> YC startups don’t have to be unique. Far from it.
Slow news day. YC has made it clear over the years it's almost all about the founders not the idea. It's almost impossible to know if an idea is good at the early stages, and ideas change, startups pivot, often the timing is wrong, and the market unproven etc. More often than not most of what startups do is not unique, otherwise there's no market for it. A new take on an old idea has a much higher chance of success than something totally new that ends up being too early.
The CEO of YC gave a talk about how you should first assemble a founding team and THEN come up with an idea. The idea seems way less important than identifying founders they want to back.
Steve Jobs or maybe just Apple used to pit teams against each other to develop a solution to a problem and then pick the strongest of the two.
It also offers a convenient way to pull investment out early if the doppelganger startup isn't meeting targets. Just get the original startup to buy them out.
It's not something that is a negative for YC, but it could be for the startups they back.
Agree. I have watched several YC videos where they state this again and again. What they are less specific about is how precisely founders are selected.
Reminds me of how pelicans will raise two chicks and then kick the weakest of the two out of the nest and devote all future resources to foster the stronger of the two. YCombinator as convergent evolution, I guess.
> how pelicans will raise two chicks and then kick the weakest
there is a youtube video ( pls don’t watch ) that gave me nightmares for days on end. i had completely forgotten about those pelicans and now you had to bring it up again in the comments. the little pelican had a broken leg. It was limping, so mom and brother together pushed it out of the nest. Very cruel.
> More often than not most of what startups do is not unique
The message is also that if your start-up is based on deep tech moats choose another seed. (Think of YC's home runs. None had an industry secret/IP secret sauce.)
YC's roots are definitely the software hacker/painter/kill FAANG from a coffee shop type founders, although they've shown that deep tech teams can make interesting progress without years of R&D. Finding investors that get your idea and can help with their network is paramount. YC might not be the best fit in all cases.
YC has only been investing in deep tech for about a decade, I'm not sure that's long enough for them to have had a home run yet.
For example, Boom Supersonic was founded 10 years ago, and just this summer completed their second test flight. They are scheduled to launch commercial operations in 2029.
Lucid bots was founded in 2018, and just did their Series A to fund their growth of their autonomous drone fleet.
I wouldn't count YC out of the deep tech game just yet.
The article lists a few, none of which were unique - coinbase? Cryptocurrency exchanges already existed. AirBnB? Booking.com and other hotel or bed-and-breakfast booking websites already existed. Stripe? Yet another payment provider. Reddit? A Digg clone. Dropbox? rsync. etc.
Airbnb was basically a monetized form of Couchsurfing, not a hotel alternative. It only later turned into a direct hotel competitor. To my knowledge there was no similar service at the time.
>> - Popularized the idea of sharing a space when the host is there
this was not a popular option, and I don't believe was ever intended to be. It also opened the door for VRBO to gain traction explicitly marketing NOT sharing accommodation. The "rent out your spare bedroom" has never been a major component; it was a fake-out to counter the regulatory & licensing complaints they were facing.
I agree with the reasons for their success, but I don't believe that any of those alternatives allowed you to book a room/couch in someone's apartment. They were merely ways to either use properties for vacations (VRBO), semi-hotels like beds and breakfasts, or just regular renting space (Craigslist) for short/long term. Not the same thing as AirBnb at all.
But AirBnb didn't "completely solve" the hotel industry, and hotels still exist. If anything, they seem to still basically be operating in the same space as they started: owner-based rentals, for both individual rooms and entire properties.
I think there's something missing from this analysis - YC companies might duplicate one another's products but that doesn't say anything at all about their target markets, route to market, product focus, etc.
As an example, my first startup was a requirements management app that, on paper at least, was a copy of IBM DOORS. Except DOORS is a massive enterprise app targeted at companies who are building a new airplane that has 250,000 technical requirements that need fully traceability, and my app was aimed at small businesses doing software projects with 1000 requirements. I was not competing with IBM; I was trying to apply the value of that app to much smaller projects (the end goal might have been to become a competitor one day but we failed long before then.)
You can't just say "These two products do the same thing so the companies are dupes." It's far more complicated than that.
Incidentally, if anyone else wants to reinvent IBM DOORS for ~1000-requirements fields, email me. There's a vast market out there for combined hardware/software shops that are in the no man's land of "not designing an entire literal train from top to bottom" and "not just hiding a Raspberry Pi in a trench coat".
The great suspicion with YC is what proportion of YC companies have all their customers being a mix of other YC companies and those with shared investors?
There is a real danger with current era Bay Area tech that it is just a game of musical chairs played with money, with remarkably little external value being generated.
> There is a real danger with current era Bay Area tech that it is just a game of musical chairs played with money, with remarkably little external value being generated.
It was nothing like as bad as this 10 years ago, no.
Just look at the state of successful exits - it is awful. This is not the same as an ecosystem producing Sun, HP, Apple or even Google, which all had enormous positive externalities.
Ten years ago was 2014 - Sun, HP, Apple and Google were all very much "old hat" and entrenched. Hell, HP was in the process of significantly cutting back it's business and eliminating jobs[1] (34,000 lost jobs in 2013 and ~16,000 in 2014 is an interesting "positive externality" lol). There was no ecosystem producing them, they were the people who were either running SV, or realizing that their time in the sun was coming to an end.
Yes it was like this for Apple, Microsoft, Google, Facebook. The difference is that at that time the genius youngster (which is just the son of some already successful people) creating startups were cool. Now nobody wants to make or watch a movie about Sam Altman and OpenAI.
This can be a good thing. One of the hardest things about building new software products is getting initial customers to discover your bugs, missed requirements etc and also add credibility.
As an enterprises SaaS buyer, I'd much rather use a code documentation tool that'd been circle jerked around a YC batch a few times compared to one with no prior customers.
It makes sense. If you are an investor and have a strong belief that a specific product or idea is a good one - you might want to decouple your odds of success from the people/team/company executing that idea.
What's interesting is that the people who are able to predict and come up with the idea (e.g. a researcher using AI in 2021) are often not the best ones to execute on it (typically, lack of experience or capacity to handle the pain of growth while marketing).
What's most interesting is that most people aren't just "one type". In your life you go through multiple roles. Just like how most people, regardless of their income at age 20 will be earning top 35% income by age 35, people move up in their roles (and struggle at a young age to understand that this will happen to them). It's all about timing and age.
I believe some investors go for multiple teams purely because the ratio of those types is different - like a different risk profile. They invest in one with 80% AI boffins, and one with 80% business folks, and one will likely win in the circumstance of the moment (in the ChatGPT era - mostly the business folks. In the data driven AI era - mostly the AI boffins)
Human beings are the only creatures capable of self-evolution, using our minds to analyse the world around us and the world we have nurtured within us. Over time, we can stagnate into ossified animalistic patterns of selfishness, or we can expand our curiosity, consciousness, and, hopefully, our realization that compassion for others is the source of our own happiness. We can either find ways to better integrate ourselves into a better future for those around us, or wall ourselves off from the world around us. We would do well to remember that carpenters don't make hammers, nor computer scientists their own food, soil, packaging, tractors, or trains.
