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"Y Combinator style built-to-flip companies?" Sigh. Does this guy not grasp how much less we make when a company gets acquired early than we would if it went on to become a big success? The real money in venture funding, for us as for all other investors, is in the companies that become Google, not the companies that get bought by Google. The returns can be literally ten thousand times higher.

We would always prefer it if founders turned down acquisition offers and kept growing the company. Any investor would. The reason some YC startups get bought early is not that it's the optimal outcome for us, but that we're willing to get less than the optimal outcome if that's what the founders want.

I was storming into the thread to say the same thing. The other fantastic part about it is how YC will become madly rich at the cost of the 'gullible young naive programmers'[sic]. YC takes ~5%, those gullible fools only walk away with 95% which is clearly a horrible ratio compared to traditional VCs.
There is also the question of wether or not there would be a second (or new) offer. The Yahoo/Microsoft saga is a good example. Some (most?) founders aren't willing to risk it, specially when they have good technology but aren't doing too great on the business side.

That's my $0.02 anyway.

Are there any current companies that you think have a reasonable chance at pursuing an IPO within 12 months? 24 months?
I don't think there are many companies in the world that have a significant chance of doing an IPO within 12 months.

I do think there are several YC-funded companies that have as good a chance as any other startup at their stage. Loopt is obviously one. There's another that's almost as old but is building something so big that they haven't launched yet. More recently than that, it gets harder to say, but there are at least 5 more I wouldn't rule out.

Yeah, the IPO has (at least for now) ceased to be an indicator of success.
Are there any Internet companies at all that have done an IPO in the past 24 months? Or are planning to in the next 24? The answer is very few.

"In the past quarter, for the first time in 30 years, not a single tech company went public." (http://www.wired.com/techbiz/startups/news/2008/07/portfolio...)

By compressing the dull but necessary task of making a living into the smallest possible time, you show respect for life, and there is something grand about that. - last line of http://www.paulgraham.com/startuplessons.html

PG's article is about working very hard and then it's over, through some kind of exit (acquisition or IPO). This is what "built to flip" means to me. If founders "kept growing the company", they would just have more of the same very hard work and stress (by my interpretation of the article).

(To me), the alternative to a built-to-flip company is one Warren Buffet would like. It has an economic moat (durable competitive advantage), putting it in such a strong position that you don't need to work so desperately hard. You can continue to deepen the moat, it's no longer life-and-death stress.

I think I'm missing something - maybe PG's [8] footnote, that a startup is choice (a): you don't love building the company. It's just a means to an end, of financial independence.

I 'd like to do work I love, within my own economic moat.

He makes the mistake of assuming that the lack of a world changing YC company is strong evidence that the YC process is biased away from this result.
"Why these large firms, and now even places like YCombinator continually think the best way to move forward in software is to hire as many gullible young naive programmers as possible and work them to death is beyond me."

Seems like this guy doesn't understand how YC works (and judging by some of his comments, OP as well) any more than the last troll. YC doesn't hire anyone other than the occasional caterer (and to my knowledge, none of them work 80 hour weeks).

PG invests in people and says to work very hard (not as a mandate, but as advice, which he gives just as freely to people he doesn't fund) and in the troll's mind he's hiring them and forcing them to work for 2 months without sleep.

My question is, why does this sort of stuff keep climbing up the page? It's not interesting, it's not well thought. It's just senseless accusations from people who apparently didn't even take the time to read YC's FAQ.

I've been trying to figure this out as well. Maybe people like this kind of thing because they WANT it to be true. The notion that they COULD be doing something better is threatening in a way. They want someone to tell them that their other options are all worse, that they've made the right choices.
I think people sometimes vote for things, not because they agree with them but because they know other people won't and they're interested to see what the reaction will be. It's the online equivalent of 'Fight, fight, fight'!
sensational quotes aside i think the author put a pretty good argument forward, he took a point and counter point and then added his opinion, seems fair. One can also question, why everyone here attacks any form of criticism as nonsensical babbel. PG's comment was right on target, no finger pointing, just a swift counterpoint.
How did he put forth a good argument? His argument was that it's wrong for YC to hire people and work them for extraordinary amounts of hours. YC doesn't hire anyone, and doesn't (can't) require anyone to work any certain amount.

