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0 pointscodingdave4y ago0 comments

> The entire industry of venture capital is based on a tiny percentage of companies absolutely exploding.

Exactly. Which means the risk level to founders is high. Because it is a roulette wheel where the VCs are the house, and the founders are the gamblers. With TechStars vs. YC being akin to the difference of the wheel having one zero or two. Founders are still gambling... even if YC gives better odds than others.

Again, VC has it place, as does YC. I'm not saying nobody should do it - I'm saying they should do it as a fully informed decision.

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whack4y ago

>> I got into the fifth batch (s07) and remember my other startup friends staging an intervention to dissuade me from accepting because "the valuation is really bad."

> Your success and the success of YC doesn't make your friends wrong

His friends weren't telling him to leave the startup world. His friends were in the startup world themselves, and felt that there were better options out there compared to YC. In this context, his friends were absolutely wrong

random3144y ago

Given that his startup didn't succeed, his friends weren't absolutely wrong.

whack4y ago

Classic outcome bias

https://en.wikipedia.org/wiki/Outcome_bias

nilsbunger4y ago

This is very wrong. VCs don’t control the game at all and their economics come from the few huge outcomes where founders also have a life changing outcome. Also, gambling has a negative expected value, while a good team starting a company has a positive expected value.

Startups are a high risk game but no one says you have to play it.

anamax4y ago

> [VC] economics come from the few huge outcomes where founders also have a life changing outcome. Also, gambling has a negative expected value,

VCs get more shots on goal, so the typical outcome of a VC could approach that of the average of the industry. (It doesn't, but that's for other reasons.)

Founders can't because they have too few shots on goal.

Suppose that I'll give you a 10% chance at $100k if you pay me $1k.

If you can take that offer "enough" times, you have reasonable odds of making 5-12x on your money.

However, if 100 people take that offer once each, around 90% of them will lose their $1k. (They should pool.)

https://www.nature.com/articles/s41567-019-0732-0.pdf

j / k navigate · click thread line to collapse

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whack4y ago

>> I got into the fifth batch (s07) and remember my other startup friends staging an intervention to dissuade me from accepting because "the valuation is really bad."

> Your success and the success of YC doesn't make your friends wrong

random3144y ago

Given that his startup didn't succeed, his friends weren't absolutely wrong.

whack4y ago

Classic outcome bias

https://en.wikipedia.org/wiki/Outcome_bias

nilsbunger4y ago

Startups are a high risk game but no one says you have to play it.

anamax4y ago

> [VC] economics come from the few huge outcomes where founders also have a life changing outcome. Also, gambling has a negative expected value,

VCs get more shots on goal, so the typical outcome of a VC could approach that of the average of the industry. (It doesn't, but that's for other reasons.)

Founders can't because they have too few shots on goal.

Suppose that I'll give you a 10% chance at $100k if you pay me $1k.

If you can take that offer "enough" times, you have reasonable odds of making 5-12x on your money.

However, if 100 people take that offer once each, around 90% of them will lose their $1k. (They should pool.)

https://www.nature.com/articles/s41567-019-0732-0.pdf

j / k navigate · click thread line to collapse