To date YC has not shown a good understanding of the life sciences. It's not just about a regulatory burden, but the premise of breaking away from academia, of somehow finding a magic bullet and commercializing it, and assuming that biology is somehow like software is flawed. Sure the barriers to entry may be lower, but most science is a slog. There are very few home runs. Next-gen sequencing was a huge breakthrough and happened very fast by life science standards. The drivers came both from academia and industry and by all means it worked really well and remains highly innovative.
I completely buy that a different model of funding will help and could be successful. I just don't have a good understanding of whether there is a good understanding of the real scientific challenges and the implications.
If you go ask scientists that work in the life sciences, most (at least the ones I know) will say that there are much more fundamental problems that we should be tackling.
Synthetic biology is super interesting, and maybe that is the right space for YC to play in, but it's not the needle mover that the tech crowd thinks it is going to be. Trying to understand the mechanisms of GNRH receptors and developing lead candidates that could be potential therapies is just not as sexy as synthetic biology. Would you fund something in that space?
But this is where my head just starts spinning
"I'm going to help our biotech startups find the partners and tools they need to make wetware at software-like speeds."
That's not going to happen. It's not how biology works in a lot of others, and you lose a lot of credibility when you say that. Unfortunately, a lot of founders say that as well. I forget the name of the company, but there was a recent algorithms startup that made it sound like they were (a) going to change pharma with their methods, and (b) what they were doing was new and unique. None of which was true.
YC (and others) can do a lot here, but I feel you go in without really understanding the space or the pitfalls. A lot of biotech fails not because of the business model, but because biology hard, the human body is unreliable and illogical, and because our understanding of the science is flawed.
Wouldn't any CS academic also look at every YC software startup and say, "there are much more fundamental problems that we should be tackling."?
Biological engineering can and should be a thing separate for biological sciences.
You do not always need to understand biology to be able to hack with it; it's robust that way. Maybe biology can't breakout the way software has, but on the off chance that it could, it's worth having a lot of people trying to figure out how.
CS academics would have no interest in the majority of YC software startups, because most of them are not innovating in CS, they're just using software as a tool for business model innovation.
Biotech startups are fundamentally different in that they're driven by scientific advances, which is exactly what life scientists in academia are trying to produce.
That's exactly my point. Silicon valley used to be driven by scientific advances too. But at some point the science got good enough that the engineering and business logic decoupled from the science. That will happen in biology, maybe it's now.
> at some point the science got good enough that the engineering and business logic decoupled from the science. That will happen in biology, maybe it's now.
It's definitely not now. The thing holding back biotech isn't business model innovation, it's technical difficulties - what the scientists are tackling. You can't compare semiconductor innovation to biological research - one system was man-made to be as reliable and robust as possible, whereas the other one is still largely utterly incomprehensible.
My sense is that the vast majority of people on HN touting rapid advances in biology have never actually spent any time reading up on the scientific literature, and haven't spent any time doing life science research. The same goes for most of the YC partners, which has led to their selecting companies that often have fatal flaws that are immediately apparent to anyone with life sciences expertise.
>"I'm going to help our biotech startups find the partners and tools they need to make wetware at software-like speeds."
This is spot-on. The "quickly move to market" approach of the typical VC simply does not work here.
Good science -- in which I include money-making science -- takes time. There's a lot more fiddling involved, as we can't manipulate the system at all levels.
While I agree that there are more critical and fundamental problems that need to be solved by us, not all of those problems could be solved by a profit seeking corporation. Also, a lot of such problems should be kept out of hands of people primarily concerned with building a business, because that could be a dangerous way to lead the solution.
That said,these problems must be solved. Which is why over the last thousand or so years, we have built a system of universities, public donations, and taxation, so these problems are addressed by right people.
If you know great scientists solving important problems, please encourage them to apply :)
That said, great research projects do not necessarily translate into great startups. People doing fundamental research with no clear path to market likely aren't a great fit for the program at this time.
I suspect that's one of the differences between the CS world and life science world (again broadly speaking). In CS, there tends to be a pretty large gap between academic projects and commercial software projects both in terms of the expected output and the goals. For the life sciences that's not the case. Even in commercial companies you end up doing a lot of fundamental research or you acquire it via partnerships or IP acquisition.
There are some aspects of biology that likely translate better to the tech model. But for most aspects, especially anything to do with therapeutics, it is essentially impossible to avoid the hard slog. No software is going to change how you study efficacy and toxicity in animal models and human testing. With more targeted therapies the complexity only goes up.
I think YC should invest in the life sciences, but it should be a different model, perhaps an innovation on the existing tech transfer model, perhaps building an incubator that ends up being an IP funnel for pharma, or to provide some competition in an underserved area, but the software mindset is generally going to fail.
Your problem is that great (life) scientists solving important problems have no interest in (or need for) YC. They'll just go to Noubar Afeyan, Bruce Booth, or Bob Nelsen.
Mmmmm. Flagship (Noubar's shop) mostly incubates it's own companies (same with 3rd Rock) and uses VC partners as founding CEOs -- so if you are a missionary founder it's not really a fit. In general the pharma VC ecosystem is way more "professional executives"-minded. It's a stark contrast to tech venture ecosystem that goes for young founder leadership. So if you are a great, recently graduated life scientist solving important problems and want to build your own company I'd still consider YC.
I don't think that young founder-driven companies make sense in biotech. Young founders do well in tech because business model innovation requires contrarian thinking, which young people (who are naive and lack preconceptions) are more likely to do. Also, software engineering can be learned at home for very little money, on one's own, even at a very early age.
