YC is 100% what you make of it. It's not a lean back experience.
I did not meet most of the companies in my batch but I've gotten to know many founders through YC that I would not have otherwise. Founders that have been source of advice and support.
Network of clients - yep don't go into YC expecting to sell to other YC cos. It is easier to get warm intros through the network though.
YC advice, office hours specifically - it's what you make of it too. Expecting a group partner to know your space in great detail is unreasonable but if you recognize that they've seen hundreds of companies with similar problems and make use of that pattern matching, you can get very valuable advice. Some of the advice I did not take and did the opposite and it was the right decision. And some advice that I did not take was exactly right, but I only saw it in retrospect months later.
Fundraising - being a YC company definitely opens doors, and also helps protects you from bad actors who have to think twice before fucking with a YC co. Very valuable for any first-time founder. You have someone to sanity-check everything, terms you're not sure about etc. The bump in valuation is real too.
>Some of the advice I did not take and did the opposite and it was the right decision. And some advice that I did not take was exactly right, but I only saw it in retrospect months later.
Sometimes their advice is right, and sometimes it's wrong? That doesn't sound particularly valuable.
>Fundraising - being a YC company definitely opens doors, and also helps protects you from bad actors who have to think twice before fucking with a YC co. Very valuable for any first-time founder.
> Sometimes their advice is right, and sometimes it's wrong? That doesn't sound particularly valuable.
This is true of literally every source of advice you'll ever encounter.
It's not that the advice is right or wrong in an absolute sense, it's that how good the advice is depends on the context of it. So you always have to evaluate the advice according to your own circumstances. Some of it will be appropriate to you and some will not.
> This is true of literally every source of advice you'll ever encounter.
Right, that's the point. If the main thing you have to say about some advice is a thing that's true about all advice, then that's not a good endorsement.
that you got advice for the particular areas you needed and it was not always bad is actually a pretty major step up from what you’d otherwise be dealing with, in my experience.
If you could find a source of advice for areas you need that is always bad, that would be amazingly useful. Each piece of advice is another pitfall you can confidently avoid.
Eh, I know you're being facetious but the opposite of bad advice is not good advice. Things are more complicated than that. Which is why even a 20% hit rate (say) could be very impressive.
If you can get multiple wrong takes on the same topic you can very likely narrow down the correct path by a lot. Even if each piece of anti-advice is kind of vague by itself.
The main thing about the advice comes immediately before the bit you’re zooming in on. Want to talk to people who have seen hundreds of companies deal with what you’re dealing? YC is great for that.
> Want to talk to people who have seen hundreds of companies deal with what you’re dealing? YC is great for that.
The way I read your post, saying you "can get" very valuable advice immediately followed by saying some advice was wrong undermines that "can" pretty solidly. I'm not just looking at that sentence in isolation.
Could we get an estimate of how much of the advice was right, weighted by how non-obvious each thing was and how much of an impact it would have to follow or not follow?
> The way I read your post, saying you "can get" very valuable advice immediately followed by saying some advice was wrong undermines that "can" pretty solidly.
I disagree. Getting advice from subject matter experts is almost always of great value. The chances of that advice being on-target for you are never 100%, but that doesn't mean the advice is without value. It just means that it's not infallible.
In the end, as with literally everything about running a business -- VC backed or not -- you need to take in all of the quality information you can get and decide what's important/relevant and what's not.
Having access to more information is a Good Thing, even if some particular bit of information isn't helpful.
Also, while access to subject matter experts is one of the benefits of a group like YC, it's not necessarily the most important. Even if that's not useful to you, the other benefits may very well be.
Disclaimer -- I'm personally not interested in doing VC-backed ventures. For me, the juice isn't worth the squeeze, so I'm not asserting that YC is some sort of panacea that is valuable to everyone. But it is obviously of great value to some. Part of what an entrepreneur needs to learn how to do is how to determine what is of value to your startup and what is not. Every venture is different, and has different needs.
I just had this discussion with my child. I tried to advise them through experiences based on my trip through those same experiences. So I gave them advice like 'don't rack up student debt' and "don't buy a house that costs more than 3x your salary".
Turns out, even though I had the same experiences (went to college, bought a house, etc.) my advice doesn't seem to fit today's world. At some point, they should just quit asking me for advice. #DitchTheSherpa
100% right is likely impossible, but the way it was written it made it sound as if it was right 50% of the time, which is essentially the worst you can do. Anything below or above that is valuable. Obviously, the closer to 0% or 100% the better.
Yah, seeing that is a signal from others personal experience that you’re now entering into non-formulaic territory and need to put on the appropriate hat.
No idea about whether bad actors would think twice, but if you are asking about whether having YC attached to your business opens doors, absolutely. I did a startup with a much less well-known incubator VC and that alone got us in so many doors compared to when you are trying talk with VCs on your own. Honestly, I think that is the one and only major benefit to doing an incubator. Unless you are just really green and need the support for things that maybe aren't on your radar like taxes and payroll and compliance, etc., the unknown unknowns.
There are a lot of businesses with a great deal of traction that do incubators because it simply opens a lot more doors for VC investment. You would be surprised how little due diligence many investors actually do. Many will just invest in whatever $respected_vc is investing in. Assuming that $respected_vc has already done the due diligence.
> Sometimes their advice is right, and sometimes it's wrong? That doesn't sound particularly valuable.
As others have commented, all advice is like that. The person offering it cannot know your precise situation, but just pattern match on what they hear. That's life.
I turn this around the other way: if I am asked for my advice but the asker uses none of it, I don't feel bad, but stop offering advice. I'm clearly not the right person to be helping them.
But the opposite is true too: if the asker takes 100% of my advice then they aren't thinking about their business (or whatever they're asking about). And so I won't offer them any more advice either.
” ‘… The choice is yours: to go or wait.’ [Gildor said.]
‘And it is also said,’ answered Frodo, ‘Go not to the Elves for counsel, for they will say both no and yes.’
‘Is it indeed?’ laughed Gildor. ‘Elves seldom give unguarded advice, for advice is a dangerous gift, even from the wise to the wise, and all courses may run ill. But what would you? You have not told me all concerning yourself; how should I choose better than you? But if you demand advice, I will for friendship’s sake give it.’“
Whenever I see interviews with YC advisors, they blame mistakes of founders of not taking their advice as the biggest as mistake.
I don't have a strong opinion on this, and I believe YC is worth it, as 7% of nothing is still nothing, so any way a startup can decrease its risks is great.
My experience is usually more like being told to do X, me saying X probably isn’t worth the time and energy, doing X anyway at their prompting assuming they’ll take some accountability for it going sideways, it ultimately going sideways because it was a bad idea, and then them taking zero accountability for their bad idea and not helping with the fact we’ve now been materially set back by the attempt.
I’ve since learned to align our incentives around advice. If they’ll put their money where their mouth is to stand behind their advice, then it’s good advice. If they won’t, then it’s bad advice and I’m just their lab rat.
As someone who has raised hundreds of millions of dollars for venture capital backed companies, I can tell you that this absolutely does not change even at the highest level of the company.
My advice from experience - if the advice you're receiving is wrong and you know it's wrong, explain why it's wrong and if you're pressured to go against your advice, then that person is not a fit for you and you should part ways.
Thanks for the tip. That’s more or less where I’ve ended up with things. Initially I was obstinate to predictable deleterious result. Then I went through being compliant only to be hung out to dry for abiding when it didn’t work out. Then I went through a phase of trying to educate in hopes of them coming around to no avail. Now I just look for stronger signs of alignment right out of the gate before even bothering to spend the time engaging at all.
> My advice from experience - if the advice you're receiving is wrong and you know it's wrong, explain why it's wrong and if you're pressured to go against your advice, then that person is not a fit for you and you should part ways.
I've raised about 5 million from VC... and agree at least 100% with this advice.
>>Some of the advice I did not take and did the opposite and it was the right decision. //
FWIW that does not mean the advice was wrong. Trivial example: "head East, there's a great bakery there", "I went West and found a place for a lovely lunch".
Unless the parent elucidates (and maybe even then) you can't tell if the advice was right or wrong.
But, as a serial entrepreneur for more decades than I like to think about, I can confidently say that there is one thing that you really do need: you need access to people experienced in business, preferable a similar sort of business to yours. You need their advice.
YC can provide that, and has paved the path for it. You can also get it through many other avenues. But whether through YC or not, your business will be more likely to succeed if you can learn from what other people have already done.
As much as I think VC is problematic: Those folks have a host of previous experience. When they share advice with you, it's a distillate of seeing lots of companies go through similar things.
And that's all any advice is - "based on what I've experienced before, here's what I see". You never should take advice unevaluated, but it's additional data that might help you to come to a better decision.
If that additional data is worth enough to you is a separate question, but there's certainly value there.
VCs are not gonna help you build your company (doesn't matter if it's YC or anyone else). As a founder, you're the only one responsible about what advice to follow or not (and very often you get conflicting advice from two very credible sources)
Because a lot of first-time founders have no idea what they're doing and other experts are at least experts whether they're 100% right or not. Anyone on Sand Hill is probably a better resource than some guy down the alley.
You can't expect them to be oracles though, right? Even the most experienced can give not-good-enough business advice, they don't do it on purpose I imagine.
I can’t speak for if it is better or not in YC land, but I can vouch for a truly amazing amount of scammers that salivate when they hear startup. It’s mind boggling.
If someone makes a YC company legitimately happy, then using them with other YC companies would be both natural and a good way to filter out the scammers.
> I can vouch for a truly amazing amount of scammers that salivate when they hear startup.
It really is amazing, isn't it? Over the years, I've developed a few coping mechanisms. One of which is that I never tell people I'm an entrepreneur, and I never use the word "startup".
