It's not just a return for the VCs, but all the contributors that gave their money to the VCs to invest, like your university's endowment fund, retirement and pension funds, etc.
Who cares if it's bad for VCs. They already get paid over 200k+ in carry every year for over 10 years. They are also not investing their own personal money.
The point is that if all startups behave like that, thr VC business model doesn't work out, will vanish, we will all have to stop playing the startup game since there is no one providing that kind of funding anymore.
No it won't. One case in either direction means anything.
The game is that VCs will adjust, then founders. Then VCs. Then founders ad nauseam forever. This is just one small piece of a giant play being performed by many in different ways every day.
I also think another factor is over the past 10 years, there has more investor money thrown at early stage startups. That just means that it harder for companies to break out. Due to that fact I am not sure accelerators even YC will provide much more advantages.
I think they already had revenue and they were profitable before taking the money https://www.inc.com/profile/messagebird. Maybe their growth in terms of revenue and profits, really got investors excited. However they do have to payout telecoms so that revenue may not mean too much.
I am curious why they decided to join YC? Was it a ego thing. What proof do they have that their service is better than Twilio?
Oracle is not going to win, not matter what they do. Oracle is built on selling costly products and services versus operating in a low margin environment.
1.) Amazon has a much higher bar for hiring talent, than Oracle does.
2.) Amazon is internally use to being frugal, and so pricing wars are not going to hurt them. Oracle is use to charging a arm and a leg for their products.
3.) Amazon shareholders are already use to the company not being profitable, where as Oracle shareholders are not.
My favorite memory from a former employer was eavesdropping on a call between our CIO and our Oracle representative. Oracle had told us we only needed to pay for production environments. Then, during a license audit, they claimed never to have said that and wanted to charge for all environments.
I never got to hear the Oracle rep's side of the phone conversation, but everyone within 50 feet of the CIO's office got to hear his.
"Fine! You want to fuck me on these licenses! Go right ahead! And then I'll turn around and fuck you by throwing you out of our datacenter!"
Good that it was possible for CIO throw away Oracle dependency just like that. Normally Oracle replacement with alternatives in big companies would be in order of decade not months or years. In those kind of places Oracle people would treat these threats as routine business discussion.
The reason for this is the way in which the db is embedded throughout the organisation. Many years of dev being done on oracle specific technologies with business logic tied up in things like plsql procs.
Organisations do not realise the risk they face with closed source software. You are basically at the mercy of your vendor.
I believe any a CTO/CIO worth their salt would require motivation on why to use proprietary software vs open source. Is there absolutely no alternative?
There's a trade-off being made by picking proprietary software vs. open source and it's entirely about control, strange as it might sound. A good CTO/CIO has some measure of power over their vendors and can boss them around a bit like they're an employee. If the primary account manager is golf buddies with him, endangering the relationship with arm-twisting on either part isn't just business it's personal and can be viewed in some respects as stable. With open source software, you don't really have anyone you can hang over a fire that holds the kind of political weight - you don't want to have to talk to every single open source project lead or something as a super busy F500 C-level, you want less throats to choke and that your hands are big enough to wrap around them. For open source, the trend has somewhat shifted into each major open source product having a corresponding company offering the full support cycle like any other closed source vendor (Red Hat, Chef, Cloudera, Sqrrl, Puppet, etc.) so things are looking better for hybridized open source efforts today as they grow, but without some consolidation they're not going to be a full enterprise "solution" due to most of them being too specific in applications for their technologies.
As an engineer, I like to think of this primarily social problem like trying to focus a huge, distributed system architecture upon as few languages and platforms as possible. With most enterprises having grown through dozens, maybe hundreds of mergers they have a huge zoo of different stuff to support culturally. You could try integration approaches like message buses and such, but there's a lot of people overhead involved there and it gets really ugly when everyone disagrees upon the message bus (and in sufficiently large groups, conflict is inevitable).
I don't think this is a really an open vs closed source question. If anything, long term you might be better off on a closed source solution if you don't mind paying for it. To many open source projects die because something cooler comes along and the maintainers lose interest. Then you end up being the maintainer of some piece of dead open source history.
