Why the angel/VC hype is bunk for most hackers

[stevejobs]

Sites like Techcrunch and to a lesser extent PG's Hacker News make it seem like it is easier than ever to get funded (ex-f&f) if you have a cool idea. Don't believe it. Even if your startup has a good team with an idea that you think others will want, getting funding, even minimal seed funding, is tough.

The reason is the math. There is a limited amount of capital out there for seed stage funding and only a handful of investors willing to risk funding at the angel/seed stage. For every Etsy, Groupon, or Foursquare there are thousands of hopeful entrepreneurs (even hackers) who will never get a dime of outside money.

Since YCombinator came onto the scene a few years ago, I'm sure that its rejection rate is now an order of magnitude harder than getting accepted to Harvard (a 1-100 chance instead of a 1-10 chance). Moreover, there are many entrepreneurs who don't even know what YCombinator is, so for them it is an even more arduous task because at least Paul Graham & friends are willing to take a flier on novices. Most investors aren't and will never be.

So, don't get your hopes up that even if you do have a bright idea and a working concept that it will mean investors will come knocking to fund you.

[pg]

The two ideas you seem to believe are contradictory, that it's easier than ever to get funded, and that getting funding is tough, are not in fact contradictory. Both are true. It's hard to get funded, but it's easier now than it has ever been in the past.

It's also not true that it's an order of magnitude harder to get funded by YC than to get into Harvard College. Our acceptance rate is usually around 3% and Harvard's is currently 7%, so the difference is closer to 2x.

The biggest mistake though is the implicit one that it's ideas that get funded. At the seed stage, it's people that get funded, not ideas.

[cperciva]

At the seed stage, it's people that get funded, not ideas.

To what extent do ideas influence your judgement of people? It seems to me that -- for all that you're funding people, not ideas -- it would be very hard to avoid saying "what sort of idiots came up with this idea?" at times. (The opposite, namely forming a positive impression of people based on their having had a brilliant idea, seems also possible but likely far less common.)

[pg]

You're right. We care about the idea as much for what it tells us about the people as for its own sake.

[limedaring]

Wow. What ever happened to a little optimism?

If you have a bright idea and a working concept, take some risks, hustle, and do your best. If you fail, then at least you tried. If you don't try, you'll never know if you'll succeed.