skysight-inc/HackerNews huggingface dataset:
Nice article, but drastically oversimplified. Paul ignores two critical issues: Risk, and non-linear utility-of-money functions. These two factors become critical when there is a tradeoff between probability of success and the payoff of success.

Suppose, as a simple example, that I have a startup which I think has a 50% chance of succeeding and being sold for $1M, and a 50% chance of failing and being worthless. Now suppose that Paul selects me to participate in YC, but wants 10% of the company, and I think his help will leave the potential valuation unchanged but increase the chance of success from 50% to 55%. If I accept his offer, my EXPECTED return drops from $500k (50% of $1M) to $495k (55% of $900k) -- but I'd still accept the offer, because increasing my chance of getting that first $900k is worth far more than getting an additional $100k on top of that.

On the other hand, suppose a venture capital company comes along and offers to help me expand into a much larger market, where I'd have a 10% chance of the company being worth $100M (and a 90% chance of the company being worthless), in exchange for taking 50% of the company stock. If I accept the offer, my EXPECTED return jumps from $500k to $5M (10% of $50M) -- but there's no way that I'd accept the offer, because I really don't want to spend years of my life on something which has a 90% chance of being worthless.

It's important to understand the numbers, but in the end the numbers, at best, have to guide you rather than making decisions for you.
"enough bandwidth to make it no longer a factor"

You need to do an order-of-magnitude idea check. Wireless video broadcast is extremely intensive, and radio technology is expanding at a sub-linear rate.

There is a problem with Moore's law vs. 2D images: making more transistors on an imager will only be half as effective as the extra cpu power needed to crunch it. A doubling of density turns a 320x240 into 640x480. This means twice the computation for four times the image size.

The point is that bandwidth will always matter. Video is the kind of application that will make it matter.
True 3D doesn't make sense for a lot of kinds of data. Images are inherently planar.

My limited hope is that the web can be as peppy as today's desktop interfaces. The elephant in the room of "Web 2.0" is how slow lots of implementations of asynchronous server communication are.
Paul, I really liked your article and I have always wondered about working out these financial details. Its cool how you did it for employees. I liked the fact that you kept it simple.
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curious--is anybody actually using OpenID or is it like one of those things everyone promotes publicly on principle (like feeding hungry kids in 3rd world countries) but ignores privately?
Normally when you try to make a point using reduction to absurdity you jump straight to nuclear missiles: i.e. "How is this different from allowing people to bring nuclear missiles to work that they may point at you occasionally?"

Unfortunately this is a contrived comparison. People who are bringing dogs into work are not bringing them as weapons that they then deliberately threaten their coworkers with. The key differences here is intentionality: bringing a dog to work is not intrinsically threatening, point a gun at someone is.

Your comparison only becomes valid if the individuals brought their dogs into work and threatened to assault coworkers with them. This is likely not part of Google's acceptable policies.
Even in a simple model, time should be incorporated, right? The total cost for the life of the company of an employee is included, assuming a particular growth rate. What about for investment? "the total cost of this round of funding" doesn't make sense so much. And surely the rate of increased value of your company matters.

Also, it seems, like you note in the end, that there is still a gut feeling, and here it is stated simply: how can you predict how much your company will grow because of an investment?

This is easier if you have sales numbers that show some trend, where investing $N in business development yields X more users leading to Y more profit. If you're reddit, and you haven't even monetized your users before being purchased, this can be harder. Also organic growth implies less direct business development.

One simple question that I think has a standard/GAAP answer: how much is your company worth if you are making $X yearly and growing at a rate of Y%? I vaguely recall terms like "good-will estimates" and "present value of future money" in the single management class I've taken years ago. But is there something standard for a company going through valuation for acquisition or taking a next round of funding. [Ignore for the moment that a company making a nice profit and growing ideally wouldn't need a next round of funding.]
A smart company would give 6% equity to YC just for the advice and publicity. The cash is the least valuable part of the equation. 5k per person can be saved up in a number of months, even for relatively low salaries if you are stingy.
The point is dogs are less predictable than people and may decide to attack for no obvious reason. It doesn't matter that their owners did not bring them to work to intimidate coworkers.
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It's less of a benefit than you might think, because most websites are not CPU-bound. The bottleneck tends to be disk seeks, particularly if you use a database. You can't move I/O to your visitor's machines because you don't have access to their disks.

Perhaps it'd be more useful for sites like Mailinator or news.YC that keep everything in memory, but sites like that usually don't have performance problems anyway. And bandwidth typically becomes a bottleneck if you try to use a distributed memory cache over consumer Internet connections.