Really if your worried about becoming attached to a particular technology, you should choose from the beginning to build a heterogeneous environment, and require all your in house development to adhere. In the beginning it might be painful to assure that your software stack runs on two different databases/OSs/ec, but once the abstractions are built up it will likely result in a more stable environment, and ease porting to a third should one of your original choices die.
This sounds like you're talking about abstracting and decoupling components. Building systems to accommodate heterogeneous environments early is akin to starting a project with microservices instead of a monolith - it's overscoping probably. Furthermore, it's fallacious to say that all software should fit some new standards of environments when there's no scenario for it all (the COBOL code that's for accounting doesn't have anything to do with the products your company sells probably).
This then raises issues of compatibility with your customer's environments. The configuration matrix that you'd need to test is tedious (read: costly) in traditional software releases compared to SaaS where you're free to make a lot of decisions independent of your customer and not everything can be automated (anyone that's deployed automated tests against TN3270 terminals with a lukewarm IQ QA department is right to challenge this). Then there's longevity. What happens when your biggest paying customer wants you to stay on IE 8 until 2025 (not an exaggeration)? Want to create yet another customer-specific branch? Eventually you wind up needing a test environment that matches exactly what that customer has and paying contractors to maintain that dead-end tech stack and doing that for every customer. That is quite common and also quite costly but not needing much talent, so the washed up maintenance engineers go here at less than mediocre compensation to cut costs. That's zombie software for you - the soul and spirit of engineers are gone and its corpse is animated by money by a cruel master that cares little for its past life.
It's not so much that the CIO/CTO wants the ability to call up a vendor, or have his employees call up a vendor for support. What a CIO/CTO wants is the ability to tell his CEO that "Yeah, we're having a problem with our database, but it's Oracle so we're good. I'm kicking the vendor's ass, but he's going to make things right on our next renewal." It's all about plausible deniability, and goes back to the days of "Nobody got fired for buying IBM."
On 3) have you looked at the profitability of AWS? It's ridiculously profitable. I just checked their latest 10K, and I see for 2015 their total AWS numbers were $1.9B operating income on $7.9B revenue with 70% year over year revenue growth.
> 2.) Amazon is internally use to being frugal, and so pricing wars are not going to hurt them. Oracle is use to charging a arm and a leg for their products.
They may be used to being frugal, but that is not at all reflected in AWS pricing, which is ridiculously high across the board.
Operating infrastructure costs what it costs. Amazon are paying the same per Watt of electricity as anyone else. They are paying the same per sq foot of DC. They are famous for lowballing salaries but they do need to remain in in the ballpark at least. I don't mean this as a criticism necessarily but it is what it is and folks need to understand it.
Operating infrastructure costs what it costs, and it is a tiny fraction of what Amazon prices it at.
I make a lot of my income cutting peoples infrastructure costs by optimising their setups, and a lot of it involves moving people off AWS (I also move people onto AWS when they have needs that are actually best met there - there are lots of AWS services I love, but they are expensive) to save money. I can generally price my services at a few months worth of their savings.
Competing with AWS on price isn't the hard part. The challenge is the amount of people that either don't care, or think that AWS is cheap without having done realistic comparisons.
But for Oracle, those are exactly the type of customers they have built their entire business around selling to.
It's an interesting question. In my experience people often have this idea that AWS can scale infinitely, and get shocked when they are faced with the AWS limits ("but I thought we could just spin up 200 instances, what do you mean we have to ask them to increase limits?"), and I've actually had errors from the EC2 api telling us there were no instances of a given instance type available (one of the larger/more unusual instance types, in one of the smaller regions).
But their margins should be large enough, and have been for so many years, that they should have been able to take that into account and adjust expansion accordingly.
I'm more inclined to think that they have simply decided to milk it while they can. I rarely meet people who have any clue what their infrastructure choices actually cost them and what they would pay elsewhere, and I regularly have conversations about how much people believe they'd save by moving to/from provider X where it transpires that said person hasn't even tried costing it out but are certain they'll save money. I also regularly talk to IT departments that have no kind of budget or forecasting in place for their hosting requirements. The state of budgeting for server infrastructure is simply shocking. In that kind of environment, if you price based on actual cost, rather than based on whether or not people believe you're expensive, you're leaving money on the table.