He's arguing against something that doesn't exist. I don't know about other articles, but this one was attacked as nonsensical babble because it was.

We are _not_ built to flip. There won't be a talent acquisition for us either.

We already have revenue and hopefully we'll have profits soon.

These blanket statements bug me - everyone else forgets about or chooses to ignore Wufoo.

I think blanket statements about YCombinator companies are a little unfair to the diversity of YC startups. As fallentimes points out, Wufoo has been profitable from the start and continues to build on a vision they believe in. Hardly built to flip.

Posterous, our YC-funded startup, is 100% committed to changing the world by bringing publishing online to the other 90% of people out there who know how to use email but don't know how to use complicated blog software. And we're pretty sure we'll be able to do it well enough that people will be willing to pay for the right features.

Finally, regarding the quote from Austin Wiltshire: "Who will end up really getting the spoils out of any of YCombinator’s work? Paul Graham." This quote strikes me as absurd on its face. YC takes an average of 6% but speaking from personal experience the value of the mentorship and connections far outstrip that slice of the pie. This isn't even including the access and network you get from the hundreds of other founders who have passed through YC doors now.

It's completely misguided to think that YC has some sort of strange or malicious goal of taking advantage of unassuming hard-working startup founders. Paul didn't HAVE to create YC, but he did it to serve a need he identified -- to help smart hackers like himself 'solve the money problem.' The business world rewards owners, and YC / PG is giving smart hackers a push in the right direction towards owning their creations and their destiny.

As for deciding whether to flip or not-- Google, Facebook, and every other world-changing tech firm you can think of had the chance to flip a thousand times. They said no. Making that decision is a part of a founder owning their own destiny. YC is there to help startups get to that point. What you do when you're on the threshold is your choice.

Also, YC gets 6% of the first round. That gets diluted significantly over time by further investment. By the time a company hits a liquidity event they usually have significantly less.
The Austin Wiltshire quote was interesting - I don't imagine YC is doing much better than break even at this point.
The choice isn't only about Changing the World or just getting paid. You can also change the world in a small way that gets you paid consistently.

Search engines changed the world in a big way, and Google continued with that. Google makes a ton of money as a consequence.

Wireless Toll Payment changed the world in a small way, which will probably get bigger in time. But for now, toll roads are just a bit more convenient to use.

You can also change the world in a big way that doesn't generate much money at all: YouTube.

You can also change the world in a big way that doesn't generate much money at all: YouTube.

This was also true for Google for about 2-3 years after they started - perhaps more. I think we should judge Youtube after a few more years. Everyone accepts it has changed the world in a big way.

People have been saying that YCombinator and the general hackernews culture encourages people to work 80+ hours a week. I would like to put that to rest right now. It's just not true.

Yes, people who work for YCombinator startups tend to work a lot of hours. There is a simple reason for that: Anything worth doing is hard. It takes time and passion and constant attention. There is no free lunch.

Paul Graham isn't a damn cult leader. He just talks sense. Imagine you have only 3 months to build something so impressive that a venture capitalist will give you a million dollars to continue building it. What would you do? Work a four day week like 37Signals? Or spend every minute you have working hard to make something amazing?

People get defensive when they feel that you're implying they aren't working hard enough. Starting a company (especially a YC company) is an extraordinary situation that calls for extraordinary measures. Please stop making a big deal about the hours people work and focus more on what they build.

We had a RescueTime group tracking founders in our class where we could look at the aggregate data of how founders spent their time. Rarely did anyone actually spend more than 5-6 hours in their dev tools, and rarely did they spend more than 10-11 hours per day on their computers.

Note that this is DURING YC-- the most intense months of hte experience. Since then, these numbers have declined a bit.

I really love the "unconditional love from a cult leader" part of this particular string of trolls. Paul is decidedly NOT loving-- in fact, he's kinda brutal. :-)

the YC deal (a bit of cash, huge PR, and massive connections) for a 5-10% ownership of an idea is the fairest and most generous seed investment deals around. The fact that you get to start a company and peruse a dream while your young is priceless compared to the alternative. people who think this model is about robbing youth and forcing 80 hour work weeks are missing the point.
Now business people can see how silly it sounds when they start talking tech stuff to developers.