The use of the vast sums available to successful tech investors gives them a greater point of leverage than the rest of us not so endowed. And the more power is given, the responsibility is required, though few acknowledge or heed such wisdom.
At the end of the day, no matter how confident many folks are, who really has the humility and intelligence to know if a person is a genius? Very few, I guess. Very, very few, indeed.
The general is that income, like wealth, is correlated with age, not ransom. Most workers under 18 will be making near minimum wage. Workers in their 20s are probably still starting their careers. People fall off again when they are older, as they either retire early or in some professions just become less capable.
So when you put it all together, a lot of people with an under average career will have an over average income at 35: Just not an over average income within the cadre of 35 year olds.
The lack of correlation with income at 20 comes from how many careers require training that doesn't give good early income. A future doctor, barista or AI programmer are not likely to have. a great income at 20, but their incomes and wealth diverge rapidly as some have longer training with different outcomes. The doctor will hit the 1% after residency. The AI expert might start making money earlier. The barista is probably ahead in his 20s, but it's unlikely their income grew quite as much, although many a barista is working on doing something else. So again, looking just at percentile of income at different ages is going to lead to mistakes as different life curves are being aggregated together.
Exactly. I think this is a brilliant strategy by YC. They know that some ideas have great potential. They just back multiple teams and hope that one of them will win with their execution.
We need to define conflict of interest. Question: is an investor who gives money to one organization, but is not involved in the decision-making, conflicted if they give money to another organization? Are they self-conflicted (undermining their own likelihood of success)? Are they contractually or legally conflicted? Have they breached the trust of people they invested in? Are they ethically conflicted?
Answers to these questions are non-obvious. Attempts to simplify the set of relevant questions means imposing a worldview.
On the ethical question, a consequentialist would say it depends on the outcomes. Like many consequentialist analyses, this is complicated. Consider this: Investing in a similar company might validate the market and make it more likely for the company and/or its people to reach viability.
The conflict of interest is simply dead and forgotten in an era where the president-elect has his own cryptocoin, his own social media company, and appoints his billionaire supporters to improve efficiency in the parts of government that directly oversee those billionaires’ own businesses.
Yes, political corruption is a drag/loss on everyone except the corrupt ones. Worse, it can shift a system out of its viable operating zone. Corrupt individuals in a market can destroy the market.
But what is the connection to the parent comment? No matter how corrupt one part of government or a market becomes, it doesn’t excuse further corruption. If anything, more corruption makes additional corruption more likely to break the whole system.
I think it's reasonably straightforward they were making the point that conflict of interests are no longer taken seriously, along with many other related things. Politics tends to be a trailer of social views, not a leader.
If that were true, there'd be no point in ever applying a second time to YC.
Anecdotally, people do get accepted after 2-4 failures. Maybe YC was on the fence about those founders and their willingness to slam themselves against a wall repeatedly tipped the scales, or maybe they invest in a certain kind of founder and when they run out of those they invest in "promising" ideas.
If nothing else, having competition helps validate the market.
Which is often an advantage to all companies involved - a lot of the time, you're only notionally competing with each other, your main enemy is "people not using a product in that space at all."
e.g. for a lot of business SaaS the only enemy worth caring about is Excel.
(I've more than once been involved with companies where the "competitors" were all on friendly terms because convincing people that using *some* product in that space was a good idea expanded everybody's addressable market)
I see it more as more of a hedge. If you believe in the opportunity, placing extra bets makes sense. Uber and Lyft weren't the only ride share companies but sometimes luck wins out and sometimes execution does.
Additionally, if one seems to be winning, you just acqui-hire the "loser" in the winner, use that problem space expertise to scale faster AND you still get to claim a higher exit rate even if it was just to yourself.
Exactly right. Traditional VCs come up with a thesis and then buy 20% of the company they think will be the winner who fits that thesis when they're at like $1M to 10M revenue (series A)
YC can instead get ~10% of every plausible winner they come across when they're at $0 revenue
As noted elsethread, I think that almost certainly *is* what's going on; I was explaining why it's probably a good thing from (at least many of) the companies' perspectives too.
Yes, this can happen. How often and under what conditions I’m not sure.
I’ll give some other lenses:
1. From the point of view of an individual person, growth in the overall market is often an advantage. If one company doesn’t survive, there will be probably be others. Your skills and connections can help in a similar organization with a slightly different angle on the problem.
2. From the point of view of memetics, good business ideas are likely to appear and survive and take many forms in many niches. If you find yourself with competition, this can suggest that the underlying ideas are suited to the current environment. (Warning: this tendency can be distorted by irrational herd behavior and intentional gaming.)
Yes, and as a variant on (1) from the point of view of potential *customers* it makes adoption (at least feel) less risky because if your original chosen supplier goos *poof* there'll be another one to switch to rather than you having to re-adjust your internal processes to go without.
(I'm not sure under what conditions either, I mostly know this from having lived it and I wasn't on the business side in any such cases so)
And? As the article says, they've funded thousands of companies. Of course there's overlap. It would be weirder, much weirder, if they kept a conflict list like a law firm and avoided funding things that intersected their portfolio.
It's hard to emphasize enough how little YC knows about the companies they fund, and how little influence they have over the companies once they've funded them. Often, there's barely a company at all, just a small team that YC takes a shine to. Even if YC wanted to keep a conflict list, they couldn't: companies joint the program with one idea and launch with another.
To have a problem with that is to have a problem with the entire concept of YC; this is the process they invented, that they're notorious for.
modern portfolio theory (MPT) is the only acceptable measure of investment performance, and calculating co-variance is the salient feature of MPT, so no, it would not be weird to track overlap.
"Y Combinator seems to be the perfect place for mergers. Every winter for the past three winters, Y Combinator has funded a podcasting company. In winter 2017, Breaker. In winter 2018, The Podcast App. And in winter 2019, Brew."
> YC commonly accepts startups that are building similar or nearly identical products to previous YC grads. Some of them are direct competitors; others differ slightly by targeting a new geography (Asia or Latin America), or are a subset of a larger market (point-of-sale software for bars versus coffee shops).
It seems like a wise strategy to, if an investment does well (or otherwise proves a market) in one niche, to invest in another niche. It certainly increases the odds that you've invested in whoever will become the dominant player.
It seems pretty obvious to me that in modern times successful companies pick a segment of business to build expertise in and then expand outward from there.
Your ability to understand a specific client's business is usually gonna be your key differentiator against large incumbents.
It makes sense as an investor, doesn't it, you identify markets you see an opening, you check which companies are in that domain, pick the ones where they can execute and have good people on their team.
It would worry me as a startup company, who knows where the information I share with them will end up...
A more interesting question is, do you as a startup company have any information worth sharing? Ideas are dime a dozen and like you just said, the differentiator is the capabilities of those people. And that is not something that can be shared, and no other startup can benefit of it.