I work for a business, doing <whatever the business does>. Outside of potential investors, nobody needs to know that the company is a startup running on my sweat and blood.
The advice can't always be right. As a founder, I get a lot of (also unsolicited) advice every day, and it is the founder's responsibility to decide what advice makes sense in the current context. YC partners always emphasise that, and I really appreciate that.
In general, I can only say positive things when it comes to YC advice (especially on the fundraising side - YC partners know A LOT about fundraising)
Substantiating as an early employee of a YC company. There is much honor among thieves, so to speak.
EDIT - but to the OP's point, yeah, it's what you make of it. I would suspect that word could get out about founders who are rude or combative to important people as not being worthy of any veil of protection.
Does it really need to be stated that you can learn a ton from advice you don’t directly take? It could be relevant later, get you to think up a different solution, help you understand a competitor’s business model or decisions, improve your understanding of the industry you’re in, etc.
Hearing both good and bad advice and making smart decisions is what a CEO’s job is. Get as much advice as possible but understand no one knows your business like you do. Being able to hit go hard on the right advice and go slow/ignore the bad is what makes a good leader.
Ah it could be if you learn from it-- which it sounds like they did. They would have learned mire imagine than if they had never had to make those choices and live with the consequences.
"Better" can mean a bunch of different things, too. For example, if your business is headed for the rocks, mediocre advice that you get in time to enact it is much better than perfect advice that you get too late.
What advice isn't, and can never be, is ironclad rules that you can just accept without consideration and expect to provide value. The real value of almost all advice isn't the part where it's telling you what to do -- it's the part where it's providing you with a new way of thinking about the problem.
We can't accoubt for stupidity true. Almost every situation I encounter is a learning opportunity. Even a repetitive one where you learn : "Gee, I shouldn't do that again." : is a lesson.
Advice does not need to be correct to be valuable. Simply getting a perspective on a problem, and a proposed strategy, can improve your ability to reason about your problem domain. If advice is wrong, and you choose not to follow it, then you know that people will ask about it later and you will be prepared to explain why you thought it was wrong; which is a better situation then saying to potential investors "Gee, never thought about that option."
That is to say that advice, right or wrong, gives you information about the problem space and perspectives on it; which can be valuable if you evaluate said advice critically.
As an example "You should always unit test your code" may not be applicable, but being able to say something like "This code is almost 100% dealing with External systems so a pure unit test would not be the appropriate way to test this code" is a better answer than "What's unit testing?" (Yes, I'm sure someone is going to quibble with this example :) )
Absolutely. Except, YC is designed to maximize your odds of "surviving"
It really is like college/university. You can skip class every day and no one cares. You can also attend every class, leverage every resource, and work really hard to be successful.
YC absolutely does not guarantee success (speaking from experience. my YC company failed). It absolutely increases your chances of success, particularly if (or perhaps only if) you don't have a strong professional network and/or network of advisors.
I could not help but notice the similarity with another popular question "Is MBA worth $100K+" and the equally similar answer "MBA is what you make of it".
this seems obvious, but its not for some. Should you get an MBA from Harvard? the material is probably very similar to other materials in other programs. But, the contacts you can make are probably priceless. Are you a shy individual who isn't going to put effort into meeting people, growing a network? probably not worth it because the actual advantage is the people, not the degree.
A classic example I use is I attended Arizona State for a bachelors and masters in electrical engineering. A friend of mine attended Arizona State for bachelors and Stanford for a masters. We both learned the same material. He had more opportunities to meet good contacts and use those resources to expand his future. Did he? no, he ended up at a defense contractor back in AZ. Instead he had larger student loans to pay back. The big fancy schools have big fancy networks of people, but if you're not going to leverage it, its not worth it. Sounds like YC is very similar.
No but you don't need a Stanford degree to do it. They hire out of local areas. My girlfriend is attending ASU virtually right now and I've been really impressed with their program. When she said she was learning Matlab in a fairly normal math course I had a bit of a revelation about the defense partners of the school.
5 years out he's doing defense work in AZ... but 20 years out he's flexing that Master's to get CTO roles, and making connections at the local Cornell / Stanford / MIT club, etc. etc.
That said, there's definitely diminishing returns doing an accelerator for a 2nd time. I did Techstars NYC 3 years after doing YC, and no complaints but once you're part of the YC (or Techstars) network, you're in and you know all the core teachings / philosophies - sort of like a college degree.
Plus, you already have the experience of starting and running a company.
100% do an accelerator at least once. But doing one twice, I would really consider the cost/benefit.
> Founders that have been source of advice and support.
What are the specific logistics/semantics of reaching out to a group of "founders" with targeted questions? Is it an e-mail chain? Is there a group chat? Discord? WhatsApp? iMessage?
I feel like if you were to ask 10 different "founders" general questions about "should I do XYZ in business?" (pivot, grow, measure how much you should listen to or ignore existing noisy customers, raise prices, don't raise prices, offer a free tier, don't offer a free tier), aren't you possibly going to get 10 different answers given that business isn't an exact science? Or... is it?
VC's have pitched their "value added" other than funding forever. I suspect it is no different with YC. From my own limited experience as a startup founder VC's can be detrimental as well as helpful. Ultimately if they provide a stable source of funding and lend credibility to your venture consider yourself lucky. The valuations are just a reflection of the mood of the day.
The fundraising aspect is understated. If you build a company on your own lots of investors don’t really care. But if you graduate from YC you get a huge reputation bump.
It's been an only option during Covid times. I believe now the program is still remote-friendly, tho everyone is encouraged to come in-person (particularly because it became crystal clear how harmful the remote experience is)
It's true that YC will tell you over and over to (1) work on your product and (2) talk to users. Those are the "make" and "people" in "make something people want".
If you want to focus on marketing tricks / media hype / "content" / that kind of thing, you're going to hear the above repeatedly, since those are neither (1) nor (2). For my part this reflects well on YC. In fact it's a little reassuring to hear that this is what (some) people are complaining about. If you're a YC startup and want to launch on HN (https://news.ycombinator.com/launches) you're going to hear even more of it from me.
I like this part: "present dry facts—how much money customers already paid you, what the size of the market, if you count all the units you can sell, what you have actually built and what is working today." On the HN side we also push for "just the facts" and urge founders to cut hype and marketing speak. That's as much about the HN audience as core values, but it's nice (and for me a relief) that those overlap.
If building a valuable product, talking to users, and focusing on facts sounds good to you, you should consider applying to YC.
(feel free to discount this to zero based on my bias but I wanted to say it anyway!)
> If building a valuable product, talking to users, and focusing on facts sounds good to you, you should consider applying to YC.
Also being perfectly honest, it does sound very appealing, but I'm afraid it unfortunately just isn't what makes startups successful in 2023. Speaking from personal experience and carrying the battle scars.
At least on the consumer side of things it doesn't. The consumer-facing side of the internet is quite mature. You are fighting for consumers' attention with giant companies that have addiction down to a science. Furthermore there are entire categories of the internet that have people's attention on lock (social media, video, music, gaming, news, chat, e-commerce and gambling). Breaking through all that existing noise is super tough now, a valuable product won't cut it. If you look at the big consumer-facing successes post-2015 (TikTok, OpenAI, Fortnite, Disney+), they all spent obscene amounts of money to get where they are at now
this to me is very appealing. while i dont know if ill get into this upcoming batch, all i know is i can just keep watching and reading yc's free content and i know i'll still be on the right track.
most of it is boring and repetitive, but effective.
Their logic can be understood: make a good product, and the rest will catch up. But in real life marketing and hype really matters, and when everyone does these things while you naively sit and code, they get an advantage in the market, and you get your cool product.
I sometimes get the feeling, also by watching their public content on YT, that a lot of YC advice, especially w.r.t. what to prioritize, is from an era of startups about 10-15 years ago.
Back then there were about 10x fewer SaaS startups (maybe that's a conservative estimate) and if you had a decent product that solved a problem for your customers and you were just plugging away at it, that was enough to get noticed and grow.
Nowadays every worthwhile niche seems to have 10-15 companies in it in no time, all of them doing more or less the same thing. Even if your company differentiates in a very special and useful way, getting that across to your potential customers is a totally different game now. You basically need 1-2 full time staff doing nothing but content creation and social media outreach marketing. Also locking in (micro-) influencers in your niche is key. Once they start promoting your competitors it's game over.
From the content that I see publicly on YT etc. it seems to me that YC thinks such things are basically a waste of time. And back in the late 2000s and early 2010s that was largely true. If you are targeting a narrow hyper-niche it is probably still true, however it's just not the reality for 99% of today's startups, even YC ones.
My view: entrepreneurs should take on a little more technology risk. Not just market risk. License IP from federal labs and government agencies -- there is SO much advanced tech sitting on shelves. Do government contracting to fund R&D.
Go beyond just software, especially the SaaS kind, because ultimately, software can only make so much difference in society. Investors don't like government and anything sciencey, especially when there's a hardware component, so I don't believe most hotshot founders will go for it. But hopefully enough will take on more technology risk.
The biggest problems out there right now require a mix of traditional software, ML, hardware and research. All put together in the right way.
You are describing a moat, and it is indeed important. I’ll step up on the soapbox for a moment…
A moat can be unique technology, an exclusive licensing agreement, an exclusive IP (patent or otherwise), very unique experience or insight, an exclusive geographic location, a very unique business model, a very unique skill and/or reputation, etc.
Follow the leader seems like a plan, but it’s probably not a good plan unless you have tons of money to spend on marketing and sales.
In my previous home city, someone opened a bake shop with coffee that was targeted at the growing Korean population. It was unique: Korean pastries, Korean friendly faces, great coffee, etc. They probably invested $100k in opening this shop. It became very popular. Then, in about nine months, five more copycat shops opened up within a mile or two of this store. Result: business went way down for all of them. They all lost revenue, and they all invested a lot of money.
