HN Theater @HNTheaterMonth

⬐ hi

HN donesn't allow timestamps so here is the conversation: https://youtu.be/syoqjYLDs48?t=1168

As someone who went through YC and met PG while he was still actively running it, I can tell you that at least in our batch he was 100% spot on about who was going to do well. He had a tendency to spend his free time with the same individuals who ended up doing phenomenally well. It would be easy to be dismissive about this and say something about doubling down on his best investments, etc. But during our batch many of those companies had not yet become the clear cut winners that they are today, and instead only turned into them a year or so down the road. One of the best companies from our batch is Flexport, and PG had been super impressed by Ryan Petersen even before he was officially accepted into YC [1].

It's pretty clear in hindsight that taking note of who PG was hanging out with was a very investable strategy. In fact, one of my batchmates had some money to put into other companies in our batch, and when he asked me for my opinion of who to invest in, that's exactly what I told him. I just did some quick math and would estimate that his ROI today is somewhere in the 1,000x range.

I am not the only who figured this out - while this wasn't quite as much of a factor during my batch, nowadays there is an entire cottage industry of YC-only funds who invest only during YC demo days. As you can imagine, the way they differentiate from each other is by how much insider knowledge they are able to accumulate leading up to demo day (I am not implying that the partners ever leak anything, but these funds are very motivated and they look for all sorts of signals). One such signal is to track all other investors around you, and a well-connected angel can single-handedly increase the valuation of a startup (which explains why they manage to get in before demo day and at a discount).

I have to say though - while the success rate of these YC-only funds is likely good enough to make them quite profitable, none of them come even close to what I observed with PG's ability to pick the winners (which makes sense, since a lot of other people have tried to build accelerators and none of them come even close to YC).

[1] https://youtu.be/syoqjYLDs48?t=1169

⬐ vorhemus

That sounds like a self-fulfilling prophecy: If a lot of investors and angels want them succeed, they will succeed. I doubt that it is always hard work and passion that make the difference in whom to invest, I think there are other variables that are less talked about (e.g. sympathy).

⬐ darawk

> That sounds like a self-fulfilling prophecy: If a lot of investors and angels want them succeed, they will succeed.

This is nonsense. VCs do not have that kind of power to will something into existence. They can pour money into it, but they can't make a company successful. And if they continually spend more than they make...they don't get to stay VCs for very long.

⬐ TeMPOraL

But how many of startups are self-fulfilling prophecies? Runaway success? Where by "success" I mean growth and ultimately good return for investors. The way it's achieved is by... perpetually operating at a loss, burning VC dollars from follow-up rounds. It has that nice pyramid scheme flavor to it, where the final investors - or the public - are the ultimate parties left holding the bag. Such a scheme can indeed be willed into existence if enough push is made to set up an initial feedback loop.

⬐ aerosmile

For your self-fulfilling prophecy theory to be valid, venture capital would have to be able to ensure that your contribution margin is staying constant. Eg: if you make $1 per sale in CM at $1m in revenue in 2020, will you also make $1 per sale in CM at $100m in revenue in 2025? The reality is that unit economics change massively with scale and with time, and only a select few companies get the contribution margin to be constant (and even fewer achieve a constant contribution margin that's in the right ballpark). Therefore, venture capital can accelerate a successful company or delay the demise of an unsuccessful one, but it won't change the eventual outcome.

If you need mathematical proof for this, just ask yourself how many net new customers would you have to add to a business every year if you are at $100m in revenue and have an annual churn of 10%. Yep - you'll be running out of your TAM pretty quickly at that rate. And then add to that the fact that each new net customer will likely keep getting more expensive to acquire [1]. To get to $100m and stay there of even grow beyond that figure, the business fundamentals (first and foremost: churn) need to be good.

You can also think about it from this angle: why is it so rare for the same founder to continuously churn out one IPO after another? With each next attempt, they should be getting better at it and have more people willing to support them. The answer is - it takes a ton of stars to align correctly, and money alone won't fix your unit economics at a moment in time, let alone over many years and 100x growth in revenue.

[1] https://andrewchen.co/the-law-of-shitty-clickthroughs/

⬐ tomhoward

I think what you're describing is WeWork and Theranos. So, sure, they happen, but they get found out eventually, and in both cases, they were found out before they went public.