Diversification is a hedge against ignorance. Investors are always more ignorant than founders to begin with (breadth vs depth), and at the stage YC backs most companies at, even the founders don’t have much of a clue how successful they will be.
Stirs up competition within a cohort and there’s bound to be idea sharing between teams. YC claims to bet on people not ideas, so as another commenter pointed out, if a team pivots there’s no longer a competition.
My guess is YC also believes in simultaneous invention: the same idea coming from multiple places at once implies said idea’s time has come, while any team wanting to work on it must have already done the work to hit that forefront, making them great people to bet on.
Not surprising. This reminds me of HBO's Silicon Valley:
Ron LaFlamme: So Pied Piper, You're one of Peter's compression plays, huh?
Richard: One of? How many does he have?
Ron LaFlamme: Not too many, like six or eight.
Richard: Okay. Why are there so many?
Ron LaFlamme: You know how sea turtles have a s*t ton of babies because most of them die on their way to the water? Peter just wants to make sure that his money makes it to the ocean.
There are a lot of people who seem to think that zero-sum economics is how businesses work when it couldn’t be farther from the truth.
For example, if I open a bar downtown it may attract 100 customers. But if two entrepreneurs open two bars next to each other, they might attract 300 customers between them. The same can apply to entire market segments.
I think a different, perhaps weird, way of looking at this is that YC looks at the founders first and then market opportunity ("idea") secondly as justification.
YC doesn't need a single version of an idea to "win", and it's often stated plainly it doesn't even necessarily value the "idea" behind a lot of these investments but the founders themselves.
If you look at it that way, it's no surprise that multiple startups are working at the same market opportunity ("idea"), and that YC actually just wanted the founders themselves regardless of whose execution of the "idea" ends up winning (if any).
The cynic in me wonders if one of their goals is to keep the most talented people away from the competition, as cheaply as possible. With the goal of preventing independent competition, which could be seen as a greater threat to their golden boys.
I think this is actually okay. Execution matters, not the idea. Also if YC was trying to do coordination between its portfolio companies, it would be against the interests of the founders themselves because the founders do not care if another company in the YC batch succeeds or fails - they don't have a stake in that other company.
> This is the core ethos driving Chinese manufacturers to rip off anything and everything they can
I think everyone does this. We just like to focus only on Chinese companies when they do it, because many times when Chinese companies do it, they do it so well that it is a threat.
I guess I am saying that ideas are a dime a dozen. Every idea will likely get executed by multiple teams - it is incredibly rare for an idea to only get explored by a single team. Those teams that succeed did so because of execution.
I disagree. True "good execution" will not produce bad results over the medium and long term but that is what good execution is actually solving for. Good execution should recognize when/how pivots should be made to produce value.
This isn't really a big deal. Usually, obvious market opportunities have multiple organizations, trying to enter, and it makes sense for an investor to diversify.
That's different, from Amazon and Microsoft, who used the data they gathered during their work with smaller orgs, to then actively compete with those orgs.
> Yet, a deep dive into the data from all of the nearly 5,000 companies YC has backed to date [...]
The answer is in that number. YC is a startup accelerator. These days they back 500-1000 companies every year. There is no intention of having only one horse in every race. At that volume that is impossible. Their funding model allows them to bet on as many horses as possible to increase their own chances of success.
I dont think the headline is all that surprising. YC makes a lot of investments and most start ups fail. They are hedging their bets.
The more surprising thing about this article is that one YC company blatantly copied anothers product. To the point where the founder said they would start over and build their own product.
Useful here-say from some investors at the last few demo days: not all of the companies that are "copiers" apply + are accepted with the "copying" idea. Many founding teams end up pivoting during the batch and scramble to get proof points on the board before demo day. They're most likely to end up pivoting to well-known problems, therefore the clustering around a few common themes. It doesn't explain all of the data, but it's a big part of it. When you have to come up with a fundable new idea in a week and prove it out in a month this can happen...
Of course YC backs multiple companies in the same spaces, they have for quite some time if not from the start.
The controversy with pearai was not because it competed the market space of another YC company, but that it had the appearance of being a direct clone of the exact product of another YC company.
It's interesting how many of the commenters are starting from the assumption that this is both intentional and desirable (or in some other way smart on the part of YC) and then reasoning only on that basis.
(Or maybe it's not interesting, since this is on YC's own site... :-P)
Why is that interesting to you? Do you have a contrasting point of view to share? Do you have experience with startups and/or venture capital?
I have no involvement with YC, but with a little startup and VC pitching experience, I can tell you that in my experience, lots of VCs like the idea of founders doing something incremental that builds on successful ideas. The article notably did not compare YC to any other VCs, but the truth is likely that all VCs “often” back startups that duplicate others in some way. VCs will tell you not to build something original, because there’s no demonstrated market for it. And statistically they’re right, your chances of success with an unproven idea are lower than with an incremental change to something people already buy. The article also notably did not talk about how often startups duplicate other businesses on their own, before there’s VC involvement. In that sense, despite the claim in the title that there’s data, the article is unscientific.
This article struck me as one of those “studies” that shows something everyone already knows, and the title kinda seems designed to sound dramatic and/or accusatory to appeal to readers drawn to controversy even if there isn’t really any controversy there.
There's an enormous amount of evidence that almost no VC knows what they're doing (almost none beat index funds in the long run).
YC seems to have a spray-and-pray approach, and it used to be run by Sam Altman who has repeatedly failed upward, so I think it's very reasonable to assume this is either not a conscious strategy or it's just a bad strategy.
Either way, the VC's value is to be able to predict whether Dropbox or Zumodrive deserves their bet, and they clearly couldn't.
> Either way, the VC's value is to be able to predict whether Dropbox or Zumodrive deserves their bet, and they clearly couldn't.
This is an extremely wrong-headed view of what VCs do, and one thing investors do _in general_ is to have a strong idea of what they know and don't know, and in particular, what _nobody_ knows is which companies or products in particular will succeed or fail. If they knew that, they'd put all their eggs in one basket.
What VCs do is allocate capital in a way that mitigates risk for themselves.
There's actually a _really_ interesting way to think about what VCs do, which is that they _offload_ their own risk onto founders and early hires of startups. VCs invest their money across a broad basket of investments, founders invest all their time and money into _one_. VCs and early hires are taking a massive amount of personal risk. Almost all of the profits of VCs come from what is essentially a risk arbitrage -- they get more profits than they should be from the smaller risk they're taking by investing in a startup, and founders and early hires get less profits than they should be from the personal risk they're taking by starting a company.
The structure of investment deals is often setup in such a way that even events that "feel" like they should be a payday for the founders, such as a funding round or even a sale, could end up with them getting nothing because their shares get diluted, because they have lower priority ownership stakes than the VCs do.
Your description of a VC's value is describing them as an index fund of startups, and I suppose you could say YC has moved in that direction.
But most VCs are paid to make bets on which companies are most likely to succeed. I never said they're supposed to know with certainty. That's a silly straw man that no one who understands basic finance would suggest.