Software is prone to this kind of copycat behavior. The thinking goes like one of these two sequences:
1. People like software—>I write software—->People like [note apps, for example]—>I can write a note app in a week—->I’ll start a SaaS business
2. I write software—->I think [fill in the blank] is cool—>I will write an app for [that] in a week—->I’ll start a SaaS business
Writing software is not a differentiator. It’s not a shortcut to big bucks. It’s not a solution in itself. It’s just a tool. Anything you can write in a week (or 3 months) can be done by 100,000 other people—-in a week (or 3 months).
You have to start with a problem, defined by a large group of people, that you have the experience and expertise to solve in a unique and valuable way. Software may be part of that solution, but it’s just a fraction of the whole pie. You need to think about the whole solution—-and the moat. It may take 5 to 10 years to develop your moat. Be patient and be observant.
> Writing software is not a differentiator. It’s not a shortcut to big bucks. It’s not a solution in itself. It’s just a tool. Anything you can write in a week (or 3 months) can be done by 100,000 other people—-in a week (or 3 months).
> You have to start with a problem, defined by a large group of people, that you have the experience and expertise to solve in a unique and valuable way.
That precise argument is why I didn't make Slack. And yet Slack is a lots-of-dollars business, made by people who, as far as I can see, started with no more expertise in the domain than any of us who've ever worked for a big company has.
As I get older I'm more and more convinced that actually doing anything at all can be a differentiator.
Doing a thing, and doing it well is a really good differentiator! The thing about software is that it scales way easier than a Korean bakery, so the brand itself is the important differentiation. If you can identify a need in the market and throw the right pieces at it, and spend 6-months building it in secret, that 6-month head start building your product and adding features before you release to the public is your moat. Yeah it's not the deepest moat but those features are a moat nonetheless and you can totally build a successful business on top of that. Anybody that starts after you launch is going to be 6 months behind and forever playing catch-up.
Did Slack even spend 6 months building something in secret? Microsoft and everyone else were already in that space. If anything it felt like Slack were the ones playing catch-up.
ah yeah that's a fair point. Look at Skype, they've been doing video calls since approximately the beginning of the public Internet. Yet zoom was still able to become the dominant cross-platform video chat app. So that "build in private for 6 months and be ahead of your competitors" isn't a one size fits all tactic. "doing it better" is another good moat.
It's not a "moat" in any meaningful sense as far as I can see. Doing it better isn't a particularly defensible position, it's just something you can win by doing.
You have to rotate your thinking 90° to see things my way (you don't have to. your opinion is as valid as mine, I think my reasoning make me right, but I'm biased). But your moat is how you defend your castle, and, outside of having a patent on the core piece, all moats only take time and money to shovel in enough dirt to be moot. Does Tesla have a moat? They have a huge head start on EVs, and being vertically integrated to a degree that other car makers are trying to catch up to. They'll eventually get to where Tesla is in 2023, but by that time, Tesla is going to be ahead by however many years it took them to get there.
And the NSF's equivalent, the many national labs, defense labs, and research-intensive universities (eg UC Irvine is keen to for entrepreneurs to pick up IP; as are lots of others). There's so much out there, and it's just waiting for entrepreneurs to commercialize it. Many things won't have direct commercial application, but much of it does. Typically the entity doing the licensing doesn't just give you the IP, but a full teaching program and network to help you get further.
For example, there is significant IP around additive manufacturing beyond plastics that are sitting as a squatting duck with national labs and universities that can be leveraged
Maybe that’s your clue that your idea is bad then? YC likely has decided it’s not in their interest to badmouth your idea, but if you are making the 20th data pipeline company in the same batch, maybe the smart thing to do is take a step back and ask yourself “is this really what I want to spend 5 years in?”
From what I hear in the YC YouTube videos, it’s clear that the partners quickly form an image of how much brutal feedback you can take and measure their responses accordingly. My suspicion is that they are unable to gauge who’s good at that brutal feedback until you’re well into the program and they would rather have 100 grifters for that one golden founder who can truly take feedback. I suspect that one founder gets a very different treatment from everyone else. Clearly OP was not that 1 in hundred.
If you approach YC with this mindset, you can make a decision before you even join whether this is worth it for you - are you ready to easily take brutal feedback and adjust or are you like OP going to double down on marketing or whatever you think is the key to succeeding? In the latter case just don’t bother I guess!
W.r.t bad ideas, I'll just leave you with this PG quote [1]
Err on the side of doing things where you'll face competitors. Inexperienced founders usually give competitors more credit than they deserve. Whether you succeed depends far more on you than on your competitors. So better a good idea with competitors than a bad one without.
I'm not sure where anyone said marketing doesn't matter, even YC will say that "build it and they will come" is false. But, talking to customers face to face or in person is much more valuable that marketing, because you experience first hand what the customer wants in a way that is not very doable with just marketing.
This logic just implies YC is more relevant than ever.
If there's 10-15 players in the space and you're the one with YC connections...
Meanwhile if there are barely any players in your niche you have time to get things wrong and iterate in isolation, no need for the all-or-nothing style of growth
I think parent's (and OP's) point was that YC was more valuable for investing and strategy, but less valuable for finding customers.
And since customers are the most difficult part now (because 10-15 players), it adjusts the relative value of something that doesn't help you acquire customers.
IOW, the differences between a "build it and they will come" historic era and a "make me care about you" modern one.
YC has never taught "build it and they will come" – they give plenty of advice and encouragement to find customers and will add, er, kinetic energy if you're not actively on that. That's a huge focus.
This, however, not so much:
> "You basically need 1-2 full time staff doing nothing but content creation and social media outreach marketing"
If that's the way you're thinking, YC's going to try to change your mind, and if you don't want to change your mind about that, YC's probably not a good fit.
(I'm not speaking for YC here! just from my own experience as a founder, observer, HN mod)
I don't agree, the parent's point is directly attacking strategy:
> a lot of YC advice, especially w.r.t. what to prioritize, is from an era of startups about 10-15 years ago.
I'm saying any misalignment in strategy matters less than implied. I spend a lot of time with current and past YC founders these days, and the recurring thought has always been "if you know already know business they're not going to teach you that much".
> it adjusts the relative value of something that doesn't help you acquire customers.
Money is how you acquire customers. From outlasting competitors to advertising to improving your product, it's money that turns into customers. So YC being valuable for investing is tantamount to being valuable for gaining customers.
In the crypto space currently, there are projects that excel in terms of technological merits, making them far superior to their competition. However, the competition often has better marketing and generates more hype and win the market.
I don't think that's true for crypto companies with actual customers (like coinbase) but rather the ones that are surviving on hype/investment alone, which all crash sooner or later, and aren't really companies. Just fluff.
Yep. I've heard that sentiment more times than I can count over the decades -- and in every single case, without exception, those ventures failed pretty hard.
I think its because the sentiment expresses a fundamental misunderstanding of how business works and what makes it successful. The idea is not the most important ingredient in a business, the execution is.
For the most part, it doesn't matter if someone else takes your idea and beats you to it as long as your offering is better at solving the customer's problem. And that's a matter of execution.
S22, solo founder, open-source infra + internal tools (windmill.dev).
As the other ones in this thread have mentionned, YC is what you make out of it. For the fundraising alone, it allowed me to raise - a non US solo founder - at very comfortable terms and on the financial aspect alone it would have been worth it. But most importantly, the hardest part to start a company in my opinion is to keep being motivated.
I was under the impression that surely a successful startup wouldn't have to go to any struggle and that founders were a special - genius-like - kind of breed. Being in YC opened my eyes:
- everyone struggle, relax and keep working
- the great people of this world are smart, but not crazy smart. They are crazy pragmatic, and crazy motivated, which you can be TOO
- YC founders are nice people, and they make for great friends to keep. Those people are the only one that will understand truly what you're going through.
YC was a transformational experience for me and I would recommend it to all.
EDIT: To give a more balanced view, YC was also stressful, and the expectations were the same, solo founder or not. Be prepared for an intense ride.
Thanks so much for posting this, I really appreciated it. I can't say enough how much this point aligns with my experience:
- the great people of this world are smart, but not crazy smart. They are crazy pragmatic, and crazy motivated, which you can be TOO
One of the things I've seen about successful entrepreneurs is that they have the ability to just push, push, push, even when everything is hitting the fan. I've realized about myself that that's just not the way I work - in super stressful/chaotic situations, some people have the ability to just cut out the noise and focus. I'm not like that, my nervous system just gets too hyped up.
So, over time, while I've been disappointed that I don't have some of these skills I wish I had, I've found that I can be very valuable in other roles, and those can be lucrative or at least "lucrative enough" for me.
Same batch, not a solo founder. But I agree with his opinions about the experience. Transformative, positive, difficult, and it is what you make out of it.
These are good points! Especially for founders who don't have any founder-group in the first place, YC may be a source to create one.
These things are really important, just that in comparison I saw alternatives which can help with it better (being in a small in-person group, for example)
I wonder how much of this is a function of the W22 batch being remote.
We all know the benefits: The fundraising pop is great, the brand patina helps you hire better talent than you would otherwise, the advice can be useful, especially for first-time founders, you can sell into the YC network, etc. All of this pales, IMO, to the value of the personal connections you make in the program. It sounds like OP, by virtue of being 8,400 miles away, missed out on that.
I went through YC in S14, and I found the in-person experience to be invaluable. There were 80 companies at the time, so we had somewhere around ~200 founders in our batch. Even at that scale, you're not going to get to know everyone, and I found myself gravitating toward a smaller group of people who I connected with personally.
