Most web startups aren’t capital intensive, so why bother with VC? The only VC that seems worthwhile is YC, not for the money, but for the experience of working with the YC team and a bunch of other founders.

Actually if an investor can put the “last equity dollar in” then there are a number of ways to make a profit. One of the things working against venture capital is short time horizon. The funds last ten years but most investments don’t take place until years two through five, and they have to hold back significant dollars to prevent dilution in a later round.

Graham has clarified his thinking here http://news.ycombinator.com/item?id=143480
“We actively encourage startups to stay as small as possible for as long as possible. And like all investors we would prefer the startups we fund to go public rather than get acquired. I bet if you outsourced all the inessential stuff you could grow a company to that stage without needing more than 150 people, which you could do with only two layers.”

Which would indicate he has taken to heart “a bureaucracy is an organization that energy into solid waste” with his desire to see his portfolio companies stay lean, not only are they likely better places to work but his investment is less likely to be lost.

Paul’s as much about creating happiness as anything. You should see the look on his face when he talks about YC. He’s giddy. If he’s going to go this route, and champion himself as a creator of founder happiness, then he should look at other options. There’s more than one way to make money off of small businesses.

No, that’s not really his thesis at all. Or at least I don’t think it is.

I think his thesis is, “working in a startup or small company tends to make people feel happier and more alive than the alternative”– there’s a subtle, but really important, difference.

The rest of your post is really interesting… I’d point out that Paul isn’t trying to create good jobs– he’s trying to create wealth and success. Founder creates great company, makes it grow big, sells it, becomes an angel investor. Big payout for founders, big payout for YC.

Building “happy” little companies is a laudable goal, but a pretty lousy focus for an investor. If you take out the “grow big” and “sells it” parts… how does he make money? Dividends? Interest on a loan?

@David. Fixed.

I’d be interested in hearing about companies that grew (organically or inorganically) into big companies and managed to maintain this dynamic. Or, second best, companies that managed to re-introduce this dynamic over time.

For example, I had heard that Amazon moved to scrum partially to empower smaller teams. I’m sure I heard a glossy version of this, since it was from an Amazon VP. Does anyone work at a reasonably sized company (500+ employees, maybe?, 200+ developers?) that organized around small units, removed vertical organization insanity and increased happiness and quality?

That’s a great and simple way to put it: people want to do work that MATTERS.

You’re right that Jay and I do a lot of maintenance work. We’ve spent a lot of time in the last two months redoing things that were originally done poorly (i.e. done before Jay started) and it’s felt great.

There’s only two reasons we do maintenance or cleanup work. 1. A customer wants it. 2. One of us personally wants it. In other words we only do work when _we_ think it matters.

Some times it ends up that the work I do doesn’t matter and I end up feeling stupid. But overall, it’s pretty clear to me that I’d rather feel stupid than useless.

Unfortunately feeling useless has been common at other companies I’ve worked for. By far the best company I’ve worked for was O’Reilly. But I think we can both remember the website we launched for a book series that was about to be canceled.

That was a case of work that mattered to one person. At CrowdVine, when work matters to one person that person just does it. But at a bigger company, where the work is done by proxy, the work gets transferred to other people but the feeling of mattering doesn’t.

There’s certainly work that I do that sucks (I hate scanning documents) but at least all of it matters. Wow. That feels good.

I wonder what you think also about his statement that “the essence of programming is to build new things” and how it relates to your satisfaction of working in a small group. Because I read that and, as a person who’s worked with developers, I cringed. There’s so many systems that need updating and repair work, and it always seemed so hard to find any programmer willing to really dig in and do that.

But I’ll bet that you and Jay do quite a bit of updating and maintenance work, and that you feel quite differently about it than you might have doing that same kind of work, er…let’s just say “at a larger company”.

My point is that I don’t think that it’s so much that programmers are different breed and need to always be working on new things (unlike sales or support people, as Paul suggests — oh those boring dull uncreative non-programmers!). I think it’s that people want to feel like they MATTER. It’s harder to feel that the work you do matters in a larger company or group.