But they spend much of their time supposedly screening deals to find good ones, and there is a preponderance of evidence that they're worse at it than a dumb index fund.
There have even been experiments to automate picking deals, and even a fairly naive algorithm is better than most VCs.
Only people on the VC side of the table think they have any added value other than lucking into being trusted to invest other people's money.
Just because you have similar or the same idea doesn’t mean at the end you have a sustainable one. Also, companies get bought out but while ideas are the same execution and scope can change given the level of technology available .
This isn't anything new. Heck, the first season of Silicon Valley called this out with Peter Gregory backing a number of compression startups.
Interestingly for the OP, that same season featured Tech Crunch Disrupt. It's a bit ironic to see TC publishing this concept now as though it is a new revelation.
It makes sense to scatter a bunch of seeds on fertile ground, and then pick the strongest plant that shows the most growth. There are many kinds of smart, ambitious people; some will form teams that succeed, others will fall prey to unforeseen impediments, and not.
Is this surprising? almost 10 years ago even Silicon Valley (the TV show) made fun of the fact that the main guys' company was only one of many compression startups their investor invested in.
In executing on an idea, the end result is often very different from where you started. They might look similar now, but in 5 years one went enterprise on feature set and the other consumer etc etc.
Pardon my ignorance, but is it wrong for my reaction to this piece to essentially be, "... okay, and?".
If we're being honest with ourselves, platitudes are just platitudes and the ultimate point of YC is to further enrich investors, and to enrich founders. Of course they're going to try everything they can to make that happen.
It's not like YC's #1 mission is, "Do original, world-changing things", no, it's, "We want more money".
This is reads as if that is negative an unusual. One might think supporting copycats is bad but obviously a company cannot simply be copied and is more than just its product. While a product might be, you can still outclass your competitors with better engineering, or sourcing of materials or marketing.
You wonder if this is a telling story about YC or just one about the startup space in general.
Possible outcomes include:
1. There is little unique ideas going around. YC is truely and knowingly funding blatant copycats.
2. There is little unique ideas going around. Due to the large amount of duplicates, all accelerators invariably invest in mostly copycats.
3. There is unique ideas going around, they are just not popular with YC. This could have various reasons. I wonder what they might be
>> The Silicon Valley dream is to build a tech startup that is such a unique idea it alters the commercial universe and turns its founders into billionaires.
The headline is a false assumption. While there are still people who are trying to build off unique ideas to change the world, it seems very few of them are motivated by becoming billionaires. The latter have no intention or particular desire to create a sea change, and actively look to (at best) have a "X for Y" strategy. Even more are "Yet another <already successful> X".
I don’t mean this in a bad way, but like, at this point YC’s business model is spray and pray right? They weed out obvious losers, and then use vibes to pick a section of the rest, push them through a standard accelerator program, and demo day at the end, and this works because having been accepted into YC is like being able to say you went to a fancy university: no guarantees on future performance, but you’re probably not an idiot.
They should be (and are — YC Fall Batch!) trying to maximise the number of companies they take on while not diminishing returns below their cost of capital and brand dilution.
That approach is perfectly valid and could even be smarter than other VCs that avoid funding competing projects. I also think that, since YC operates at an earlier stage than major funds like Sequoia, different heuristics could apply. Ultimately, it's about balancing risk and reward—duplicating efforts can increase the chances of success while mitigating risks. Of course, it's not easy to establish processes that help competing companies in the same space without inadvertently favoring one over the other.
YC should back duplicate startups because each startup's chance of success is low. If it makes sense to back a startup with a 10% chance of being a big company later, then a second such startup also makes sense, even if there is a 1% chance that they both make it and one of them is not needed.
The problem is when someone says the quiet part out loud, and the duplicate startups start talking to each other. The people at one startup refuse to do useful work because they incorrectly believe the other startup have a better idea. You want to leave those decisions to senior management, who can move technologies to make one company successful.
Have you ever suddenly received an influx of employees because someone jast realized that there was a duplicate company doing the same thing (fake gasp) and that it was time to combine the best parts of both the get a product? Somehow, despite nobody knowing there were duplicate startups, a proof of concepts has been working for a few months combining the best bits from each of 3 (fake gasp) startups, and the third one had very little to contribute so you will not see their people around.
I'm sorry if my post hurts anyone's plans. Fell free to delete it.
One of the reasons that YC is so great is that they back founders, not ideas. YC has never backed the same founder twice in a batch to my knowledge, and doing so is antithetical to its values.
> YC startups don’t have to be unique. Far from it.
Slow news day. YC has made it clear over the years it's almost all about the founders not the idea. It's almost impossible to know if an idea is good at the early stages, and ideas change, startups pivot, often the timing is wrong, and the market unproven etc. More often than not most of what startups do is not unique, otherwise there's no market for it. A new take on an old idea has a much higher chance of success than something totally new that ends up being too early.
The CEO of YC gave a talk about how you should first assemble a founding team and THEN come up with an idea. The idea seems way less important than identifying founders they want to back.
Steve Jobs or maybe just Apple used to pit teams against each other to develop a solution to a problem and then pick the strongest of the two.
It also offers a convenient way to pull investment out early if the doppelganger startup isn't meeting targets. Just get the original startup to buy them out.
It's not something that is a negative for YC, but it could be for the startups they back.
Agree. I have watched several YC videos where they state this again and again. What they are less specific about is how precisely founders are selected.
Even today there are decent odds that within Apple the macOS and iOS groups are locked in a multi-decade long fight in which one may prevail...
Reminds me of how pelicans will raise two chicks and then kick the weakest of the two out of the nest and devote all future resources to foster the stronger of the two. YCombinator as convergent evolution, I guess.
> how pelicans will raise two chicks and then kick the weakest
there is a youtube video ( pls don’t watch ) that gave me nightmares for days on end. i had completely forgotten about those pelicans and now you had to bring it up again in the comments. the little pelican had a broken leg. It was limping, so mom and brother together pushed it out of the nest. Very cruel.
They say that, but what if the opposite was the actual truth?
Look every VC is "founder friendly" because without founders there's no deal flow. At the end of the day though every VC is optimizing for exit value.
So it makes sense to bet on the same idea twice. If Founder A screws the pooch, you've still got Founder B.
This matches typical VC investment patterns.
> More often than not most of what startups do is not unique
The message is also that if your start-up is based on deep tech moats choose another seed. (Think of YC's home runs. None had an industry secret/IP secret sauce.)
YC's roots are definitely the software hacker/painter/kill FAANG from a coffee shop type founders, although they've shown that deep tech teams can make interesting progress without years of R&D. Finding investors that get your idea and can help with their network is paramount. YC might not be the best fit in all cases.
YC has only been investing in deep tech for about a decade, I'm not sure that's long enough for them to have had a home run yet.
For example, Boom Supersonic was founded 10 years ago, and just this summer completed their second test flight. They are scheduled to launch commercial operations in 2029.
Lucid bots was founded in 2018, and just did their Series A to fund their growth of their autonomous drone fleet.
I wouldn't count YC out of the deep tech game just yet.
