[HN Gopher] How Y Combinator made it smart to trust founders
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How Y Combinator made it smart to trust founders
Author : spacemarine1
Score : 83 points
Date : 2026-01-05 17:20 UTC (5 hours ago)
(HTM) web link (elbowgreasegames.substack.com)
(TXT) w3m dump (elbowgreasegames.substack.com)
| spacemarine1 wrote:
| Y Combinator forged a long-term, high-trust ecosystem to the
| benefit of all tech founders. The video games industry needs to
| do the same.
| daedrdev wrote:
| I feel like this is impossible given how many games flop each
| year.
| psawaya wrote:
| As a YC founder turned gamedev, I can tell you that failure
| is the norm in both pursuits. As with YC, the question is:
| can we create more outsized outcomes when we succeed?
| daedrdev wrote:
| Great point, I think I'm just being overly pessimistic
|
| Related, I find it interesting is that gacha games seem to
| ahve the highest possible returns but almost none are made
| by western game companies.
| trueismywork wrote:
| You're right though. Industrial software/hardware in
| general always has money in all times. But gaming is
| essentially entertainment and people only spend on
| entertainment last. So gaming industry has a lot of
| failure but even if you're successful in a huge way, you
| won't earn huge money. There's a big cap there.
| awkward wrote:
| Games are a zero marginal cost industry driven by hits.
| The cap is pretty high. The floor is what you should be
| worried about.
| dpoloncsak wrote:
| Aren't games like CSGO, FIFA, and Overwatch almost
| exclusively run on gacha-profits?
| jsheard wrote:
| Yes they are. The implementation tends to differ from how
| eastern-developed gacha games work, but they're making
| billions from virtual slot machines nonetheless.
| dpoloncsak wrote:
| Yeah, I still indulge in video games, and understand that
| on the surface CSGO skins feel different than Genshin
| summons, but from 100 feet up it's all the same crap, imo
|
| I do kinda get what you mean, though. Gacha mechanics
| feel expected in anything western, while 'loot boxes' are
| still a 'feature' of some games in the east. Eastern
| studios have definitely noticed, though, and are running
| the same playbook.
| dpoloncsak wrote:
| ...I think I mixed up East and West oops
| modwilliam wrote:
| Overwatch is not
| dpoloncsak wrote:
| Didn't they bring back loot boxes?
| modwilliam wrote:
| Yes, but you basically can't pay for them. Revenue is
| basically all from direct cosmetic sales or the battle
| passes
| dpoloncsak wrote:
| I see. You can remove 'Overwatch' from my original
| comment and the point still stands, but I do appreciate
| the fact check. I know Blizzard from HearthStone and
| Diablo....not great experiences with gacha there haha
| (Diablo Immortal, atleast), but those are far from the
| most popular Eastern games
| spacemarine1 wrote:
| I think it is possible to be successful in games without
| being predatory. Humble Bundle was a demonstration of
| that.
|
| I don't believe that ultra-predatory mechanics are long-
| term sustainable. They usually yield a "ring of fire"
| effect that creates a growing ring of users for a while
| but really you're burning out all your core users and
| will implode. This is how many describe the original
| Zynga model.
|
| Supercell (founded around the same time) has cultivated
| longterm ecosystems and IP by respecting their players.
|
| EGG takes a similar long-term perspective.
| YetAnotherNick wrote:
| > Humble Bundle was a demonstration of that.
|
| No idea what it is, but it has double digit million in
| revenue, across everything. How is it being successful.
| Loughla wrote:
| It's successful in my opinion by offering really good
| value with fair practices. It's not a secret, I think.
| dpoloncsak wrote:
| >I don't believe that ultra-predatory mechanics are long-
| term sustainable
|
| I don't think they're trying to be. I think they're whale
| hunting, find a few high spenders, and milk them for all
| they're worth. Then they spin up a new IP (or license one
| out), rinse and repeat
| Analemma_ wrote:
| I don't think that's possible and frankly I'd much prefer
| capital not even try. To the best of my knowledge, the only
| games which generate the really outsized outcomes you'd
| need for a VC portfolio do really gross, anti-player shit
| (gacha, lootboxes, whale fishing, etc.) to get it. Or they
| become distribution monopolies like Valve, which is fine-
| ish when Valve is private but would be a ongoing
| catastrophe if it had been VC-funded. I'd rather not
| encourage that.