In biotech, once the technology has been developed, the innovative component has largely been completed. And it's the top scientists that have the institutional knowledge and non-dilutive funding to make that happen. The reason there are so many unmet needs in healthcare isn't for lack of trying or a lack of original thought in the top academic research labs - you can be sure that Bob Langer isn't just trying to up his h-index.
That said, you are right that a recent graduate won't be able to found a company in that model. That's mostly irrelevant though, since recent graduates are rarely capable of creating scientific breakthroughs on their own.
Who do you think is doing the hands-on work in Bob Langer's lab that leads to that scientific breakthrough (hint - it's not Bob). No reason that recently graduated PhD/postdoc can't start a company built on their work. The pharma VC ecosystem has a blind spot for these sort of founders - I'm glad YC is an option for them.
> No reason that recently graduated PhD/postdoc can't start a company built on their work.
Except for the minor problem that any IP generated through their work is owned by the university. And if the IP's valuable, it typically flows straight into the hands of Flagship, Polaris, Third Rock, & co. The professor might have a say in what happens to the IP, but the students and postdocs have zero leverage with the TTO. And how could they? They are replaceable cogs in the machine (and often in the US on a student/work visa) - Bob Langer is not.
I won't go down the pharma IP rathole, but I don't think this problem is intractable. There are many inventions that aren't CRISPR where TLO is happy to have the student who invented it run with it. Funding is a much bigger limiter than IP in my experience.
> There are many inventions that aren't CRISPR where TLO is happy to have the student who invented it run with it.
And my original point was that Paul Buchheit's request that "If you know great scientists solving important problems, please encourage them to apply" was unrealistic. YC isn't going to get the crème de la crème of scientists or scientific innovations - they're getting what's discarded by the TTOs.
To be more precise, nobody's going to get the top scientists (they're going to go right back to their labs) and the biotech VCs are going to get the top innovations (for which they often have an informal licensing option with the inventing professor before the academic research even begins). There's a record amount of funding in biotech right now, but why spread it evenly? Might as well just run dozens of trials in parallel for therapies derived from a single technology.
I apologize if I sound overly negative, but I have expended significant time and energy exploring this idea maze (http://cdixon.org/2013/08/04/the-idea-maze/), only to hit one dead end after another. I left for greener pastures (software), but I wish you and the rest of the YC biotech founders the best of luck.
> I forget the name of the company, but there was a recent algorithms startup that made it sound like they were (a) going to change pharma with their methods, and (b) what they were doing was new and unique. None of which was true.
Honestly? The pattern of biotech groups that YC has invested in, signals that YC is in over its head. They're the sort of selections that smart people would make, but not the sort of selections that smart people with ___domain experience would make.
You reference Gingko, but that company is (in my opinion) uniquely viable in terms of YC biotech investments.
Of course, my perspective is based on media reports (famously unreliable), by public information, and by my own experience in biotech. I would love to be completely wrong, and I could easily be completely wrong since I don't have access to the information that you do. Also, maybe an outside perspective is what is needed in biotech—good things happen when smart people from other disciplines cross-pollenate. Also, my own startup is not yet successful, so I criticize from within a lovely glass house surrounded by stones. That said, based on what is public, I don't have confidence in YC's biotech investments. I am hesitant to even consider applying, given with what is publicly available.
I don't think this is an appropriate forum to be specific with criticisms, nor do I wish to be a "negative Nancy" with YC's new push—if YC could do a fraction of what it did in software in the biotech area, it'd be amazing. I would however like to offer one particular outsider's perspective.
> Remember VC economics and the power-law distribution of returns. One big winner pays for a lot of small losing bets.
The calculus is actually quite different in biotech. With proper scientific due diligence (read: late-stage cherry-picking), there are usually more (but smaller) winners and fewer (but larger) losers in biotech than in tech. The absolute number of winners may still be smaller than the number of losers, but there isn't a tech-style power-law phenomenon. This is partly because the needs are often very well understood in the life sciences, so the size of the opportunity isn't that uncertain. It's whether or not the science will pan out that is uncertain (which can be very costly to find out and with little recourse - you can't easily pivot on a therapeutic, particularly if that happens late in clinical trials).
I don't think that is true of the last biotech boom in 80s when recombinant DNA tech was developed. Amgen, Genentech, Biogen, etc, were outsized winners. Just b/c biotech has gone to more of a 'single drug asset, build and flip to a BigPharma' model in recent years doesn't mean it is some permanent law of the industry.
I agree, and this line from Mr. Iseman's post is a great example:
>Why give half of the money you raise to your university when you can rent lab space for hundreds of dollars a month?
Because:
1. In practice, you don't actually have to give half the money you raise to a university. Universities reap huge benefits from collaborations with the private sector.
2. SBIR/STTR grants come with far fewer strings attached than do funds from VCs.
3. Scientific startups often need credibility, and working with a university all but completely resolves that issue.
4. Universities are not simply a monetary resource; you benefit from (a) access to ___domain-specific expertise (b) cutting-edge research (c) a pool of highly-educated people to take on as interns and employees.
YC should pay special attention to point 2. I'm co-founder a startup that offers cognitive biometric analysis -- we can make inferences on cognitive and affective state through video analysis. We have a general-purpose product (read: large and diverse customer base) and we can go very far with very little funding, so why sell shares when we can get a 50k grant in exchange for some (admittedly tedious) paperwork?
Can we go faster with, say, 1 million? Sure, much faster, but then we have to deal with investors who probably don't know much about our product. And more to the point: universities, to a certain extent, behave like VCs.
> we can go very far with very little funding, so why sell shares when we can get a 50k grant in exchange for some (admittedly tedious) paperwork?