YC is more focused on B2B now, so this will change.
The article lists a few, none of which were unique - coinbase? Cryptocurrency exchanges already existed. AirBnB? Booking.com and other hotel or bed-and-breakfast booking websites already existed. Stripe? Yet another payment provider. Reddit? A Digg clone. Dropbox? rsync. etc.
Airbnb was basically a monetized form of Couchsurfing, not a hotel alternative. It only later turned into a direct hotel competitor. To my knowledge there was no similar service at the time.
Folks had been using alternatives to rent space like HomeAway.com, VRBO.com, BedandBreakfast.com and Craigslist for years.
Airbnb won because:
- Better design, easy to use, nice pictures they took themselves at first (per PG's advice)
- Integrated payments and reviews in a seamless experience
- Popularized the idea of sharing a space when the host is there
- Offered unique accommodations in urban places
- Lots of buzz about treehouses, castles, teepees, shipping containers, etc.
- Their timing benefited from the Great Recession
- Very good at promoting their rag to riches story with YC's help
- Also you didn't need to constantly repost like Craigslist, just post once
>> - Popularized the idea of sharing a space when the host is there
this was not a popular option, and I don't believe was ever intended to be. It also opened the door for VRBO to gain traction explicitly marketing NOT sharing accommodation. The "rent out your spare bedroom" has never been a major component; it was a fake-out to counter the regulatory & licensing complaints they were facing.
I agree with the reasons for their success, but I don't believe that any of those alternatives allowed you to book a room/couch in someone's apartment. They were merely ways to either use properties for vacations (VRBO), semi-hotels like beds and breakfasts, or just regular renting space (Craigslist) for short/long term. Not the same thing as AirBnb at all.
The first resonating problem you solve is rarely the bigger problem you end up completely solving.
But AirBnb didn't "completely solve" the hotel industry, and hotels still exist. If anything, they seem to still basically be operating in the same space as they started: owner-based rentals, for both individual rooms and entire properties.
Yeah, back then Booking was hotels only, not people's apartments or couches.
I think there's something missing from this analysis - YC companies might duplicate one another's products but that doesn't say anything at all about their target markets, route to market, product focus, etc.
As an example, my first startup was a requirements management app that, on paper at least, was a copy of IBM DOORS. Except DOORS is a massive enterprise app targeted at companies who are building a new airplane that has 250,000 technical requirements that need fully traceability, and my app was aimed at small businesses doing software projects with 1000 requirements. I was not competing with IBM; I was trying to apply the value of that app to much smaller projects (the end goal might have been to become a competitor one day but we failed long before then.)
You can't just say "These two products do the same thing so the companies are dupes." It's far more complicated than that.
Incidentally, if anyone else wants to reinvent IBM DOORS for ~1000-requirements fields, email me. There's a vast market out there for combined hardware/software shops that are in the no man's land of "not designing an entire literal train from top to bottom" and "not just hiding a Raspberry Pi in a trench coat".
That's not the case for most dev tools YC startup, they are targeting the same HN users/ other YC startups (trying to sell shovels)
The great suspicion with YC is what proportion of YC companies have all their customers being a mix of other YC companies and those with shared investors?
There is a real danger with current era Bay Area tech that it is just a game of musical chairs played with money, with remarkably little external value being generated.
> There is a real danger with current era Bay Area tech that it is just a game of musical chairs played with money, with remarkably little external value being generated.
So, you don’t think that is already the case?
It was nothing like as bad as this 10 years ago, no.
Just look at the state of successful exits - it is awful. This is not the same as an ecosystem producing Sun, HP, Apple or even Google, which all had enormous positive externalities.
Ten years ago was 2014 - Sun, HP, Apple and Google were all very much "old hat" and entrenched. Hell, HP was in the process of significantly cutting back it's business and eliminating jobs[1] (34,000 lost jobs in 2013 and ~16,000 in 2014 is an interesting "positive externality" lol). There was no ecosystem producing them, they were the people who were either running SV, or realizing that their time in the sun was coming to an end.
[1]https://en.wikipedia.org/wiki/Hewlett-Packard
Yes it was like this for Apple, Microsoft, Google, Facebook. The difference is that at that time the genius youngster (which is just the son of some already successful people) creating startups were cool. Now nobody wants to make or watch a movie about Sam Altman and OpenAI.
This can be a good thing. One of the hardest things about building new software products is getting initial customers to discover your bugs, missed requirements etc and also add credibility.
As an enterprises SaaS buyer, I'd much rather use a code documentation tool that'd been circle jerked around a YC batch a few times compared to one with no prior customers.
It makes sense. If you are an investor and have a strong belief that a specific product or idea is a good one - you might want to decouple your odds of success from the people/team/company executing that idea.
What's interesting is that the people who are able to predict and come up with the idea (e.g. a researcher using AI in 2021) are often not the best ones to execute on it (typically, lack of experience or capacity to handle the pain of growth while marketing).
What's most interesting is that most people aren't just "one type". In your life you go through multiple roles. Just like how most people, regardless of their income at age 20 will be earning top 35% income by age 35, people move up in their roles (and struggle at a young age to understand that this will happen to them). It's all about timing and age.
I believe some investors go for multiple teams purely because the ratio of those types is different - like a different risk profile. They invest in one with 80% AI boffins, and one with 80% business folks, and one will likely win in the circumstance of the moment (in the ChatGPT era - mostly the business folks. In the data driven AI era - mostly the AI boffins)
Human beings are the only creatures capable of self-evolution, using our minds to analyse the world around us and the world we have nurtured within us. Over time, we can stagnate into ossified animalistic patterns of selfishness, or we can expand our curiosity, consciousness, and, hopefully, our realization that compassion for others is the source of our own happiness. We can either find ways to better integrate ourselves into a better future for those around us, or wall ourselves off from the world around us. We would do well to remember that carpenters don't make hammers, nor computer scientists their own food, soil, packaging, tractors, or trains.
The use of the vast sums available to successful tech investors gives them a greater point of leverage than the rest of us not so endowed. And the more power is given, the responsibility is required, though few acknowledge or heed such wisdom.
At the end of the day, no matter how confident many folks are, who really has the humility and intelligence to know if a person is a genius? Very few, I guess. Very, very few, indeed.
"Just like how most people, regardless of their income at age 20 will be earning top 35% income by age 35"
Could you say more about this, or perhaps provide a link where we can read more?
The general is that income, like wealth, is correlated with age, not ransom. Most workers under 18 will be making near minimum wage. Workers in their 20s are probably still starting their careers. People fall off again when they are older, as they either retire early or in some professions just become less capable.
So when you put it all together, a lot of people with an under average career will have an over average income at 35: Just not an over average income within the cadre of 35 year olds.
The lack of correlation with income at 20 comes from how many careers require training that doesn't give good early income. A future doctor, barista or AI programmer are not likely to have. a great income at 20, but their incomes and wealth diverge rapidly as some have longer training with different outcomes. The doctor will hit the 1% after residency. The AI expert might start making money earlier. The barista is probably ahead in his 20s, but it's unlikely their income grew quite as much, although many a barista is working on doing something else. So again, looking just at percentile of income at different ages is going to lead to mistakes as different life curves are being aggregated together.