I'm not going to lie, YC was stressful. You're dropped in amongst bunch of smart and accomplished people who are sprinting as fast as possible toward the all-consuming Demo Day. It's a bit of a pressure cooker, but that's not unintentional. Those shared experiences formed the substrate of some amazing, life-long friendships.
I have 15+ close friends who went through S14. We talk every day. We've been in each other's weddings. We've watched each other have kids, shut down companies, start new ones, get acquired for enormous amounts of money, and everything in between. It's been incredible watching their trajectories over the last 9 years. Some are C-level execs at public companies, some are tier 1 VCs, a couple are billionaires, some are homesteaders and amazing parents. All of them are solid, kind, high-quality people, the likes of which you are unlikely to meet in the regular world.
I think you lose much of that in the remote-only format. If I were to go through a remote-only accelerator located in Singapore, I imagine I would make few meaningful personal connections. Like it or not, Zoom is a pretty thin facsimile of real human interaction.
My life's trajectory is meaningfully better for the friendships I made in S14, and I expect that trend to keep compounding over the next 30 years. If you missed that benefit, you missed much of what makes YC special.
> All of them are solid, kind, high-quality people, the likes of which you are unlikely to meet in the regular world.
This attitude may have something to do with the skepticism we low-quality people out in the regular world may harbor for the Silicon Valley startup sphere
I understand how easily this feeling can arise. It may not be obvious but we spend a lot of energy on HN trying to mitigate it. I don't want a high-status-insider vs. low-status-outsider dynamic on HN.
One thing I'd like to tell you is that as someone who came from little class privilege and a geographically provincial place, and had zero connection to the "Silicon Valley startup sphere" or really any other sphere, YC welcomed me and gave me a shot and a lot of help.
These dynamics aren't simple but I'd like to think (and do think) that YC is still one of the best ladders in the snakes-and-ladders game if you're talented, ambitious, and sincere. And at the same time, there are still lots of obstacles.
maybe my brain is sleed-deprived but this doesn't feel great to me either. can we not be high quality people without those connections, regardless of how those connections might be made easier for the rare individuals who participate in YC?
Who is saying you/we are not high quality people? No one is saying that high quality people don't exist outside YC, just that YC accepts high quality people. You are committing the logical fallacy known as the fallacy of composition [0].
I believe this was the offending sentence fragment that implied the sentiment you say is not there: "the likes of which you are unlikely to meet in the regular world"
I read that as 'There's a higher probability of meeting high quality people in a location that actively concentrates them, then just randomly going through life.'
Definitely could have worded that better, but my point is that I found YC to cultivate a density of smart + ambitious + nice people that I haven't found in quite the same quantities in most other networks I've been a part of.
Even if you can't have personal connections with the founders of 80 companies in a batch, having hundreds of companies in each batch--twice a year!--is seriously diluting my own worked-for-a-YC-startup brand equity. "Oh, yeah, I met Jeremy at $EVENT" becomes a thing of the past when there are thousands of founders with tens of thousands of early-stage employees.
This reminds of my college experience. My friends and I were always stressed trying to finish the next CS project or study for the next exam but we came out of it extremely close to one another. Nothing builds friendships like shared pain I guess.
> In their picture of the world, you, the founders, should only build a product and talk to customers, everything else is superfluous and waste of time. Hiring is waste of time, paid advertising is waste of time, content is waste of time, talking to investors is waste of time, getting media coverage is waste of time.
IMHO YC doesn’t want you to “build” a product they want you to “grow” a product. I think the YC framework (again IMHO) is to get an idea out and then do everything you can to make it grow 30% each week, and if after a few months you’re obviously failing at that — maybe that product isn’t working.
This seems, on the whole, like kind of reasonable high level operating parameters for startups, since traction is what defines revenue and fundraising chances.
I do think there is a flip side to this approach which is it can kind of lead to short-term-erism where if things aren’t working you flail about, and/or it can encourage founders to specifically tackle things they can ship quickly rather than things that are maybe more compelling.
I would argue that when things are slowly working that’s exactly when you need skilled advisors and founders to give you critical advice. Most dying startup don’t flat line… they slowly grow.
> In their picture of the world, you, the founders, should only build a product and talk to customers, everything else is superfluous and waste of time. Hiring is waste of time, paid advertising is waste of time, content is waste of time, talking to investors is waste of time, getting media coverage is waste of time.
Getting you to focus on those two things, particularly the second one which many technical founders are initially out of their comfort zone doing (I need to work on it myself), is probably a huge value add in itself if they're successful at doing just that.
> get an idea out and then do everything you can to make it grow 30% each week
Compounded? After 8 weeks you go from 10 customers to 81, seems doable. But after 6 months you'd have 5,428 customers. Maybe if it was an App Store app? But if you have to talk to any of them, yikes. Might not be the most sustainable rate of growth?
Yeah, the entire venture capital model is based on outlier outcomes. They don't want 2x or even 10x returns, they want 1000x returns on the outliers, so in aggregate they can hopefully 5-10x the fund overall.
I'm not sure I understand the question but HN discusses what it wants and this post happened to show up and get upvoted. Considering that the author went through YC a year ago I'm not sure that the timing matters much.
All I am saying is that YC terms should be a place for clarification outside of HN - and if Q's show up on HN, they should be answered and addressed in a YC FAQ/forum-specific/whatever...
I did YC also remote, though a bit earlier than the article's author. The part that stood out to me was
> In their picture of the world, you, the founders, should only build a product and talk to customers, everything else is superfluous and waste of time. Hiring is waste of time, paid advertising is waste of time, content is waste of time, talking to investors is waste of time, getting media coverage is waste of time.
I talked to many other founders who also disliked this view (only talk to customers and build), and they all tended to be the worse founders in the batch - a large part of the value add yc provides imo is acting as coach/therapist and pushing back against founder pschology/thinking traps. The view that many things founders want to do early is a waste of time is correct and works, and hearing that can be jarring for many.
The founder psychology bit was key for us as well. You may not like hearing what you need to hear. Hiring before product market fit, increases the chance of death
I did YC in W21 in NYC. I was not allowed to meet people in large groups until April (after the batch).
I disagree with each and every one of these ratings and conclusions.
Firstly, the comparison should be "Is the alternative to YC worth it?" For many companies, the alternative is raising nothing and bootstrapping, or raising at significantly lower valuations.
Additionally, I believe founders approach YC the wrong way. YC is not there to coddle you. They are there to give you access to hundreds of exceptional founders, brilliant partners who have seen much more than you, and a fundraising platform.
It is on the founder to adapt their behavior to get the most out of Y Combinator. Unfortunately, many founders are unable to do so, and waste the opportunity.
That's totally true, we also heard that the attitude is dramatically different if you're in the top of the batch.
Unfortunately, long-term performance is proven to not correlate well with performance during the batch, and YC are transparent about it. So I wouldn't recommend over-stressing it.
It's true that the business is governed by power laws at every level and you can't ignore those and succeed. I hope that doesn't prevent people from still being decent to each other.
> For many companies, the alternative is raising nothing and bootstrapping, or raising at significantly lower valuations.
The review has four stars for fundraising. So it's not like they don't address that.
However I don't understand "1.2. Network of clients/partners". I wonder why YC is expected to provide that. And for the Money one, that's common knowledge and only makes sense if you don't get a lot of value out of it.
The most concerning one to me is that Networking isn't 5 stars and I would like to hear reviews from others because I suspect it might still deserve that.
> They are there to give you access to hundreds of exceptional founders
Is there anything you can't do on your own? Like finding email and writing? Mentioning that you're from YC in the beginning adds less to the conversion than the actual message you're conveying, imo.
If you have enough of those to send, seems like something easy enough to A/B test. You only have a few sentences before an email recipient marks your email as spam. If one of those mentions your YC batch and that's what keeps their attention for another couple sentences, hey.
As a YC alum, of all the emails i get spammed with, I'll give YC founders are read and a reply. More often than not it's a "sorry can't help" but I will at least give it a look.
We did YC in S20 (fully remote during COVID) and, as a Silicon Valley outsider, it was absolutely, 100%, no-questions-asked worth it for the fundraising credibility alone.
After demo day, we were able to get in the room with dozens of top-tier investors, got multiple term sheets, and were able to pick the seed investors that were right for our business. This is a luxury none of my non-YC founder friends have had (being outside of Silicon Valley it was just such a stark, stark contrast in our fundraising experience to my friends'). Fundraising has always been a struggle and giant distraction for them.
The doors YC opened for us let us focus on building and have had an outsized impact on our trajectory. Re the 7%: I'd much rather have 93% of a giant pie over 100% of a small one.
Edit: I should caveat that YC and VC in general are built around finding & amplifying outliers. If you don't think you are an outlier founder and aren't trying to build an outlier company, our experience probably isn't relevant.
Wow. In the footnote they mention they shut down right after demo day? Perhaps I'm old school but I always had a huge feeling of indebtedness to my investors.
So here they lose all the money within 3 months and write a scathing review to boot?
That's why we did it, instead of spending money dragging the decision or even taking more money and spending them while building mediocre company, we wind up operations in a shortest term, and returned everything, to minimize damage for investors. We even cancelled the checks which were about to get wired.
How to perceive it—is up to you, we sleep well because we did the best we could in that situation.
Startups are hard, and I should not have been so critical.
Everything looks bad and impossible before product market fit. How did you know you could not pivot? Did YC agree with you that this was the best decision? I'm really curious as to how that conversation went.
Typically and hopefully they would have to return the money that they did not spend, and it's better for the investors to get that portion of their money back than to have founders run it into the ground.
I wouldn't describe the review as "scathing", although it's certainly titled as though it would be. The parts where the author offers the most critical complaints seem to be particular to their experience as a startup based in Singapore, while most of the YC companies are in SFBA or recently NYC. And in that, their feedback may be more useful for YC or others than a generic story from someone on YC's home turf.