To be entirely frank, it depends on the field, but I imagine it's easier in many ways to get VC funding than a grant for many projects. Grants are a pain to apply for (there's a reason that full-time grant-writers exist) and the feedback loop is very slow. Compare that to the VC world, where you can quite easily raise a small amount of seed/pre-seed capital quickly, and even when you're rejected, you're likely to hear back quickly[0].
This will be a challenge for YC, because it inherently creates an adverse selection problem. The companies that YC (and all venture funds) want to attract the most are the ones who could win a grant if they applied, not the ones who are seeking venture funding simply because they can't actually survive the grant process[1]. The grant application process is terrible for a lot of reasons, but it does have the side-effect of filtering out a lot of people who simply aren't that serious or invested in their work. For YC, it means a lot more companies to sift through to identify the gems.
There are certainly some billion-dollar companies that could not survive the grant process (or simply would prefer not to go through it), but if we're looking strictly at the ratios, it's going to be a lot more challenging for any venture fund to find these 'needles', because the 'haystack' is simply much larger (relatively speaking).
[0] If you never hear back from a VC, that means you're probably either rejected or being punted on ("not now, but maybe later"). But that's a good thing - at least you know! If you don't hear back from a grant application after 2 months, that doesn't actually mean anything other than your application may not have been reviewed yet.
[1] Possible reasons for failing to win grants: project/business model is simply not valuable, project is not well fleshed-out, company does not have the runway to survive the drawn-out application cycle, etc. All of these apply to the venture world as well, but the cycle there is much faster.
It most assuredly depends a great deal on the field. I'm in a particularly advantageous position, and I recognize this. "Wet" science typically requires a lot more equipment, but bear in mind that this is also greatly mitigated by working with a university.
Regarding grant writing, it is a pain in the ass, but the terms very generous, and universities have no qualms about letting you borrow their grant writers. At the end of the day, it makes little sense to sell shares for 1 million USD when $100k ensures that the same shares will sell for 5 million in one year.
>There are certainly some billion-dollar companies that could not survive the grant process
Billion-dollar companies are looking for billion-dollar grants. It's a question of how much one needs. For small seed funds, grants make a lot of sense.
In any case it should be obvious that, as you said, it all depends on the field. What's undeniable is that grant money comes with far more favorable terms than VC funds.
At the risk of tooting my own horn, I'm surprised YC is moving towards wet-science instead of investing in projects similar to my own; they're life-sciences with a highly computational aspect, which implies the tight development cycles they're used to. It also means they can understand what I'm talking about, at least on the implementation level.
There was a grant application rejected because the header font was 13pt rather than 14pt. Most of us have to deal with some level of petty bureaucracy, but that level is just absurd.
YC operates like a startup would: they have a bold hypothesis, something that must be challenged ("most science is a slog"). There is very little chance that they could be right, but in case they are, and they execute well, the benefits could be huge.
Speeding up life sciences development cycles the way development cycles in software engineering have been sped up is the goal, but the way to do it is hard and complex and uncertain. It requires funding, perseverance, trial and error, incremental improvements as much as breakthroughs. YC has proven they're good at all of this.
I share your thoughts exactly, and why YC talks about biotech I just can't picture it. I don't doubt their efforts, but I can't picture it.
However, I've always thought that with the right network and influence one could make major shifts in a whole industry if the timing is right. As history has shown us, all we need is one breakthrough way of doing things and previously closed doors are busted open. If YC convinces enough people along the biotech foodchain, they can at least get a good crack at it.
I'd love to see a post specifically about what they have in mind for biotech.
Me too. I am happy to be proven wrong. There are elements of biotech that could use more risk taking, but they seem to ignore some of more "mainstream" (yet relatively knew) technologies where there may be room for innovation.
I woek in a uniersity lab.. But I'm here less than a year.
In some ways investing in science is a good thing. But there is a big difference between "industry" where some of our post docs go to work on for profit medicine and the academic labs.
Why give money to a university? Well some pays for overhead you are going to have anyway. For all its problems, the fact that a lot data is published (pubchem and pubmed) is good for society as a whole. The for profit side doesn't do that to the same degree.
The equipment side of things I think is where hopefully YC can help. Right now overpriced equipment, "robots" with software that barely works (Microscopes that use proprietary image formats....). I even saw a USB dongle for software access of the really expensive microscope. welcome to the 90s.
> For all its problems, the fact that a lot data is published (pubchem and pubmed) is good for society as a whole. The for profit side doesn't do that to the same degree.
I work in a pharma lab, and I can tell you that a great deal of the work we do relies heavily on work done by university labs to point toward the right pathways to target.
I may be naive/ignorant (I do have an Electrical Engineering B.S.), but hardware really seems like it would benefit from an experience / innovation sharing like this. It seems like hardware is at an inflection point w.r.t. large portions of it being backed by shareable / FOS software (e.g., 3D-printing blueprints; hardware/software platforms like Tessel, Beaglebone, Arduino; etc...), and adding a little fuel to the fire like this really seems like a potentially huge payoff. Pardon the connotation, but it's like domesticating a rare, but extremely useful wild flora, and growing it in mass while disseminating the process so others can grow it as well. Very exciting.
Would anyone with recent hardware prototyping experience care to comment on whether the above reflects their own experience?
It does. Hardware startups need more experience than software startups, because there are more moving parts (contract manufacturers, component makers, distributors, standards bodies) and because mistakes are harder to fix. It helps a lot to have one guy (Luke) spend half his time keeping current with everything, and half his time disseminating this to startups as they need it.
Another factor is that when dealing with big companies (like most contract manufacturers and component vendors,) a single early-stage startup has no leverage to negotiate good deals, but a community of startups does.
I'd recommend an SBIR/STTR (or other govt grants) first for wet-lab biotechs - it's a good source of patient money while you show early technical traction. YC after you've got things rolling can be throwing gas on a fire. It was for us (Ginkgo Bioworks, S14). Awesome founder community/ partner advice / investor connections.