Exactly. I think this is a brilliant strategy by YC. They know that some ideas have great potential. They just back multiple teams and hope that one of them will win with their execution.
YC also says that they don't believe in the idea, but the founders ¯\_(ツ)_/¯
Seems reasonable to pick two horses in a race you believe is worth running
This creates an extremely obvious conflict of interest.
We need to define conflict of interest. Question: is an investor who gives money to one organization, but is not involved in the decision-making, conflicted if they give money to another organization? Are they self-conflicted (undermining their own likelihood of success)? Are they contractually or legally conflicted? Have they breached the trust of people they invested in? Are they ethically conflicted?
Answers to these questions are non-obvious. Attempts to simplify the set of relevant questions means imposing a worldview.
On the ethical question, a consequentialist would say it depends on the outcomes. Like many consequentialist analyses, this is complicated. Consider this: Investing in a similar company might validate the market and make it more likely for the company and/or its people to reach viability.
The conflict of interest is simply dead and forgotten in an era where the president-elect has his own cryptocoin, his own social media company, and appoints his billionaire supporters to improve efficiency in the parts of government that directly oversee those billionaires’ own businesses.
Yes, political corruption is a drag/loss on everyone except the corrupt ones. Worse, it can shift a system out of its viable operating zone. Corrupt individuals in a market can destroy the market.
But what is the connection to the parent comment? No matter how corrupt one part of government or a market becomes, it doesn’t excuse further corruption. If anything, more corruption makes additional corruption more likely to break the whole system.
I think it's reasonably straightforward they were making the point that conflict of interests are no longer taken seriously, along with many other related things. Politics tends to be a trailer of social views, not a leader.
The connection is that the conflict of interest being discussed was only ever a social/ethical contract.
That social contract is in the bin right now, so the question is moot.
If that were true, there'd be no point in ever applying a second time to YC.
Anecdotally, people do get accepted after 2-4 failures. Maybe YC was on the fence about those founders and their willingness to slam themselves against a wall repeatedly tipped the scales, or maybe they invest in a certain kind of founder and when they run out of those they invest in "promising" ideas.
> YC also says that they don't believe in the idea, but the founders ¯\_(ツ)_/¯
That still doesn't preclude them backing two founder groups that have similar ideas.
If nothing else, having competition helps validate the market.
Which is often an advantage to all companies involved - a lot of the time, you're only notionally competing with each other, your main enemy is "people not using a product in that space at all."
e.g. for a lot of business SaaS the only enemy worth caring about is Excel.
(I've more than once been involved with companies where the "competitors" were all on friendly terms because convincing people that using *some* product in that space was a good idea expanded everybody's addressable market)
I see it more as more of a hedge. If you believe in the opportunity, placing extra bets makes sense. Uber and Lyft weren't the only ride share companies but sometimes luck wins out and sometimes execution does.
Additionally, if one seems to be winning, you just acqui-hire the "loser" in the winner, use that problem space expertise to scale faster AND you still get to claim a higher exit rate even if it was just to yourself.
Sure, though I'm not sure that "I see it more as" makes sense in context given -
You're talking about how YC sees it.
I was talking about how it affects things from the companies's point of view when YC does that.
As such, so far as I can see our actual statements about the upshot of the situation are probably both correct :)
Exactly right. Traditional VCs come up with a thesis and then buy 20% of the company they think will be the winner who fits that thesis when they're at like $1M to 10M revenue (series A)
YC can instead get ~10% of every plausible winner they come across when they're at $0 revenue
As noted elsethread, I think that almost certainly *is* what's going on; I was explaining why it's probably a good thing from (at least many of) the companies' perspectives too.
Yes, this can happen. How often and under what conditions I’m not sure.
I’ll give some other lenses:
1. From the point of view of an individual person, growth in the overall market is often an advantage. If one company doesn’t survive, there will be probably be others. Your skills and connections can help in a similar organization with a slightly different angle on the problem.
2. From the point of view of memetics, good business ideas are likely to appear and survive and take many forms in many niches. If you find yourself with competition, this can suggest that the underlying ideas are suited to the current environment. (Warning: this tendency can be distorted by irrational herd behavior and intentional gaming.)
Yes, and as a variant on (1) from the point of view of potential *customers* it makes adoption (at least feel) less risky because if your original chosen supplier goos *poof* there'll be another one to switch to rather than you having to re-adjust your internal processes to go without.
(I'm not sure under what conditions either, I mostly know this from having lived it and I wasn't on the business side in any such cases so)
And? As the article says, they've funded thousands of companies. Of course there's overlap. It would be weirder, much weirder, if they kept a conflict list like a law firm and avoided funding things that intersected their portfolio.
It's hard to emphasize enough how little YC knows about the companies they fund, and how little influence they have over the companies once they've funded them. Often, there's barely a company at all, just a small team that YC takes a shine to. Even if YC wanted to keep a conflict list, they couldn't: companies joint the program with one idea and launch with another.
To have a problem with that is to have a problem with the entire concept of YC; this is the process they invented, that they're notorious for.
modern portfolio theory (MPT) is the only acceptable measure of investment performance, and calculating co-variance is the salient feature of MPT, so no, it would not be weird to track overlap.
"Y Combinator seems to be the perfect place for mergers. Every winter for the past three winters, Y Combinator has funded a podcasting company. In winter 2017, Breaker. In winter 2018, The Podcast App. And in winter 2019, Brew."
https://dan.bulwinkle.net/blog/there-should-be-more-mergers/
Any idea why mergers aren’t more common? The article doesn’t really seem to have an answer to that.
> YC commonly accepts startups that are building similar or nearly identical products to previous YC grads. Some of them are direct competitors; others differ slightly by targeting a new geography (Asia or Latin America), or are a subset of a larger market (point-of-sale software for bars versus coffee shops).
If you're going "by the book" with Crossing The Chasm, (https://en.wikipedia.org/wiki/Crossing_the_Chasm), all startups need to conquer a niche before they can own an entire market.
It seems like a wise strategy to, if an investment does well (or otherwise proves a market) in one niche, to invest in another niche. It certainly increases the odds that you've invested in whoever will become the dominant player.
It seems pretty obvious to me that in modern times successful companies pick a segment of business to build expertise in and then expand outward from there.
Your ability to understand a specific client's business is usually gonna be your key differentiator against large incumbents.
"That is already being done" is a good sign in the world of startups. It means there is a market.
It's hilariously used to shoot down startup ideas.
Makes sense. That way it reinforces those accumulated companies so they remain best in class.
It makes sense as an investor, doesn't it, you identify markets you see an opening, you check which companies are in that domain, pick the ones where they can execute and have good people on their team.
It would worry me as a startup company, who knows where the information I share with them will end up...
