[HN Gopher] YC Graveyard: 821 inactive Y Combinator startups
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YC Graveyard: 821 inactive Y Combinator startups
Author : memalign
Score : 328 points
Date : 2025-01-26 06:37 UTC (16 hours ago)
(HTM) web link (ycgraveyard.iamwillwang.com)
(TXT) w3m dump (ycgraveyard.iamwillwang.com)
| thecleaner wrote:
| Wth. Blume benefits sounds like a really useful thing ? Wonder
| what happened.
| smt88 wrote:
| A) If being useful were enough to make a product successful,
| we'd still have Google Reader
|
| B) We have no way of knowing how well Blume's product actually
| worked
|
| C) Health insurance is heavily regulated, which means it's not
| a great target market for AI
| Eikon wrote:
| > A) If being useful were enough to make a product
| successful, we'd still have Google Reader
|
| Yeah bad example, Google Reader was extremely successful, so
| much so that it's demise was enough for _many_ companies to
| be very financially successful by taking Reader's customers.
| muzani wrote:
| Generally the ones that don't sound useful do better. Why
| Stripe? Why Airbnb? Why Twitter? There's less competition and
| winner takes all.
| riffraff wrote:
| How do stripe and Airbnb not sound useful? "Need to get paid"
| and "find accomodation" are among the oldest business models
| on the internet.
| adastra22 wrote:
| There were plenty of ways to get paid on the internet
| before stripe. On paper it didn't look like they were doing
| anything new. They just did it better.
|
| Airbnb... idk. Who wants to rent their house out to total
| strangers? I wouldn't. I wouldn't have thought it would
| take off like it did.
| jjcob wrote:
| Airbnb is mostly commercial listings that are basically
| unlicensed hotel rooms / appartments. I don't think
| people renting out their personal living spaces is a big
| part of their income. It's just a story they use to get
| around regulations.
| KingMob wrote:
| That's true now, but not when they first took off.
| adastra22 wrote:
| None of that existed when they first started. The pitch
| was to rent out your house while you're out of town.
| Lionga wrote:
| But they only got big when the commercial "hotels" came
| on and saw they could "work around" laws like that.
| adastra22 wrote:
| That's the point--their utility wasn't obvious at first,
| until a new market showed up.
| aaronblohowiak wrote:
| It was commercial version of couch surfing and/or web2.0
| version of vrbo. I was highly skeptical of it taking off
| because it was "a copycat"! How wrong I was...
| eddiewithzato wrote:
| Target audience is very niche
| thecleaner wrote:
| Hmm. Charge high, better profit margins. To me that sounds
| exactly like the sort of thing a startup should do. Maybe my
| instincts are off.
| nikolayasdf123 wrote:
| how many YC startups are there?
|
| wiki says 4K, so 821/4K = 20%. not too bad. I expected much
| worse.
| smt88 wrote:
| It's certainly much worse. It's often difficult to tell when a
| company is dead unless they announce it.
|
| Many other failures (likely most of YC's portfolio) will have
| died by being acquired for less than the most recent valuation,
| meaning YC lost money on the deal. These sometimes look like
| successful exits unless you know the details.
| xmprt wrote:
| Also, it's not counting many of the startups from the last
| few years which haven't had enough time to fail. If the
| denominator is the total number of exits then it's probably
| much lower than 4k.
| muzani wrote:
| Companies also almost never announce their death. Startups go
| to die quietly. Paul Graham says the best indicator is they
| don't reply to emails, but this is usually something that's
| not very visible.
|
| https://www.paulgraham.com/die.html
| nradov wrote:
| That's one signal, but it's surprising how many established
| companies that appear to still be going concerns also don't
| reply to emails even when I literally ask about buying
| something. And I'm not talking about my own little consumer
| purchases, I mean emails from my work account to vendors
| with the potential for significant ongoing revenue.
| Strange.
| threeseed wrote:
| > will have died by being acquired for less than the most
| recent valuation, meaning YC lost money on the deal
|
| Does YC really lose money on all acquihires ?
|
| Because it seems like most of the batches look to be purpose
| built for it.
| withinboredom wrote:
| I'm sure they build the investing deal where they get all
| the money and the founders get a token amount.
| fakedang wrote:
| Most YC companies are zombies. There are a lot of 3-5 person
| startups still "active", some of them since a decade ago.
| adastra22 wrote:
| What's going on there? Are they profitable but just not
| scaling, or taking no salary?
| cutemonster wrote:
| Zombie mode: "Others are stuck in "zombie" mode --
| surviving but unable to grow. They can muddle along like
| that for years, investors said, but will most likely
| struggle to raise more money."
|
| https://archive.is/HNJoo "From Unicorns to Zombies: Tech
| Startups Run Out of Time and Money"
|
| Discussed at HN:
| https://news.ycombinator.com/item?id=38554608
|
| (I also wondered what it was)
| winux-arch wrote:
| My uncle has had his startup kickstart with investors money
| and then paid them back. Now he is slowly growing but not
| expanding the company only the assets. I wouldnt call this
| dead. Its just sometimes you hit a ceiling for expansion
| shlomo_z wrote:
| Something is blocking the UI (loading the images?) but cool site!
| sebmellen wrote:
| I personally know the founders of three YC startups that are
| functionally dead (raised capital, not developing anything,
| basically laid off everyone but the founder(s)) but are not on
| this list. I'd bet it's at least twice that number.