SBIRs have been super effective for many people. It takes time to show technical feasibility and building up real partnerships. SBIRs are well designed for that but also don't allow you to overspend.
That's an interesting thought, SBIR then YC. How would you recommend dealing with the SF relocation issue? I ask from the prospective of a biomedical startup not in CA.
They're not mutually exclusive -- some YC startups have gotten SBIR funding too. In addition to money, YC provides advice, community and connections useful for building a startup company.
Sure, but I was thinking more along the lines of the SBIR/STTR-based incubator ecosystems at major research universities. They too have good advice and a strong community, and also have more ___domain experience, rentable high-end lab equipment, proper wet lab space, clean rooms, contract personnel, regulatory consultants, industrial hygiene assistance, etc. I don't understand (but would like to) what the value proposition of YC is over a good university incubator---superior general business advice? (I could easily see that!)
Apologies, my original post was incompletely expressed.
Advice about how to create a good startup turns out to be more generalizable that I originally thought. The hardest problems--mostly around people--are more similar than they seem.
> The hardest problems--mostly around people--are more similar than they seem.
That's a good point and reflects my own experience. But I'd be hard pressed to generalize what I've learned in my career in IT/IT related start-ups and take that and apply it to say a company that creates a new medicine or one that tries to commercialize some new medical instrument. The sales avenues in that ___domain are radically different from 'just' IT based start-ups and just like I wouldn't see a bio-tech person run an IT firm the reverse probably holds true as well, ditto for advice to such management.
I recently had a long and in-depth look at an organization that sells a lot of physical goods on-line and even in that case there was so much ___domain knowledge wrt to the retail portion of it that without a CEO with significant knowledge in that particular field they wouldn't have stood a chance.
Anyway, you're doing pretty good so far, can't wait to see you prove me wrong :)
Not quite. YC has been successful selling to people. Biotech isn't selling to people. The drug sells itself. It either works or it doesn't. Science doesn't care what we want.
The more I read HN, the more I am convinced that the dearth of leadership & management experience among founders is the biggest reason (besides bad ideas) so many young companies fail. Seriously, reading some of the questions & answers here gives one the impression that the value YC and other incubators provide -- besides networking -- is just in keeping founders from making stupid business & management decisions.
That alone might make it well worth the investment. If I knew back in '95 what I know today (as in lessons learned the hard way, not 'invest in apple')...
One thing I don't see happening in biotech is an end-run around the law such as AirBNB pulled off. That's going to get you into a lot of very hot water.
I'm not sure exactly what you mean by 'end-run' but there are massive opportunities in biotech for reading the letter of the law and understanding what you can do that other people don't realize.
For instance my company (Glowing Plant, YC S14) is entirely predicated on such an understanding. We read the rules and realized that if we engineered a plant with a gene gun instead of agrobacterium it would not be regulated in the United States. This saves us millions of dollars in getting a product to market and means we can pursue an agile product development strategy. Game changer.
I'm aware of another 4-5 such opportunities for syn bio products where you can get to market for low or zero regulatory permission.
With respect, there is a large gap between the letter of the law and the spirit of the law. Yours is a good example: using a gene gun may not be regulated in the US at present, but as was pointed out in a Nature piece covering the controversy around your company [0], that may not hold for the future [1]. My experiences with the FDA, and I have reason to believe they hold true at the USDA, lead me to conclude that regulators are fickle. What is the plan for when Monsanto, seeing your early success, copies your business plan and regulators respond to their terrified constituents in order to "fix the glitch"?
Trying to move fast and break things in a regulated industry strikes me as producing fragile business plans, at best.
Thanks for the counterpoint, and I agree. Some areas of biotech are much less mature than others when ti comes to regulation.
Most of what people think about when they hear biotech still falls under typical FDA CFR regulations for either pharmaceuticals or durable medical devices. I think that's what the grandparent was talking about.
It's about optionality: startups of all types can now do more with less. SBIRs, access to college labs, in-house prototyping facilities: these can certainly help, but what's exciting is that they're no longer required to iterate on prototypes. So little funding and time is that it looks a lot like software.
So you're looking for a class of problems that you can better address than the existing system? Something for which SBIR/STTR takes too long to fund, needs more money/support than self bootstrapping, doesn't need exotic equipment, etc.
I am imagining that what they're going for will be biotech problems that can be addressed as software problems in disguise (since they would most certainly be in the right place and connected to the right people for that). Those connections may be worth more than the $2M or from SBIR (assuming they reached phase II), for companies that are fundamentally software shops.
Otherwise, I'm very curious what their strategy is for breaking into the bioscience and technology space in a broader sense, and if that would lead them to opening shop in other metro areas outside of the bay area.
Let's be honest - the only place that really matters for biotech is Boston, and the movers and shakers there have no desire or need to work with YC or anyone in Silicon Valley. San Diego's biotech scene is mostly just companies mindlessly pursuing cheaper and faster sequencing.
I'll take a pro-Boston comment on hackernews however it comes!! It is true that BOS is basically unrivaled for pharma-biotech. Biotech is moving into other markets now too though. That said, we (Ginkgo Bioworks) are mostly non-pharma but are in BOS anyway. There is an awesome pool of bioengineering talent here.
I wouldn't call that 'mindlessly', faster sequencing is going to unlock a whole slew of new offerings just like 'faster transistors' powered the computer revolution.
If we are naming cities NYC should be included. With 8 leading medical research institutions, the second highest annual NIH funding, and a wealth of talent/capital in adjacent industries - NYC's foundation for Biotech is extremely strong.