It'd be really useful for websites with heavy algorithmics, but how many websites like that do you know? I work in the financial sector, and even there this isn't feasible, because the data needed totals about 50 GB/day and there's no way in hell you can transfer that over a dialup modem.
ABC7 is pushing this pretty hard. Every time I see one of their news shows (which is not very often) there is an ad for their futures market or they are quoting futures market results.

There's never any mention of Inkling which is probably a good thing. The more I think about white labeling the more I like it. Empower and incentivize a first tier of users to attract additional users on their own. It especially makes sense in the context of webapps where it's relatively easy to do.
User('ben') -- what does that even mean? Find 'ben' in a database? Create 'ben'? Get the 'ben' singleton? Maybe I've spent too much time in the land of lisp, but I'd like the code I read to actually tell me what it's trying to do.

I'm a fan of case insensitivity for pedagogic and typographical reasons. If you watch the H-P SICP videos, you'll see Sussman and Abelson writing code in upper case, lower case, whatever case. `Lambda' and `cond' and `if' are words, not hieroglyphs, and I want to be able to write them, and write about them, without having to do typographically stupid things like starting sentences with lowercase letters.

That said, there are times when you may want case sensitivity, but I'd rather create a "I need case sensitive tokens" kludge than deal all case sensitive tokens, all the time.
Religious acceptance is a two-way street. Demanding that other religions accept your religious tenants is bigotry. As a world with diverse conflicting religions we have to remember that our relationship with a higher power (or lack thereof) is a personal issue: we ought to apply our standards to ourselves, attempts to force them on others end with catastrophe.

The typical response to my statement is "What if their religion supports eating babies?" This is what secular government is for, it formulates these things called laws which trump religious preference.

The response to that response is "there is no truly secular government." Imperfection is one of the few realities we can count on, condemning a solution for its lack of perfection is insincere. Remember that we're all using operating systems built the Wrong Way.
From my perspective it's partically an emotional path, not merely an analytical path. A company that's a startup has an intention, and it's one of these:

1. You use resources to incrementally grow a user base and get market share, then sell it off to a bigger company

2. You develop technology that enhances a company's market share and pulls users from a competitive company's market

3. You lose, and the investor loses a small amount of money

The bottom line for me is that the value of your start-up is based on the number of users you can get. It's about your intention X with the assistence of your investor will find the users and people you need. Whether it's a good deal or not is irrelevant if those are not true - take the journey.

Whether it's a Mobius or another VC, for me as an entrepreneur, they have not established a community tool to have access to a community that will help grow the start-up quickly. You're not just buying equity in the equation X you're buying into the community's collaboration.

The equity value is not just based on "here's some money for X cents on the dollar" X it has to go beyond that.
There are two issues here.

If indeed most Muslims don't like being around dogs, then there is definitely a problem with Google's policy.

The other issue is that some people -- like me -- simply don't like being around dogs even though this has nothing to do with religious beliefs.
"how much is your company worth if you are making $X yearly and growing at a rate of Y%"

In finance, the standard answer is "the net present value of all future cash flows". Basically, all cash that the company throws off beyond expenses technically belongs to the owners. However, owners could've parked their money in T-bills instead of investing it, and they'd receive interest for it. So you discount these future cash flows by a factor that depends on the rate of interest and the time between investment and cash flow, and then sum up all these discounted cash flows over the life of the company. If earnings are growing, you just figure the increased earnings into your calculations. http://en.wikipedia.org/wiki/Net_present_value

I dunno if VCs and acquirers use this method: they face a problem in that it's notoriously difficult to estimate the future cash flows of an unprofitable technology company. They might be building a stellar product and growing market share for years, then suddenly start raising their prices when they become a monopoly. Or they might be building a mediocre product and growing market share for years, and then lose them all when they start raising their prices and a competitor comes along.
Your argument is based your intuitive view on the comparable reliability of dogs and people. It is your personal opinion that dogs are less predictable than people. Personally I find your opinion to be troubling, how can a much simpler creature be more complex and less predictable?

There have been between 17 and 26 dog related deaths per year for the past two decades in the US. There were 28874 gun related deaths in 1999 in the US. These numbers don't tell a very complete story, but I think they are sufficient to raise doubts about your premise that dogs are less predictable or more dangerous than armed humans.
"I really don't want to spend years of my life on something which has a 90% chance of being worthless."

How does that mesh with the fact that a failed startup is probably worthless (in the literal sense that you can't make money from it), and most startups probably have >90% failure rate?

