch of money.

Great production; watch a tear down of the Juicero product itself, it is a mechanical work of art.

Great potential; a SaaS for a fruit drink? Lots of people love fruit drinks! They can buy our packets of delicious pre-made juice, people drinking juice is a huge Billion Dollar Market™!

Stupid Idea! You can just squeeze the juice out of the bag by hand, no fancy device needed. It is less convenient than pouring from a bottle! Does it really taste better than the delicious organic juice you can buy at any grocery store in every city for a lower price?

Lets put one hundred and twenty million dollars behind it and find out. Hahahahahahahahaha big swing and miss! Survey said? No.

You can of course have a great team with the smartest best credentialed people working on the idea motivated by tons of money. If the idea is bad they still fail, maybe they can pivot, but probably not.

> "Invest in the team" gets you Juicero.

It can get you Juicero, or it could get you Android. That's the whole thing with investing, isn't it? It's rather uncertain.

The Juicero was very overbuilt, I know because I watched the AvE video, but isn't that a sign of amateur engineering? I'm thinking of the old saying that anybody can make a bridge that stands, but it takes an engineer to make one that barely stands.

Hah! It's totality overbuilt for a product that squeezes a bag of Juice! That being said the idea did work for Coffee: e.g Keurig; just not juice.

>it takes an engineer to make one that barely stands.

Engineers do not build bridges that barely stand. They build bridges that they reason will stand for an amount of time in the conditions they predict the bridge will be subject to versus the cost required to build said bridge. They build realizing that no bridge will stand forever but it must stand for a specified amount of time.

They build to "Correct",

Not "Perfect"

YCombinator doesn't put in that much money though. I'm sure they don't intentionally fund scams or juiceros, but if they do, that's not the end of the world. It's a bigger deal to miss the dumb thing that turns out to be good then to accidentally fund a few dumb things.

Totally agree not trying to be critical of YC. Situations like Juicero, Theranos, this topic, et al scams, are interesting to observe.

A key skill of con-artists is being able to make yourself resemble someone competent. If you go back to 5 years ago, YC probably wasn't on the radar for con artists yet, but starting about then, it was becoming clear that VCs had more money than there were good companies to fund. We are now seeing the results.

Unfortunately the con artists make funding harder for people who are not con artists. A con artist can spend 100% of their time and effort on polish and marketing, while someone trying to actually do something often has to make those things an afterthought. I’m sure the con artists have much better decks and web sites.

I've been following YC companies closely for about 6-8 years of data. Before the last big transition, I noticed virtually every founder came from an Ivy League school or something comparable. Their work experience was equally impressive before YC. Other people noticed this too and brought up the lack of diversity and complained. They felt that this strayed from pg's initial goal for YC, which was helping the little guy against the VCs instead of being yet another launch pad for Ivy League alum. Is this the result of YC wanting more diversity (not just gender and race, but for background too like education and experience)?

EDIT: The technical founder came from Apple and Cruise, and he graduated from the Univ of Michigan. He has the same cred as most YC founders. They probably didn't vet them as much since he came from a successful YC company, and I'm sure they talked to his former bosses. YC's system just had a public failure after using what seems like the same process for 15 years.

EDIT: If YC was too careful, Stripe and AirBnB wouldn't have happened. Those guys didn't have any experience in their respective industries either.

Definitely damaging to the YC brand.

I'd like to see a postmortem on how these _blatant_ con artists got through.

Some of us remember when YC funded InstallMonetizer and people around these parts were defending it.

I doubt it'll affect the brand.

YC didn’t fund installmonetizer! They funded the next venture from the people behind installmonetizer, who then proceeded to say “we’re funded by YC” on their about us page.

Italics on HN are made using asterisks. They should really make underscores do the same...not like those do anything else.

Maybe the brand is a little bit hyped to begin with? I suspect there are only two companies these VCs have ever funded that are known to turn a profit. It seems like they've trained a generation of young smart people on how to get rich by losing money.

What a strange thing to hear. Even I can tell you that many more than "two" YC companies have become profitable, and I'm pretty removed from the business side of YC.

