Could I have passed muster with YC?

Paul Graham describes what Y-Combinator looks for in business founders, and he explains why you become a billionaire by building a great product, not by being a bad person. Pointer from Tyler Cowen.

I would bet that the chances that you are a bad, exploitative person are much less if you work at a profit-seeking firm than at a non-profit. Within a profit-seeking firm, I would also bet that the chances that you are a bad, exploitative person are much less if you have a stake in the enterprise as a whole than if you are highly compensated based on individual performance. To be clear, what I am saying is that the non-profit sector is more likely to unintentionally select for bad people than is the for-profit sector. And within the for-profit sector, high compensation without skin in the overall game is more likely to unintentionally select for bad people than is an ownership stake in the overall enterprise.

On the topic of what YC looks for, how would I have done in 1994, when I first started Homefair?

Graham writes,

People’s motives for starting startups are usually mixed. They’re usually doing it from some combination of the desire to make money, the desire to seem cool, genuine interest in the problem, and unwillingness to work for someone else.

He prefers the latter motivations, and I had them. For me, it went beyond just an unwillingness to work for someone else. It was a desire to prove that the people for whom I had been working had wronged me. They said I had ideas but I could not execute them. But the way I saw it, the reason I could not execute was that they wouldn’t let me try. To execute, I had to fight the corporate bureaucracy to get approval. With the Internet, I saw an opportunity to skip that step and just get going.

In 1994, I had dreams of really changing the homebuying process and/or the mortgage lending process. Those are not ridiculous dreams to have. But after a while I was more willing to succeed by working with the existing ecosystem than to fail trying to displace it.

So my motivation died out without ever getting anywhere close to the billionaire stage. One reason was that an opportunity to sell out came in 1999, and that was the right time to sell. In hindsight, for sure. But even at the time, my partners and I had a lot of foreboding about all the baloney sandwich going on with the Dotcom boom of that era.

Graham writes,

The crucial feature of the initial market is that it exist. That may seem like an obvious point, but the lack of it is the biggest flaw in most startup ideas.

In April of 1994, the only honest answer for me would have been to say that there was no market for information about homes and mortgages on the Internet. I was “living in the future” a bit too much. As one of the first curious visitors to my site put it, “Congratulations. You’ve set up your lemonade stand on the moon. Now you just have to wait for the astronauts to get there.”

When the Web started to go mainstream, I had partners, and we pretty quickly figured out what people wanted and how to give it to them. So I would say that in 1996 I could have satisfied YC on that score.

Another question YC asks is what could go wrong. I think I could have handled that question–I surely would not have been tongue-tied. For example, for a long time, I was asking what if Microsoft never includes a TCP stack in Windows? (they finally did in August of 1995). The only thing more threatening than the Web not going mainstream was having it go mainstream and watch well-heeled competitors sprout up. Ironically, Microsoft HomeAdvisor was probably the competitor I admired the most, but fortunately Seattle never put its heart into that project.