Interesting observation, though it raises the obvious responses:
1. What's constraining AWS's growth capacity? Isn't it simply a matter of stamping out AZs and DCs?
2. Why would Amazone create a pricing structure which encourages new entrants into the field? Contrast local retail in which defunct firms continue to sit on, and extend, real-estate leases, strictly to prevent other companies from growing into the market they've abandoned. See Dominicks / Anderson grocery stores in the Chicago area, in which seventy-two stores are being leased, at a cost of ~$1m/year, each, to prevent competitors from occupying the space:
(This works in part because rent is only a small part of the operational cost of a grocery store: electric power, labour, maintenance, and of course, groceries, are required if you're actually utilising the space.)
> Why would Amazone create a pricing structure which encourages new entrants into the field?
Because the primary entrant threats were not going to be dissuaded by low price competition. Specifically Microsoft and Google. Both are hyper cash and income rich and under no circumstances did they want to cede the cloud computing universe to Amazon. Fundamentally it's the exact same reason AWS stopped trying to compete so intensely on price cuts quite a while back now.
Put another way, if you're going up against Google, Microsoft, IBM, Oracle - speaking hypothetically it's better to own 1/3 of the market and print significant operating income, than to own 1/2 of the market and barely make money. That operating income is responsible for roughly doubling the value of Amazon's share price (the stock took off like a rocket after it became clear AWS was going to be a cash-cow).
"What keeps this going is that each VC thinks they're better than average"
Another thing keeps them going is that the VC Partners get a nice salary for 10 years. Many of them will make more money than many C-level executives. I don't see a downside in being a VC.
I am always curious about who are the LPs are and the slide deck KP used to raise more money. What was the deciding factor in the LP committing more money. Is it because there are no other options for LPs to make a decent return (close to zero interest rates).
"His self-funded experiment could end with Hotz humbly going back to knock on Google’s door for a job."
The biggest thing here IMO is this is self-funded. Any startup trying to do what he is doing in this environment would have raised $50 Million, hired 100's of engineers from top notch schools, become accepted in YC, and have Marc Andreessen, Paul Graham, Sam Altman and all singing their praises.
Could not help thinking about the stark contrast between Hotz and the Theranos "entrepreneur":
a. self-funded vs. VC friend funded
b. demo-ing the product (try it and 'feel' it) early on vs. hiding behind a ton of marketing legalese
The text that isn't overlaying images is terrible too. It's too thin for subpixel rendering to look decent. There's not enough contrast for viewing on a TN LCD panel unless it's in the middle of the screen.
Oi. This is not the kind of thing I want kickstarted.
I'd prefer my autonomous cars to have gone through insane amounts of testing, regulation, etc. This is just too new of a field, and the amount of edge cases you have to handle is practically infinite.
While I understand where you're coming from, and even feel emotionally invested in the idea of bootstrapping, objectively speaking, it's a bad decision to stay self-funded. It is, after all, a business, and if you can accelerate your business' growth 100x by taking on some very smart outside investors and hire very smart people, why wouldn't you?
You might not because the goals of a founder and an investor are different.
Investors know that their returns are generated by a handful of super-successful companies. And so they have a natural pressure to "swing for the fences".
Founders have a tremendous amount tied up in THIS company, and are naturally risk-adverse.
So you get conflicts like the following. There is an initiative which has 20% chance of losing everything, but could double how much you make. Investors will always want to go for it. Founders reasonably may not.
A typical woodhead's thought. "Accelerate your business's growth". Hahaha. Hard things have to be done solo because explaining to others is slowwwwwwww.
Hard things have to be done solo because explaining to others is slowwwwwwww.
A million times this. I never really understood how hard it was to explain a (in my mind) simple new technology to the lay person until I had to do it. This is even after spending years as a technical briefer for high power executives.