They also seem to be thanking YC for basically inducing them to shut down before they had lost everything. Here it is more contradictory to what they wrote (3/5) about YC as a "school", because they apparently gained quite a bit from the advisement, even if it wasn't in the way they initially hoped. Though, I can certainly understand being a little unhappy with the bearer of bad news, even though we've all been taught not to be.
Even when it came to fundraising, all the YC’s advice came down not to how to raise smarter and more, but to the fact that everyone needs to follow their simple framework, not try to shine too much, not try to choose the right words, wash off all the makeup, put on a gray uniform, and present dry facts—how much money customers already paid you, what the size of the market, if you count all the units you can sell, what you have actually built and what is working today. And this will always sound bad for anyone, it just can't sound good in the early days. And what actually works is storytelling, confident vision, committed revenue, and all these subtle things. It looks as if they are trying to make the selection process among 400 companies easier for the investors, and cover their own reputational risks, instead of trying to wrap each company in a beautiful wrapper and help it to raise easier.
Just for ref, I did SUS and applied to YC three times unsuccessfully.
I guess both perspectives seem completely rational to me. Why shouldn’t Ycombinator care most about viability and why shouldn’t startups care most about vision?
Each side needs to cater to the other a bit but ultimately this is just the difference between funders and builders.
I think the complaint here is that the current "mass market" version that treats all founders the same isn't really able to deliver on the promise of helping most of them achieve their vision. If YC makes all its money from tentpoles, the fund doesn't care. But founders probably care.
Cannot even remotely understand the logic in this getting flagged.
People are upset with the idea, that the mother and the fetus form a feedback loop, to ensure the baby is as large as possible, while still being able to exit the womb??
Yeah, horrible, flaggable idea. Even if one disagrees, what is the logic in flagging? "Ew, ick! Birth!"?!?
It's the opposite! Only the good hype-makers and storytellers get early access to investors before demo day. If you're a good huckster, no one finds out about your stats. Even though... YC tells people to be dry and boring and focus on stats.
I think the rationale here is "be so good they can't ignore you". While advanced fundraising skills could potentially help someone to raise without first making a great product that people demonstrably want, nailing product and early growth sufficiently well makes fundraising achievable even for founders who are notably lacking in the charm and storytelling departments.
Here again, I think the complaint is the opposite. He's saying that if you have traction already, you don't need YC. You're further along than what they offer. They are there to help people who have no traction and no metrics and no money.
The sad thing is that the hype cycle is more important than the product delivery. Many huge investments are made on products that have nothing delivered. It's more BS than we'd like to admit. My own product failed in the market because I focused on the MVP and making it real and not on getting hype out and using that to get money.
'Traction' is a pretty wide spectrum. Having some early traction with a small number of users who love your product is a sweet spot for YC imho, especially if you don't have connections or a 'pedigree' in the startup world. At that stage, VCs typically aren't interested unless you have something else going for you. YC helps you take the few sparks you've got smoldering in some twigs and turn it into a little fire that is potentially interesting to angel and seed investors without too much embellishment.
You can call it reputation management. They can provide access to good investors, because investor know they are not selling lemons.
For example, if YC has a strict rule about inflating the startup users only up to 20%, and then everyone will inflate them 20%-25% and investors will pay only the the 50% because they never know how much the number are inflated.
I have minimal contact with YC these days, and have no particular motivation to artificially inflate the value of the program.
YC was transformational for my company (MedCrypt). I have almost zero negative things to say about it, and would do it again immediately with my next company (despite probably not needing help raising the first $500k for a company).
I can't think of a situation where I would recommend a company not accept a spot in YC.
I find these two concepts [1, 2] at odds with each other. Not a critique on the author - on the contrary, empathy: I felt the same when applying to YC (did not make a batch).
On one hand, the general impression you get when preparing for your application (via FAQs, Startup School, YC videos, etc) is very much in line with [1] - YC is looking for _very_ early stage.
But once you go through the actual application you feel focus shift towards [2] - metrics and $. That is to say (with admittedly some not-having-been-selected bias), I feel [2] is a significant factor in deciding on applications. So as I weigh in on whether to apply for the next batch, I'm not sure whether a product I've just finished building makes sense for YC and whether I should gamble on attempt #3.
I think it would help both YC and founders if they take some steps to make this clear(er) for potential applicants.
[1] > In general, there is an evident focus on the very early stage without a product. The main theory and advice are about how to figure out what to do, how to build an MVP, how to launch, how to talk to customers, where to find the first 10 customers, how to raise the first money, and so on. Needless to say, for companies with tens or even hundreds of thousands in revenue it won’t be very valuable.
[2] > [...] present dry facts—how much money customers already paid you, what the size of the market, if you count all the units you can sell, what you have actually built and what is working today. And this will always sound bad for anyone, it just can't sound good in the early days.
My impression from YC and investors in general is that without a product and traction, the investment decision becomes mostly about you as a person. Do you have an impressive résumé? Are you an MIT/Stanford grad? Do you come across as especially intelligent and ambitious in conversations?
When you have a product and traction, a lot of that goes out the window. All the things I listed above are basically proxies for “might have the ability to make something people want”. If you’ve already shown you can do that, other things become less important. On the extreme end, where you are growing like crazy, most investors will overlook just about any flaw or lack of credentials.
> But once you go through the actual application you feel focus shift towards [2] - metrics and $. That is to say (with admittedly some not-having-been-selected bias), I feel [2] is a significant factor in deciding on applications.
While the application does ask about that (and I'm sure it's very helpful for getting in if you've already demonstrated traction) it's absolutely not required to have any revenue or users when getting accepted into YC. I'm in the current batch. We applied before we'd built anything and definitely before we had any users (we didn't even have a name yet -- we had to pick one in order to submit the application). Across the batch there are a few companies that came in with strong traction but they're definitely in the minority.
I think this dissonance comes from most of YC's guiding literature being written by PG in the 2000s and early 2010s. Back in those days it was definitely possible to grab the attention of users and investors with janky prototypes. But now the reality is that prototypes are nothing and traction is king. The new YC partners probably have to make this shift in practice and out of politeness, they don't call out the guiding literature
YC has both transformed by company and saved my role as a founder. I'll be completely transparent and say I disagree with a lot of the sentiment. I'll do my best to briefly explain why.
From talking to many YC alumn, I've observed a strong correlation with business success and YC opinion. Every founder that is no longer operating within 2 years of YC has a generally negative sentiment. Others are quite positive. Not sure what biases are at play, but the correlation is clear.
As others have said, YC is what you make of it. I (S22) did not ever feel like I was getting cookie cutter advice from my GPs. When I talked to my partners, we really honed in on our issues specifically. Every time the GPs told us something they were right, whether it took me 10 seconds or 10 weeks to accept it. And to be fair the cookie cutter and repetitive advice they do give is because people generally don't listen if they just say it once or twice, and it's also REALLY important.
> Hiring is waste of time, paid advertising is waste of time, content is waste of time, talking to investors is waste of time, getting media coverage is waste of time.
This is dangerously oversimplified, these are all things that they suggest at various stages. Their advice for you depends greatly on your stage. Early on they told us paid placement is innapropriate. Later they told us it would be a great way to quickly validate changes and iterations. Depends on where you are and what you do.
Yeah YC makes fundraising orders of magnitude easier. Yeah in person definitely makes it way better. I've no regrets, would do YC again every time.
I've also heard similar sentiment from investors! "7% it too much for $125k", etc. But it's the prestige of the brand, and the super powerful network. I'm not part of any other pre-defined networks so I don't really know how to compare, but YC is POWERFUL. Nobody I've talked with that had those opinions had alternatives to getting that network or valuation that quickly, unless your already a startup star.
The big caveat is that my timezone lined up and I had many in person options, I also did not shut down immediately after demo day. I'm sure that made our experiences dramatically different. Being in a group of founders with similar experiences and comfortable being vulnerable with each other is the greatest therapy any founder could ask for.
I would warn non-YC founders reading this that this founders experience is highly abnormal for YC, and to talk to many more YC founders before drawing your own conclusions.
A recurrent theme I noticed is that a fully virtual setup (zoom calls, distributed companies in the batch) coupled with varied timezones lead to shallow interactions, weak bonds and no sense of community. Furthermore, if you are in a remote timezone (vs SF/NY) like the author, you will have even more trouble like ungodly meeting hours or very few fellows in the same timezone.
This is very similar to how I have experienced remote work as well. Just replace startups with individuals and the takeaways are still the same.
Heard similar opinions from other YC founders before.
I think any educational system will run into similar issues.
The problem is that the system takes over and becomes more important than the original goal of educating, coaching, helping. And instead it just becomes a conversions and return optimizer.
At the end the individuals don’t matter as long as the aggregate produces good enough results.
I went through YC in S12 and have been investing in YC companies + active on Bookface and YC’s founder matching program. I recommend YC to almost everyone I meet and plan to apply again when/if I am working on a new product company.
We’re all adults and we all have agency. Every community is a function of how much you put into it; how much you invest in getting to know others.
It feels like the author expected YC to do all the work of community engagement for him. That’s 100% not what YC is about. Folks like Michael Seibel, Garry Tan, and other partners all respond to emails + engage as much (or as little) as you ask them to.
It's unfortunate the author had an experience that wasn't ideal, but I'd be wary of saying this is representative.
Do the things that make you seem like a great startup/founder regardless of YC: show you can execute. This means coding or launching experiments, and show that whatever you're doing is getting some sort of a market response.
A lot of people think YC has some secret formula they will teach you (I think maybe OP made this mistake?), in reality they are very open: build product and talk to users.
If you can do that well, you'll get in.