Looking at the list of "Former Unicorns" on this page [1], I can't see many that fit your description. Sure, there's a handful, inevitably, but it's far from the norm. Most of them have grown into real businesses making real revenues. And sure, some of them may be still making losses but that's a valid strategy where there is still growth potential in the market.

Granted, Uber is a big question mark; it remains to be seen whether they will ever turn out to be profitable. But everyone knows what the strategy and the bet is, it's just a matter of waiting to see if the bet pays off. But no serious commentator could dispute that Uber's founders and present executives are talented people, building a company of substance.

So, if the claim is that it's commonplace for unskilled/disingenuous founders to build huge, successful-seeming companies just through huge sums of VC money being pumped in, then exiting and fleeing the scene before they get found out - there don't seem to be many real examples of that happening as far as I can tell.

[1] https://en.wikipedia.org/wiki/List_of_unicorn_startup_compan...

⬐ throwaway03857

Or he makes winners rather than picking them by giving them extra attention, recommending them to fellow VCs and being willing to go further on the whole "disruption" (Aka law breaking) front for them.

⬐ sillysaurusx

It's pretty clear in hindsight that taking note of who PG was hanging out with was a very investable strategy. In fact, one of my batchmates had some money to put into other companies in our batch, and when he asked me for my opinion of who to invest in, that's exactly what I told him. I just did some quick math and would estimate that his ROI today is somewhere in the 1,000x range.

That’s hilarious. Cheers! I never thought of a person’s movements as an investment signal, but in hindsight it certainly must’ve been.

⬐ JayStavis

A strategy as old as hedge funds themselves: https://www.bloomberg.com/news/articles/2019-07-02/hedge-fun...

There's a lot of money to make for the freight forwarding companies.

A lot of container owners charge you fully knowing that your product may get caught up in customs and they make their money on late fees.

As a user of this product, I think you probably get better visibility of where your contents are in the overall process and access to customs agents, which that in itself would help cut your overall costs down if you know that your items were categorized correctly on your customs forms, preventing the above from happening.

The founder talking about it at startup school. https://youtu.be/syoqjYLDs48?t=1169

Congrats. I remember watching Flexport get pitched to PG and Sam Altman during open 'Office Hours' at Startup School in 2013.

https://youtu.be/syoqjYLDs48?t=19m30s

⬐ bedros

I don't get it, from the video, they say brokers make 3-5 billion a year, yet, they value the company at 800 million?

I've never seen a startup valued at this large percentage of market size

please correct me if I'm wrong

⬐ gricardo99

He also says he sees the broker business as a foot-in-the-door for a much bigger, broader logistics business. If you go to flexport, it certainly seems they're pushing more a global logistics solution. I'm guessing the valuation is based on more than just the broker business.

⬐ uhhhhhhh

They've already moved to become a full forwarder, including warehousing, order consolidation and other services (or are in the progress), so I imagine this valuation is based on the market for forwarders, not brokers.

from the article: Petersen told Forbes he expects revenue of $500 million this year, yet that still makes Flexport an underdog. “There are 25 freight forwarders that each do more than $1 billion in revenue a year,” he said.

⬐ mbateman

2% of 4B earnings market-wide would be 80M, 10x valuation on 80M is 800M.

⬐ spiznnx

A company is usually worth a multiplier of annual earnings, since they make that money every year.

⬐ eloff

Startups are not evaluated like that though, the earnings multiplier approach only really applies to big public companies, and even then not so well - just look at Tesla or Amazon stock.

⬐ pbreit

Have you seen Uber which is value a 2-10x the entire size of the taxi market?

⬐ abhi3

Here we have a business that is going after a huge existing market. For some perspective, Slack is valued at > 5 Billion

⬐ eloff

Here's where the market is being irrational in my opinion. I would bet that in 10 years Flexport dwarfs Slack in revenue and in growth potential.

⬐ pbreit

I'd take that bet. Slack is more like Facebook meets LinkedIn.

⬐ erdle

Oh, I will take the other side of this bet.

⬐ rtx

I can draw an contract for a 10% fees.