What I was meaning is actually not about external investors or so. My point is, sometimes even putting more equally competent technical collaborators won't work; it's like digging a tunnel: the working surface is only that wide, an extra worker can do little more than staring at the working man's ass.
Because if all of that will distract you from actually developing the product. Granted this won't work for most people, but if you're extremely talented like geohot then it may not be a bad call.
Because creating a self-driving car is an extremely creativity-intensive exercise that demands "smartness"... but smartness doesn't add linearly (or, I could posit even monotonically). If 1 smart guy can produce 1 self-driving car in say 6 months, it doesn't mean 2 smart guys can produce a self-driving in 3 months. Once you have a bunch of people, 2nd order and third order interactions between us get complicated and managing that becomes its own time/money-sink.
As for money, yes, it can accelerate growth in its first-order effect; but it also induces stress and so threatens early exhaustion of your other precious resource: personal motivation.
So, as a crack-shot programmer, if you know with 90% certainty you can crank out a self-driving car in 6 months by yourself or fail, but only 20% certainty you can arrange a cohesive team with someone else's money to crank out a car in 1 month or fail (and alienate your team, and ruin your credit)... I would advise taking the 6 months route. Patience is a virtue and sometimes it's better not buying into every pot of snake-oil the SV hype machine wants to sell us.
Well, Hotz did state that, “The truth is that work as we know it in its modern form has not been around that long, and I kind of want to use AI to abolish it. I want to take everyone’s jobs. Most people would be happy with that, especially the ones who don’t like their jobs. Let’s free them of mental tedium and push that to machines. In the next 10 years, you’ll see a big segment of the human labor force fall away. In 25 years, AI will be able to do almost everything a human can do. The last people with jobs will be AI programmers.”
What interests me about your argument is the assumption that the "poor starving" will just sit by and passively accept that.
The reason we don't have an insurrection on our hands now about wealth disparity is that while the wealth of the super wealthy has accelerated hugely so has the general living standard of the poor, if (when) the jobs go away that will no longer be the case and then you are talking about a brutal escalation into a full insurrection and while the technology and wealth will be on one side, the last 15 years in the middle east has shown what committed people with pickups and AK's can do against an on-paper massively superior opponent.
I just hope the super wealthy are smart enough to see this coming and avoid it, it would be spectacularly brutal.
Once our entire agricultural system (here in the UK) was dependent on manual farm labourers, now we grow 60% of the calories we consume with 1.6% of the workforce.
> It's a nice dream, but the idea of AI and robots doing dishes, picking strawberries, washing cars, cooking meals will never happen.
If something can be automated at a lower cost than paying wages it eventually will be, automation is coming (arguably has been here since the industrial revolution) and it's not stopped yet.
I am sure he may have something up his sleeve. But how exactly is Rama going to compete, are they going to acquire real infrastructure or build cell sites? It will be pretty costly to build something from the ground up or to acquire customers from Verizon or AT&T, just ask T-mobile and Sprint.
Unless they have some game changing wireless technology than I don't see it happening and investors may as well put their money down a black hole.
BI says "Part of his plan involves installing microcells in customer's homes to blanket the nation, but also making it as easy as buying a cellphone to sign up for it. Another key to the plan is a portfolio of zero-rated apps that won't cut into your data, Palihapitiya said."
^That does not sound like a very good plan. Carriers like AT&T and T-mobile already have microcell options, and most people won't opt for it especially if other people get use the microcell at the cost of the person's personal bandwidth with their ISP.
What is Zero-rated apps? Isn't it similar to what T-mobile is already doing with their video and audio streaming; whitelisting Apps that will not count against data. Most carriers also have WIFI calling.
That auction that he wants to participate in, isn't that for low band spectrum like 600Mhz. That is good of extending coverage but will not increase your download speeds. Carriers like to have both low band and high band.
> What is Zero-rated apps? Isn't it similar to what T-mobile is already doing with their video and audio streaming; whitelisting Apps that will not count against data.
I am seeing a lot of sentiment on HN that feels sorry for VCs. VC already get paid above 200k/year; no need to feel sorry for them.
People should feel sorry for the founders & the employees who did all the work. Now if they get liquidation, then that is good.