Yes, I too could see YC bringing value to a software-intensive project. Perhaps I put too much weight on the "wetware" mention in the link, that makes me think "wet lab".
I would be fascinated to hear how they will handle the regulatory challenges, and how they bridge the cultural differences inherent to a group in a regulated industry vs. the more stereotypical software startups.
This type of ___domain expertise may not be perfectly purchaseable, but it is purchaseable, and given the money involved, I'm sure they will. (And partially have already.)
Also, gaining the relevant knowledge to filter nonsense from sense here isn't necessarily as hard as you might think. And some of the filtering can be done with information theory, basic economics, probing deeper until you find the "and them some magic happens!" step, and some other non-biological tools that apply everywhere. I'm not saying it's easy, it's still months of work potentially, but it's only months. You don't actually need a PhD for nonsense filtering.
1) SBIR/STTRs are specific solicitations that serve the specific goals of funding agencies. If you don't see one that matches your tech exactly, it's a nonstarter.
2) Often times, the call for proposals are written with a specific company in mind that the funding agency already has some relationship with or interest in funding. Breaking into this can be challenging for a new company to learn the landscape.
NCI SBIR/STTR applications can be contract solicitations for specific problems, as you point out. The majority are (as I understand it) funded however through the omnibus solicitation, which can be directed to high-priority research areas or to general problems within the scope of the NCI. I assume the same is true for other NIH agencies.
In the US, life science is done both for science and for money. Any non-human research or basic research are done with funding avenues outside of corporations. All drug discovery and the vast majority of scientific instrumentation and tools are produced by for-profit institutions.
The YC you know created a new model for funding early stage startups. The YC I joined is creating a new model for innovation.
If I had to guess, the original focused on software whereas the new YC will be open to more long term, hardware-oriented companies. But it's not entirely clear.
In practice, it doesn't work this way, and universities are much, much more than a monetary resource:
- unrestricted access to cross-disciplinary expertise
- access to a huge recruitment pool
- access to SBIR/STTR grants (with far fewer strings attached as compared to VC funding)
- scientific/technical credibility and legitimacy
- access to bleeding-edge equipment that cannot be purchased
While it's true that scientists often know little about entrepreneurship, this is a prime example of VCs knowing little about science. Reasoning in terms of cheaper lab space is penny wise and pound foolish.
I strongly disagree with your assertion. The real question is —— all things being equal (equivalent monetary amount, recruitment pool, legitimacy, etc.), for a given start-up today: would it be better to join YC or a given universities partnership program for start-ups?
I truly believe it would be better to join YC for the following reasons:
1) Capital. In terms of capital resources. YC will most likely be able to help raise a given start-up more many than a university because the primary purpose of YC is that, while that is not the case for universities.
2) Cross-disciplinary expertise. Granted this may be an advantage that universities have over YC. But, it’s much easier to recruit faculty as YC venture backed start-up than as a non-YC venture backed start-up, unless there are contractual obligations that skew incentives towards the universities themselves.
3) SBIR/STTR. SBIR stands for Small Business Innovation Research, while STTR stands for Small Business Technology Transfer. They are both congressionally mandated programs so that “….domestic small businesses can engage in R&D that has a strong potential for technology commercialization.” Nothing precludes a given start-up from not getting SBIR/STTR funds. In fact, an organization like YC helps bolster the case that the technology in question can be commercialized.
4) Scientific/technical credibility and legitimacy. Yes, YC is not a research university, and will not bring that level of “scientific/technical” credibility and legitimacy. But, they do offer credibility and legitimacy for partners, users, VCS, etc. In addition, most founders that are tackling a scientific/technical problem, usually have experience in that field, and bring a degree of scientific/technical expertise.
5) Bleeding-edge equipment that cannot be purchased. The cost/quality/risk really depends on the industry. For example, contract-research organizations (CROs) are common place for big companies and small companies throughout the pharmaceutical industry. In this case, CROs play the function that a university would in conducting/publishing the research.
I see your point, and even partially agree with it, but I think you're making a few flawed assumptions along the way. I'll try to respond point-by-point:
>all things being equal (equivalent monetary amount, recruitment pool, legitimacy, etc.), for a given start-up today: would it be better to join YC or a given universities partnership program for start-ups?
There are two things here, but I'd like to address the contention that all other things are (or might be) equal. My entire argument rests on the fact that "all other things" are not equal. If all other things were equal, YC would undoubtedly be a better deal, but they're not, so it isn't (for us, of course).
>1) Capital
I was admittedly unclear in my previous comment, but in my own experience, the university does not directly help with fund-raising. Rather, it grants a legitimacy that aids in fund raising via other means (STTR, specifically, but more on that later).
Yes, YC can help you raise much more capital than federal grants or university funds, but this is by and large a non-issue. University partnerships grant you access to equipment and personnel, both of which drastically ease the financial burden, so less money ends up going much further -- I've done the math, so please hear me on this point! :)
>2) Cross-disciplinary expertise
Respectfully (and I mean it -- it's easy to come across as a jerk on the internet and it's not what I mean to do), this is completely back-asswards. Establishing a partnership with a university laboratory is first and foremost an exercise in proposing an interesting research project to interested parties.
At the administrative level, the university turns towards its faculty to judge the merit of the project before any serious deliberation takes place, so you have to have a strong professional relationship with a faculty member before approaching the university. Much like VCs, scientists are weary of projects that oversell and under-deliver, so good researchers -- the ones who consistently publish meaningful, interesting results -- want to work with someone they know personally or by reputation. By and large, they're untrusting of VCs, and they will be sure to mention this to the university administration. The result is that you'll either get someone far less competant to sign on, or end up working with someone who's not too terribly invested but wants the latest flux capacitor for his lab.
