[HN Gopher] On $600B of Y Combinator startup success
___________________________________________________________________
On $600B of Y Combinator startup success
Author : merename
Score : 53 points
Date : 2022-05-11 16:43 UTC (6 hours ago)
(HTM) web link (jaredheyman.medium.com)
(TXT) w3m dump (jaredheyman.medium.com)
| drumhead wrote:
| How much profit are they generating and how much free cashflow?
| 1270018080 wrote:
| Seems like every public YC company has fallen 50%+ within the
| last 12 months. I'm sure the private ones are even worse off. I'm
| hoping the definition of success changes. I'd like to see
| "rational valuations", "cash flow positive", or "a sustainable
| business model" as metrics in the future.
| vmception wrote:
| This is success because the fund's cost basis is so low
| specifically because of the financial engineering involved when
| they were private companies. The valuations of the public
| companies could fall 99% and still be highly profitable bets
| for the angel/seed investor.
| instance wrote:
| I wouldn't say that's a YC-specific issue. Look at Nasdaq, this
| is a general issue with tech stocks right now, just this
| immense selling all across the board.
| somethoughts wrote:
| Yes it's probably going to round trip back to $300B given
| AirBNB and DoorDash have taken their hits as of late. That said
| - I do think since the lock-up periods have probably expired on
| the big ones - the pre-IPO investors like YC/founders/VC
| probably made it out just fine already.
|
| It's really a message to those of us retail investors buying
| the IPO or post IPO shares of YC companies that need to be
| aware of the track record w.r.t. an investment. Most of the
| gains have been extracted already and future post IPO growth
| has already been priced in.
|
| It also does suggests that YC was perhaps a beneficiary of easy
| monetary conditions that lifted valuation.
| whiplash451 wrote:
| Why would this be specific to YC IPOs vs other IPOs?
| somethoughts wrote:
| I agree - It isn't specific to YC IPOs - it applies to all
| IPOs. I think the point is that YC perhaps is a good early
| stage VC in maximizing the IPO price for the benefit of LPs
| and founders and unloading at the right time onto the
| market.
|
| Perhaps its less clear given the current state of things
| whether their companies are good for long term earnings
| performance for long term ownership by retail investors.
| dntrkv wrote:
| It's not just IPOs, the whole market is experiencing a
| correction. We're way overdue for one anyway.
| somethoughts wrote:
| Its relative - high PE, high growth multiple stocks (such
| as YC IPOs) have generally been reverting to mean. Most
| stocks that were already at the mean w.r.t. PE are still
| sticking to the mean with flat earnings.
|
| What needed correcting is getting corrected. What was
| correct is staying correct.
|
| The rise in interest rates means that companies that have
| been producing their own cash can fund growth initiatives
| internally. Companies who were funding growth initiatives
| using outside capital (debt, VC investment) are now going
| to be paying 10%+ to do so.
| pc86 wrote:
| I search for it but can't find it, but I do recall reading an
| article that if you put the same amount of money into every
| tech stock at IPO, you actually beat the market by a hefty
| bit. It was probably a year ago so who knows if that's held
| as I think tech has been particularly hard hit by the latest
| correction, but who knows.
| [deleted]
| gsibble wrote:
| Indeed. The market cap of YC backed companies has tanked in
| the last few months, even days.
| adamsmith143 wrote:
| This is pretty much the case for the entire market so I'm not
| sure it says anything in particular about YC companies.
| rkk3 wrote:
| > YC recently published an updated Top Companies list including
| 271 companies with a combined official valuation of over $600B
| (we now estimate it closer to ~$900B). Much can change in a year!
|
| 900B! Is this time travel or cognitive dissonance?
|
| #3-5 on the list are being valued significantly above 50B and
| closer to 100B Meanwhile...
|
| #3, Instacart now 24B (private valuation)
|
| #4, Doordash now 20B
|
| #5, Coinbase now 12B
| dmitriid wrote:
| How come most "successful" Y Combinator startups lose hundreds of
| millions of dollars per year, every year.
|
| Well, they suffer no consequences, and get more money to lose, so
| that's success, I guess.
| kevingadd wrote:
| Sometimes losing tons of money is an intentional decision, so
| if the board/investors are OK with it, it's not a failure.
| Certainly not the best way to run a company though...
| droopyEyelids wrote:
| A "dumping" period where your business gains marketshare and
| undercuts competitors to drive them under is an essential part
| of establishing monopoly power.
| cannaceo wrote:
| Dumping doesn't work unless there is customer lock-in. Many
| companies believe they have moats and find their moats have
| evaporated 2 years later.
| pc86 wrote:
| Also strangely enough it's illegal if you're already a
| successful company and try to do it in a new vertical, but
| completely fine if you're a couple unknowns with a few
| hundred million of venture capital.
| 21723 wrote:
| Ninety-nine percent of private equity profits come from
| taking strategies that are illegal with regulated, public
| companies and applying them to unregulated assets. And
| venture capital is a subset of private equity. Almost every
| conversation VCs have amongst themselves would be
| considered market manipulation if it pertained to an
| exchange-traded company, and of course the fact that it's
| all insider trading goes without saying. So no one should
| be surprised.
| hmate9 wrote:
| My main takeaway from this was how much B2B SaaS companies
| dominate their unicorn distribution.
| 21723 wrote:
| It's astonishing how much money can be made while providing
| absolutely nothing of value to society.
| georgehill wrote:
| > ...absolutely nothing of value to society.
|
| Are you serious? I am interested to hear your perspective.
| 21723 wrote:
| Most venture-funded startups solve silly non-problems or in
| fact cause serious harm to society, but make billions of
| dollars in doing it.
