As someone who has been a huge believer in CE and the theory of change, I’m honestly just not really seeing it for this.
A few thoughts:
I am a buyer that a group (CE) can identify numerous very high value and high-impact nonprofit organization ideas (because there is not really a robust “market” for doing so), and I think that this is the major innovation of CE. But I am very skeptical that the same can be said of for-profit ideas. If you are expecting participants to bring their own ideas, I’m not sure the value proposition is really there for the program.
I’m skeptical that investing resources into trying to create successful entrepreneurs that are EA-aligned is more effective than just trying to convince existing successful entrepreneurs to become EAs.
Your assumption that the “average chance of a graduate of the Founding to Give program getting into YC of 40%” feels WILDLY optimistic to me. YC and this program may bring in very strong applicants along many dimensions, but I actually think the overlap between those interested in EA and founding unicorns is weak. In addition, the “not funding a company that will make the world worse” constraint on this program likely makes unicorn status substantially less likely, and YC doesn’t really have that constraint. I think it would be helpful to re-estimate the model with a much lower % on this (5%,10%?).
Hi Kyle, thanks a lot for your thoughtful comments. I think you highlighted some of the key assumptions this program hinges on. Here are some thoughts on the points you mentioned.
I think you’re correct in saying that idea generation in the for-profit sector is more efficient than in the nonprofit sector, as feedback loops are both shorter and stronger. In fact, we don’t plan to do a lot of research into the specific ideas, at least in the first instance, but rather support participants in ideation and validation. The idea you start with seems to be regarded as less important in this space (ideas are cheap, as the saying goes) and companies will pivot in their quest for product-market fit.
One of the main value add of the current incubation program, which applies to this one as well, is matching participants with a talented, complementary and value-aligned co-founder. This would probably be pretty hard for a single person to do, going through thousands of applications, picking the top 15 or so and spending 4-5 weeks working with them to find the best match. The co-founders are often regarded as the chief ingredient of a startup, and I think CE has a solid know-how in this domain. Moreover, a lot of incubators look for projects/companies a bit further down the line (post-cofounder and post-idea), and this program aims to fill the gap between zero and this stage.
I think both paths you are describing are plausible, and notably, the second one of convincing entrepreneurs to donate has already been validated by Founders Pledge in a sense. Creating successful entrepreneurs might not be easy for sure, but convincing people to buy into effective donations might be more challenging than what people expect. Founders Pledge did mention that it is hard to change what people care about, and according to their website, only about a quarter of the donations by their members go to what we would call effective charities.
One key advantage of working with EAs or EA-adjacent people at this early stage is that we could expect considerably higher pledged percentages and donation effectiveness. Of course, we need to balance this with the lower number of companies of this approach compared to the Founders Pledge on, but I think both approaches have their merits.
Yes, 40% might sound a bitoptimistic, at least in the first instance. But I don’t think it is totally unrealistic that we can optimize both the selection process and the program for what YC is looking for and that we can have a substantially higher conversion ratio than the base rate. The CE vetting process is very selective and usually only about 1% get through, which already applies a lot of filtering. Moreover, YC is only one of many incubators, and if a company doesn’t make it into YC, it might qualify for other incubators.
Indeed, I think you are right that by adding constraints to the ideas we are considering, we are somewhat reducing our chances. However, by looking at the list of YC’s top companies, not a lot struck me as blatantly net negative. My sense is that most of those companies have a neutral direct impact (using the EA definition of impact), and some even have plausible positive flow-through effects (like Wave). Of course, assessing flow-through effects is pretty hard, so all this is to be taken with a grain of salt.
There you have it, here are some thoughts. I hope that they can shed some light on some of the rationales. This program is definitely hits-based, but I don’t dislike our chances and I think we have a pretty good shot. And thanks for your support!
Nice one Kyle, I begrudgingly largely agree with you, and like you I think CE are incredible.
I lije that they have put out that 40 percent number though, as they can now measure success easily. Even though like you I don’t quite buy the value proposition here, I almost trust CE that they have done their research well and are seeing upside here that we can’t.
One important point they make though is that they they only really need one incubated business to go moderately big in three or four rounds of this to make it all make sense.
