VC funds see a power law distribution of returns (including YC). This is unusually lopsided, and suggests several possible explanations. For example:
- All these startups compete in winner-take-all markets, where the luck factor would amplify enormously. This may be true for consumer web startups where people vote with their fingers, but it's hard to imagine how it would be true for all startups in every industry VCs invest.
- All VCs are really bad at identifying people who are really good. This is very doubtful, especially for YC. YC seems to be better than most at identifying very competent people.
- Luck is really a huge factor. So far, all the evidence I've seen suggests this is the more plausible explanation.
Comments
How do you know it's not the other way around?
VC funds see a power law distribution of returns (including YC). This is unusually lopsided, and suggests several possible explanations. For example:
- All these startups compete in winner-take-all markets, where the luck factor would amplify enormously. This may be true for consumer web startups where people vote with their fingers, but it's hard to imagine how it would be true for all startups in every industry VCs invest.
- All VCs are really bad at identifying people who are really good. This is very doubtful, especially for YC. YC seems to be better than most at identifying very competent people.
- Luck is really a huge factor. So far, all the evidence I've seen suggests this is the more plausible explanation.
Sturgeon's Law ;)