⬐ KGIII

Someone set up an escrow service. I want in.

As an aside, I have pondered the viability of an escrow service aimed specifically at people who want to wager about topics like these.

I see this at verious forums, someone says Company A will be bankrupt in a year and another one says that won't happen. One of them frequently pipes up to say, "I'll bet you $100 that I'm right!"

Yet, nobody ever takes the chance to capitalize on those potential bets.

Basically, they would set their terms, agree on those terms, upload those terms in a verifiable way as the terms they agreed to, pay their money, and then wait for the time period to end.

At that point, someone at the escrow company will review the wager and the evidence and decide who gets the payout, less the fees associated with it. Not all bets are easy to judge, so writing accurate terms would be important. The service will supply, if needed, impartial judging of the merits. I suppose the company would also need to have the ability to refuse to accept certain bets, perhaps insisting that they make the goals clearly articulated and demonstrable success or failures would be important.

They might even enable it for multiple parties. Each bet would require a deposit of the entire amount due. I suppose people could even go so far as to set odds, if they wanted.

I'm pretty sure this should be a thing.

⬐ michaeloblak

This is where Smart Contract comes in.

⬐ svieira

I believe you are looking for http://longbets.org/

⬐ KGIII

That's pretty close, though not quite what I was looking for. I'm comfortably retired but maybe I should look into making something along these lines. They don't have to be long, for example.

⬐ NamTaf

You want LongBets: http://longbets.org/

⬐ QML

The only aspect of Slack that is like Facebook or LinkedIn is that its an IRC channel that you typically have with co-workers. I wouldn't really consider it a social media website though.

⬐ timfrazer

Once Flexport expands outside just the USA this company will just become massive.

⬐ throwayit

The value of a company is not equal to it's revenue - that doesn't make sense. To give an example, let's say someone offered to sell you a magic bean which caused $10 to appear magically every year. Would the bean grower sell it to you for $10? Probably not unless they needed cash immediately, since they could make $50 from the bean in 5 years.

Instead value of a company is the perpetual value of the cash flows to the buyer. The problem is for startups we have very little idea what their cash flows will be in the future. Their revenues could be anywhere, we have no idea what their costs will be (how many sales people do you need, how much R&D, etc.), etc. So because of that valuation becomes a very imprecise art.

Outside of the cash flow approach, another approach for valuing a company is to consider future buyers. Suppose you have a magic bean that returns 50 cents each year in perpetuity. However, the magic bean is called MagicBeanAI and since AI is hot you know you can sell that bean for $50 to someone else. In this case you would be willing to buy it for <$50 regardless of MagicBeanAI's cash flows. This is what happens when markets start to behave irrationally. Eventually people realize they don't have any more suckers to sell to and their MagicBeanAIs value goes to almost nothing. This is essentially a market crashl; google "tulip mania" for more examples.

⬐ ijafri

Watching this video was immersive in a way Ryan has introduced customs brokerage and freight forwarding to the valley and internet to the freight industry. I meant it was PG and Sam asking him like... ELI5 wow

⬐ paulcnichols

Really inspiring.

⬐ dopamean

Man PG's style of interviewing is super annoying. I get that he was curious and seemingly enthusiastic but at times the dude could barely get out a word.

⬐ jamestimmins

Wow that was extremely impressive. You could tell he had a lot of experience in the industry, because he knew a surprising amount off the top of his head.

⬐ Cyph0n

Not only that, but PG and Sam were masterful at drilling into the relevant details and understanding the core of his product.

⬐ dsfyu404ed

"Take problem from one domain you know and make a business by being really good at solving it with something from another domain you know" is a pretty tried and true business strategy.

⬐ justinator

Lateral thinking.

Try getting a job that way though - you're looked at as if you're too much of a risk.

⬐ jamestimmins

Makes perfect sense, I just hear so many people looking for problems in other areas outside their domain that it seems rare.

⬐ TeMPOraL

Which is what makes me sad being primarily a programmer. I often wish I had another career first so that I could use the programming skills to solve something there. As it is, I often feel like a loaded gun without a direction to aim in.

