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Value vs. Worth (Part 2 - YCombinator)

Value vs. Worth (Part 2 - YCombinator)
By Adam Draper • Issue #74 • View online
Thoughts on YCombinator, leading to more discussion on Value vs. Worth. For previous post click here.

Continued: It turns out I have a lot more thoughts on this, I might continue the conversation on another post.
The YCombinator Demo Day experience took place the last 2 days at Pier 48 in SF. It’s incredible what they have built - talk about the compounding value of a brand. The demo day is also a perfect example of value vs. worth.
Any critique that has ever been stated about YC by me or others is completely out of jealousy. Jealousy can blind decision making, and it can drive reactive behavior rather than pro-active, which is why YC is so unique, they keep the industry on its heels always. Always forcing a reaction, rather than evolution of the market, which makes them the market.
Before getting back to Value vs. Worth, I think it’s important to understand what drove YC to become as powerful as they are. Why could they exist, why was there a need for accelerators? And what drove YCombinator’s success?
I’m speculating, but I believe that it is 4 different things:
  1. The anti-VC started it —– If you read Paul Graham’s blogs straight through, you realize two things - he loves LISP and he despises venture capitalists. Only someone who despises venture could have loved entrepreneurs enough to revolt against the system. I’m sure I’m over-generalizing a lot of Paul’s impact as the leader, he partnered with amazing people, namely Jessica Livingston, from my understanding, whose impact has been extraordinary. I hope others see the irony in Paul becoming the most notorious VC of all time.
  2. Founder friendly —– No one can argue that they have invented products and processes that have enabled the power shift in venture capital from the money to the hands that build. The whole thesis behind YC originally was “Can a Computer scientist learn the business side.” And every step of the way they have built out education and super powers for the founders to use against the money that invests. The SAFE, Startup School, Thought leadership… to name a few.
  3. Lazy VCs —– I realized very early that YC was the best business model in VC, I forked it to start Boost VC! and we have evolved into something that I’m very proud of. The brilliance is that they take the 2% and 20% (Management and carry) fee that you would normally deliver to the Limited Partner, and they front load it to the entrepreneur (7% for $150k) by creating an insane filtering system - this allows the LPs to actively replace the need for early stage venture capitalists. The biggest fear of a venture capitalist is losing touch with the dynamic people building things, and YC has created the magnet for all, while incentivizing the replacement of VCs with Limited Partners. It’s wild! The venture capital 2 and 20 is going away!
  4. The Global shift in Venture Capital —– I’m not sure that anyone could have predicted the insane rate at which entrepreneurship has taken off globally. The power, and how entrepreneurs like Elon Musk and Jeff Bezos have crossed into celebrity status globally. YCombinator and other accelerators allow you to visit Silicon Valley for 4 days a year, and participate in the innovation taking place. Also, there are more entrepreneurs starting businesses all over the world!
Well it turns out this is going to be a 3 part series. Because this is leading somewhere, but I have to get off the train now.
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Adam Draper

I ponder as a VC.

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