| choppaface wrote:
| Need to also consider the ones that had a qualified exit event
| and then the product got axed (e.g. aquihire or just customer
| acquisition). It's a very different graveyard but in many cases
| has similar impact on the non-Founders (especially the IC
| SWEs).
| satvikpendem wrote:
| I'm curious, what do ex-founders generally do after their
| startup is dead? For me I just got a job after my first few
| ones died, until I was able to succeed at my current ones, but
| I'm sure many might just continue working a job indefinitely.
| noduerme wrote:
| I don't think a lot of founders actually _write code_ , but I
| did, I just realized my startup was probably going to be
| illegal soon and also that it wasn't going to get the funding
| it needed. I just kept _writing code_ for whoever wanted to
| pay. It 's fairly lucrative.
|
| Looking back, maybe I should have just done the illegal thing
| and gotten pardoned.
| kiney wrote:
| now I'm curious about the illegal thing
| CamelCaseName wrote:
| Seems like Bitcoin casino (from bio)
| jsemrau wrote:
| Might have worked in a different jurisdiction. If you
| look at valve and the CSGO controversy.
| netsharc wrote:
| Gotta love the jumping on the criminality bandwagon...
| Louis Brandeis says hello.
|
| https://www.azquotes.com/quote/1062178
| xenospn wrote:
| Fun fact: my kibbutz is named after him. He bought the
| land from the local Palestinians.
| sebmellen wrote:
| I know some (YC and others) who float around doing nothing on
| $200k a year in salary because no investor cares enough, or
| has the legal right, to get their money back. Not sure what
| their long-term game plan is.
|
| The others end up at another Series B+ startup or go to a
| MANGA company if they can grind leetcode for a bit and get an
| interview.
| tinco wrote:
| They pay themselves 200k/y in a pre-market fit startup?
| That's insane and I guess on the investors for going over
| the traditional preseed amounts.
|
| Or do you mean that they're zombie startups that make
| enough to pay the founder 200k/year?
| xenospn wrote:
| I think a lot of gen z founders see nothing wrong with
| paying themselves a FAANG salary. My generation, not so
| much (I'm 45).
| leetrout wrote:
| I worked at a startup where the founders were your age
| and paid themselves that much while holding their
| majority stake in stock.
|
| We had open salary bands so we were all paid OK -
| especially our couple ~entry level folks at $100-120k. It
| was strange times in my eyes, though. They hired an HR
| person whose first act was to raise the c-suite salaries
| to market rate ($200k+) while the business still had
| negligible income but closed a round.
|
| It is good to be in the owner class, I guess.
| Salgat wrote:
| What a sweet position to be in. All the upside of the
| potential stock valuation windfall while none of the
| downside of putting your career and income on the line.
| ryandrake wrote:
| I mean, when your dad knows the right guy at a
| prestigious bank, and your mom is a VP in a prestigious
| biotech firm, and they bought you your spot at Stanford,
| you kind of deserve it, right?
| gammarator wrote:
| Not an expert myself, but I don't believe $200k/year
| counts as a "FAANG salary" for anyone with founder-level
| responsibility.
| AlotOfReading wrote:
| I'd argue there there aren't any single positions at
| large tech companies with founder level responsibility by
| design.
|
| It's a pretty decent compensation though. The base salary
| of a mid-level position at Amazon with substantially
| better equity terms (no cliff, no one deciding your bonus
| will be cut without your input, etc). It's a far cry from
| the PG ideal of salaryless founders surviving on instant
| ramen in their garage.
| whiplash451 wrote:
| I think the parent's point is that $200K would be the
| base in FANG, but you're missing on massive RSUs as the
| founder in a startup.
| immibis wrote:
| What do you see wrong with it? There's no social contract
| any more, where people are expected to be nice and save
| each other money. Everyone's in it for themselves, and
| the VC/investment side started that trend first.
| evanelias wrote:
| I wonder if it's related to the social phenomenon of Gen
| X and the older half of Millennials having a sharply
| negative view of "selling out", whereas many younger
| folks don't appear to even be familiar with that concept.
| bobxmax wrote:
| Depends on your money raised and your leverage. YC
| companies are typically top tier founders with tons of
| leverage and capital options.
| sebmellen wrote:
| Yep. The former. Maybe they make $50k in revenue, have a
| few products still officially available, and raised a
| couple million dollars.
| satvikpendem wrote:
| They're just cosplaying being a startup founder at that
| point.
| chrisjj wrote:
| > some (YC and others) who float around doing nothing on
| $200k a year in salary
|
| So, not "functionally dead" then. ;)
| chipotle_coyote wrote:
| I can think of at least one YC startup -- one that was
| relatively high-profile, for a hot minute, at least in the
| developer space -- that just shut down, period, that doesn't
| seem to be on the list, because I worked there. One extra irony
| point for its absence: it was basically across the street from
| Y Combinator's office in Mountain View at the time. :)
| chasely wrote:
| I know a similar number but they were "acquihired" to
| essentially return money to investors and get the founders
| promotions at their former companies. So an exit on paper even
| if it's not necessarily so in practice.
| mgraupner wrote:
| There was a similar project a few months ago that tracked
| changes/pivots/shutdowns in startups. It was a very light site,
| unfortunately I lost the bookmark or forgot to bookmark it. Can
| anyone help me here?