A more interesting question is, do you as a startup company have any information worth sharing? Ideas are dime a dozen and like you just said, the differentiator is the capabilities of those people. And that is not something that can be shared, and no other startup can benefit of it.
It's not always about ideas. Growing startups often have proprietary information they can't share with competitors.
Diversification is a hedge against ignorance. Investors are always more ignorant than founders to begin with (breadth vs depth), and at the stage YC backs most companies at, even the founders don’t have much of a clue how successful they will be.
This is the “correct” investment behavior.
To be honest, I would do the same.
If it’s a good idea, maybe the only difference between It’s succeeding or fail is the team executing it.
So in order to maximize the outcome, you double the bet and it’s even better than have someone doing it outside your control
Seems like a great idea!
Stirs up competition within a cohort and there’s bound to be idea sharing between teams. YC claims to bet on people not ideas, so as another commenter pointed out, if a team pivots there’s no longer a competition.
My guess is YC also believes in simultaneous invention: the same idea coming from multiple places at once implies said idea’s time has come, while any team wanting to work on it must have already done the work to hit that forefront, making them great people to bet on.
Not surprising. This reminds me of HBO's Silicon Valley:
Ron LaFlamme: So Pied Piper, You're one of Peter's compression plays, huh?
Richard: One of? How many does he have?
Ron LaFlamme: Not too many, like six or eight.
Richard: Okay. Why are there so many?
Ron LaFlamme: You know how sea turtles have a s*t ton of babies because most of them die on their way to the water? Peter just wants to make sure that his money makes it to the ocean.
There are a lot of people who seem to think that zero-sum economics is how businesses work when it couldn’t be farther from the truth.
For example, if I open a bar downtown it may attract 100 customers. But if two entrepreneurs open two bars next to each other, they might attract 300 customers between them. The same can apply to entire market segments.
I think a different, perhaps weird, way of looking at this is that YC looks at the founders first and then market opportunity ("idea") secondly as justification.
YC doesn't need a single version of an idea to "win", and it's often stated plainly it doesn't even necessarily value the "idea" behind a lot of these investments but the founders themselves.
If you look at it that way, it's no surprise that multiple startups are working at the same market opportunity ("idea"), and that YC actually just wanted the founders themselves regardless of whose execution of the "idea" ends up winning (if any).
The cynic in me wonders if one of their goals is to keep the most talented people away from the competition, as cheaply as possible. With the goal of preventing independent competition, which could be seen as a greater threat to their golden boys.
I think this is actually okay. Execution matters, not the idea. Also if YC was trying to do coordination between its portfolio companies, it would be against the interests of the founders themselves because the founders do not care if another company in the YC batch succeeds or fails - they don't have a stake in that other company.
> Execution matters, not the idea.
This is the core ethos driving Chinese manufacturers to rip off anything and everything they can
> This is the core ethos driving Chinese manufacturers to rip off anything and everything they can
I think everyone does this. We just like to focus only on Chinese companies when they do it, because many times when Chinese companies do it, they do it so well that it is a threat.
> Execution matters, not the idea.
Execution matters _as much as_ the idea.
A good idea executed poorly produces bad results.
A bad idea executed well produces bad results.
This is what YC is hedging (was it the execution or idea) by investing in duplicative startups.
It's more like 90/10. 90% execution and 10% idea. And actually almost all successful startups didn't have "original" ideas:
- google wasn't the first search engine
- facebook wasn't the first social network
- tesla wasn't the first electric car
- ChatGPT wasn't the first chat bot
I guess I am saying that ideas are a dime a dozen. Every idea will likely get executed by multiple teams - it is incredibly rare for an idea to only get explored by a single team. Those teams that succeed did so because of execution.
I disagree. True "good execution" will not produce bad results over the medium and long term but that is what good execution is actually solving for. Good execution should recognize when/how pivots should be made to produce value.
This isn't really a big deal. Usually, obvious market opportunities have multiple organizations, trying to enter, and it makes sense for an investor to diversify.
That's different, from Amazon and Microsoft, who used the data they gathered during their work with smaller orgs, to then actively compete with those orgs.
A classic Microsoft joke (hope you like Comic Sans): https://www.davar.net/HUMOR/STORIES/MS-CUISN.HTM
VC sees buzzword in pitch and throws money at it, data shows.
This! Other comments imply some kind of strategy from YC, but it's likely a VC bias and/or a lack of communication inside YC.
> Yet, a deep dive into the data from all of the nearly 5,000 companies YC has backed to date [...]
The answer is in that number. YC is a startup accelerator. These days they back 500-1000 companies every year. There is no intention of having only one horse in every race. At that volume that is impossible. Their funding model allows them to bet on as many horses as possible to increase their own chances of success.
I dont think the headline is all that surprising. YC makes a lot of investments and most start ups fail. They are hedging their bets.
The more surprising thing about this article is that one YC company blatantly copied anothers product. To the point where the founder said they would start over and build their own product.
Useful here-say from some investors at the last few demo days: not all of the companies that are "copiers" apply + are accepted with the "copying" idea. Many founding teams end up pivoting during the batch and scramble to get proof points on the board before demo day. They're most likely to end up pivoting to well-known problems, therefore the clustering around a few common themes. It doesn't explain all of the data, but it's a big part of it. When you have to come up with a fundable new idea in a week and prove it out in a month this can happen...
Not to be pedantic but maybe it will help in the future: it is spelled hearsay. You heard someone say it.
Making lots of bets is a core part of the venture capital model.
Of course YC backs multiple companies in the same spaces, they have for quite some time if not from the start.
The controversy with pearai was not because it competed the market space of another YC company, but that it had the appearance of being a direct clone of the exact product of another YC company.
Reminds me of some German guys who specialise in copying successful companies and have made billions in the process .
https://en.m.wikipedia.org/wiki/Rocket_Internet
Does anyone know the best alternatives to YC?
Hedge funds that use a "pod" structure (Chinese walled groups of traders) will hire one pod to mimic another pods strategy. Not hard to guess why.
It's interesting how many of the commenters are starting from the assumption that this is both intentional and desirable (or in some other way smart on the part of YC) and then reasoning only on that basis.
(Or maybe it's not interesting, since this is on YC's own site... :-P)
Why is that interesting to you? Do you have a contrasting point of view to share? Do you have experience with startups and/or venture capital?
I have no involvement with YC, but with a little startup and VC pitching experience, I can tell you that in my experience, lots of VCs like the idea of founders doing something incremental that builds on successful ideas. The article notably did not compare YC to any other VCs, but the truth is likely that all VCs “often” back startups that duplicate others in some way. VCs will tell you not to build something original, because there’s no demonstrated market for it. And statistically they’re right, your chances of success with an unproven idea are lower than with an incremental change to something people already buy. The article also notably did not talk about how often startups duplicate other businesses on their own, before there’s VC involvement. In that sense, despite the claim in the title that there’s data, the article is unscientific.
This article struck me as one of those “studies” that shows something everyone already knows, and the title kinda seems designed to sound dramatic and/or accusatory to appeal to readers drawn to controversy even if there isn’t really any controversy there.