| mikepurvis wrote:
| I agree. I'm not the moral police, but video games
| ultimately have to walk a line where they serve up
| entertainment that is engaging/addictive without being
| all-consuming and abusive, and do so for an amount of
| money for which there is general consensus is
| "reasonable".
|
| Trying to ride that to the moon is a very different
| proposition from a B2B play where you sell some service
| that concretelt delivers $X/mo recurring value to each
| customer for a $Y/mo price tag, and X > Y, but Y - your
| costs still turns a healthy profit. If you do that right,
| everyone is winning and the economy as a whole grows, not
| at all the same as the zero-sum game that is soaking a
| few whales and ruining their lives.
| 7777777phil wrote:
| I appreciate this perspective.. but I think there might
| be a false dichotomy here. Some of the biggest gaming
| success stories didn't rely on exploitative mechanics -
| Minecraft, Among Us, even Fortnite's initial success was
| based on solid gameplay before the monetization kicked
| in. The question is whether you can build sustainable
| platforms that create genuine value rather than just
| extracting it. Steam takes 30% but provides real
| distribution value. Maybe the trick is focusing on
| companies that help other developers succeed rather than
| trying to create the next Genshin Impact
| jsheard wrote:
| > Fortnite's initial success was based on solid gameplay
| before the monetization kicked in.
|
| Fortnite is a bit of weird backwards example because the
| early PvE iteration had paid lootboxes, but they were
| scrapped in the Battle Royale spinoff which actually got
| popular, and eventually removed altogether. They still do
| things like engineering FOMO to drive sales but
| ironically the games monetization was the most
| exploitative when nobody was playing it.
|
| But now the siren song of lootboxes is calling to them
| once again... https://kotaku.com/fortnite-loot-boxes-
| gambling-roblox-20006...
| spacemarine1 wrote:
| Agreed. It is possible to make money in video games while
| treating customers with respect. This is the way! (and
| what EGG looks for because it builds stronger IP and
| longterm retention and good will)
|
| I helped Indie Fund Hollow Knight back in the day and
| look a them now!
| mikepurvis wrote:
| On some level it's the role of the publisher to pick winners
| and guide them over the finish line. See for example the hit
| machine that is Devolver:
| https://www.devolverdigital.com/games
|
| I'm not an indie dev, but if I was I would _happily_ give up
| a chunk of my potential profit to be listed on there, knowing
| the size of the market that says "oh yeah... a Devolver
| title, I would blind-buy this, it's probably pretty good."
| mrdataesq wrote:
| I suspect games are like movies: for every 100 movies, around
| 20 of them make enough money to cover the losses of the other
| 80. But predicting which movies those will be is extremely
| difficult (Goldman's Law: Nobody knows nothin'). Any studio /
| label / distributor which can do better than the average is
| probably headed for greatness.
| guywithahat wrote:
| My thought too, the bar is higher and the rewards are so much
| smaller. People don't appreciate how incredibly difficult it
| is to make a mediocre game
| seizethecheese wrote:
| VC math follows a power law and expects almost all
| investments to flop, and the one winner to pay for it all.
| The question here is not about the flops it's: are the
| winners big enough?
| conartist6 wrote:
| And now that they're eliminating diversity in their
| investments are you still certain they will pick the next
| generation's winners? All they're investing in are AI
| companies...
|
| Once upon a time someone like me for whom engineering
| competence is a core aspect of my identity would have never
| considered turning my back on YC. But now I'm just
| embarrassed by them. The things they now think are the only
| things worth investing in mostly make me want to vomit,
| like the vibe coding casino-IDE startup. As someone who
| still espouses their old values rather than their new ones,
| I'd rather succeed on my own.
| bob1029 wrote:
| Making a game that will sell well on Steam is typically much
| harder than finding a bunch of boring business leaders and
| pitching them a SaaS or consulting package. On the surface it
| might seem simpler to do a game, but once you get into the
| mechanics of building, testing and publishing something for
| the masses, the fear of cold calling or emailing total
| strangers begins to evaporate quickly.
|
| About 99% of the work you do on a game will wind up in the
| trashcan. Doesn't matter what kind of work it is. Code,
| audio, textures, models, map layouts, multiplayer balancing
| work, etc. are all susceptible in the same way. No one is
| safe from the chaos. It takes a lot of human energy and
| persistence to produce sufficient 1% content to fill up a
| player experience.