⬐ saalweachter

There's a reason why so many programmers want to make new programming languages, text editors, and compilers :-)

⬐ keganunderwood

I too want to work in tooling. Sadly, we are just animals and want features faster rather than having a low memory footprint (don't know how I'd do it to be honest but I'm sure desktop apps should be leaner than they are now). I mean even gnome feels pretty bloated to be honest.

I think the problem is we are too accepting. We should put our foot down and say no. No to two clipboards on the same system. No to Eudora or whatever running in the background even though you haven't set up an email account with it. No to apps having ability to access the Internet or run at boot or run in background by default.

The problem is if I try to implement this, my best hope is to fracture everything further and realistically I will fail and have no users.

⬐ caseysoftware

Get out and meet new people and learn new things!

Don't go to your local "I want to build a startup!" meetup as those are almost always useless. 99% of the people there have an idea and "just need someone to build it!"

Instead, check out events, meetups, conferences, trainings outside your core field. I went to a few game developer events and then music+tech meetups and learned a bunch but the most valuable were construction technology. Project management is project management. Accounting is accounting. The industry/situation changes some of the specifics but it's many of the same principles and concepts.

The vast majority are free, you just have to show up.

⬐ kcorbitt

Would you be interested in a service that aggregated startup/product ideas from people with deep industry experience but a lack of technical skills? It's something I've been thinking should exist.

⬐ dreamfactored

oppsdaily.com

⬐ nashashmi

When people take a look at my "computer" skills, they ask me why I didn't become a IT/programmer instead and make lots of money. I always respond "IT people don't need IT people. Everyone else needs IT people."

My skills are a product of the needs of my environment.

⬐ mattmanser

You should pick up the domain you're programming in. Like when I was working on a product for the construction industry, I knew all about how certain parts of it worked. I knew all the terms and insider slang and quite a few of the problems they face because I built those things for them. There were plenty of problems I heard about that our product wasn't aimed at.

When I was working for the credit industry, and that was only for 2 months, again I picked up a lot of the terms, asked questions about how the debt buying companies works, how were the banks using the information we gave them, how the debt relief system in the uk works, looked up our clients to find out what they do, ask the customer support team what they do, etc.

Now I'm working making tools for the restaurant business, etc., etc.

One of the things I've noticed is that most other programmers don't. Because they don't talk to the sales people. They don't talk to customers. They don't talk to the consultants. They don't ask questions about why they're implementing something. They don't ask how their product is used.

You have to ask yourself, if you're not picking up problems in the domain you're presently working on, why would you if you'd worked anywhere else?

⬐ vvanders

Oh yeah, there's huge value in building a relationship with other parts of the business at a large company.

A lot of people loathe talking to Sales & Marketing but I always try to have a good understanding of their areas. If you build the right relationship it also gives you great trust and authority when cross-department decisions are made since you can (reasonably) speak to both sides.

⬐ None

None

This is a decent writeup because it defines what "an uber" is and what it means to be a business like that.

How many "Uber for X" businesses label themselves that way because of interactions like this one, where customers and investors are so focused on Uber as some kind of canonical startup that there's attempts to squeeze unrelated business models into it?

https://www.youtube.com/watch?v=syoqjYLDs48#t=19m31 (specifically 21m56s and 24m9s)

This video is four years old, so it's good to know that claims of "Uber of X" are getting long in the tooth. It'll help to start agreeing on definitions and get away from the buzzwords.

It's an interesting business.

I'm impressed that

>DHL “bought three of the biggest freight forwarders for $15 billion, then spent $960 million with IBM for an IT backbone, and that failed. They wrote it off completely.”

You'd think IBM could do such stuff.

See also Office Hours at Startup School 2013 with Paul Graham and Sam Altman https://www.youtube.com/watch?v=syoqjYLDs48&feature=youtu.be...

⬐ lubos

Someone should finally break the rule and fire the guy who hired IBM.

⬐ keebEz

The CEO resigned... as close as you're going to come:

http://theloadstar.co.uk/dhl-forwarding-chief-roger-crook-qu...

⬐ lubos

That's uplifting news.