It's amazing how few people actually "get" this, though. I recently met with a friend who is running a consulting firm and is convinced he has a product... But there's no demo, customers can't just sign up -- they need to speak with him and it takes a few weeks to onboard them, etc... Yet his deep (and well-meaning, I'm sure!) belief is that he has a product. Nothing I say will convince him otherwise.
10 years post YC, I find most of the issues people have with startups (getting in to YC included) is they overcomplicate their interpretation of what YC says you should do.
No one clearly knows, but it should be there for a reason. We used a referral when applying and I would recommend finding one. Won't hurt for sure, prob will increase the chances to be seen.
We did W21, and whilst the point that 'remote < in-person' has some validity, I fundamentally disagree on the points about YC's network, partners and community.
Most of the YC network effects occur after demo day. Likewise, most of the socialising occurs after demo day, as during the batch companies have little time to socialise. You get out of the network what you put in.
Similarly, with YC partner advice - it depends on how you utilise it. To be honest, we probably under-utilise the partners (we made most of our stupid startup mistakes pre-YC). But looking at batch-mates I've seen companies attribute pivotal decisions to YC advice, particularly during funding rounds.
I'd liken it a college experience - you won't be spoon-fed like you were in preschool. You must be self-directed to be successful, and there's always someone smarter and more successful than you to learn from.
YC used to be for people who investors wouldn’t normally take a chance on…and imo, it still is. If you have a FAANG attached to your name with multiple years of experience, you can probably find better deals elsewhere. YC has done a relatively good job of scaling themselves, but it has never been a “one size fits all” funding solution, and if you are a founder you’d be wise to consider your options carefully.
That being said, removing the relocation requirement was a big mistake — it was partially a forced move, but it’s not at all surprising that you get a significantly degraded founder experience if you are not in SF.
> YC used to be for people who investors wouldn’t normally take a chance on…and imo, it still is.
It absolutely is not. The recently released Founders Directory[1] shows that YC is practically a big tech company now. Most alumni are from FAANG or Ivy League. This was an inevitable result when YC became the most prestigious accelerator in the West
That's why I said in my opinion. Which is to say, in my opinion the opportunity YC presents is more compelling for non-FAANG founders. That doesn't necessarily mean anything for what the demographics actually end up being. I'm sure at least some of those FAANG founders are favoring prestige over a better financial deal.
I have FAANG attached to my name with multiple years of experience, where else would you recommend as a replacement or competitor to YC? I am aware of angel investors’ existence but looking for anything besides that
It depends on what your goals are and what your business needs. I would recommend reaching out to your local angel investors —- even if you don’t plan to fundraise with them, they usually have an avenue for you to get in touch directly with investors —- and they can interview you about your startup and dispense free advice that is much more informed than what I can give you here.
Assuming you are at a very nascent stage with your startup, there are still all sorts of options out there, including but not limited to —- Kickstarter, loans, raising from friends and family, running on a shoestring budget offshore, raising convertible notes from local investors (you probably have some of these people in your extended network already), selling preorders, self-funding (e.g. via collateral loans), grants, incubators (other than YC), etc.
There are a lot of variables, and several options to choose from depending on your particulars.
Thanks! Yeah I guess to be more specific, what meant to ask is: besides YC and angel investors, what will help me as much or better than YC? Particularly in the context of the person I was replying to saying that people with my background can potentially find better deals than with YC (which I guess I assumed meant in terms of VC - you’re right that it probably helps with alternative funding routes too).
Like, what better incubators or accelerators will be looking at 5+ years at FAANG as a shoe-in (honestly, I’m a bit skeptical that’s even a shoe in at at YC, but what do I know) and give me better terms and/or more support? I know Sequioa has a small incubator now and I’ve actually talked to them, but I assume there are some good ones out there that would be hard to learn about except through word of mouth.
You might be able to find some of those, but you probably don't want to work with incubators or accelerators that consider anybody -- let alone such a large absolute number of people as "ex-FAANG" -- a "shoo-in". Just think about the second order consequences of that.
And yes, when it comes to startups (i.e. business) and funding, word of mouth is very powerful and not to be underestimated.
> Now, with a 500k deal, the amount is more substantial, but in turn, its terms are not super funder-friendly. Imho, the previous 125k deal was better for the founders since once the company gets accepted to YC it can raise easily a lot more money and on better terms.
Wait, the additional $375k is an uncapped SAFE. How could a company “easily raise at better terms”?
Add one angel or one early commit of 10k to it and the uncapped SAFE turns into a very bad SAFE. Basically it blocks you from flexibility of building up fundraising moment gradually.
Your problem is that the YC terms are generous, and what you are complaining about is a hypothetical where you trigger a problem by causing an early valuation. If you choose to, you get given $375k by YC, that will usually convert at the price of your future round A valuation, also the SAFE doesn’t have a discount or onerous conditions from YC (YC has zero incentive to stiff you over a measly few hundred k, from their perspective). That is far more generous than most investors who want to capture the gains between angel and round-A (e.g. the angel below who wouldn’t ever consider an uncapped SAFE, for good reasons).
If you want your angels or $10k, get them into your Cap table before YC (just like you had prior investors?). Or ask YC for an exemption, which I would expect them to give you for a reasonable request (although I admit I am just guessing).
I suspect there are many ways that you can stiff YC out of their money, because the terms are founder friendly in comparison with most VC terms? Could someone sell 5% of the company to VC_BOB for “round A” at a ridiculous overvaluation (diluting YC’s SAFE’s), then shortly afterwards sell 15% to VC_BOB for “round B” at a normal valuation?
My intuition is that YC is playing an iterated game where reputation is everything, so YC has little interest in screwing over founders (YC seems wayyy more founder friendly than most VCs). YC probably wants unethical founders to show themselves sooner, rather than waste time on them. YC is interested in the few big IPO winners - and filtering for them and investing their time in them. YC might punish highly egregiously public cases to avoid having YC look like soft touches. YC can do the uncapped SAFE because they structure everything to get the round A valuation within months at demo day (they don’t seem to care so much about their gains as an “angel”).
Generally I found the points in your article to be fairly weak, and unfairly critical, and missing important details (e.g. your founder’s over-dilution). Disappointment is expected for over 50% of YC inductees, but I don’t see that YC has been bad for you. Some cash, access to resources, a lot of learning, and the ability to try again! Disclaimer: no love for YC, I just prefer people to be fair in their judgements.
But really what matters is what outcomes have occurred? Although the only way I can think of to know that would be to ask the experiences from a few founders a few years ago that used the YC SAFE.
According to the contract, in exchange of 375K USD (+/- salary for 1.5 developer) you agree to this when you sign the MFN:
==
If the Company issues any Subsequent Convertible Securities with terms more favorable than those of this Safe (including, without limitation, a valuation cap and/or discount) prior to termination of this Safe, the Company will promptly provide YCombinator with written notice thereof, together with a copy of such Subsequent Convertible Securities and, upon written request of YCombinator, any additional information related to such Subsequent Convertible Securities as may be reasonably requested by the Investor.
In the event YCombinator determines that the terms of the Subsequent Convertible Securities are preferable to the terms of this instrument, YCombinator will notify the Company in writing within 10 days.
Promptly after receipt of such written notice from the Investor, the Company agrees to amend and restate this instrument to be identical to the instrument(s) evidencing the Subsequent Convertible Securities.
==
So, any type of issue triggers the MFN and the jackpot to YC.
What I'm saying is that you can issue the exact same $375k YC MFN SAFE to other investors (with a different $$ value). This will not trigger the MFN because the terms are absolutely the same
Most small angels, like myself, will not do an uncapped SAFE. It's too risky when I'm only putting in $25K. I'd like to know at least very roughly how much I will own when it converts.
I don't want to be in a situation where they never raise again and then exit for $100M five years later and I only get my small little piece with no benefit for being in early.
Imagine you have a toy store, and you want to make it bigger and better.
To do that, you need more money, so you ask your friend YCombinator to help you.
In return, you promise to give them a special kind of toy money that you created (like monopoly money) that they can trade for real toys later when your store becomes bigger and better.
But for now, there are no real toys to exchange yet because the shop is still small and not opened yet.
Now, if you ask other friends for help and give them even better toy money (with better chances to get more toys), you need to tell YCombinator about it.
If YCombinator thinks the new toy money is better, they can ask you to change the toy money you gave them earlier to match the better one.
You have to do this quickly after YCombinator tells you they want the better toy money.
It means that MFN will likely convert very fast, and these 375k will cost you more dilution than you might want otherwise. Or you have to play very fancy sheningans convincing other investors who wanted to be early to wait, just to postpone it and decrease its dilution.
I always thought the primary benefit of YC was the brand. It's like an Ivy League school for startups. The article suggested it didn't help much. Perhaps going too big has diluted the YC brand?
I actually like the YC as Ivy League school comparison - it has many parallels. Highly selective, has a set regimen ("world view"), has a somewhat high cost of entry ($500k for 7%, not bad tho), and has a fairly exclusive clique that provides value by association that's difficult for outsiders.
Given that, is it harder to get into Harvard or YC based on admission numbers?
> Given that, is it harder to get into Harvard or YC based on admission numbers?
I always find it laughable (sorry not directed at you in particular) when people make that type of comparison. Probability of something occurring for unrelated events ... why in the world does that matter at all? I could say it's harder to get accepted to a certain health club than Harvard or YC.
I am reminded of a restaurant in my city that opened and the local press talked about how hard it was to get a reservation. In fact this particular chef decided to open that restaurant both because he didn't have any experience and also the fact that it had a limited amount of tables would always make it seem more valuable in some way than it was. 'So hard to get a table harder than WONDERFUL RESTAURANT IN SAME CITY where it's hard to get a reservation HARDER THAN THAT EVEN!' Additional point in that restaurant was it took over the location (another PR win) of an old established and very famous restaurant in the same city. The press ate that up as a story angle. As if it mattered at all. It didn't only it made a good story angle. Otherwise why should it make any difference at all?