|
| I'd estimate for a B2B SaaS product, the ratio is
| approximately the same, however you don't need such a broad
| range of talent to proceed. One developer with a desire to do
| the hard things constantly can be all you need to make it to
| profitability. Going from one employee to N employees in a
| creative venture is where things go bananas. If you
| absolutely must do an indie game and you need it to succeed
| or your internet will get cut off, you will want to strongly
| consider doing it by yourself. Figuring out how to split
| revenue and IP with other humans when you can't get _the_
| customer on the phone is a nightmare.
| spacemarine1 wrote:
| Many people agree that being a video game founder is harder
| than being a tech founder. Staying small and being as
| resourceful as you can is a good way to mitigate risk.
| WhereIsTheTruth wrote:
| YC works because B2B can survive early with a few paying
| customers
|
| Gaming is pure B2C: hit driven, capital intensive, and
| unforgiving
| spacemarine1 wrote:
| Fair point though Humble Bundle was B2C.
|
| There are clever gaming platforms out there and the best
| games seem to turn into platforms effectively.
| doctorpangloss wrote:
| It's a little more nuanced than that. B2B offerings cost
| money, video games cost time haha
| api wrote:
| B2B isn't as hit driven as gaming but it's still hit driven.
| Most startups fail.
| FloorEgg wrote:
| That doesn't sound right to me. A lot of b2b comes with high
| barrier to entry.
|
| Also I know of many successful indie games, some of which
| were built by one person.
|
| I can think of so many exceptions to your point on both sides
| that I question your thesis as a rule.
| conartist6 wrote:
| I wonder how long this can survive now that their priority is to
| fund AI users to use AI
| spacemarine1 wrote:
| AI tech has the spotlight right now for sure amongst VC's. But
| I believe AI is also a huge tailwind for video games.
|
| Namely, small, clever teams will be able to do big and
| entertaining things that were not possible before.
|
| (But yes there will also be tons of slop.)
| conartist6 wrote:
| It can't be a tailwind for a whole industry. It can only take
| from some and give to others.
| spacemarine1 wrote:
| The industry has experienced slowed growth and is
| restructuring which is scary for many people right now.
| There have been continuous layoffs and studio closures.
| That sucks (though is not all caused by AI).
|
| But a few quick thoughts: Video games have always been
| about cutting edge technology. Because they are
| interactive, they are best positioned to leverage AI tech.
| (unlike static media)
|
| Prototyping tends to be the most important but most
| neglected process for finding the fun. AI is a catalyst for
| rapid prototyping such that a studio can more quickly build
| and assess game loops and de-risk the rest of their dev
| cycle before staffing up or pulling team members off other
| projects.
|
| AI may long-term create more leisure time macro-
| economically for everyone, meaning more consumer time that
| may be consumed playing games. (Owen Mahoney thinks the
| industry will soon triple in size)
| conartist6 wrote:
| 1. "More leisure for everyone" is utter bollocks. We know
| it doesn't work like that. If it did we would all be
| doing nothing but leisure because of how much leisure we
| gained by switching to email.
|
| 2. Games are just code that's fun. How does this sounds
| as a process for making something fun: "Start by de-
| risking." Hmmm OK, yes, this tracks with my experience of
| private equity companies being the most innovative and
| successful creators of games.
| zmmmmm wrote:
| > "More leisure for everyone" is utter bollocks.
|
| it's fascinating how this delusion persists.
|
| More leisure will only occur if it becomes true that the
| marginal return of doing additional work falls almost to
| zero. So to say people will have more leisure time
| actually suggests more that they will lack opportunities
| to do things of value than it does that they will choose
| to have more leisure time. Which is depressing.
| conartist6 wrote:
| If everyone could live a life of leisure, the logical end
| result would be roving gangs engaging in street warfare
| for funsies. If money is no object for anyone, what else
| is there to do but to seek fame, even infamy?
|
| Each gang member could be running their AI value-miners
| at home, but of course since they're the only kind of
| value in the new AI-communist society they'll be the
| obvious target for the other leisure gangs. So after
| enough rounds of violence each leisure gang will run a
| fortified, paramilitary "intelligence mining" operation,
| and oh by the way indie software dev is punishable by
| death in these territories.
|
| Is this scenario, like, 9 kinds of insane? Sure! But so
| is the idea that we'll all be at the beach doing Idunno
| what, fucking? All this to say yeah, I'm with you that
| anyone who describes that AI will make a future defined
| by a lack of productive work is describing a depressing
| future...
