Overheard at YC's 2012 Demo Day: "I really liked 2008. It was a great year. People weren't trying to make money. They were trying to do something." PG is right that @ycombinator has a surprising legacy of critics, going back as far as 2007. The best batch was always the earliest batch. There's a simple reason for this: observability. The latest batch is inherently a list of nobodies, pursuing odd looking ideas. First, we get to know the loudest and most controversial companies. Only much later are companies recognised for actual progress and meaningful successes. So, the lazy read is that batch quality is constantly falling and it's only ever the older batches which were actually any good. In defiance of this, the program has posted consistent, impressive results. And it has done so by supporting companies across the spectrum, like @boomsupersonic, @oklo, @AstroForge, @opentrons, @initofertility and @noxmetals. Most importantly, YC produces a credential which is more earned than awarded. The YC stamp allows other investors to herd behind promising companies, rather than chasing Stanford grads, Meta alums, or whatever other "legible" signals the market dictates. It's easy to imagine that without YC, venture capital would be even more crushingly consensus-driven.

Many of the great VC firms and solo GPs started out with funds of $10M or less. These micro VC firms have a risk appetite which is crucial to the industry, and play an important role in seeding risk capital where larger firms cannot. "Micro VCs play a pivotal role in democratizing access to entrepreneurial finance by allowing ventures to get funding from a new type of investors. Moreover, micro VCs encourage more kinds of limited partners to access the VC industry." - Micro VC (2022) Unfortunately, the associated regulatory costs make operating at this scale incredibly difficult in the UK. Admin and compliance often consumes about $1.4M of a $10M UK fund, versus just $450k in the US. As a result of this high cost, the median fund size in the US was $20M in 2024, in the UK (with just 3% of the volume) it was $88M. So, the UK not only has lower total venture capital volume, it also has fewer small funds — the worst of both worlds. This is a major bottleneck, but there is a fix. If you're interested in hearing more, drop me a DM. (Credit to @cupazhou and @samhuleatt for the graphic below, from The Side Letter.) Micro VC paper:

Venture capital exists to get companies to the point of having stable, scalable businesses — then sending them to public markets (or acquirers). In recent years, as private markets inflated, the default behavior switched to remaining private and absorbing more capital (to justify more VC fee income). This has resulted in fewer IPOs, and worsening prospects post-IPO for venture-backed companies. VCs continually misrepresent this as the public markets being hostile to innovative companies (further deterring IPOs, maximising fees), when in fact it is the result of too much venture capital. The theory is simple: Private and public markets have fundamentally different priorities, reflected in how they value companies. Private companies are primarily valued on their fundraising momentum, which is a result of ARR and hot market narratives. The resulting companies are fragile rocket ships with weak economics. Public companies are valued on a range of metrics, including a relatively thorough examination of their financial health. Hype also competes directly with pressure from short sellers. As a result, the longer a company stays private, the more it will struggle in public markets. It's possible to test this theory by examining recent IPOs, controlling for market conditions and sector relevance (e.g. excluding biotech). It turns out, the logic holds. See the bottom of this post for the full report. The following factors are all directional indicators of WORSE performance (vs Nasdaq-100), post-IPO: - More revenue - More capital raised - Higher valuations Holding companies private to use them as vessels for increased allocation (more fees) is toxic. It has produced a frail generation of startups which lack staying power or meaningful innovation. Instead, VCs should be looking to send companies public much earlier if they are optimising for the future success of their portfolio companies. The correct moment for an IPO will vary significantly by company, market timing and narrative — but in general there's a statistical case to be made for companies that are: - $100–200M in revenue (not ARR) - Raised <$250M - Listing at <$1B This is the implied pattern if the goal is post-IPO outperformance, and access to growth capital on better terms for founders. For investors, earlier exits would favour those who want to deliver solid returns on shorter horizons than the current status-quo. It will not be favourable for firms who just want to maximise fee income by absorbing and deploying ever-larger sums into bloated vessels. Check out the full paper, in the @joinodin research directory:

Excellent stuff from @TurnerNovak and @chudson. So much in here worth listening to for early-stage managers. The way that Charles develops talent within @PrecursorVC, with a deliberate effort to not influence what associates think "good" looks like. Versus the ~1-2.5 years you have to wait for investment privileges at a larger firm, during which you are specifically learning what the firm thinks "good" looks like. (Which relates to the VC world model idea I wrote about at the weekend.) Or the fallout post-2021, and how LPs trimmed emerging managers due to a lack of track record, rather than the managers who had driven the market. It was not a healthy or meritocratic culling. I'd also love to know who it was that thought 100% of the successful founders in the future are going to be repeat founders that are known to VCs. They do not belong in venture capital. Well worth a listen.