In addition, the “not funding a company that will make the world worse” constraint on this program likely makes unicorn status substantially less likely
Citation needed on this—I’m not sure what net-bad unicorns you’re thinking of (and I’d be interested to know), but I think at the outset they probably mostly looked like not-making-the-world-worse ideas and by the time they’re getting to unicorn status the original incubator has very little influence over what they do.
I actually think the overlap between those interested in EA and founding unicorns is weak
Perhaps, although as the post says you don’t need to found a unicorn to have a very promising exit and give a large amount to charity. I’m one of the people who became a software engineer back when 80K recommended it as a promising career path. I think more of us should start EtG startups—and suspect there are many like me who don’t feel themselves a good fit for direct work (or just like tech) and would make good founders.
I think that promoting startups which offer what CE calls “flowthrough effects” is probably a large part of CE’s value add here, so it would be nice if some of the analysis of fields and the potential for impact within them looked a little more developed in future. I can see some value in EA founder-matching, but I think the existing startup funding ecosystem provides a lot of information on how to get into accelerators and what a high growth business model looks like etc already.
Despite sharing others’ scepticism about the 40% into YC and implied unicorn exit projections, I can see the numbers working purely because I think the 50% of founder share value CE is asking to be donated will tend to work out as a greater percentage of share value than a typical accelerator or angel takes (and so even a modest acquihire potentially represents ~$1m to effective charity, for relatively little initial input).
But I think it’s a little disappointing that CE seems to be writing off the “double bottom line” space in between pure charity and VC-funded moonshots. It’s true that those sort of companies don’t tend to become as big as the outlying VC-funded successes, but that’s not really the point: since they’re not asking for philanthropic capital to sustain them and can generate recurring moderately positive impact, they’re still potentially a very efficient use of their founders time and initial resource input. Some of them operate in niches much larger than some of the charities CE is incubating too, and whilst “ethics” isn’t a big “buy me” signal to VCs and acquirers, it can be to consumers. I’d have thought CE’s focus on quantifying impact worked well in this space too.
If CE is looking to broaden what it incubates goals and work with the for-profit sector, it would also be interesting to see what it could do with corporate partners with some of its purely impact driven ideas too: in particular the SMS-reminder ideas feel like something that could be advanced most effectively in partnership with a mobile telecoms provider
As someone who has been a huge believer in CE and the theory of change, I’m honestly just not really seeing it for this.
A few thoughts:
I am a buyer that a group (CE) can identify numerous very high value and high-impact nonprofit organization ideas (because there is not really a robust “market” for doing so), and I think that this is the major innovation of CE. But I am very skeptical that the same can be said of for-profit ideas. If you are expecting participants to bring their own ideas, I’m not sure the value proposition is really there for the program.
I’m skeptical that investing resources into trying to create successful entrepreneurs that are EA-aligned is more effective than just trying to convince existing successful entrepreneurs to become EAs.
Your assumption that the “average chance of a graduate of the Founding to Give program getting into YC of 40%” feels WILDLY optimistic to me. YC and this program may bring in very strong applicants along many dimensions, but I actually think the overlap between those interested in EA and founding unicorns is weak. In addition, the “not funding a company that will make the world worse” constraint on this program likely makes unicorn status substantially less likely, and YC doesn’t really have that constraint. I think it would be helpful to re-estimate the model with a much lower % on this (5%,10%?).
All that said, I am rooting for you!
Hi Kyle, thanks a lot for your thoughtful comments. I think you highlighted some of the key assumptions this program hinges on. Here are some thoughts on the points you mentioned.
I think you’re correct in saying that idea generation in the for-profit sector is more efficient than in the nonprofit sector, as feedback loops are both shorter and stronger. In fact, we don’t plan to do a lot of research into the specific ideas, at least in the first instance, but rather support participants in ideation and validation. The idea you start with seems to be regarded as less important in this space (ideas are cheap, as the saying goes) and companies will pivot in their quest for product-market fit.
One of the main value add of the current incubation program, which applies to this one as well, is matching participants with a talented, complementary and value-aligned co-founder. This would probably be pretty hard for a single person to do, going through thousands of applications, picking the top 15 or so and spending 4-5 weeks working with them to find the best match. The co-founders are often regarded as the chief ingredient of a startup, and I think CE has a solid know-how in this domain. Moreover, a lot of incubators look for projects/companies a bit further down the line (post-cofounder and post-idea), and this program aims to fill the gap between zero and this stage.