Which ones? There are only two public companies that currently make a profit that I'm aware of: dropbox and coinbase. I don't really pay much attention, but that's all I can think of at the moment.

Well, here's one: https://www.forbes.com/sites/alexkonrad/2021/03/08/zapier-bo.... Sorry I don't have a list for you, but HN seems to have warped my memory in strange ways. I'm sure that YC has funded at least dozens, probably hundreds of profitable companies, including many that people wouldn't remember, because they found a lucrative niche for the founders and a small team (or maybe even just the one or two founders), and opted out of the fundraising track and are happily making a good living. That's not the preferred outcome from a venture investor's point of view, of course, but YC has always supported what founders want to do. Also, Zapier's an outlier - there are others that have followed a more conventional fundraising path.

Seems like a deeply tedious topic, but it sounds like the argument is that the small number of (claimed) profitable companies have basically ignored whatever it is you tell them to do. That's a great pitch.

In my YC batch (I was in the same one as dang and Airbnb), the issue of revenue/profit was what the partners talked about the most. Growth too, but profitable growth. Like, it was talked about all the time in the batch. That was particularly important in our 2009 batch due to the financial crisis, but it remained important later in the good times - see PG’s post “Default Alive or Default Dead?”.

Though it took us a while due to engineering challenges, our company survived and became profitable by minimizing spend and focusing on revenue/profit, just as YC advised.

This notion that YC backs/encourages companies to flush money down the drain is a mistakenly applied stereotype spawned from a combination of different eras, different companies and different investors. Notably, YC has never been involved with companies like Uber, WeWork or Theranos, or any other company that SoftBank has tried to artificially pump up by pouring billions of dollars into.

And yet here they are investing in something that is so obviously a scam that possibly even my grandmother would notice.

It reminds me of the "but you fuck ONE goat" story: one misstep like this surely can and should have more impact than all the good steps.

> "investing in something that is so obviously a scam"

None of us has any idea what was presented in the application form and interviews, but given YC prizes its reputation above anything else, we can reasonably presume it wasn't obviously a scam.

Most of these companies are obviously a scam in one way or another. It just depends on your definition of what a scam is. Is it a scam to insert a middle-man to profit off a transaction that already occurs, or is it a brilliant hack? Is it a scam to use huge amounts of veture funding to undercut prices in an existing market to grab market share and claim "disruption?" These are called business models, but some of us call them scams. They seem particularly scammy when they never ultimately turn a profit and begin to look suspiciously pyramid shaped.

> It just depends on your definition of

This is the moment in an online discussion where we all lose 50 IQ points, so thanks for that.

"Scam" has a well understood meaning in modern legal and economic systems, and that's obviously what I'm addressing, not some other ideologically-charged alternative definition that you're now invoking as a debating move that amounts to little more than trolling.

(As for middlemen - for as long as commerce has existed, middlemen have been derided for inserting themselves into transactions that were already happening, by people blithely handwaving away the fact that those transactions were not, in fact, already happening.)

Your insinuation was that YC trains the founders it invests in to deliberately build long-term money-losing companies, which is demonstrably false and also highly implausible.

Philosophical discussions about the deeper nature of things are also of great interest to me, but not like this.

I'll set aside your ad hominem and let you go on your merry way. Enjoy.

I don’t think Dropbox are GAAP profitable either, I was looking at their financials a couple of weeks ago.

I lost a lot of respect for YC when I realized they invested in a startup that sold laundry detergent with a manly scent. The founders I think were from Stanford.

So yeah, I don't think they are nearly as good as they say at judging startups. I believe a lot of it is based on signaling from founders and already successful startups applying.

We have been following YC's devops companies. It seems like they are basically investing in pretty much similar companies, which we found a little bit weird. I would assume as fund or incubator you would diversify your investments.

In an area that might be hot, VCS are wise to diversify by investing in multiple companies in the space rather than trying to pick the winner themselves way ahead of time.

VC is about funding the massive winner and much, much less about avoiding funding the runners-up.

Yes, it is funny. Sometimes fools with big mouth get more attention than they clearly deserve.

By the way, I wouldn't like to be those three YC interviewers who valitaded this idiotic project into ycombinator !