|
| Meanwhile, we haven't been to the moon since the '70s, life
| expectancy in the US is declining, and a substantial
| percentage of our energy comes from coal. Oh, but if you want
| to bet your life savings on (entries in a distributed ledger
| that say you own) digital pictures of dog penises, I imagine
| there's a way to do it.
|
| Technology didn't fix the evil of neoliberalism. It didn't
| clean anything up. It accelerated the corrosion.
| sillysaurusx wrote:
| How many of your arguments would apply to a casino?
|
| Do you feel that the world shouldn't be allowed to have
| casinos?
| jamesmcintyre wrote:
| I wonder if it'd be an overall boon for Rebel Fund to open up
| their data sets?
|
| Pros:
|
| - The HN/YC community would almost certainly contribute new
| models with new types of signal.
|
| - It's been proven many times that we mere mortals often
| unknowingly either bake-in our own biases into models or act on
| model output unaware that the models arrived at what could be
| undesirable, unintentional bias. Having more eyes on the data &
| methodology could not only prevent unintended biases but reveal
| signals that turn out to be much more insightful.
|
| - If these signals point to real, underlying fundamentals (which
| they likely do) perhaps YC startups could benefit by learning
| from them or using them as guideposts.
|
| Cons:
|
| - Obviously Rebel Fund may risk giving away their competitive
| advantage.
|
| - YC startups and applicants may over-optimize for these signals,
| distracting them from their unique challenges and overall end-
| user value generation.
|
| On one hand it seems obvious for Rebel Fund to protect their IP-
| on the other hand what if more value could be generated for YC,
| YC startups and Rebel Fund by finding a way to introduce a
| cooperative positive feedback loop? Any loss of their slice could
| be outweighed by growing the pie. This is likely an
| oversimplification and naive to the many factors being weighed
| but it's an interesting space for thought!
|
| (edited for formatting)
| gsibble wrote:
| Personally, I want to know how much Y Combinator companies have
| lost in Market Cap in the latest route. Many are trading below
| their IPO prices and have lost a huge amount of value.
| mensetmanusman wrote:
| At a long enough time scale everything is below value because
| our star collapses.
| eloff wrote:
| The oldest company in the world is only 1443 years old (Kongo
| Gumi of Japan.) Most companies don't last a single human
| lifetime. It's completely besides the point to bring up
| things that play out over billions of years in that context.
| It's just trolling.
| mensetmanusman wrote:
| https://worksthatwork.com/3/kongo-gumi
|
| Interesting that it started by building Buddhist Temples
| and has been building and maintaining them for that long.
| Cool!
| jjtheblunt wrote:
| Pseudo-blasphemously, I immediately thought "Is the
| Catholic church older, and in some sense a company, selling
| salvation?".
| eloff wrote:
| Haha, yeah that raises some interesting questions about
| what a company is. I feel like you could look at it
| through that lens.
| gmmeyer wrote:
| Hate to be pedantic but our star won't collapse it's not
| large enough for that, it will simply puff out and die
| leaving behind a very hot core called a White Dwarf
| mensetmanusman wrote:
| Won't the white dwarf be a smaller diameter than the sun?
|
| That's what I meant by collapse, but maybe in astronomy
| collapse means supernova?
| gcheong wrote:
| Well, talk about anti-climatic!
| ProAm wrote:
| You're underestimating humanity's future potential to add
| more gas to our star!
| c0brac0bra wrote:
| Not at these prices.
| whatshisface wrote:
| There are a lot of good responses, but another is that these
| companies are all expected to pay dividends, do buybacks or
| liquidate some time between now and the end of the universe.
| Every stock contains that promise, or a chance of it,
| supplying the ultimate justification for a nonzero price.
| lordnacho wrote:
| There are other stars
| garbagetime wrote:
| Prove it
| jrlocke wrote:
| You're looking for rout, not route :)
| skeeter2020 wrote:
| Though a bad one can lead to the other!
| [deleted]
| ShivShankaran wrote:
| > data-driven approach to our investments
|
| This is as absurd as saying "data-driven approach for finding out
| successful humans".
|
| I am kind of aggravated to see drivel like this from VC's. This
| is similar to algorithm trading on stock market and not funding
| deserving startups. This 'data-drive' garbage is how you end up
| with more grocery delivery, food delivery and pet walking
| startups.
| exolymph wrote:
| > data-driven approach for finding out successful humans
|
| not absurd at all, simply do IQ tests
| sam0x17 wrote:
| Don't forget about hover-board-renting!!
|
| But yes, these days I think "data-driven" is really just a
| convoluted way of saying "we approximate the informed decisions
| of others without specifically understanding what we're doing".
| This is ML in a nut-shell after all. Is it possible to use ML
| and data science to find insights and draw conclusions that you
| then base your activities off of? Sure, but most are just
| looking for a magic black box that makes decisions for them
| specifically because they don't want to go to the trouble of
| understanding X. Once you abstract things away to that extent,
| you're inevitably training your algorithms to do what others do
| in an informed way, because where else would the training data
| come from?
| [deleted]
| ksajadi wrote:
| Absolutely! Looking at the success in hindsight is not data
| driven. Just because the most of the past YC unicorns have been
| in industry X, doesn't mean the next ones are going to be like
| that. This is even more pronounced when it comes to the year of
| the batch, which is already past. Unless he wants to suggest
| companies in batches of the years with even numbers achieve
| higher valuations.
| jomjomv wrote:
| Those pie charts should either a) be sorted by size---not by name
| :eyeroll: or b) be tables.
| boringg wrote:
| For real those are visualization fails.
| yawnxyz wrote:
| maybe Lagos, Nigeria DOES have the most unicorns...!
___________________________________________________________________
(page generated 2022-05-11 23:01 UTC)