But all of this is really besides the point, since "access to expertise" doesn't imply hiring or recruiting. It means you can knock on any door of any department and ask for help on an interesting problem.
One lures researchers with interesting work, and this means you need ___domain-specific knowledge, not money.
>3) SBIR/STTR
STTR explicitly requires that your startup be partnered with a nonprofit research group, so actually something does preclude a startup from getting research funds without a university partnership (or equivalent). YC is for-profit, and does not qualify.
Regarding SBIRs, a bit of context is needed. SBIR operates in three phases:
- Phase 1 is for the exploration of technical merit or feasibility of the technology
- Phase 2 is for expansion of phase 1 results, and evaluation of the *potential* for commercialization
- Phase 3 is for moving to market. No funds are allocated for phase 3 and, in fact, external funding is required to benefit from SBIR mentorship.
YC can clearly help with phases 2 and 3, but now we return to the crux of my argument: I can get funding in phase 1 with no strings attached. YC, to my knowledge, cannot provide this.
Moreover, SBIR/STTR are obvious examples. There are a great deal of public research grants that are only accessible to private institutions having partnered with a university, so again, we can get funding that ends up costing us less.
>4) Legitimacy with respect to investors
Your point is well-taken, but a university can do this as well and, again, with few/no strings attached. Business depts/schools love this kind of stuff.
>5) Bleeding-edge equipment
I now realize you probablycome from a pharmaceutical background. I know little about pharmaceutical research, so you're probably right.
For the rest of us, my point stands: universities often have unique equipment that simply isn't available on the market.
===================
In an attempt to be more constructive, here's a short, mutable list of what it would take for me to consider YC:
1. Very favorable terms relative to the sum of money being invested. I'm not willing to sell 10% of the company's shares for $1 million when $100k will ensure that those very same 10% sell for $5 million in one year.
This is especially true given that such deals almost always involve preferred shares. It's a poor deal for me.
2. Strong guarantees of research independence. We know more about the science than YC does, and culturally speaking, scientists are very untrusting of private funds in this respect. If one is not careful, private backing can quickly degrade legitimacy. I have no reason to believe that YC doesn't provide such guarantees, but it's important to me, so I'm mentioning it.
I don't completely understand this quote -- is money to the university grant money? Like, for a tenure-track professor? Paying with federal grants? Rent is not usually the motivator in that instance...
Or is it simply due to paying rent costs?
Lab-space-for-hire is not a new concept, if anyone was wondering, though it often exists only in life science hub areas (e.g., LabCentral: http://labcentral.org/).
I know he emphasized biotech in the blog post, but I got the impression that he would assist general startups that incorporate some kind of hardware in their product. So it could be biotech or something like Anki or the Myo armband by Thalmic.
> Over the next decade, you’ll see some of these entrepreneurs create companies at YC that rival Airbnb’s social (and financial) impact.
I think this sentence is interesting. It kind of hints that they use the term "AirBnB" internally as a short-hand way of saying "Our most successful company". He doesn't mention AirBnB anywhere else in the post, and this sentence expects the listener to understand the implied context.
airbnb is a great example for hardware companies. YC (specifically PG) didn't believe in the the idea. If they hadn't started selling Presidential Cereal, they would have died. Literally, they bet the whole company and a binder full of credit cards on Obama O's, a gimmick cereal. if no selling cereal, then no YC investment, and no airbnb.
This is an important lesson to hardware companies, who need more money than anyone will bet on them: FINANCE YOURSELF DOING SOMETHING ELSE. Nobody ever, ever believes in any idea, ever, even if it obviously works and is great, in fact ten billion dollars great. Nobody will believe you.
Go sell cereal - you'll get sales from a standing start in a market you've never played in, faster than you can get liquid investment when rushing full-scale ahead toward $10 billion that you're executing on.
Never, ever forget this lesson. Obama O's obviously weren't even a $50 million worldwide market. airbnb "obviously" was a $10 billion worldwide market. The former is what financed the latter - "convincing someone" didn't. Brian Chesky famously posted his 7 rejections here - https://medium.com/@bchesky/7-rejections-7d894cbaa084 (well, 2 didn't respond.)
The only one who will ever, ever believe in you is you. If you can't do it without money, go do something else: vc's don't care about seeing and investing in winners; they want to ride their coattails.
You may think I'm being cynical, but let me turn it around and make it a hypothetical: everyone knows battery tech kind of sucks, it lags behind all other advances in consumer electronics. If I personally had a breakthrough battery technology, everyone in the world would want to hear from me when we're raising series A. But to my point: nobody would look at the tech itself and invest before then. the stages are just totally different. This is just a hypothetical and I don't know anything about battery tech. I just know that if I did, I could never raise an investment for it, on the basis of what likely would be a research report and maybe prototype.
The first time ?ve read the comment I read "Alibaba", now, that would have been interesting! Airbnb is successful indeed but it's a "tax-wise iffy" solution to an old problem. On the other hand competing with Alibaba takes the challenge to a whole new level!
I find it odd that AirBnB is consitently pointed at as a resounding success when, alongside Uber/Lyft/TaskRabbit/the now shutdown maid service, it simply relies on literally breaking the law and hoping that you'll make enough money to change the laws. Granted, AirBnB doesn't have the same "fuck the worker" mindset as the others, but I still feel like the "sharing econony" is far from an established sure thing. Then again, if you own stock in AirBnB I doubt it matters at this point.
More particularly, the people want this. Because the people like it. The economy is rough for everyone outside Silicon Valley right now and they love the fact that with some hustling they can make a good side income. Any company that helps people make money will be loved by people and when the people pressure the government, that's a very powerful thing.