| mgraupner wrote:
| Ha, I finally found it myself: http://pivots.fyi
| moontear wrote:
| And all inventory of the defunct startups goes here:
| https://svdisposition.com/auctions
| nathancahill wrote:
| Filestack YCS12 is a mistake, it's very active.
| Ozzie_osman wrote:
| Same for Tandem
| bithavoc wrote:
| there's one in '19 and a new one in '24, which Tandem are you
| referring to? I just checked and the one listed in this page
| is YC'19 it looks zombie-ish, both founders moved on quietly
| according to LinkedIn
| andygcook wrote:
| Filestack was acquired by Scaleworks:
| https://www.scaleworks.com/companies
|
| It's not really dead, but not really a "startup" in the
| traditional sense anymore either.
| riffraff wrote:
| Since you probably already have this information, it would be
| interesting to have the "death date", with a link to the
| announcement or however you gathered the information.
| vector_spaces wrote:
| There's not really such a thing as a concrete "date of death"
| in many cases, and very rarely will there be a public one --
| I'm familiar with a few names on this list that never actually
| made a formal public announcement and kept the website running
| for months to well over a year after everyone was laid off
|
| The methodology of the aggregator might have been as simple as
| "ping every YC company's listed website, check the response"
| with some light hand curation, which suggests that the number
| presented is just a lower bound on the number of dead YC
| startups
| n2d4 wrote:
| The methodology is just this list filtered for companies
| tagged "Inactive": https://www.ycombinator.com/companies
| SALCKIN wrote:
| Reply
| mattlondon wrote:
| > Better to have launched and lost than never to have launched at
| all
|
| ...yet when Google does this, people are up in arms and insist
| they should run their products forever, even if they have no
| product market fit.
| roenxi wrote:
| That is different. Google get heat because they have poor
| management flailing on a huge budget when they have more
| important things to be working on.
|
| These startups are flailing with poor management, but the blast
| radius is small because of their limited resources and nobody
| has a better idea for what they should have been working on.
| And flailing startup management is expected in a way that
| Google has no excuse for.
| jsemrau wrote:
| Google launches, people start using it, and then they just turn
| it off.
| DonHopkins wrote:
| Sometimes customers just can't grasp simple concepts, and
| people are morons who don't understand how really great
| Google products are. /s
|
| A Pissed Off Tutorial For Google Wave:
|
| https://www.youtube.com/watch?v=4Z4RKRLaSug
|
| In the long term, Google's better off focusing their efforts
| optimizing the AI and UI behind their "I'm Feeling Lucky"
| button.
| ekianjo wrote:
| Is YC better than other incubators, percentage wise?
| threeseed wrote:
| I would imagine so.
|
| a) Almost all of the other incubators are just awful. Either
| they are predatory, ineptly managed or simply not well
| capitalised enough to offer a competitive product.
|
| b) YC is able to rest on its laurels i.e. they can/do market
| how well AirBnb, Stripe etc have done. And so their funnel of
| talent is by far the best.
|
| c) That said, YC is the worst I've ever seen it. And Garry Tan
| is mostly to blame although it's been trending downwards for a
| while. It's now as if Jake Paul ran an incubator: very hype
| driven, cynical, focused on easily exploitable young 20s males.
| Lionga wrote:
| YC has probably become worse then most of the other (really
| bad) incubators
|
| Started with Sam now with Garry Tan it is really going in the
| gutter.
| bobxmax wrote:
| How, exactly?
| bobxmax wrote:
| Worst based on what, exactly?
| threeseed wrote:
| If you look at the batch data [1] it is very clear that
| there is either an investment thesis or some inherent bias
| in how they choose startups. Since Garry Tan took over it
| is now heavily favoured towards (a) SF based, (b) young,
| (c) AI centric.
|
| And if you look at the partner YouTube videos you see why.
| There is a concerning lack of diversity in how they see the
| world i.e. they are all very much the e/acc types.
|
| [1] https://www.walturn.com/insights/in-depth-analysis-
| trends-in...
| bobxmax wrote:
| How is that worse, as a VC firm?
|
| If I was betting on technology right now, I would bet on
| SF-in person teams with young founders and a focus on AI.
| Sounds like the perfect target.
| threeseed wrote:
| I have zero issue with YC's investment thesis.
|
| I have an issue with the way they continue to market
| themselves as being altruistic and a defender of startup
| founders everywhere rather than your run of the mill
| predatory, self-interested SF VC.
| pockmarked19 wrote:
| I might regret saying this here, if it causes a negative
| change, but I find that a lot of the text materials YC and
| startup school have retain a lot of PG-era advice and can be
| a goldmine of wisdom. Most of the negative influence of post-
| PG operation has been on the video and audio content
| marketing side of things (and of course, the accelerator
| itself). Perhaps it is just harder to have certain things
| come across as sincere in text format.
| ttoinou wrote:
| Where does the money go ? Especially for startups dead 6 months
| after investing
| jjcob wrote:
| Salaries and rent, probably.
| LightBug1 wrote:
| Hookers and blow.
| DonHopkins wrote:
| 1980 called and said they're now selling OnlyFans
| subscriptions and ketamine.
| threeseed wrote:
| YC and an average Seed round only gives you enough money for
| a small team for 18 months.
