[bko]

I checked the top 6 and 5 of them appear to be vaporware without a real product. To be fair, they're working on hard products, but I wonder if the model is selecting for that. According to the announcement[0] 29% of the batch were accepted with only an idea, so I guess that's not surprising.

Slightly off topic, but I thought it was interesting that 29% of the batch has just an idea while 10% had more than $50k of monthly revenue when accepted. Given they all get the same deal, it would be wild to build out a business that's making a 600k+ a year and get the same terms as two guys with an idea. Seems to go very against everything I read from YC about validation and product market fit, but I guess it's good if they can get away with those terms. That is of course if you're doing a real business rather than MoviePass model (selling $10 bills for $5).

Is there anywhere I can get a breakdown of the companies that fall into these categories?

[0] https://www.ycombinator.com/blog/meet-the-yc-winter-2022-bat...

[ad404b8a372f2b9]

That's because it uses as only input the description of the company, which is 80% non-informative common words, and 20% buzzwords. It's basically a buzzword detector.

I reckon you could reach the same results with TF-IDF and kmeans.

[lumost]

Investors get yield by investing in unique products. When there is enough* money floating around, anything that can be built in a few weeks will have been built in a few weeks.

This means that in order to get return, investors have to be willing to invest in longer term efforts which are sufficiently difficult to execute that other investors will either refuse to fund the project - or their teams will fail to deliver.

When there is enough* money available, it stops making sense to launch product - you can keep pitching a bigger vision indefinitely, but once you launch you are beholden to real metrics. In fact, launching means that your competition suddenly looks ridiculously capital efficient in comparison.

* for some level of enough.

[bko]

From my experience the two biggest pitfalls to startups are lack of product market fit and execution.

Product market fit is the hardest thing you have to do. Sometimes the current products are good enough or no one really wants the product. You also have to consider whether its economical. For instance, there may be a demand for flying cars but its uneconomical to driving, so it doesn't really work as a startup.

The other problem is execution. Take the high to medium end electric car market that sprung up after Tesla proved product market fit. There are probably a dozen electric car manufacturers that don't actually manufacture electric cars for sale. That's because its actually very hard to do that. It's easy to create a pitch deck and even a prototype, but shipping cars is hard.

A start up with no product has not proven either of these. They don't have product market fit because their idea has not been tested in the market yet. And they certainly didn't execute yet.

Compare that to a company with 600k+ a year revenue. They may not have proven the economics aspect (they're probably losing money) and they may never prove it. But they have proven that someone will pay for their product and they can create and deliver a product (assuming revenue isn't pre-sales). So if you were to compare to a few guys with an idea and a company shipping real product, I would think the one shipping is a lot further along and deserves a higher valuation in general

[lumost]

Here is where TAM starts to be a consideration. A company building 3D printed rocket engines can claim that the market is whatever size they want as they are not beholden to prove it for 5+ years. A company making a mobile blood tester isn't expected to have a working demonstration for 5+ years.

Compare this to a company with 600k in revenue, if they are in a competitive/small market - then this may mean a company which ultimately produces 100 million in revenue with 10-20 million in profit. Whereas the above two companies can pitch that they will eventually produce $BigNumber revenue with $HighProfit margins.

This scheme really only works when there is effectively infinite money floating around, and the opportunity cost of parking the money in a bad idea is low. I wouldn't expect a MagicLeap or Theranos to occur in any other environment.