It’s not like an Ivy League, it’s more like joining a frat, but for startups. Except, it used to be more fun, when all companies worked at the same location and you could bump into people in halls and then go do keg stands after work or sleep on couches, etc.
Now it’s just remote webinar garbage, talk to some people on Zoom, etc.
I think it would have always been the same for overseas companies - I've had several YC-founder friends, and the experience is vastly different if you're YC-in-the-Bay versus YC-elsewhere.
The Ivy League is talked about and well known all over and public knowledge your neighbor your aunt, your wife, your mother, the guy who owns the local bakery etc. It's an international brand.
YC known in the startup community. Most likely the guy who runs the local 200 person wholesale operation wouldn't even know about it unless he read about it in the WSJ he reads print edition. Go to sell to that company and they will say HUH what's that mean 'YC'.
So much of this seems to just be a misunderstanding of how venture capital works. Like, yes, obviously they want your pitch to minimize flashy and showy and maximize real numbers like customer count, average spend, and market size.
I may have a low opinion of venture capitalists but at the end of the day they're not complete idiots. They're operating with a known framework, they're trying to maximize their own returns, and the only way to know if that will happen is to know hard numbers (like how many customers you have, how much money you have in the bank, how quickly you spend money), all the hype and sales charisma is not going to help you, and if that's your entire presentation to investors they're going to tell _other_ investors not to waste their time talking to you.
The reason you're getting advice to minimize hype and showmanship and maximize hard numbers is because when you get into those investor meetings they're going to cut off hype and showmanship and ask you to just tell them the numbers. This isn't some "make life easier for YC and make every startup fit into a box" thing, it's just how investor pitches work.
YC doesn't scale for students. In fact, no accelerator does (500startups has ~3k investments as well). Accelerators are about relationships, signalling, prestige, advisory, networking, etc. The success is asymmetric, because YC is a numbers game - the more bets they make, the higher likelihood they are to succeed.
Many of the negative criticisms here have to do with the fact that there are 4k companies that have gone through YC, and this batch specifically had 400 companies, so it's no wonder there are aspects that are less than ideal.
>Accelerators are about relationships, signalling, prestige, advisory, networking
Interesting to see this after reading the ‘nice vs competent’ threads because everything you mentioned is a soft skill, and correlated with EQ/SQ, niceness and playing of the game.
I guess it’s a reminder that there is no objective superior strategy of being nice vs being competent because the game is too complex for that. It’s strategically applying both to increase your own survivability and if you’re so inclined, that of your company too.
Do you think YC would make sense for a company that doesn't intend to raise money beyond the YC investment?
I have an idea for a b2c product I want to build that has a few paths to revenue (and a possible b2b offshoot), as well as acquisition by FAANG (or FAANG-adjacent). Is there something about taking investment from YC that prevents me from turning around and selling it for $2M after building it out a bit more?
Alternately, as a solo founder, if I got to a point of $10K MRR I'd be happy to just keep doing what I'm doing, but I guess I'd have an obligation to continue trying to grow?
edit: to clarify, I'd be using the $125K 7% part of the investment without necessarily dipping into the additional $375K in this situation. But maybe I'm not understanding how the MFN provision works
I have no intention of lying, I'd rather bootstrap or shop for other investors who don't have the same expectation of 'growth potential'.
The YC model is.. it's own thing.. seems like in the current economy, they need every company to be a potential unicorn, which works out for them because they're doing it at scale, and the ones that deliver, deliver outsized returns.
But possibly doesn't work out as well for the founders, because the 9/10 that don't deliver, are forced to run their company into the ground chasing a moonshot vs. a sustainable lifestyle business, and don't get to reap the rewards they might get from the latter business model
There are funds trying to succeed at the many-small-successes model of investing - personally I am skeptical (from my own experience) because the natural failure rate is so high (before stressors due to investors). Edit: and there is a strong negative selection bias - small software businesses asking for money is a loud signal that they are much less likely to be successful at all IMHO. Relevant article about Mittelstands ”We need a middle class for startups”: https://neilthanedar.com/we-need-a-middle-class-for-startups... and my comment https://news.ycombinator.com/item?id=31350478
> small software businesses asking for money is a loud signal that they are much less likely to be successful at all IMHO
Money doesn't seem like the main benefit to going through YC (otherwise there are lots of other investment firms one could approach). The main advantage seems to be the network, connections, and expertise on running a business.
Sure, if I had another 30K I'd have an extra year of runway, which can be pretty valuable right now. But I suspect solo-bootstrapping without a good VC will result in a lot of friction at points that a specialist VC would be well-suited to assist with (providing standard ToS, verifying compliance, business structure boilerplate, etc)
Any investor would hate this idea, it's a terrible deal for them, and YC are smart enough to get it out of you. The whole business of VC is to sell later at the higher price. If they give you money at val of 5M+ and you sell for 2M - they are in loss.
It's not val of 5M though? It's ~1.7M IIUC. 7% for 125K, an additional 375K can be invested though, with additional equity attached. Is that not right?
edit: Investors are also expecting to take a loss on many of the investments. 2M is one exit option, which still gives them +17% return on investment
I know that's not the standard type of exit YC are looking for, and I'm open to growing a bit more, but not as interested in taking additional investments. Final exit could end up being 10M for all I know.
I just think this growth at all costs attitude needs to change a bit with the current economy. I'd be happy to take $80K for a 7% investment also, but they have a standard deal which I think perverts the incentives and, frankly, leads to outcomes where they're pushing you to take more investment even if you could just have a sustainable business pulling in 10-30K MRR or something
With the market conditions right now, have any ideas about how it could be better?
It sounds like structural critiques; like a smaller, tighter community that onboards with better incentives, enables more efficient engagement with the alumni and batch would be a big gain. And importantly, like ycombinator could show more flexibility and interest in the batch. That sounds like a smaller network overall though, with less success stories to tout. If they have a better 'batting average' so to speak, though, that would help the investor environment. How does it affect their income and social lives, balancing it all I wonder. Thanks for the article!
I think they did a right move - making the batch smaller and moving it back in-person. The money amount that was not very attractive at 2021 makes a lot more sense in 2023 as well.
As for the community I believe it can only be build relatively strong for <100 people. Hence, smaller niche-specific batches?
I can say, we didn't see significant uplift at Demo Day, the highest bump of valuation happened when we got accepted, it's fair to assume we wouldn't get it otherwise.
I can't answer your question completely as in the end we decided not to raise and returned the money...
There are a lot of good, even in what I write. The strongest I believe is the early and fully independent support for ideas that received no other recognition yet.
When we took the money we were planing to build up the original idea, not to start another one. For the consecutive growth of the original idea it wouldn't be an issue.
I'm surprised they haven't moved back to being in person. That seemed like one of the core benefits to companies, grinding it out with a set of like minded people who can all benefit in one place. Hearing you made a weaker network from YC than you would have liked is concerning, especially when you can find most of YC's wisdom on free videos. Network is one of the primary reasons I had applied and interviewed with YC a few times, both for investor networking and for founder networking and had presumed that was one of their main benefits.
I agree with people here saying YC attempting to scale seems to be hurting the overall experience. Hopefully with their recommitment to early stage companies only, this changes for the better. Their earlier wins set them up as the pre-eminent accelerator and diluting that experience those earlier companies had seems like a bad idea to me.
They have access to metrics I don't have though (obviously) so who knows I may be totally off base.
Wonder why YC wouldn't split into themed programs with less startups in each like some other accelerators. More focused themed groups could probably be more helpful for startups. Only very broad generic recommendations kind of work for everyone.
There is nothing wrong with being the category-defining early-stage investment company, and doing it as a for-profit business that's optimized for good financial outcomes.
I think what some of the insiders (like the OP) and semi-adjacent outsiders (like me) might be feeling a little queasy about is that YC began with a pretty clearly stated goal (in addition to making money) around disrupting the unproductive importance of high-status networks and signaling like elite university educations and to a lot of us (even people who didn't apply like me) that was really inspiring. And to at least some degree, YC is now a high-status network that signals well.
There's nothing uniquely bad about it, it's kind of the default throughout human history, and they are completely transparent about being a for-profit company, but it's also ok to be a little sad that it's not quite as idealistic as it used to be.
From my personal experience, the greatest benefit of YC is being part of a group of so many brilliant founders that are trying to create amazing things - this creates healthy peer pressure and pushes you forward A LOT. As a result, many companies achieve absolutely crazy results in just 3 months
This is even better now that YC is back in person. I think W22 batch was the last remote batch
I was also in the W22 batch. While I don't know Oleksii (to his point!), I'm left thinking that he might not have understood and acted on YC's advice.
YC coached us on all the things that Oleksii thought were portrayed as a waste of time: talking to investors, hiring, content, etc. The trick here is timing. It's harmful to talk to investors early in YC when you have the leverage of demo day far ahead of you, but it's priority #1 closer to the end of batch. YC clearly guides founders through this process, if you listen and follow their advice.
The founders I know who were repeatedly told the generic advice of building and talking to users had a bad product that wasn't improving quickly (including us for a while!). I don't know if that was the case here, but many founders spent more time thinking about investors and selling a story vs. building something for their users. It seems like YC understands this, and it was refreshing to see group partners dissuade trying to raise on hype and a story, and instead pushing founders to build something great for their users.
There are certainly things that could be improved, but at the end of the day we raised with a 8x higher valuation post-YC vs. pre-YC and intentionally built strong relationships with other YC founders who shared our same problems and interests. While I'll hopefully work on my startup for years to come, I would apply to YC again in a heartbeat.
