Am I understanding that right? Twice in two years this guy took other people's money for something and then quit?
I know we are in another bubble, but this really worries me. What, as an industry, are we doing if recent graduates see their basket of choices as "a) go to grad school, b) work at a big tech company, or c) attend a prestigious startup accelerator"?
On the one hand, I love entrepreneurs, and think that anybody who feels the calling should be supported in doing it. But on the other, I really feel like it is a calling, like being an artist or a religious missionary. People who are the kind of people who will be happy taking one of life's default choices should probably just go do that. If people are becoming entrepreneurs because they see it as another convenient, high-status, high-reward option, then I think we're doing something pretty wrong.
And kudos to Charlie Guo for being honest like this. It's sure not easy, but it's very valuable to the rest of us.
Something is fucked up here. I don't blame Charlie Guo, he's just a product of the environment, but why would anyone invest in him doing this idea? There's no knowledge or experience. It's like investing in my idea for in home brain surgery. It doesn't make any sense, and the article thing raised multiple red flags to me.
For example, a portion of the people who win $30k/year National Science Foundation graduate research fellowships take a year or two of the funding, and then decide a PhD isn't for them. Some of those people, after taking $30k or $60k in PhD fellowship funding, leave grad school to start a company instead. I don't think it should be that surprising that people might go the other direction as well, taking $30k in Y Combinator funding, trying a startup for a bit, and then deciding to leave the startup and go to grad school instead.
I think with this amount of money it's just a risk of funding people. Putting in strings requiring repayment if the person changes areas, when you're giving someone <$100k, is pretty heavyweight for either the NSF or Y Combinator, so they just try to pre-screen for people they think are going to use the money as intended and stick with it, and accept that some percentage of people will instead use the money to flail around for a year or two and leave. If the percentage gets too high, then I guess reconsider the screening process.
I think you're right re: clawbacks, though. I can't imagine the mental pressure were the scenario to be "you MUST stay in academia or you owe the government $XXXk". I actually know a PhD student on a (non-US) government scholarship who has a clause like that. He calls it his "slave contract".
Getting back to the original topic, I think that for any venture with a high rate of failure (startups or grad school or...), there has to be some room to allow the funded person/people to say "this isn't working" in good faith and pivot or leave. That's totally different from someone taking funding without the intention to use it properly, or just deciding they're bored or whatnot.
Every time I have taken investment, I have seen it as a commitment to see a venture through. Maybe it works, maybe it doesn't, but I am going to give it all I have. So no, I don't think, "gosh, I found something more fun to do," is a legitimate reason for walking away from a startup. If that's how somebody thinks, then they are not cut out for starting a company, because there are always points where almost anything else will be interesting or appealing.
Fellowships are different. I'm advising a new fellowship program right now and, like all education, it's seen as an opportunity to help someone learn. We expect a certain percentage of people to go on to do the thing we want people to do, but if not they'll be taking the knowledge and doing something else, which is also fine.
My concern here is really with the system. If we are pressing money upon people who aren't suited for it, then something's pretty wrong. Nobody should be "trying a startup for a bit".
I'm concerned that graduates have the expectation that you an sit in a room, brainstorm and come up with a killer idea which will get millions in seed funding. That doesn't show that you're interested or knowledgeable in the field/problem area you're trying to solve. It sounds like the gold rush.
That's not to say that you shouldn't sit in a room and brainstorm, but sitting down and listing currently-hip ideas is a quick way to crash. Sit in a room and list current big problems that you have a lot of knowledge about!
The fully loaded market rate for "two guys who seem pretty smart" in Silicon Valley is somewhere between $200,000 to $300,000 per year -- at regular day jobs. Even boring regular employers invest a ton of money in people just based on an interview.
Remember this, when thinking about all of the investors who are always demanding tons of up-front proof and traction from founders. Regular day jobs generally require you to do nothing up front, except showing up to an interview. Firing within the first year is relatively rare. In many ways, regular day job employers are a lot less risk averse than investors!
Each
You're completely correct that the original meaning of the term was specific. Eric Ries originally wrote, "I want to introduce the concept of the pivot, the idea that successful startups change directions but stay grounded in what they've learned. They keep one foot in the past and place one foot in a new possible future. Over time, this pivoting may lead them far afield from their original vision, but if you look carefully, you'll be able to detect common threads that link each iteration. By contrast, many unsuccessful startups simply jump outright from one vision to something completely different. These jumps are extremely risky, because they don't leverage the validated learning about customers that came before." [1]
Sadly, the term is getting killed by Semantic Diffusion [2]. Precisely because people want to dignify their flailing with a fancy-sounding word.
[1] http://www.startuplessonslearned.com/2009/06/pivot-dont-jump...
"Affordable wireless networks" somehow became a food company.
http://blog.soylent.me/post/51007573199/the-biggest-pivot-in...
If I remember correctly, the creator of soylent invented it for his own needs, blogged about it, then was stunned by the amount of interest.
In this case, it seemed like the idea kept changing before they had even figured out much about it, or had any evidence to justify a different direction.
Yes, actually. Under the assumption that smart people can adapt and change as situations demand.
Someone with "a good idea" who is not smart is tied to that good idea. If it turns out not to be a good idea, or the environment changes and they need to adapt... I'd rather bet on the smart people.
It is really timing as well, even if you have the right people at the time it might not work out. Personally it seems you would want more of a track record for investment, but it is a risk YC is willing to take for the big fish as they have a much bigger net + filter with smaller investments.
YC essentially pans for gold way upstream right in the blue stream before the blue ocean way before the red ocean.
edit: I guess Stanford grads apply in much higher numbers than most other colleges.
In a lot of talks by VCs, Seed funds and incubators posted on YT, they have said that they invest in people. It's been said that people with entrepreneurial spirit will keep coming with ideas & executions and the said VCs/Seed Funds/Incubators want to build relationships that span across these ventures.
And then, so it seems, when that idea runs out you just say "uhhh... let's do this instead!"
So, what are the YC people investing in? Two guys who seem pretty smart?
I appreciate that you might need to pivot from "a social network for dogs" to "a social network for pets" or even "a dog training forum" - but this just seems like they were given investment for one idea, then immediately dropped it to do something else.
Or, like I say, have I missed something vital?