Remember, Al Capone was loved by the people because he funneled a lot of his money into helping the poor and funding soup kitchens and things like that. That made it much much harder for the government to take him out.
But unlike Al Capone, who was considered a gangster and a crook even by the people who loved him, the sharing economy is seen as morally good. People think they should be able to rent out their apartment whenever they want. They think they should be able to give people rides and so on. These companies are doing nothing wrong in the eye of the people, they only laws they are breaking are bureaucratic laws. Which are the kind of laws people break all the time anyway.
Not saying those laws don't exist for a reason, because they do. But they've been in effect for so long that the reason has fallen out of the public conscience and people don't understand why these "outdated" laws shouldn't be broken.
At the end of the day, taxis don't drive around London with a bale of hay in their trunk like they're supposed to.
I may have trailed off there, my point is that in the eye of the masses, these companies are doing the right thing. And that's powerful.
> But they've been in effect for so long that the reason has fallen out of the public conscience and people don't understand why these "outdated" laws shouldn't be broken.
Sometimes that's the case and sometimes it isn't, and, as others have noted, it is not at all clear that "the people" want the sharing economy. The question is whether the law should be changed by breaking it first. I'm not saying it's always morally wrong, but I sometimes find it amusing to see VCs, accelerators etc. be somehow nonchalant about their companies breaking those laws while at the same time being completely livid and unforgiving if you dare to break their own. I don't mind general irreverence towards any kind of law in general, but discounting state/city laws while taking your own rules extremely seriously seems to express a certain disrespect towards the population at large, as if saying "their laws don't matter but ours do because unlike theirs, our rules are logical because they're made by smart people; theirs are stupid or irrelevant relics".
A certain subset of the people want this. Others (such as those in areas where rent and property prices have been driven up by AirBNB) don't.
> These companies are doing nothing wrong in the eye of the people
I've only rented an AirBNB place once, and when I did one of the neighbours gave me a blast about how having new people going in and out of the AirBNB rented apartment was disturbing his peace and the security of his own apartment. I can understand his viewpoint, and I doubt he's alone in it.
I'm not saying that AirBNB is right or wrong, and I get where you're coming from - I just think you're oversimplifying the complexities of public opinion on the matter.
Yes, some laws are silly. Worker protections though? I don't think there's much to cheer about when the reason many of these sharing companies are so profitable is because they basically eliminate using employees for their "unskilled"(read: job markets with an excess of employable people) labor.
Also I would dispute that people(edit: this is basically impossible to prove, it'd be nice to see some data) see the sharing economy as "morally good". I certainly don't. Not because I don't think people should be allowed to share, but because I don't think corporations should be able to 1099 what are obviously employees in order to cut costs.
edit. I guess I'm getting downvoted because worker protections actually are considered a bad thing here? smh
I agree with you, and I think companies are abusing the word "sharing." If I lend my neighbor a tool, that's sharing. If I bring cookies in to work and put them in the break room for everybody, that's sharing.
If I visit a website, order something and pay for it, then it's not sharing - it's ordering a product or service. I don't care who actually owns the car or the room.
Regarding worker protection: Lets take the case of a simple roadside flea market. The property owner sets up a situation where workers can sell goods at a table, and connect with customers. But the people running the individual tables may sit there all day and only make a few bucks. So is it the venue owner's responsibility to make sure that everyone that he rents a table to is getting minimum wage? I think that is what Uber et al. are arguing, is that their duties end at connecting individual sellers with individual buyers.
That's one of the side effects of strong worker protection laws -- if applied too far, then they have the effect of causing some work to just not exist, even if there are people that really want to do that work. Of course, the flip side of this is that it can prevent a tragedy of the commons situation, in which workers desperate for income will get into a competitive race to the bottom.
But as for your analogy, what's the big difference? Uber controls too much of the process to really classify them as "connecting individual sellers and buyers". They are the seller.
Which worker protections? AirBnB has no unskilled labor, and Uber is replacing an industry where the workers were already contractors with no benefits - in fact, an industry where workers had to rent medallions to work.
I specifically mentioned AirBnB is not one of the companies screwing their employees in the name of profits, but Uber/TaskRabbit/etc most certainly are.
As far as "well, it's better than what existed" w/r/t Uber, It's still illegal.
As far as "well, it's better than what existed" w/r/t Uber, It's still illegal.
... in California. In any case, I was disagreeing with the claim that they are "eliminate using employees". Not using employees was already the status quo, so Uber couldn't eliminate it if they wanted to.
I guess that depends if you consider Uber some kind of brand new business type or just a lower class limo service combined with a taxi dispatch. Because there are plenty of drivers out there that do receive benefits, even if Taxi drivers aren't one of them.
I think the "social impact" in the above quote is more interesting than the "financial impact." It's not just their most successful business, it's the business that is most reshaping the world—doing the most controversial things, affecting laws and regulations wherever it goes, etc.
This will be even more pertinent to startups in the new "hot" industry of wetware/biotech.
It's one thing to break up a dumb taxi/hotel cartel by allocating capital more efficiently through iphone apps and good customer service (albeit illegally).
It's another thing to perform rigorous scientific testing an analysis of drugs, treatments, hardware, etc. that will be interfacing with fathers, mothers, children; human beings who could die as a result of the fail fast, break things SV startup mentality.
"hoping that you'll make enough money to change the laws"
I think what you mean to say perhaps was "raise enough money to change the laws by hiring lawyers and political operatives that know how to work the system".
Airbnb has the "fuck the neighbors" mindset. Interesting way to think of the inherent evilness of different companies. Google and Facebook have the "fuck user privacy" mindset. Microsoft has a "fuck competitors up" mindset. This is fun.
I recently went travelling and used it. An old woman opened the door to the apartment building for me when the lock was giving me trouble, then was then confused then concerned that she didn't recognize me.
