And it is very stupid to let valuation decide which startups you invest in
This is only true if the math is hard. If the math were trivial, people would just do the math. The math is hard. Therefore math is of no use/irrelevant/stupid. Does the last sentence follow? Not obviously.
PG wrote a nice essay on why the math is hard.
There is some argument that the complexity can be simplified at higher levels of abstraction. There is another argument that the goal of a VC is to make the math work at a higher level of abstraction. There is empirical evidence that both arguments are pretty good.
So, its not unreasonable to (1) agree with PG that the maths are hard; but (2) disagree we should dis-regard maths altogether...so we don't throw the baby out with the bathwater.
[Addendum: YC invests at a fixed valuation in its companies, wich are selected via a competitive admission process. This is a logical approach if you believe the math is hard on a granular basis, but is more tractavle at higher level of abstraction. The co-hort is thus the unit of investment, not the company.]
This is sophistry. Some math is hard. Some is very easy. The math you're referring to is hard. The math of "what to do if startup valuations vary multiple orders of magnitudes less than startup outcomes" is very easy.
This point is so obvious that I find it hard to believe you wrote the above comment in good faith.
The math of "what to do if startup valuations vary multiple orders of magnitudes less than startup outcomes" is very easy.
If "what to do" was "very easy", everybody would do "it". But that doesn't happen. Investors are not all created equal, and investor returns show massive variance (ie, they are not observed to be uniform.) So something is very wrong with your approach/level of abstraction.[1]
You might want to also read this comment from paulsutter that PG responded to, if you think this is a personal attack on you.
This is only true if the math is hard. If the math were trivial, people would just do the math. The math is hard. Therefore math is of no use/irrelevant/stupid. Does the last sentence follow? Not obviously.
PG wrote a nice essay on why the math is hard.
There is some argument that the complexity can be simplified at higher levels of abstraction. There is another argument that the goal of a VC is to make the math work at a higher level of abstraction. There is empirical evidence that both arguments are pretty good.
So, its not unreasonable to (1) agree with PG that the maths are hard; but (2) disagree we should dis-regard maths altogether...so we don't throw the baby out with the bathwater.
[Addendum: YC invests at a fixed valuation in its companies, wich are selected via a competitive admission process. This is a logical approach if you believe the math is hard on a granular basis, but is more tractavle at higher level of abstraction. The co-hort is thus the unit of investment, not the company.]