Flexport is hiring engineers: https://jobs.lever.co/flexport

As an engineer starting at Flexport in a couple of weeks, here are some more interesting resources that shaped my thinking:

Interview with Ryan Petersen (Flexport CEO) https://theblueprint.com/stories/ryan-petersen/

Office hours at startup school 2013 with pg & sama https://youtu.be/syoqjYLDs48?t=1167

I also happened to have recently read Zero to One.

Plus, Flexport has an appealing mission. Removing friction in something as basic as shipping makes pretty much everyone in the world better off.

⬐ vskarine

How do you differentiate yourselves from FreightOS?

⬐ thedogeye

FreightOS is a software company building tools to make incumbent freight forwarders more efficient--so it's more of a supply-driven marketplace.

Flexport is a freight forwarder that builds our own software, with the goal of providing better customer experiences with lower transaction costs--so it's more of a demand-driven marketplace.

Probably we will meet them in the middle someday and have to compete with them for customers. They founders seem very smart and accomplished, and they appear to have solved many hard problems already, so it will be a fun challenge when it happens.

⬐ None

None

I agree its really great of them, you can watch office hour sessions on youtube from the Startup School that YC runs https://www.youtube.com/watch?v=syoqjYLDs48

It's like in the university where you could drop by at your professor's office to discuss on topics or problems. This [0] should give you a better idea.

[0] https://www.youtube.com/watch?v=syoqjYLDs48

I remember seeing these guys get accepted to Ycombinator on stage at at Start Up School 2013.

Cool concept!

Here's the link if anyone is interested.

https://www.youtube.com/watch?v=syoqjYLDs48

⬐ gsaines

Thanks iMuzz, that was an intense day for everyone, and it's always surprising to see how much of a splash that made!

Yep: https://www.youtube.com/watch?v=syoqjYLDs48

Fantastic work. I really hope pg has accepted your application to ycombinator. You clearly have a talent for hard work, perseverance and knowing how to market your product well. Even if pg doesn't like the idea, he should realise the team is very capable.

I have a question though Karen, did you know you were going to do this project before you created this video http://www.youtube.com/watch?v=daC2EPUh22w ? (I originally saw it on r/GetMotivated when it went viral originally) or did you decide to build it due to the popularity that the video got and the requests from people wanting to achieve similar?

(Just curious from a marketing point of view whether you planned for the dance video to go viral to boost your idea or whether you saw an untapped market due to the popularity of the video and decided to fill it)

----

[EDIT] - Just got my question answered by watching this : http://youtu.be/syoqjYLDs48?t=9m57s - I'm glad that it was an idea that came out of the viral consequence of the original video, rather than the original plan all along.

Also just realised that the woman learning to walk video I saw today on r/GetMotivated was submitted by you / part of the same project.

I can see pg's mind turning over in the office hours video, trying to understand the concept and how big it can grow - I think he's right in the fact that you should see how people use it and allow yourselves to pivot if another idea emerges out of where you're at so far.

I guess the issue is that one of the reasons for the successful popularity of your original dancing video was that it had a nice balance of unique story, being told in a short enough manner that the viewer keeps watching, combined with the final scene coming together perfectly with the music / train / nailing the dance which in my opinion was the 're share' moment - where the user thinks 'I must re share this!'.

The problem is in the 10 second videos it's unlikely I'll want to 're share a single video' - so it's the compiled story at the end which becomes the thing I want to share as a user - but that's not automated / easy to produce. That said, I did enjoy watching the journey of you guys producing the product in 100 days (10 second clip at a time) so, in a world of transparency and people wanting free publicity it does seem to work. (infact I would happily continue watching the journey for 10 seconds a day, to continue the journey past launch out of interest to see what happens next).

Either way, both you and Finbarr have produced, marketed and launched a cool product in 100 days which is a pretty amazing feat in itself.

⬐ karenxcheng

Thank you so much, Paul. Your excitement is contagious. Our YC interview is on Thursday. Fingers crossed we get in.

Oh yeah... these guys did office hours on stage for Startup School 2013: http://youtu.be/syoqjYLDs48?t=9m57s

⬐ karenxcheng

Yeah! I'll post that video into our meta 100.

⬐ None

None

⬐ fudged71

It was great to meet you, and the site is exactly how I imagined it from your description. Great work!

It is now: https://www.youtube.com/watch?v=syoqjYLDs48