| mrguyorama wrote:
| >Because they are interactive, they are best positioned
| to leverage AI tech.
|
| You have not supported this argument.
|
| On the contrary, I think LLMs are not a big help.
|
| We've already been here. Procedural generation was the
| magical solution that was supposed to help a single dev
| make giant worlds. And it did. It helped you make giant,
| _utterly empty and soulless_ worlds.
|
| Great for minecraft. Not so great for No Mans Sky, as
| there were significant limitations. Useless for anything
| that depends on a story or immersion in that story or
| characters.
|
| This idea that you can wire an in game character up to an
| LLM is misguided and doesn't seem to understand what
| players want a character to be.
|
| In Mass Effect 2, a fan favorite character infamously had
| little content for most of the game. Garrus was a very
| loved character, including being the love interest for a
| lot of people who played the game, but during 2 he just
| sits in a part of your ship and says "Sorry, can't talk,
| running some calibrations" for almost the entire game.
|
| Put the entire game's script into an LLM as context and
| have it pretend to be Garrus and try and talk to it. Will
| the LLM take a strong stance that Garrus would take? Will
| it correctly figure out that Garrus would rather kill a
| bad guy than let him get away, and then have him make
| convincing arguments about that in reference to the
| previous mission, and then in the next mission put you in
| a situation where you have to decide whether Garrus is
| right and whether you should dome that "Bad Guy" instead
| of letting the police fail to aprehend him? Will that
| Garrus make you think about this world and your place in
| it and whether your personal or chosen morals are right?
|
| Probably not.
|
| People don't want to chat about the weather with random
| NPCs. People want characters that have character notes
| and integrate into the story and make you _feel_.
|
| So far LLMs can't really write that well, and certainly
| are not cohesive and multidisciplinary enough to be able
| to build that into a game in a convincing way.
|
| There's a famous game called "Facade" which plays up this
| big fanfare about how it uses "AI" and Natural Language
| Processing to bring two characters to life for you to
| talk with and navigate a crisis with, but it's almost
| entirely lies. The actual logic of how it works is almost
| identical to old fashioned text adventure parsers in
| their heyday. It's a heavily scripted sequence, with
| fairly few actual paths it can take, and the script is
| not that big. It got so much press for what was basically
| done in the 80s. I think some people have tried to hook
| LLMs into it, but it just doesn't feel good. The problems
| that AI dungeon adventure game always had still exist,
| just under more paint.
| psawaya wrote:
| I wouldn't say that for sure. Here's a take that says it'll
| create a lot of growth for the games industry:
| https://www.owenmahoney.ai/owen-mahoney-blog/size-matters
| conartist6 wrote:
| It bases this entire chain of assumptions on "AI is
| really big and everyone agrees".
|
| But I don't see the games industry as all that vulnerable
| to AI at all. Game engines already drive constantly-
| improving dev efficiency through improved abstractions.
| Hammershaft wrote:
| None of this is necessarily zero-sum. I'm skeptical AI is
| going to be a meaningful tailwind for games, but if I'm
| wrong it could absolutely benefit customers, studios, and
| labs through boosting productivity.
| iwontberude wrote:
| I don't know why but I keep having recurring nightmares of our
| government giving AI human rights
| Zak wrote:
| Talking about the shift raises the question of why it used to be
| the other way. Were VCs bad at picking founders who were honest
| and/or competent, or were VCs always wrong to mistrust founders?
| spacemarine1 wrote:
| It was all of the above in my opinion.
|
| VC's raised easy money (ZIRP era) and they wanted to deploy
| fast. Founders told VC's what they wanted to hear to secure
| capital.
| seizethecheese wrote:
| I think it just seems like a bad idea? If you believe in
| expertise in business, giving someone with little of it a bunch
| of money seems a recipe for disaster. (And YC showed that in
| fact it's not a disaster.)
| Zak wrote:
| Taken to its logical conclusion, that idea suggests hiring
| business experts to start companies from scratch rather than
| investing in existing startups.
| seizethecheese wrote:
| Yeah, and Graham showed this is folly.
| throw-12-16 wrote:
| Its never smart to trust people who have a vested interest in
| lying to you.
| mattmaroon wrote:
| " Some say YC is now big enough that it has a self-fulfilling
| distortion effect where the best founders in the world know they
| should all apply to YC first before they talk to any other
| startup accelerators or investors."
