Silicon valley is a lot larger than just web start-ups. If and when YC launches something that eventually turns in to the next google or something on that scale it will have a real impact, but for now the big winners have not been created using the YC model.
Actually, if there was one tension point underlying the conference, it had to do with the impact of this model versus the older VC model that encouraged companies to "swing for the fences." There undoubtedly has been a decided shift in typical early-stage funding during the past two years. The VCs, which once controlled all the key activity, are now in a position of having uncertain deal flow, while the angel side of things is plainly booming. Of course, the biggest winners likely will emerge from the VC side but even then angels are typically heavily involved as co-investors in those deals as well.
Google _was_ a web startup, and there's no reason that it couldn't have come out of yc. Also, a fair number of yc startups are not "web startups", whatever that means. (do you have to make hardware to not be a "web startup"?)
The YC model is great but I think it's going to continue to be a place that mainly turns out companies that investors like, rather than what is a hit with the public at large.
Why? Because of Farmville. Because no one in their right mind could have predicted Farmville's success. And that's the learning. If you're good, you might be able to guess singles and doubles, but no one can guess the homeruns.
I think YC is great. As long as the risk in early stage businesses is misvalued by the market, it doesn't really matter if they hit singles, doubles or home runs.
Incidentally, Farmville was not a crazy bet -- the game was a clone of a Chinese casual game called Happy Farm that was seeing insane traction in China. The US innovation was hooking it up to the non-transparent mobile subscription services that Zenga got nailed for later.
It's one of the more successful ones but for all the hype I haven't signed up and neither has anybody that I know outside of HN. Now I'm probably not the target audience anyway so that's no surprise, but I really can't see something like dropbox being the next google.
They have a business model that requires payment for anything but the most trivial uses (which is great, they'll be profitable, but it is a definite brake on growth). Hard to do that soft of thing without charging for it, and as soon as the price goes over $0 the market is much smaller.
It's a much bigger decision to pay at all than it is to pay $10 or $20.
It sounds to me like you are quoting verbatim something Chris Anderson might say.
Software companies in the valley have gotten along just fine charging for services and software with only giving users a token free trial. Microsoft and Oracle are doing just fine.
If you want to look at the big players on the web, there are far more public companies charging for services then there are whose main product is free. Akamai, Sales Force, Amazon, Ebay, NetFlix, Omniture (now adobe) I could go on and on.
When talking about public companies who give their primary service away for free, I can only think of 4examples with market caps over a billion: Google, Yahoo, IACI, and sometimes Monster.
There is a lot of hype about free, thanks especially to Chris Anderson's highly accessible book and influence, but if you look at the results and who really made it big (not 100 million dollar exit big, but multi billion dollar market cap big), starting with a business model where you charge your customers is the best way to achieve that.
Data syncing is a huge problem and its need will only expand. Dropbox is at the forefront of this (i.e. when I think of search -> google, shopping -> amazon, online storage -> dropbox).
The consumer space is growing (more devices and users) and the enterprise space is wide open. I can see Dropbox going after Sharepoint et al.
You're right, it might not be enough to be the next google but they might come close.
With the cost of storage being what it is I seriously question any business model that tries to sell you a plan based on the size of the storage on the other end of a wire.
You're basically setting yourself up to have a 'gmail' pulled on your 'hotmail'.
Why not extract value before that happens? There is always going to be the risk of a new competitor operating below costs, but money in the bank is the best way to fight that.
PS: Nobody things the best way to beat gmail is to offer 1 TB email accounts. Email fell behind the HW curve but as long as Dropbox stays reasonably close to actual costs nobody is going to dramatically undercut them.
Okay, this is just a counter-anecdote, but I know tons of people that are using Dropbox. It's really big and getting rapidly bigger in academia, which is how I first found out about it.
Last week I had to send a PDF to one of my students (an undergrad philosophy major) and suggested dropbox, and she already had a public folder set up.
Students are a big user group. The allure of accessing your school related files from anywhere (web access is a big plus) is quite big. They're probably not that lucrative, though.
I could not disagree with you more - my mother has a dropbox account (and she is _not_ technical), so does my brother, my grandmother (though only because I set it up for her) and pretty much every person I know who is working on anything related to computers.
Opponents of "Pay & Spray" will have a field day with Ron Conway's quote:
Archangel Ron Conway, who said he’s put money into 500 companies over the last 12 years, kicked off the day with an optimistic and generous recruiting speech: He said he believes every “entrepreneur who has the guts to start a company” should get funding, and added “I believe the more angels we have in Silicon Valley the better.”
>Besides, acquisitions of young companies tend to be better for everyone involved, as compared to later-stage deals, said Geoff Ralston, who recently sold Lala to Apple. Integrations of billion-dollar companies almost never work, he said.
If there was no acquisition of LaLa, we'd all be listening to music for 10 cents a track on our iPhones and Androids. Hopefully they come up with something awesome at Apple.
A rolling deal is when angels keep showing up over time and send you more money, rather than you setting a fixed date saying "on August 1st, I need 10 angels with $100,000 each, or my company is bankrupt".
I remember a comment by google people, they said something in the lines that they prefer not to employee many valuable people because they being out are better for IT progress.
If YCombinator culture is too strong, it may damage the necessary diversity in people conception of a startup.
A good group of people need a lot of small differents groups in order to explore the landscape of startup opportunities. So let's hope that YHacker influence doesn't grow to excessive influence.
Who knows, maybe one day.