I know there is a learning experience in startups and that working hard on something fun is valuable, so worthless is really just talking about immediate money here.
OpenID - Separating fact from hype: Have you implemented OpenID? What's the uptake?
I have a question for those that have implemented OpenID on their webapps. I had a coffee with a good friend of mine that has his own startup. They're working on a consumer app that's become fairly popular and they're growing nicely. Topic of OpenID came up and i asked him how long it took them to add support for it and how many people have signed up using an OpenID. He mentioned that it took them a couple of days to add it in and test it out and fix all the issues.

And you know how many people signed up using OpenID? 10. Not percent, just ten people signed up using OpenID in the past 40 days. These guys have about 900+ new subscribers per day.

Anyway, if you have a limited amount of time and money to spend on an app, spend your energy somewhere else until OpenID becomes (if ever) more adopted.
Thanks!

Then my earlier points are even more important.
How much will your company be worth? How much _more_ is it worth after taking more funding? Who knows? All hard questions.
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First, just because most Muslims don't like being around dogs doesn't automatically indicate that there is a problem with Google's policy.

People that don't like being around dogs will place a lower value upon working at Google. People who do like dogs will place a higher value upon working at Google.

If more people like dogs than don't like dogs, Google will benefit from their policy, and those who dislike dogs will suffer for their intolerance. If the opposite is true then they will suffer from their policy and people who dislike dogs will benefit.

Regardless of your policy someone is being discriminated against, so moral arguments will be irresolute. As such, economic reasoning seems as good as standard to judge by as any other. The claims of discrimination by allowing dogs in the workplace suffer from assuming that the status quo is some how more just than an alternative: don't worry, someone gets screwed no matter what.
You could make the claim that Google is actually discriminating against Muslims because allowing dogs at work is not critical to its business.

It's against the law to discriminate based on religion.
I don't think my probability of failure is 90%. :-)

This isn't as naive as it sounds: If you take VC with standard liquidation preference terms, the company needs to do really well before you get anything back -- so the amount of money you need to avoid "failing" is dramatically increased.

In my case, since I don't intend to take any VC, there's a wide range between "failure" (making less money than I would have earned risk-free by working at the university for the same duration) and "success" (making enough money that I never need to work again).

Also, on a more self-serving note: I'm a heck of a lot more competent than 90% of startup founders. Or even 90% of YC-funded-startup founders for that matter -- and YC-funded startups have distinctly less than a 90% failure rate.
Watch the dog whisperer. Dogs are extremely predictable. Now I'm exposing my biases :).

I suppose a serious reason not to allow dogs is that some people might not know how to act around them, and would become a danger to themselves. But again, only the most well behaved dogs should be included.

I should also mention that I don't feel very strongly about any of this.
Congrats! As a long-time user of webmin I can easily see you being very successful.
"Or even 90% of YC-funded-startup founders for that matter"

Not to deny this, as I don't know anything about you, but... that is a very bold statement.
Right now, I think it's still way too difficult for most consumers to get a handle on.

That said, ma.gnolia.com sees 12% of its 4800 monthly signups as OpenID signups and those that do sign up using OpenID are 11% more likely to become active users (11% less likely to be locked out?)
The famous KISS principle. In case you don't know:
Keep It Simple, Stupid
With so many coders, it looks like there's enough for a 2nd book!
This is a nice analysis and good thinking, though it's worth noting that liquidation preference makes the VC equation less favorable. I'm not sure how Y Combinator works, but preference plays a shockingly large role when you run these types of calculations against your hypothetical VC deal.
Of course it's a bold statement. But if I wasn't bold, I wouldn't have started university at age 13, set three world records for calculating pi (a stunt, I admit), ranked in the top six mathematics undergraduates in North America, received a $100k+ scholarship to Oxford University (not the Rhodes, unfortunately -- their mistake), received a doctorate in computer science from said university, and become the security officer for the FreeBSD operating system.
'Making Rails Go Vroom' (but should you have to?)
I'd honestly be surprised at this point if nobody has offered to pay YC to take equity in a startup.
Robert Thau didn't start Bianca Troll... David Thau did.
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It's not an equation, but for employee options my gut has always been that you get options as a function of how much your improve the odds of the company's ultimate success.

Founders get a lot because they take it from zero to something.

Senior folks get a lot because the influence it significantly.

Early grants > Later grants because the ability to change the trajectory is typically smaller.
"Did you win the Putnam?"

Yes, I did.
Feel free to send me friend requests to test out the friend functionality.
So you've shown that you have some (impressive) academic achievements, but have you had any business success? Just because you're book smart doesn't mean you will have a successful start up.

