{"id":2718,"date":"2013-05-04T22:20:29","date_gmt":"2013-05-05T03:20:29","guid":{"rendered":"http:\/\/www.bytebot.net\/blog\/?p=2718"},"modified":"2013-05-04T22:20:32","modified_gmt":"2013-05-05T03:20:32","slug":"on-startup-factories","status":"publish","type":"post","link":"http:\/\/www.bytebot.net\/blog\/archives\/2013\/05\/04\/on-startup-factories","title":{"rendered":"On startup factories"},"content":{"rendered":"

I read with great zeal the article about Y Combinator<\/a> in the NYT titled: Silicon Valley’s Start-Up Machine<\/a>. I think there are a few important takeaways, especially with people trying to build this kind of thing elsewhere.<\/p>\n

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  1. People take the $100,000 at a 7% stake because of the whole experience. Advice from seasoned entrepreneurs (like pitch improvements, etc.). The importance of the network they bring (which is hugely underestimated by many clones). Dumb money remains dumb.<\/li>\n
  2. \u201cThe general public doesn\u2019t understand start-ups at all,\u201d Buchheit said. \u201cThey\u2019re mystified how a company with no revenue can be worth a billion dollars. It\u2019s because of this power law: If a company has a 1 percent chance of being a hundred-billion-dollar company, then it\u2019s worth about a billion dollars. That kind of thing doesn\u2019t happen in your normal life experience. If I get a cup of tea, it\u2019s a cup of tea \u2013 there isn\u2019t a chance that it\u2019s actually made out of solid gold. But that\u2019s how this works.\u201d – direct quote from Paul Buchheit<\/li>\n
  3. \u201cOne of the reasons,\u201d he said, \u201cis because there\u2019s nothing else to invest in. If you have money, there\u2019s nothing to put it in. Bonds return nothing. And the stock market \u2013 what public company do you feel reasonably assured is going to go up at historical norms of 8 percent a year? It could all just fall apart. . . .\u201d If, on the other hand, you discover the next Google, you can increase your investment by \u201ca thousand X.\u201d<\/li>\n<\/ol>\n

    Nothing else to invest in. Interest rates in the USA are low. In Malaysia (or Singapore), you have property as an investment that should return more than 8% per annum. Refer to my old post about the startup ecosystem in Malaysia<\/a>.<\/p>\n

    Its nice to see lots of funds and accelerators pop up, but without the experience, the lack of vision, and other investment vehicles that return sufficiently, I’m not sure how even the angel incentives<\/a> help.<\/p>\n

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