|
| Anyone who is half-decent is going to be expensive.
| bodegajed wrote:
| Is it common for landlords to invest in YC companies?
| bodegajed wrote:
| To other YC companies via premium subscriptions
| toomuchtodo wrote:
| All about capital recycling and consolidation within the
| ecosystem.
| ipsum2 wrote:
| Many founders realize its not for them, and return the
| remaining money.
| robocat wrote:
| I'm onehundertpercent pissed off with YC:
|
| * The modal win for a founder is $0.00
|
| * PG makes big talk about winner's average returns...
| Yayyyyy..... However YC gets preferential shares; YC is not
| aligned with the common shareholders (founders; builders). YC
| builds a story that they support creators however YC doesn't sit
| on the same table-side as creators.
|
| * I actually believe YC is worthwhile, but I wonder if Ize just
| been brainwashed?
|
| (reedited for clarity)
| aswegs8 wrote:
| Welcome to capitalism. Of course there is an asymmetry between
| individual founders and one of the, if not the most famous VC
| firm on the planet. It's an individual decision to determine
| whether YC is worthwhile. If it wouldn't be, it wouldn't work.
| rchaud wrote:
| Silicon Valley is not capitalism, it's financier-ism. It
| isn't about finding a gap in the market and providing a
| profitable service, but bandwagoning behind the latest trends
| so as to chase "scalability" and later using
| financial/political muscle to weaken regulations so as to
| better "disrupt" the market. Profits? That's a problem for
| whoever they manage to dump their shares on.
| saulpw wrote:
| What do you think capitalism is, if not that? "Those with
| capital use their money to make the rules so they make more
| money."
|
| Many people think capitalism is simply a market economy.
| It's not. You can have a market economy without "capital"
| (investors) having special privileges that make all the
| money flow to them.
| AbstractH24 wrote:
| Is it still? Or was that true 10 years ago.
|
| Not sure if I've changed or the landscape has.
| rvz wrote:
| The quality bar for YC has been at an all time low. Hence why
| lots of "startups" are getting accepted into YC in 2024
| screaming about AI and some that compete against each other
| over the same idea, but "open source".
|
| > I actually believe YC is worthwhile, but I wonder if Ize just
| been brainwashed?
|
| Ask yourself, if you really need VC money in the first place.
|
| The moment you go to YC, they become your new boss and always
| win and you get to laugh at all of us HNers in this secret club
| called bookface [0]. (Yes, that hidden version of HN and part
| of YC)
|
| Very unlikely to change anytime soon, but the SVB collapse
| should have taught us something.
|
| [0] https://bookface.ycombinator.com/
| nradov wrote:
| The quality bar of pretty much all seed stage investors has
| always been extremely low. That is simply the nature of the
| business. At that stage the signal-to-noise ratio is very
| low. There just isn't enough data to make reliable
| determinations, hence the emphasis on quantity of deals over
| quality.
|
| There is nothing to learn from the SVB collapse. They
| mismanaged interest rate risk and overextended. So what.
| rvz wrote:
| > The quality bar of pretty much all seed stage investors
| has always been extremely low. That is simply the nature of
| the business.
|
| Of course it is. That is why I said the quality bar it is
| at an "all time low".
|
| > There is nothing to learn from the SVB collapse. They
| mismanaged interest rate risk and overextended. So what.
|
| Ah yes, why not tell those same so-called "AI startups" to
| repeat that same mistakes again in 2023 and also continue
| to burn lots of that money and we'll see yet again
| widespread massive panic, downrounds on this site like we
| did before.
|
| The startups that got complacent over believing that VCs
| will just throw money into their startup forever (until
| they don't) are the ones that will be added into that
| inactive directory unfortunately.
|
| So as soon as this AI bubble collapses with a new surprise
| catalyst, I won't be surprised to see YC directly caught in
| the contagion because they threw themselves into hundreds
| of low-quality startups, unable to make money and they are
| cloned and raced to zero.
| dmbche wrote:
| Check the Principal-Agent problem in game theory, that's what's
| going on
| jasode wrote:
| _> However YC gets preferential shares;_
|
| It's not that YC specifically gets "preferred shares" -- it's
| that _investors in general_ insist on liquidation preferences
| _when buying non-liquid shares_ in unproven private companies.
|
| How would an alternative scenario of investors buying _common
| shares of illiquid stock in a private company_ actually be
| realistic? Maybe the startup founders could hypothetically
| insist on selling only common shares and never preferred shares
| as a condition of investment?!? But what investors (other than
| family relatives) would put in money in that case?
|
| Or put another way, let's say we create a brand new VC fund to
| invest in startups and one of the novel concepts is that the
| fund _only buys common shares_ to be more "founder friendly".
| The problem is that hypothetical VC fund will attract no
| rational limited partners with money because they know that
| startup founders can just take their invested dollars with no
| payback protection. Such a VC fund with no investors and no
| money to invest would be a moot point. The general partner of
| such a VC fund would be considered a "financial idiot" for
| buying common shares in startups.
|
| In the end, the "preferred shares" is the market's "risk
| premium" that investors charge as an offsetting factor for
| losing 100% of their money. If startup founders can't find a
| way to convince investors to accept illiquid common stock
| instead of preferred shares, they need to avoid investors
| altogether and self-fund via bootstrapping.