|
| That's an interesting point but I have to imagine all the worst
| founders know it too so the filtering may not have gotten easier.
| I'd be curious to hear from them.
| YetAnotherNick wrote:
| They majorly select a kind of founders as a first filter (good
| engineers from good companies, ivy league, ex founders etc.),
| and then they look into the ideas as a second filter, and the
| third and the least important is the process in which they just
| spend 15 minutes interviewing and maybe another 15 minutes
| looking into the application.
| intalentive wrote:
| This mirrors the military doctrine of "mission tactics" which
| entrusts subordinates with wide latitude in executing orders. But
| it requires a high degree of alignment and competence, which
| explains why YC focuses on founders over product or idea.
|
| This makes sense in a dynamic environment with sensitive local
| conditions and "network lag" in the chain of command. But in more
| static or settled market environments it may be wiser (for
| investors) to focus elsewhere and restrict founder autonomy. We
| see this pretty commonly with successful founders who get "phased
| out" and replaced with more experienced managers.
|
| I wonder how much this sort of "distributed decision-making" has
| been formalized and studied.
| baxtr wrote:
| There is a good book on that subject by Stephen Bungay called
| "The Art of Action". He explains the concept of
| _Auftragstaktik_. Great book, although a bit hard to read.
| Grosvenor wrote:
| There's also Franz Osinga's book Scince, strategy, and war,
| which covers John Boyd's work in detail.
| MaysonL wrote:
| John Boyd, describer of the "OODA" loop:
| https://en.wikipedia.org/wiki/OODA_loop
| neilv wrote:
| Besides that, is YC building _new_ trust?
|
| One recent concern I have is (anecdotally) how poor a deal YC
| startups I've seen are offering for founding engineers.
|
| Before YC started, early hires who helped make a startup
| successful could get rich on stock.
|
| YC may have changed the investment scene for the better in some
| ways, such that founders are less likely to screwed by investors.
| But today, early hires are the ones who seem to be getting
| screwed.
|
| In cases I've seen recently, even if the startup has a nice exit
| for founders and investors, employees would have been better off
| as a worker drone at a FAANG-like.
|
| Do we need PG to write an essay (or the richest managing partners
| to make a video), about the value of incentivizing early hires?
|
| Or, don't even talk about the _value_ of it (since some aspiring
| founders are aggressively confident now, that they know how all
| the ducks are lined up), but talk about _new criteria_ : YC looks
| for a respectable pool to incentivize early hires as positive
| signal, when determining who to fund.
| moomoo11 wrote:
| Because the truth is that recent batches are filled with nepo
| founders and companies that are not really at the caliber of
| those that carry these VC names from the past (like pre-2015).
| Lots of fraud-aligned people/companies too.
|
| Now its just a way to sell these companies to those OGs.
| dang wrote:
| It's so easy to post substanceless slurs, but I've been
| around YC since 2009 and it hasn't changed much from my
| perspective. The primary difference between pre-2015 and now
| is that those earlier startups have been around for over a
| decade longer. Of course the ones who turned out to be
| successful are better known.
| neilv wrote:
| This got downvotes, after getting upvoted.
|
| I wonder who thinks that a practice of combining sub-market
| salary with miniscule ISO grants (not even real equity) for
| early hires is a good idea for startups that want to win big.
| neilv wrote:
| A related but slightly different impression of early YC that I
| mentioned the other day, touching on the "disingenous and
| exploitative finance" aspect this article alludes to:
|
| https://news.ycombinator.com/item?id=46437148
|
| > _This reminds me of when YC seemed to be a response to the
| dotcom boom environment, a bit "by hackers, for hackers", to help
| hackers start Internet businesses. Rather than mostly only the
| non-hackers starting dotcoms (such as with affluent family angel
| investors and connections). Or rather than hackers having to
| spend their energy jumping through a lot of hoops, while dealing
| with disingenuous and exploitative finance bro types._
| bix6 wrote:
| I don't understand this post as it seems more about Sequoia being
| helpful? And then starts talking about the game industry.
|
| YC is all about the network. You burn the network and you're in
| trouble (but I bet you could still find people to raise cash
| from).
|
| Giving founders money on SAFEs was an easy way to jump the line
| and do a bunch of early stage quickly which is the technique that
| statistically works best. Unfortunately this article doesn't
| mention any of the numerous SAFE issues or situations where
| founders take advantage of loopholes.
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