I think both paths you are describing are plausible, and notably, the second one of convincing entrepreneurs to donate has already been validated by Founders Pledge in a sense. Creating successful entrepreneurs might not be easy for sure, but convincing people to buy into effective donations might be more challenging than what people expect. Founders Pledge did mention that it is hard to change what people care about, and according to their website, only about a quarter of the donations by their members go to what we would call effective charities.
One key advantage of working with EAs or EA-adjacent people at this early stage is that we could expect considerably higher pledged percentages and donation effectiveness. Of course, we need to balance this with the lower number of companies of this approach compared to the Founders Pledge on, but I think both approaches have their merits.
Yes, 40% might sound a bitoptimistic, at least in the first instance. But I don’t think it is totally unrealistic that we can optimize both the selection process and the program for what YC is looking for and that we can have a substantially higher conversion ratio than the base rate. The CE vetting process is very selective and usually only about 1% get through, which already applies a lot of filtering. Moreover, YC is only one of many incubators, and if a company doesn’t make it into YC, it might qualify for other incubators.
Indeed, I think you are right that by adding constraints to the ideas we are considering, we are somewhat reducing our chances. However, by looking at the list of YC’s top companies, not a lot struck me as blatantly net negative. My sense is that most of those companies have a neutral direct impact (using the EA definition of impact), and some even have plausible positive flow-through effects (like Wave). Of course, assessing flow-through effects is pretty hard, so all this is to be taken with a grain of salt.
There you have it, here are some thoughts. I hope that they can shed some light on some of the rationales. This program is definitely hits-based, but I don’t dislike our chances and I think we have a pretty good shot. And thanks for your support!
Nice one Kyle, I begrudgingly largely agree with you, and like you I think CE are incredible.
I lije that they have put out that 40 percent number though, as they can now measure success easily. Even though like you I don’t quite buy the value proposition here, I almost trust CE that they have done their research well and are seeing upside here that we can’t.
One important point they make though is that they they only really need one incubated business to go moderately big in three or four rounds of this to make it all make sense.
Excited to see how it goes!
Citation needed on this—I’m not sure what net-bad unicorns you’re thinking of (and I’d be interested to know), but I think at the outset they probably mostly looked like not-making-the-world-worse ideas and by the time they’re getting to unicorn status the original incubator has very little influence over what they do.
Perhaps, although as the post says you don’t need to found a unicorn to have a very promising exit and give a large amount to charity. I’m one of the people who became a software engineer back when 80K recommended it as a promising career path. I think more of us should start EtG startups—and suspect there are many like me who don’t feel themselves a good fit for direct work (or just like tech) and would make good founders.
I think that promoting startups which offer what CE calls “flowthrough effects” is probably a large part of CE’s value add here, so it would be nice if some of the analysis of fields and the potential for impact within them looked a little more developed in future. I can see some value in EA founder-matching, but I think the existing startup funding ecosystem provides a lot of information on how to get into accelerators and what a high growth business model looks like etc already.
Despite sharing others’ scepticism about the 40% into YC and implied unicorn exit projections, I can see the numbers working purely because I think the 50% of founder share value CE is asking to be donated will tend to work out as a greater percentage of share value than a typical accelerator or angel takes (and so even a modest acquihire potentially represents ~$1m to effective charity, for relatively little initial input).
But I think it’s a little disappointing that CE seems to be writing off the “double bottom line” space in between pure charity and VC-funded moonshots. It’s true that those sort of companies don’t tend to become as big as the outlying VC-funded successes, but that’s not really the point: since they’re not asking for philanthropic capital to sustain them and can generate recurring moderately positive impact, they’re still potentially a very efficient use of their founders time and initial resource input. Some of them operate in niches much larger than some of the charities CE is incubating too, and whilst “ethics” isn’t a big “buy me” signal to VCs and acquirers, it can be to consumers. I’d have thought CE’s focus on quantifying impact worked well in this space too.
If CE is looking to broaden what it incubates goals and work with the for-profit sector, it would also be interesting to see what it could do with corporate partners with some of its purely impact driven ideas too: in particular the SMS-reminder ideas feel like something that could be advanced most effectively in partnership with a mobile telecoms provider