| dustingetz wrote:
| preferred shares prevent cookie cutter founder fraud. Founder
| raises $1M at 10 post. Founder decides to sell 6 months later
| for 2 mil. Investors get 200k back founder gets 1.8 mil. Now
| run this math for AI unicorns.
| AbstractH24 wrote:
| This is a valid concern. But shifting risk entirely to
| those without preferential shares (typically employees) is
| also unfair.
| dustingetz wrote:
| different share classes trade at different prices.
| Employee NSO/ISO strike price at seed stage (i.e. on a
| SAFE) are typically priced at a FMV of _10% (!!)_ of the
| SAFE 's postmoney valuation. Also, your use here of the
| word "fair" has triggered a personal tick of mine so I
| must direct you to
| https://quotefancy.com/quote/3709551/Chris-Voss-The-F-
| word-F...
| nradov wrote:
| Why would investors care whether a particular capital
| structure is "fair" to employees? As long as the company
| is able to recruit and retain qualified employees, any
| fairness or lack thereof is entirely irrelevant.
|
| But as a potential employee interviewing for a new job,
| if you're being offered equity compensation then you
| might want to inquire about share classes and liquidation
| preferences. It could be a factor in your decision if you
| have multiple options.
| derangedHorse wrote:
| He didn't claim YC does this where others don't, his gripe is
| with the narrative YC pushes and how they seem incongruent to
| how they currently operate.
| AbstractH24 wrote:
| Why is the risk being taken by investors greater than the one
| being taken by employees and founders?
|
| If anything, employees are taking a greater risk because you
| can replace money far more easily than years of your life.
| epistasis wrote:
| One is risking money, one time, and the money is what could
| possibly get paid back.
|
| If you can find money that doesn't insist on preferred
| liquidation, good on you. But those with the money tend to
| have a lot of say on giving it away.
| mlhpdx wrote:
| For what it's worth, which isn't much, I see signs this
| precept is changing because of the huge amounts of
| investible capital fighting for opportunities as the thaw
| progresses. It's not going to be a widespread change,
| though, most will stick with what they've known.
| nradov wrote:
| The level of risk is irrelevant. What matters in access to
| capital is negotiating power. This isn't a charity. If
| employees want lower risk then they can go work somewhere
| else.
| mlhpdx wrote:
| Likewise, if investors want to invest (deploy capital)
| they will adapt. There is more balanced leverage
| recently.
| pockmarked19 wrote:
| > The problem is that hypothetical VC fund will attract no
| rational limited partners with money because they know that
| startup founders can just take their invested dollars with no
| payback protection.
|
| YC famously claims it is not a VC fund because it invests
| their own money, they wouldn't have this problem.
| jasode wrote:
| _> YC famously claims it is not a VC fund because it
| invests their own money,_
|
| Th label "VC fund" can be imprecise because YC itself has
| changed its structure over the years.
|
| The original 2005 YCombinator where Paul Graham & Friends
| used some of their personal Yahoo wealth from selling
| ViaWeb ... instead of raising outside money from "limited
| partners" ... was the period when they were more like
| "angel investors".
|
| Today, YC is more institutionalized and has different funds
| that raise money from _outside investors as limited
| partners_ -- very much like traditional VC funds. (https://
| www.google.com/search?q=YC+new+funds+raise+billions)
|
| But YC still doesn't do all the typical "vc fund"
| procedures such as take a board seat or negotiate a
| different % with each startup founder on a case-by-case
| basis. The VC funds like Sequoia/a16z/etc will require a
| board seat and negotiate different ownership percentages.
|
| So today's YC is a "semi" VC fund depending which aspects
| are salient to you.
| morgante wrote:
| > However YC gets preferential shares; YC is not aligned with
| the common shareholders (founders; builders).
|
| YC invests on a SAFE, the terms are public.[0]
|
| For most companies, pre-seed SAFEs don't end up much above
| common.
|
| [0] https://www.ycombinator.com/deal
| ExxKA wrote:
| It was interesting to dig through and consider if it was the
| idea, the timing or the execution that lead to the failure.
| ExxKA wrote:
| Would it be possible add an "expand all" option? I am searching
| through them with ctrl+f, to figure out which of them are similar
| to other ideas that are being considered today :D
| rufasterisco wrote:
| const divs = document.querySelectorAll('button.h-full');
|
| divs.forEach(div => { div.click(); // Trigger a click on the
| div });
| jll29 wrote:
| There are not just startups that become unicorns and startups
| that fold.
|
| Investors' worst nightmare is if you just make enough money to
| keep going, but you don't grow ("lifestyle business" as they use
| it is a derogatory term).
|
| That's because they prefer a sudden death where they can write
| down the investment and deduct their loss from taxes than an
| investment where they never see any money again.
|
| And then there are "acquisitions" that are really "acui-hires"
| dressed up as acquisitions to get the people (more common) or to
| buy an asset in a limited shell package (less common) after
| things did/may have (but people were to tempted to take the
| offer) or did not pan/panned out. Some people consider anything
| <$50m as a "failure", because that's roughly the sum that many
| corporations can spend without calling the bigshots for a board
| meeting to decide.
| jbverschoor wrote:
| That's not what a lifestyle business is. Unless your lifestyle
| is eating ramen
| that_guy_iain wrote:
| Enough money to keep going doesn't mean just enough money to
| cover the costs. It means being able to continue paying
| yourself and all your employees their salaries, meet costs
| and make a small minimum profit.