"Le bonnet d'âne pour tous les trois ! "

Didn’t Oculus sound just as crazy when it was conceived? As far as I know the founder had barely any experience with hardware. Just a glorified gamer.

His wikipedia[1] page states that he was a VR enthusiast for quite a while, building several prototypes before launching the kickstarter [1] https://en.wikipedia.org/wiki/Palmer_Luckey

First Oculus was pretty much linear continuation of where VR died in the nineties with VFX1 and Virtuality. Merely a hardware upgrade of LCD and IMU technology.

The VC game these days is no different to flipping houses. They're primarily funding boring, inconsequential and incremental startups which can be acquired in <5 years. Or chasing the <1 year money-on-money return of crypto projects.

It's Peter Thiel's "Great Stagnation" decline accelerated by the capital allocation of short-sighted VCs.

The statements regarding YC in the article don't make a whole lot of sense to me. Firstly:

> Y Combinator has a rigorous vetting process topped off by an exclusive demo day with "selected investors."

I don't think anyone whose been through the YC interview process would describe it as rigorous. It's streamlined, and I suspect design it minimize false negative rate while spending a minimal amount of time reviewing companies. They have a huge number of companies to evaluate. Personally can't imagine they spend more than 30mins evaluating each company (including the interview).

Then later in the article:

> The most serious accusation is that DreamWorld only got its Y Combinator backing through nepotism. According to Upton, a senior employee at Y Combinator claims that Bellack has a friend in the accelerator who helped greenlight DreamWorld without the appropriate due diligence

I don't know what "appropriate due diligence" is here. I don't think YC generally check references, or dive into code... maybe a quick look at the demo in the 10m interview? It probably helps knowing people on the panel.

> "[DreamWorld] wasn't vetted. They apparently had nothing to show on demo day, and they were still allowed through."

Doesn't make sense to me. Do YC ban companies from demo day if they don't have enough to show? It's not part initial DD? Have they raised from demo day investors?

Just like brilliant people that gets rejected from prestigious universities and companies, there's bound to be undeserving people that gets in.

Even if there's a vetting accuracy of 99.9% (for the sake of argument), there's still a chance that some lemon will fall through the cracks. So after 1000 seeds, there should be 1 lemon.

Now does that make the program any less prestigious? No, but these things happen.

> Just like brilliant people that gets rejected from prestigious universities and companies, there's bound to be undeserving people that gets in.

This isn't that great of an analogy because there are plenty of "hard" cutoffs at both elite companies and elite schools. For example, no matter who you are, you'll never get into Yale Law with an LSAT of 125.

I'd argue it's a fine analogy. You can get into Yale undergrad with an SAT of 1250, for example.

Part of the scandal mentioned in the article is the accusation that they got in through nepotism and bypassed the usual vetting process.

Which is why I suspect the title will be changed, even though it is relevant to the discussion.

The submitted title blatantly breaks the site guidelines, which ask "Please use the original title, unless it is misleading or linkbait; don't editorialize.". It is a no-brainer of standard HN moderation that we would change it immediately, as you can see from countless previous examples (and these are just the ones I posted about):

https://hn.algolia.com/?dateRange=all&page=0&prefix=true&que...

https://hn.algolia.com/?dateRange=all&page=0&prefix=true&que...

https://hn.algolia.com/?dateRange=all&page=0&prefix=true&que...

When readers email about a title complaining that it's breaking the rules (as happened with this one), you know it's bad. However, I don't think I'm going to change it, even though it shamelessly distorts the article's meaning and adds extra linkbait on top.

The reason I'm not inclined to change it is that we moderate HN less, not more, when a story is about YC or a YC-funded startup. That's explained here: https://hn.algolia.com/?dateRange=all&page=0&prefix=false&qu.... More on that elsewhere in this thread: https://news.ycombinator.com/item?id=27321978.

It is an editorialized title and should be changed.

The "blatant scam" part, maybe. The fact it's Y Combinator-backed is still relevant, though.

The dirty secret is that, despite what they may claim, venture capitalists aren’t good at picking winners, nor do they need to be.

The real skill is in (a) raising funds from LPs, and (b) creating a wide enough deal funnel to service it.