Concluding that it's not intentional depends on the premise that they don't know they're doing it, which seems unlikely.
There's an enormous amount of evidence that almost no VC knows what they're doing (almost none beat index funds in the long run).
YC seems to have a spray-and-pray approach, and it used to be run by Sam Altman who has repeatedly failed upward, so I think it's very reasonable to assume this is either not a conscious strategy or it's just a bad strategy.
Either way, the VC's value is to be able to predict whether Dropbox or Zumodrive deserves their bet, and they clearly couldn't.
> Either way, the VC's value is to be able to predict whether Dropbox or Zumodrive deserves their bet, and they clearly couldn't.
This is an extremely wrong-headed view of what VCs do, and one thing investors do _in general_ is to have a strong idea of what they know and don't know, and in particular, what _nobody_ knows is which companies or products in particular will succeed or fail. If they knew that, they'd put all their eggs in one basket.
What VCs do is allocate capital in a way that mitigates risk for themselves.
There's actually a _really_ interesting way to think about what VCs do, which is that they _offload_ their own risk onto founders and early hires of startups. VCs invest their money across a broad basket of investments, founders invest all their time and money into _one_. VCs and early hires are taking a massive amount of personal risk. Almost all of the profits of VCs come from what is essentially a risk arbitrage -- they get more profits than they should be from the smaller risk they're taking by investing in a startup, and founders and early hires get less profits than they should be from the personal risk they're taking by starting a company.
The structure of investment deals is often setup in such a way that even events that "feel" like they should be a payday for the founders, such as a funding round or even a sale, could end up with them getting nothing because their shares get diluted, because they have lower priority ownership stakes than the VCs do.
Your description of a VC's value is describing them as an index fund of startups, and I suppose you could say YC has moved in that direction.
But most VCs are paid to make bets on which companies are most likely to succeed. I never said they're supposed to know with certainty. That's a silly straw man that no one who understands basic finance would suggest.
But they spend much of their time supposedly screening deals to find good ones, and there is a preponderance of evidence that they're worse at it than a dumb index fund.
There have even been experiments to automate picking deals, and even a fairly naive algorithm is better than most VCs.
Only people on the VC side of the table think they have any added value other than lucking into being trusted to invest other people's money.
> VCs and early hires are taking a massive amount of personal risk.
I think you meant “Founders and early hires” here?
Just because you have similar or the same idea doesn’t mean at the end you have a sustainable one. Also, companies get bought out but while ideas are the same execution and scope can change given the level of technology available .
this was true 17 years back too. dropbox and zumodrive were both in same batch and were tackling the same problem with different approaches.
P.S. Not saying its a bad thing. Early stage startups evolve and like YC has shared a lot of the early bet is on the founders.
This isn't anything new. Heck, the first season of Silicon Valley called this out with Peter Gregory backing a number of compression startups.
Interestingly for the OP, that same season featured Tech Crunch Disrupt. It's a bit ironic to see TC publishing this concept now as though it is a new revelation.
It makes sense to scatter a bunch of seeds on fertile ground, and then pick the strongest plant that shows the most growth. There are many kinds of smart, ambitious people; some will form teams that succeed, others will fall prey to unforeseen impediments, and not.
And Garry apologized for being wrong shortly after, but that’s not mentioned?
Is this surprising? almost 10 years ago even Silicon Valley (the TV show) made fun of the fact that the main guys' company was only one of many compression startups their investor invested in.
In executing on an idea, the end result is often very different from where you started. They might look similar now, but in 5 years one went enterprise on feature set and the other consumer etc etc.
So true, all the Blockchain startups are now LLM startups.
You mean there is a trend in existing blockchain startups pivoting to LLMs? Is there a source / more details?
Pardon my ignorance, but is it wrong for my reaction to this piece to essentially be, "... okay, and?".
If we're being honest with ourselves, platitudes are just platitudes and the ultimate point of YC is to further enrich investors, and to enrich founders. Of course they're going to try everything they can to make that happen.
It's not like YC's #1 mission is, "Do original, world-changing things", no, it's, "We want more money".
This is reads as if that is negative an unusual. One might think supporting copycats is bad but obviously a company cannot simply be copied and is more than just its product. While a product might be, you can still outclass your competitors with better engineering, or sourcing of materials or marketing.
You wonder if this is a telling story about YC or just one about the startup space in general.
Possible outcomes include:
1. There is little unique ideas going around. YC is truely and knowingly funding blatant copycats.
2. There is little unique ideas going around. Due to the large amount of duplicates, all accelerators invariably invest in mostly copycats.
3. There is unique ideas going around, they are just not popular with YC. This could have various reasons. I wonder what they might be
>> The Silicon Valley dream is to build a tech startup that is such a unique idea it alters the commercial universe and turns its founders into billionaires.
The headline is a false assumption. While there are still people who are trying to build off unique ideas to change the world, it seems very few of them are motivated by becoming billionaires. The latter have no intention or particular desire to create a sea change, and actively look to (at best) have a "X for Y" strategy. Even more are "Yet another <already successful> X".
Investing in a market opportunity rather than a company or person.
I don’t mean this in a bad way, but like, at this point YC’s business model is spray and pray right? They weed out obvious losers, and then use vibes to pick a section of the rest, push them through a standard accelerator program, and demo day at the end, and this works because having been accepted into YC is like being able to say you went to a fancy university: no guarantees on future performance, but you’re probably not an idiot.
They should be (and are — YC Fall Batch!) trying to maximise the number of companies they take on while not diminishing returns below their cost of capital and brand dilution.
This is not a boutique investment shop.
That approach is perfectly valid and could even be smarter than other VCs that avoid funding competing projects. I also think that, since YC operates at an earlier stage than major funds like Sequoia, different heuristics could apply. Ultimately, it's about balancing risk and reward—duplicating efforts can increase the chances of success while mitigating risks. Of course, it's not easy to establish processes that help competing companies in the same space without inadvertently favoring one over the other.
reinforcement learning done right, amirite?
YC should back duplicate startups because each startup's chance of success is low. If it makes sense to back a startup with a 10% chance of being a big company later, then a second such startup also makes sense, even if there is a 1% chance that they both make it and one of them is not needed.
The problem is when someone says the quiet part out loud, and the duplicate startups start talking to each other. The people at one startup refuse to do useful work because they incorrectly believe the other startup have a better idea. You want to leave those decisions to senior management, who can move technologies to make one company successful.
Have you ever suddenly received an influx of employees because someone jast realized that there was a duplicate company doing the same thing (fake gasp) and that it was time to combine the best parts of both the get a product? Somehow, despite nobody knowing there were duplicate startups, a proof of concepts has been working for a few months combining the best bits from each of 3 (fake gasp) startups, and the third one had very little to contribute so you will not see their people around.
I'm sorry if my post hurts anyone's plans. Fell free to delete it.
One of the reasons that YC is so great is that they back founders, not ideas. YC has never backed the same founder twice in a batch to my knowledge, and doing so is antithetical to its values.