| normie3000 wrote:
| Aren't salaries considered to be part of the costs?
| oefrha wrote:
| Employee salary is definitely cost. Founder/owner salary
| is more complicated.
| that_guy_iain wrote:
| Yea, I meant more pay all the other bills like AWS, etc.
| But yea, salaries are defo costs.
| CPLX wrote:
| You have to add "and return initial capital" to that list.
| That's usually what's at issue here.
| that_guy_iain wrote:
| The reason that is the issue is because that is not
| something they actually need to do. It's something the
| investors want but not generally required as they expect
| an exit of some sort.
| smallerfish wrote:
| Sure it is. If your business nets 3 million a year, it takes
| 5 people to run it, and your customer base is steady, that's
| lifestyle. Sucks for investors, pretty nice for you if you
| can keep it running.
| YetAnotherNick wrote:
| 3 million a year for 5 person is something like 400k/person
| after corporate tax. Which is pretty high and low at the
| same time(unless it is just freelancing). High in the sense
| that there would be competition and the other company will
| have more budget to reduce the price and make the entire
| segment unprofitable till you die. Low in the sense that
| you would likely make the same or higher in corporate if
| you are that skilled to net 3 million/year.
| smallerfish wrote:
| Once the competition has initially shaken out in a new
| category, minority players can hang on for years. Their
| product could be perfect for their customers in ways that
| the big guns don't accommodate.
| idlewords wrote:
| In other sectors that's just called a "small business" and
| celebrated as the fullest expression of the American dream.
| I've always found it funny that tech treats the idea of a
| going concern with such distaste.
| aprilthird2021 wrote:
| Specifically investors, not "all of tech". And to be fair
| to them, if a company doesn't grow, your investment is
| wasted in that company, right? No shade to good small
| businesses, but they may not be worth investing in?
| cowsandmilk wrote:
| Venture Capitalists, not all investors.
|
| See https://codiesanchez.com/book/ or
| https://store.hbr.org/product/hbr-guide-to-buying-a-
| small-bu...
| CPLX wrote:
| While I do agree with you, if it took tens of millions of
| dollars in initial capital to get there, which hasn't
| been returned, it's quite a different thing to the
| standard small businesses model.
| withinboredom wrote:
| So ... is a restaurant considered a small business? Where
| do you draw the line on initial investment?
| zdragnar wrote:
| What kind of restaurant takes tens of millions to start?
| Most estimates I'm aware of are less than 1 or 2 million
| at the very most.
| withinboredom wrote:
| I imagine some of the themed restaurants in Disney cost
| at least that much.
| soared wrote:
| Having worked at those, they are shoestring to the core.
| Guests see beauty, behind it is paper mache and $8/hr
| college students whose wages are garnished for rent and
| class fees.
| someone7x wrote:
| At Disneyland? Where there's a union for food and
| beverage workers?
|
| > We perform everything from preparing and creating
| treats like turkey legs and churros to serving grant and
| exquisite meals at the famous and exclusive Club 33. If
| you are eating in the parks, our members are making that
| happen.
|
| https://workersunited.org/joint-boards/local-50
| zdragnar wrote:
| A themed restaurant at Disney isn't exactly a small
| business...
| nprateem wrote:
| 10x return
| CPLX wrote:
| Depends on what kind of restaurant.
|
| But the point is that a business model that is
| "profitable" but actually took millions in initial
| capital and has no provision for debt service isn't an
| actually profitable business model.
| baxtr wrote:
| I know a guy who sells kitchens for a living and makes
| around $2-3 million per year with a profit margin of 60%
| or so.
|
| But he didn't spend 10s of million dollars to get there.
| AbstractH24 wrote:
| Even if he did, that's not such a bad deal.
|
| Particularly if the brand has value when he's ready to
| move on and can be sold.
| erikerikson wrote:
| Or bar owners pulling down similar amounts.
| nunez wrote:
| The VERY lucky ones that have been around a long while
| and own their building, sure.
| rvba wrote:
| Also lucky to not get robbed by mafia
| nunez wrote:
| This is kind of like tech sales at huge tech old-cos.
| Sales people there can pull down insane comp if aligned
| to the right account with way less work than a
| traditional sales grind.
| rchaud wrote:
| When you see how VC-funded AI startups market their
| products ("eliminate artists/editors/paralegals"), it's
| not surprising that they wouldn't be happy with dividends
| from a profitable business that employs people. Better to
| throw the money into a "moonshot" company that
| perennially loses money until BigCo buys them out to
| acquire their IP and fire everybody.
| amyjess wrote:
| My favorite video game company is a little Japanese
| outfit called Nihon Falcom. They've been around since
| 1981, have about 65 employees, release exactly one new
| game a year, and if you've played any of their games, you
| can tell they're all made on absolutely shoestring
| budgets. They have also never posted a loss and have an
| absolutely bonkers amount of cash on hand (enough to keep
| the company going for several years on their current
| budget IIRC).
|
| They also make the best story-driven RPGs I've played in
| my life. And they specifically went the story-driven
| route because it's cheaper to hire good writers than it
| is to wow people with AAA graphics or a giant open world
| or whatever.
|
| More video game companies should be like Falcom.