Many times people think that they can transfer great success from one domain into other domain. Michael Jordan and his short baseball stint is the first thing that comes to mind.
You're quite right, and if I do fail I entirely expect it to be due to a lack of business experience. But on this topic I'm working entirely based on what Paul says -- that being able to build something which people want is far more important than being able to sell it.
The Muslims would be the ones religiously discriminating against Google. Allowing dogs at the workplace is a secular decision, viewing them as profane is a religious ones.

This argument is without legal grounds. Restaurants serve food that is not kosher, they are not being shut down for discriminating against Jews. Restaurants serve beef, despite offending those of the Hindu faith. Legally these are not grounds for religious discrimination. Neither is allow dogs in the workplace... and other companies have done the same for decades.
Well, I hope your startup idea isn't this:

http://www.daemonology.net/blog/2006-09-13-encrypted-backup....

This post also shows a phenomenal misunderstanding of what it takes to create a successful software startup:

http://www.daemonology.net/blog/2007-06-21-think-before-codi...
Actually, I thought this was a hilarious article. I love maddox. I check his site for updates constantly.

I just didn't think that this was particularly appropriate for this particular forum, that's all.
That has to be the comeback of all time.
One personal tip, you come off as an arrogant prick because of your "I am holier than thou" statements. These kind of behaviors will drastically reduce the amount of people that will want to work with you or help you.

I work with MDs and PhDs on a daily basis, analyzing their technologies for their start up companies. By far, I am much more willing to put in extra hours for friendly people than those that cram down my throat how much better they are than me.
HAHAHA! Awesome.
Friend, if you don't mind taking more of Paul's advice, read "How to Win Friends and Influence People" by Dale Carnegie. That, combined with your impressive record, will make you an unstoppable force at whatever you pursue.

http://www.abebooks.com/servlet/SearchResults?bx=on&sts=...
There is a Boston Start-up Meetup Group that meets every month. The focus is on anything software/webapp.
http://finance.groups.yahoo.com/group/boston-startup-meetup/
That is my startup idea. I don't want to take this thread even more off-topic (if that's even possible), but please feel free to contact me at the address in that first post to explain why you think it is a bad idea.
Again you're right, and I'm sorry about the attitude. Over the past year I've started to get rather defensive when people have suggested that I'm wasting my time on this project...
Focus on the core: the most important part of the application - Jeffrey Palermo [MVP]
Speaking of "Hungry":

> If you must live on a diet of Lean Cuisine, try the Swedish meatballs.

I don't understand this part. Eating healthy isn't much more expensive than eating poorly. Why sacrifice your health and risk your mental abilities by eating crap? That seems like a stupid investment.

If you want to cut back on food bills, lose the energy drinks... especially Red Bull. That's my personal experience.

Also, fruits, vegetables, breads, nuts... these things can be eaten at your desk while you work.
"The equity value is not just based on "here's some money for X cents on the dollar" X it has to go beyond that."

Uh, no it doesn't. Equity has value, and so does what you get when you give up value. When you're like for like, emotional attachment doesn't make sense.
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This whole thread is hilarious.
If you're just gunning for maximum return on investment, note that (in my experience) you get the most protein per dollar from breadcrumbs, and the most calories per dollar from coconut milk. If you're going to be cheap and unhealthy, be that way sensibly.
we're in a similar space -- http://www.getdropbox.com (and part of the yc summer 07 program) basically, sync and backup done right (but for windows and os x). i had the same frustrations as you with existing solutions.

let me know if it's something you're interested in, or if you want to chat about it sometime.

drew (at getdropbox.com)
I'd heard of it before, but I really discovered it when we were implementing it for microPledge. Anyway, I signed up with MyOpenID -- and yeah, I'll use it for sign-ups from now on (if the website in question supports it).
Livejournal is. Ficlets.com is. Basecamp is. So are many smaller sites. https://www.myopenid.com/directory has a list.

And I use it on ficlets and basecamp. (I already have a paid LJ account; in fact, my LJ account is my openid.)
You're a gentleman and a scholar, Alex, and you've got my vote.
How easy is it to spot that openid is supported? If you have to click 'login', and then spot a tiny text link that says 'login with openid', of course not many people are going to sign up with openid.

But if you put it right next to the register link instead, EVERYWHERE that there's a register link, and at the same size, and have the openid page explain that the user may already have an openid (from a Livejournal or AIM account, et cetera), I bet you'd see more users.
We are (or rather Robert Morris is) working now on adding support for it on news.yc.