I worked with a startup that was part of a group of YC companies who all bought each other's products.
Every one of them could say "we have customers," and as far as I could tell a lot of those customers were each other.
Another founder told me he went from $0 to $1M ARR in three months. It was literally him pitching his friends a $40k a month deal, and he paid the same amount back to a friend's startup to boost their MRR.
His friends were about 80% of his clients, and the company is very popular and raised around $12M in a "seed" round.
I don't know what anyone told their investors, and I'm not saying anyone broke a rule. But that revenue looks great in a deck and tells nobody whether the market wants the thing, which is the only reason revenue matters this early.
And it isn't just them. I keep seeing $100k launch videos for half-finished products too, a lot of people clapping for each other while nobody asks who's actually paying.
My honest read is that most startups in SF, and plenty beyond it, are hype with no real business a couple of layers down.
Part of that comes from how the funding works.
VCs say they'll fund anyone credible, and in practice "credible" means you're 21 and went to Berkeley or MIT or IIT, or you spent twenty years in investment banking and now you're building for investment banking, or you already know the VCs.
From where I sit that's about 9 out of 10 deals, and the numbers I found fit the picture. YC's median founder was 24 in 2025, down from 30 in 2022.
And in a survey of almost 900 VCs, only 10% of deals came in cold from founders.
I get why. When there's no revenue yet, you bet on people you can trust.
And the bet doesn't cost them much. $2M in SF is pocket change, $250k counts as angel money, and YC hands out $500k to a room of people to see what happens.
If I had $500k I'd have a profitable business by now, but alas.
I've tried it twice myself and both products failed. The first one died because I hired freelance devs and interns who didn't give a rat's a*s about the product, and I lost a ton of money on it.
I raised nothing, so it was my own savings, and I felt it in my bones.
The one thing I did right was the slow part: 150+ discovery calls, about 50 brands on the waitlist, nothing spent on ads.
I knew exactly who wanted it, which is more than I can say for a lot of people with a round.
Michael Seibel at YC says "A financing round is not a milestone. It is literally cash."
So after you raise, write down your last ten paying customers. If half of them are your friends, you want to know before the next round.