| tptacek wrote:
| I think people are overly fixated on the fact that a
| successful small business isn't a workable VC investment
| target (the winners have to pay for the losers, and even
| with a conservative portfolio of startups, most are going
| to lose) and they're working everything back from that.
| Lerc wrote:
| I thought that was called sustainable.
| mrweasel wrote:
| Is it sustainable, if it took millions to bootstrap? I
| mean I guess if it can just keep running, but the
| investors might not agree if they need to wait 15 years
| to make their money back.
| SergeAx wrote:
| What choice do they have? If they shot the enterprise
| down, they got nothing.
| mrweasel wrote:
| I think someone else pointed this out as well, but if the
| business fail, they can most likely do a tax write-off.
| SergeAx wrote:
| Sell the company to the founder(s) for $1 and write off
| the rest?
| anovikov wrote:
| But in a case like that eventually (once the business has
| become "sustainable") we will be speaking of 1.5 founders
| (some full-time founder and some guy who just holds some
| stock because they started together/knows some know-how)
| and 3.5 Indians/Ukrainians at $40 an hour. With like 60% of
| cash going to the main guy, domicile in some tax haven and
| probably that principal founder living in some tax haven,
| too, pocketing some 1.5M a year after all (minuscule)
| taxes. Good lifestyle!
| tptacek wrote:
| Any startup investment that doesn't return, I don't know,
| like 5-10x "sucks" in the sense that it's not making the
| portfolio successful, but that's most investments in the
| portfolio. Beyond that: what sucks about this outcome? If
| your business has just 5 employees, chances are your
| investor doesn't have a board seat; it's not costing them
| much, they can just hang around on the off chance that you
| turn the knobs right and find a breakout success down the
| line.
|
| It's true that investors aren't going to invest in your
| startup if you tell them that your likely outcome is a
| healthy, stable 3MM/year. And it would be unethical to tell
| an investor you were swinging for the fences when your true
| intention was to bank the money and bunt. But if you really
| do take a big swing, and end up settling in a comfortable
| spot, how pissed do you think investors are really? You
| swung, you missed, that's life in the National Football
| League.
| dadrian wrote:
| A real false start on that baseball metaphor.
| vasco wrote:
| Nothing stops them from selling you back their share at close
| to zero if they really want to right it off.
| immibis wrote:
| They might have to prove to the IRS the share was actually
| worth that. Whereas if the business is bankrupt, it's
| obvious.
| orionsbelt wrote:
| No - that's true if you are trying to determine if you can
| write it off, but if you actually sell it back for $1, you
| can take the loss.
| booi wrote:
| Not if the fair market value can be proven otherwise.
| It's just fraud
| jjmarr wrote:
| It's not inherently fraudulent to sell something for
| below market value.
|
| If I sell something I bought for $1 million for $1 in an
| arm's length transaction, I'm realizing a loss of
| $999,999 even if the asset was worth $500,000. And it'd
| be a rational decision if it cost me $5 million in
| opportunity costs to do that $500k sale.
| nradov wrote:
| That's not how US capital gains tax law works. It's legal
| to sell something at below market value, but you have to
| use the fair market value when calculating a loss for tax
| purposes. Of course some people cheat.
| bliteben wrote:
| how many vc investors are in the class of people that get
| audited by the IRS?
| WillPostForFood wrote:
| If VC investors have high income, they are the class of
| people that get audited the most. By a lot, like 25x more
| likely than someone with median income.
|
| https://www.nolo.com/legal-encyclopedia/irs-tax-audits-
| trigg...
| paulsutter wrote:
| That does happen, but not for taxes. They do it to close out
| the fund which has (usually) a ten year life.
| persnicker wrote:
| "Investors' worst nightmare" seems very off. Most SAFE notes
| give you dividends that are on par with how corporations issue
| dividends. Assuming there is cash flow, you should be getting
| dividends.
|
| If the dividends are so low that you will never be reasonably
| paid back you can often negotiate to get out in some form. Very
| low cash flow only with no growth seems to be the only
| exception...which I'd guess would only exist if something such
| as high revenue or some unique IP existed to make the equity
| very valuable and therefore the company worth running.
|
| With a convertible note as opposed to a SAFE, you either need
| to extend the maturity date or get paid back your note with
| interest.
|
| Both SAFEs and convertible notes seems to have a path to exit
| in some reasonable form.
|
| The only time I've seen "nightmare" situations occur is when
| the investor themselves makes it a nightmare i.e.
| https://www.cnbc.com/2025/01/07/tech-investor-denis-grosz-or...
|
| ...and that's a nightmare for the company, not the investor.
| slashdev wrote:
| If there's enough money to pay the founders salaries, but not
| so much for dividends, this doesn't help.
|
| There are two direct ways to return money to the founders -
| salaries and dividends. In the U.S. there is a tax advantage
| to dividends, over an amount anyway. This is not true of all
| countries.
| persnicker wrote:
| Neat edge case! Perhaps SAFE notes or other dividend-paying
| instruments should account for this by capping executive
| salaries or trigger dividend payouts at a certain salary
| dollar amount. Though, admittedly, I've never heard of a
| founder or executive using their salary instead of taking
| dividends as an end run around paying everyone their fair
| share of dividends. It seems possible though.
| alooPotato wrote:
| There already is a cap. Founders have a fiduciary duty to
| their shareholders and can't pay themselves unreasonably.