I used it once before, in Barcelona, staying in the flat of a wonderful couple who we got along well with and it was like visiting relatives.
This time, it felt like we were saving a buck, and the owner making a buck, by scaring old ladies. I guess it's back to hotels and hostels.
I too have had some mixed experiences. A B&B in Rome, where the host had elegantly decorated our room, provided fresh flowers each day all whilst respecting our privacy.
Contrasted with a flat in residential block where one of the neighbours started shouting loudly at my girlfriend, I do not speak French (she is fluent) and didn't have any idea if things where about to get violent.
It turns out the previous guests had been making lots of noise late at night, being tourists we where of course staying up much later than we would normally. It's embarrassing having someone complain about your sex noises.
Another time we simply couldn't find or contact the host. Airbnb did not help in this matter at all. Contrasted to a friends experience on NYE when a booking.com room turned out to not be available, he ended up in the Shangri La hotel. It's clear AirBnB doesn't help you when things go wrong. As such I'd never use them for an important visit, or a visit during an event.
I think the analogy breaks down when you consider what sharing economy companies do is explicitly illegal, especially in the places they operate. Granted, there's been differing levels of enforcement from various agencies, but Hillary has been mentioning addressing it from the federal level. Point being, there are probably changes/regulations coming to the current free for all that is the sharing economy.
What's the difference between AirBNB and being good enough friends with people to stay at their place for a night or two - or even a week? The exchange of money? I occasionally give my own family money if I inconvenience them for several days.
It is illegal for me to pull to the side of a free-way and pick up a stranger who's car broke down/ran out of gas to give them a ride to the nearest gas station/place they were trying to get to.
I find it absolutely absurd that it is illegal to help someone. Moreso on the merits of "helping strangers is bad, but it's legal if they are friends or family".
I have a very loose definition of "friend". So where do I draw the line between legal ridesharing (giving a friend a ride to the airport for $20) and illegal ridesharing (giving a stranger a ride to the airport for $20)?
Legitimate curiosity - so if someone would like to clarify why one is OK but the other is bad, I'd love to hear it.
You must have a very loose definition of help, too, if you consider renting your property for profit as act of help as opposed to a self serving act with the aim being lining ones pockets.
My definition agrees with the dictionary definition, which I don't consider very loose. You can still help someone without being altruistic.
Intent is the difference between murder and manslaughter, so I recognize I tread a fine line here, unlike the aforementioned, I do not see a reason to differentiate between the following two actions:
a) I let someone stay the night in my house and they offered me $60 as a thank you in return for the hospitality, I initially decline but they continue to insist so I take the $60.
b) I charged for someone to stay the night in my house and they agreed to pay $60 to stay at my house instead of an alternative place (and/or sleeping in their car/on the street)
I guess as a couchsurfer I have a different moral perspective about the act of sleeping in someone's house, offering money, accepting money, and bargaining.
E:
A reply to this comment was deleted, comparing that A helps all people and B helps people "willing to pay". My response to that is below:
You're still helping someone in either scenario. The pool of people you are willing or able to help is smaller in B than A, but you are still helping someone. Again - helping someone else does not need to be a selfless, altruistic act.
"Instead of spending $80 at a hotel, you can spend $60 at my place and you can join me for dinner."
By saving you $20, I have helped you. You saved $60 and had a place to sleep. Your alternatives were:
1. Sleep in car for free
2. Find someone willing to help you for cheaper and/or free
3. Sleep at a more expensive place
By giving you a superior option to 1 and 3 and you failing to find 2, I am still helping you. Would I be more altruistic if I let you stay for free? Sure. But to say I'm not helping you when I'm saving you $20 is stretching the definition of "help" to include altruistic behavior.
Wow, the American attitude is strong with you ;). Looking forward to see what the SN-ratio of all these strong statements is!
edit: As I am beeing downvoted:
"you'll use many of these in your home or neighborhood within the next 12 months" -> I doubt I have used "many" yc-products from the total last batch in the past 12 months.
"Over the next year, you’ll see us introduce several features that make YC the best place in the world for people who want to make something new. Over the next decade, you’ll see some of these entrepreneurs create companies at YC that rival Airbnb’s social (and financial) impact." -> That's very nice, but it has nothing substantial to back it up!
All I want to say is: yc does not need to sell hot air.
While I have no idea how many you specifically will choose to purchase, a majority of the hardware startups in our current batch will have product for sale via Amazon and other channels by summer 2016. This sounds strong given the history of hardware companies, but our current batch is not comprised of average hardware companies;)
> a majority of the hardware startups in our current batch will have product for sale via Amazon and other channels by summer 2016. This sounds strong given the history of hardware companies...
with all due respect, it sounds weak in the history of hardware companies, because no hardware company worth $10 billion - and there are many - had any point in its past when it could go from a standing start to shipping product for millions of people's homes in 12 months.
You might think this means that your companies are above-average. I disagree. I think it means that you pass on most $10 billion plays in order to fill a stable with people who have picked something they are ready to ship within a few months.
More power to them, and they have real companies with real traction. But to say it sounds strong given the history of hardware companies is to ignore both history and the power law.
I have the utmost respect for the support YC gives to these hardware companies, but would never apply with a historically ambitious one. This is very unlikely to change any time soon. Still I hugely support the push toward supporting hardware companies!
> I doubt I have used "many" yc-products from the total last batch in the past 12 months.
I think you're conflating YC with Kickstarter. YC increasingly works with companies that are later-stage; there's no reason they couldn't be almost shipping when they do YC.
I completely buy that a different model of funding will help and could be successful. I just don't have a good understanding of whether there is a good understanding of the real scientific challenges and the implications.