To win, I have to be right on all three propositions.
1) The top 6 US companies at http://fortune.com/2015/01/22/the-age-of-unicorns/ (Uber, Palantir, Airbnb, Dropbox, Pinterest, and SpaceX) are currently worth just over $100B. I am leaving out Snapchat because I couldn’t get verification of its valuation. Proposition 1: On January 1st, 2020, these companies will be worth at least $200B in aggregate.
2) Stripe, Zenefits, Instacart, Mixpanel, Teespring, Optimizely, Coinbase, Docker, and Weebly are a selection of mid-stage YC companies currently worth less than $9B in aggregate. Proposition 2: On January 1st, 2020, they will be worth at least $27B in aggregate.
3) Proposition 3: The current YC Winter 2015 batch—currently worth something that rounds down to $0—will be worth at least $3B on Jan 1st, 2020.
Ironically a basic statistics class indicates that cherry picking companies that deliver 2x, 3x and ... whatever the fuck that third pick is ... as a guaranteed return over 5 years is indicative of the overenthusiastic hype that historically surrounds bubble valuations.
#3 is a die roll. #2 is the killer. And I might take the bet on just #1.
#3 isn't just a die roll, it's the entire basis of early stage investment. If he loses on #3, YC will either be a shadow of its former self, or Sam will have given himself enough rope to hang himself (as president of YC).
This is exactly the sort of thing that everyone making press about investment capital should be willing to do. Sam isn't making a bet about money here, he's making a bet about his reputation as a forecaster/analyst.
Exactly. I admire Sam's balls but the externalities here are immense. The greatest financial mind of our time built Berkshire Hathaway to $350B over 50 years. GE is worth $250B. Microsoft $340B.
To believe Sam's motley list of companies can either hold onto valuations approaching those "real" companies for five more years, let alone actually generate viable earnings and go public (even at goofy P/E multiples) in line with what GE, Microsoft, or Buffett's candy, ketchup and mac'n'cheese subsidiaries alone make seems ... optimistic at best.
If he loses, might I suggest the book title? "Oops! Brands Aren't Businesses!" by Samuel H. Altman.
I understand the bet. I do not think you understand what "averaging $33B" means.
For instance Rubbermaid simply owns numerous home, commercial and healthcare markets. They make everything from saws to Sharpies. They doubled their market cap in the last five years. 20,000 employees (more than anyone on that list) $6 billion in revenue (ditto) P/E ratio of 30 ... and they're worth $10B.
Rubbermaid is a razor-thin margin business, with plenty of exposure to both the pressure of retailers like Wal-Mart and the rising costs of supplies, and very little in terms of differentiation from competitors. That's why it went bankrupt and got bought by Newell.
It averaged a gross profit margin of 38% the past five years. While paying a dividend. And doubling the stock price.
Which companies in that list have profits let alone profit margins? And are half as diversified? I see the big upside. I see the big downside. But I don't see how they all grow to average 3x NWL/Rubbermaid in the absence of bubble valuations.
Also all this "2x or 3x" after the big rise talk is just dilly-shaking anyway. The numbskulls who jumped in on the last Tumblr round would've made more money flipping Microsoft stock over the same period. Talk about unnecessary risk for the sake of risk.
Or, 5 years isn't that long from now... for comparison (from CrunchBase) Dropbox was part of the Summer 2007 batch. So, in the context of this bet, they would have had to have had a valuation of 3B in 2012 (assuming the rest of the batch failed).
As of Jan 1, 2012, their most recent funding would have been a Series B round for $250M at ~ $4B. So, in this case, Sam would have won.
In my opinion, #3 is a little unfair, just because there are significantly more startups in these YC batches than in years past. I wouldn't be surprised if the entire W15 batch hit $3B in total valuation by the end of the year. There are roughly 100 in this batch, so they would only need an average of $30M in valuation for Sam to win #3.
There are a lot of potential home runs in the current batch IMO - medical startups, etc. If someone like Stripe faces too much competition (as I'm certain Instacart will), I think (2) is his best option. Most of the rest of those names don't scream megacorp to me, but then I imagine Sam is privy to the interesting future plans of all of them.
Helvetica usually looks like shit on Windows if the user happens to have it. So you might try a different order, or just rely on most Mac users having Helvetica Neue.
Great question. The differences are subtle yet definitely worth noting.
To users, $20 worth of food doesn't tell them anything about what they're actually going to buy when they arrive at the venue, whereas $1 for a $2 cup of coffee specifies exactly what they'll get. You might also only spend $18.50 of your $20 credit and can't find something worth ~$1.50 to buy, which can leave a bad aftertaste for some people.
Also, this allows merchants to prepare much more effectively by overstocking on the items being featured. Or they could discount an already overstocked item just to get rid of it.
All in all, people visit restaurants for specific (signature) dishes, not for the restaurants themselves, so it all fits together.
guynamedloren, with your passion and experience, I can see the following happening:
Day 1: Move to Bay Area,
Day 2: Land job,
Day 3: Chase dreams
Just show employers what you've done and what you want to do. They'll understand if it doesn't coincide with your degree, and frankly, I don't think they'll care about it.
Wow, this is very encouraging, but is it really that easy? I know the bay area is thriving with tech jobs, but I still feel like it would be a challenge.
Yes it is. The SF Bay area is a bit insane/awesome in that department. I would suggest you calibrate yourself correctly ... if you think you're underqualified, you are doing yourself a disservice. Frankly, I would suggest not even starting your job search for 2 weeks-1month when you move to the SF Bay area. Go to tech meetups, participate in a hackathon or two, hang out at Hacker Dojo, Noisebridge or cafe's in Mountain View. Basically ... get plugged in. It is hard to explain Silicon Valley until you actually go there IMHO. Be vary of posers, and remember that talk is cheap. Once you calibrate yourself, get a job. Show them your portfolio. Mention that you have an engineering degree as icing. I'm sure you have some math courses and decent communication skills. Highlight these as well. Be prepared that you may not get well compensated or work with the best people, and have to switch after 6 months (armed with the stuff you know then, you will be better off).
That said, I think you should reflect on the "coding is easy" attitude. I don't think that is correct. My undergrad was in CS and I used to think I was a code poet ... until I started doing professional coding. I personally consider coding to be more of an art than a science. I do it because I love it and it gives me more happiness than things like playing video games. As an art, I feel it will take a lifetime to perfect. I got a PhD in CS a few years ago but you know what? I still learn new things about coding almost every day. I hope it gives you a lifetime of happiness as it gives me.
I agree with what iqster said. If you do decide to come to the Bay Area, definitely familiarize yourself with the state of tech here first (and network like hell!) and look for a job you love doing. Being a code monkey is only fun if the project is fun. Good luck and stay strong!