| Lots of gray area, but there is a limit.
| rvba wrote:
| > Very low cash flow only with no growth seems to be the only
| exception..
|
| That's not an exception. That's the norm. Most start-ups
| fail.
|
| They literally burn down the investors' money and that's it.
| AbstractH24 wrote:
| Worse than becoming lifestyle company is becoming a zombie
| startup.
|
| Zombie is when founders get rid of almost everyone except what
| they need to give the impression of effort, do little work, but
| draw an income and slowly spend down the money they raised
| until it's gone.
|
| I was one of the very few survivors at a startup that turned
| into a zombie in 2020 (went from 100+ employees to 10 in a
| matter of weeks).
|
| In some ways it was a cushy job and a privilege, just wish I
| realized the founders didn't truly care about success. Cause
| then I could have shared the mindset and better prepared myself
| and my skills for life after.
| mettamage wrote:
| So, question, how many YC startups have been successful? (broad
| strokes, let's say above 2x or break-even).
| newusertoday wrote:
| if this app would have provided links to the startup it would be
| so much better even if they were defunct one could easily search
| more about them.
| nnurmanov wrote:
| If you didn't become a unicorn, but have a steady income, is it
| possible to buy out equity?
| hobs wrote:
| Usually it doesn't work out for these types of companies
| because its better for the VC to state losses bigger than you
| would be able to pay for on their tax bill.
| isuckatcoding wrote:
| Now do a podcast series interviewing founders on what went wrong
| nunez wrote:
| There's a brewery owner named Kelly Meyer who does this for
| breweries. It's extremely educational. One for startups would
| be an awesome listen
| zenyc wrote:
| I love seeing the 'YC Graveyard' project. It's a great reminder
| of the incredible ideas and effort behind each startup, even if
| things didn't pan out. We've been working on giving some of these
| inactive startups a second chance by acquiring them and exploring
| ways to repurpose or revive their tech.
|
| If anyone's been involved with an inactive YC project and wants
| to chat about what's possible, I'd love to connect.
| ungreased0675 wrote:
| I'd love to read more about this.
|
| Looking through the list, my reaction to some was "of course
| that OpenAI wrapper failed" but others sounded compelling. It's
| logical that some of those failed companies have a viable
| product but failed for other reasons. Maybe combining the IP of
| similar companies could breed a winner. It's an interesting
| concept and I'm curious if it works.
| Havoc wrote:
| I'd be more interested to see the stats over time. I get the
| sense that YC used to be a lot more selective in a time gone by
| sexy_seedbox wrote:
| The list is missing stock trading platform Cera. These clowns
| were absolute scammers with a buggy app and zero customer
| support.
| DonHopkins wrote:
| "Cera: Invest with Stablecoins" -- with that elevator pitch,
| how could they possibly NOT be clowns and absolute scammers and
| incompetent software developers who hold their customers in
| contempt? And how could YC possibly be fooled by that, unless
| they were maliciously and unethically intending to make money
| by financing fraud? I hope the leopards ate their faces off and
| peed on their couch.
|
| Another example of objectively obvious fraud that is on the
| graveyard list is "NFTScoring". Yeah, just what kind of people
| aspire to tell other people which NFTs to buy (professional
| shills and get-rich-quick ponzi pyramid scheme scammers, that's
| who), and what kind of people knowingly invest in them, or
| recommend them after performing due shilligence?
| rubenvanwyk wrote:
| Why do you say were? The site still seems active?
| ddon wrote:
| Google spreadsheet version of this, may be somebody needs. Also,
| it has more data:
| https://docs.google.com/spreadsheets/d/1iIu8JATRDfJ91PS_rscS...
| naiv wrote:
| Unfortunately the sheet seems to be not public
| ddon wrote:
| sorry, changed to "Anyone on the internet with the link can
| view" now... please check
| orditeck wrote:
| It's not public, need to request access
| cushychicken wrote:
| Scrolling through this quickly, I notice that I have not heard of
| a single one of these companies.
|
| I'm not sure I can assign any meaning to that. Just my immediate
| observation.
| baxtr wrote:
| 821 out of how many in total?
| dangoodmanUT wrote:
| this is not actually an accurate list
| joshdavham wrote:
| Perhaps my math is off, but I thought there would've been more?
|
| YC has often talked about how the average YC startup 'dies' and
| yet I'm sure they've funded at least double the number of
| startups on this list. Is 'dying' also synonymous with ended up
| becoming a 'lifestyle business'? Clarity would be appreciated on
| this!
| joshdavham wrote:
| If anyone's interested, here's a relevant video that goes a
| little deeper into the details of some failed YC startups:
| https://m.youtube.com/watch?v=rSY2sUPTDDc
| NetOpWibby wrote:
| And yet they've rejected my startup ideas several times. (:
| nextworddev wrote:
| Only 821?
| iandanforth wrote:
| While this is interesting it would be more trustworthy if, when
| you clicked a name, it showed you evidence for why the site
| thinks they are inactive. A founder quote, a date, a news story,
| something. Right now, aside from the title, it's no different
| from a list of active YC companies.
| atentaten wrote:
| What does it mean to be inactive? I see Pigeonly (W15) on the
| list, but they are still active as far as their website is
| concerned.
| keiehwbdidjdhd wrote:
| What's the method used here? "Finary" website still looks pretty
| good
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