The individual investments aren’t that important, just like a single bet doesn’t matter when you’re playing poker. It’s more about spreading the money over as many hands as possible and letting your mathematical advantage do the rest.

This. It’s always funny how people jumps to the VCs defence when they make obviously bad investments. They simply aren’t good at picking winners.

but do you have the kind of people skills that let you scam your girlfriend with a fake diamond ring, get caught, and be able to talk your way out of it to string her along for another 6 months? Do you have what it takes to recruit an army of free workforce (child labour) on empty promises alone? Those are some heavy duty CEO skills.

Part of it is luck. Just like job interviews or college applications. Even though I'm sure the people vetting YC startups are smart, they have to pick a few companies from a huge number of applicants without really knowing much about any of them.

If you have to ask, I’ll go ahead and take a wild guess. I looked at the founder’s bios. A couple of white guys, think one worked at a few FAANGs - textbook archetype for ‘certainly people of this type know what they are doing’.

Yeah, we do live in that world. This shit might be the most valid textbook case of white male privilege ever.

Edit:

I usually have a very high bar for throwing around while male privilege thing (I’m talking Joe Rogan levels of defense against the claim), for what it’s worth.

But my spidey senses are tingling on this one from a mile away. This shit looks worse than the Asian mmo’s that are still being built on the Unreal3 engine.

I (woman without CS degree) once pitched to an investor and his first question was “Okay, but who’s going to build it for you?”

Um... me? I _built_ it. It already exists and I have users and I said that several times but apparently the idea of me being able to do that on my own was simply too confusing for him to understand. His next question? “Who’d you hire to build it?”

facepalm

Ouch. Did you find a good investor eventually?

It's insulting for many white men who don't come from privilege - some from poor backgrounds, or rural backgrounds, or non-college educated backgrounds, or health status, etc, etc - to pull out the hackneyed "white male privilege" stereotype here.

Why not use the more accurate term for people like this, who went from a wealthy or upper-middle class home, to an Ivy, to a FAANG, to an easily funded startup? They're the elite, or the 1% of whatever similar term you want to use.

Because "white male privilege" sterotypes millions of white males incorrectly. But I know it's a very popular stereotype right now among part of the population, and so often hard to resist.

I think you are 100% right. I didn’t have the words for it I guess, just the emotion, and picked something off the shelf.

I’ll just add this though, I promise you 2 girls would never have gotten this funded lol.

And I ain’t a girl either, or a white knight.

> I’ll just add this though, I promise you 2 girls would never have gotten this funded lol.

You mean "girls", like Elizabeth Holmes, founder of the infamous Theranos [1]?

Incidentally, she fits the mold I describe above: highly privileged childhood (Dad an Enron VP, highly politically connected), to Stanford, to a well-funded scam start-up with a board packed with our nation's elite (eg, former Sec of State George Shultz).

And she's just the best known - there are other examples of scammy or poorly-conceived companies founded by (actually) privileged women.

Yeah, most of these wealthy, privileged founders of scammy companies are white men, but some are women, and some are not white. Crucially, even if most of them are white men, they only represent a very small fraction of us.

And the 1% are doing a tremendous job of playing us off each other for reasons of gender, race, etc, while they consolidate their power and privilege.

1. https://en.wikipedia.org/wiki/Theranos

Aight, you got me. No sarcasm, we need better ways of describing this shit, I’m with you 100%.

Screaming at the top of my lungs:

Hey PG, I’m not a white dude or girl that went to Stanford. In fact, I did great and bad at school. So fuck you. I’m gonna take over your whole shit, so stop discriminating.

Dumbass couldn’t even spot a half assed mmo clone.

Plenty of reasons to actually criticize the company, without the intellectually lazy act of crying racial and sexual preference with no basis.

Plenty of articles, including this one, have interviewed insiders that have revealed that they got to skip the vetting process due to nepotism. You might want to re-asses your "high bar" and stop making "wild guesses".

I’m not married to this fight. Nepotism is a gameplay mechanic in the whole privilege thing. So is corruption, collusion, etc. The broader theme can still stand.

But, I don’t want this fight, and you are probably right I’m off base and too quick on the trigger here.