I did YC in S20 remotely from Charlotte, NC. As a first time founder doing things solo, it was a great experience and most importantly, opened up a lot of doors that were previously closed. I met so many amazing people who previously I didn't have access to. Plus, the YC community was friendly to me when I had a lot of questions.
We had a terrible experience fundraising simply because I didn't understand how to do it properly. There were a lot of stuff in between the lines that I wasn't aware of. Also what I wished I would've done more of was spend time with fellow founders. It being remote, I felt I was missing the "energy" of being in the same spot as everyone else.
Overall, I'm glad that I went through YC and even though my startup didn't pan out the way I wanted to, it opened new doors and a lot of opportunities. If I was to do another startup, I would go through YC again.
> The constant comparison and growth benchmarking triggered us to look differently at our business and we decided to wind up its operation right after the Demo Day.
What happens in this scenario? YC gave them $500K in exchange for 7% of the business, and then they immediately shuttered the business?
We didn't take 375k in fact. In W22 batch they were optional, and would trigger MFN for many. As for the rest of money, we returned what has been left. That's why closing so rapidly - to be able to return more.
> In the end, YC is an investor, an investor with a strong reputation, who is now sitting in a very comfortable chair and can select the best startups and invest in them at a meager price
Wait what? a ~$7m valuation, _pre product_, is considered meager these days?
I didn't go to YC. My impression of YC is from news articles and hacker news. I believe that YC is good only if it helps you raise money.
Their advice is not worth it because advice is free on YouTube. Let's take PG; he often gives a lot of general and specific advice; he is a great writer and a fascinating mind. I enjoy reading his articles; they are outstanding, but they aren't any different from the many YouTubers giving advice. Unless you get personal time with YC staff, their services are not unique.
Do you need to be Peter Mckinnon’s apprentice to learn photography? No, likewise you don’t need YC.
"You, the founders, should only build a product and talk to customers; everything else is superfluous and a waste of time."
I found it interesting that this seems to be described as bad advice that boxes founders in.
"Hiring is waste of time, paid advertising is waste of time, content is waste of time, talking to investors is waste of time, getting media coverage is waste of time."
The above all seem to be like a waste of time—but the OP is claiming otherwise. Perhaps this speaks to some YC companies being more mature than they used to be when they enter a cohort?
I am an outsider who observed YC companies and their founders for a while.
YC is an institution in the VC world and YC is extremely specific about what people they want in their program. But you have to understand the people running YC has probably told many many founders "I am not going to spoonfeed you everything, figure that sh*t on your own".
YC will give you the initial boost and you make up what you want to make up for it. Making it to YC doesn't mean you are going to be a unicorn and they know it. Considering the amount of people they take in, it is not possible to make everyone special.
I think the picking criteria explcitely mentions that there are companies that are actually too good for YC meaning that they can certainly generate a sustainable income but they just don't fit the bill. The bill is about, a VC who is a startup founder. When the dust settles you either get a founder of a successful company or a VC who came from a failed or acquired startup.
That is what I see standing from outside. YC want people who fit the VC personality and posses the youth and the desparation of scaling up a startup. Someone who can work incredibly hard and shake hands with the sweater vest people.
I honestly don't think the startup aspect has much to do with. It doesn't have to be one person, they want this very particular personality trait shared among the co-founders.
This is not a criticism at all. But I think YC doesn't want companies they want people. Some people are just not that.
Prior to covid I was paying for a business coach/group (not yc, just paid with cash no equity). We had monthly group meetings and I had a one on one with my coach every month.
The value I got out of the group took a huge nosedive when we went remote. I felt like many of my fellow attendees weren’t fully present in our group meetings, and the one on ones weren’t the same. So I left.
Just putting stuff on Zoom doesn’t make it the same. I think a lot of orgs are struggling to make things work in the new medium.
The “credibility” value is pretty huge IMO. If you’re a small startup, the assumption from potential customers, employees and investors is that you’re super likely to fail, probably soon. Because YC companies have a strong track record, you instantly gain credibility with potential customers, employees and investors.
It’s worth 7% of the company for most, because it makes it more than 7% easier to hire, sell and find raise, and those 3 things are the most important things for most startups.
Think of YC like a Harvard MBA. You may or may not learn anything substantial from it. The quality of education may or may not be better than your local state school. Graduating with that brand, however, may be valuable enough in itself to justify spending the hundreds of thousands of dollars. How you leverage the network is entirely up to you.
At least from the perspective of a potential customer, I now view Y Combinator as a red flag for a service provider, for a variety of reasons.
The two big ones: YC companies try to "grow" too fast without any concern to the dynamics of how their market is supposed to work after they've achieved their targeted scale. The basic playbook seems to be: give stuff away for free until you kill the incumbents, then jack up prices to way more than what the incumbents used to charge while simultaneously reducing the services/products offered.
There's also the issue of companies basing their business models around regulatory arbitrage, ignoring the rules that incumbents (are forced to) live by and then using their size to try to get away with their past misbehavior.
Most surprising quote to me was this: If you have some kind of b2c or Enterprise business, all you will get is a knowledge exchange with homies. YC does not have any industrial partners, and YC partners themselves will not do external intros since this is a big part of other accelerators' pitch. Obviously YC can't compete with vertical-focused accelerators for depth of industry knowledge and day-to-day access to corporate sponsors, but knowing when and who and how to approach is one of the biggest challenges for an early stage startup and one where I'd assume YC's network was big enough to add value (beyond a list of companies to send cold emails to indiscriminately)
I don't know what "industrial partners" are but "YC partners will not do external intros" is not true, and a weird thing to say since it wouldn't be in their interest.
>I’ve seen enough cases when saying “oh, I’m also from YC” didn’t move the needle.
When you're one of a thousand companies every year, why would it? Are YC particularly discerning, or are they optimizing getting as many through the "system" as possible?
Oh my, $150K for 7% equity sounds really good. I would offer 30% equity for that amount.
I've been trying to raise $20K for the last 10 years and never managed though one time someone took pity on me and gave me $20K in cryptocurrency as a gift. I managed to stake that on a crypto project in such a way that it was soon generating me around $35K to $70K per year and I used the money to fund myself to work on a Decentralized Exchange for 3 full years which is now operational.
Can I please recommend w/ no ill intent that you take news courses of action if you've unable to achieve raising a relatively low amount of capital after 10 year?
I already met many investors and millionaire founders. I even met 2 founders who are now billionaires and many others who went on to become multimillionaires. Nowadays most of them won't even answer my emails. One of the founders I met before they were successful (and who sold their startup for millions) won't even give me a $2000 per year support contract though they continue to use my open source project and ask me questions. I'm thinking I've been blacklisted. It doesn't make sense right?
Does it make sense that someone I met 10 years ago, was using my open source project as part of their startup and was having conversations with me every couple of months throughout the whole 10 years (they even let me log into their production system with 30K concurrent users to help fix a bug) and then went on to make millions won't even support my project with a $2000 a year contract?
Probably something weird going on. This is not just about one example, it's every now-successful founder I've ever met. Nobody talks to me and I did nothing wrong except build some products that work really well.
Don't try to blame others, see what works for you and where you can improve. Some people can make other run for them and send donations without even trying. It's not about them or cruel word. Your problems are about you, and you need to either solve them or to switch to something that works for you, or you will be suffering the rest of life.
I find that hard to believe. I tried a lot of things. I switched between many companies, changed industries, moved to many different countries around the world to find opportunities, I tried playing the patient nice guy for years, I also played more assertive in later years, changed my entire personality to act like an extrovert, started blogs, pursued investors (attending events), started open source projects (one which became popular in its industry), got involved in blockchain space built my own unique projects from scratch... Nothing delivered financial results. I feel like I tried essentially everything so I know it's not something I can control.
When I study people who succeeded, the main difference I can see is that they got very lucky because they knew people who helped them get attention.
Most successful people seem to have this rosy perception of how things work; unfortunately, I cannot go back to that point. Once you've seen nasty stuff, you cannot un-see.
i find this fair and informative. i havent got into yc yet but their free content is very valuable in giving me direction, and the things mentioned in the article are very valuable to me who is still an outsider.
to some they're like "meh", but to me those subtle things really make or break your company.
it's like yc has solid focus on your company's fundamentals and reminding you of it again and again so you dont get distracted.
I am raising for playwhitelabel dot com with following stats - revenue US$16K+ (since May, 2022), paid users 120+ (including presales), and don't have a product yet.
As a 2-person team, looking forward to growing with a product, and a bit of capital, YC will suite us. But it's highly unlikely we will even get an interview. I wonder why all those later stage YC companies are being taught SuS content.
If you need 150k to start your company it is difficult to find other options.
You have a booking dollar idea, the drive and knowledge to set it through, but no cash. You need an early stage investor. What you are paying for is the massive risk that they are tipping that money down the drain. The other stuff is just value-add
The uncomfortable truth is that YC is a highly competitive program, the best teams invest a lot into preparation to get there. If you have nothing and need 150k to start your company, than you have better ways to find it, than the most prestigious accelerator in the world.
Is it worth the money? I think what YC gets you, you can't find elsewhere for less money.
But maybe this industry is ready to be disrupted, and someone could create a YC competitor that automates things like office hours with ChatGPT4. In fact you could pitch this idea to YC, and YC could spawn its own successor.
Thought experiment: if you had a successfull bootstrapped company that didnt need external financing.. how much would it cost to get Y combinator advice?
Basically how much should you pay to get their package?
They have 200 companies with 125k investment? So 25 per year?
I recently did some napkin math of a YC startup cap table to see what ownership % is given up for what money after YC and what valuation should be targeted at the demo day to keep YC ownership at not more than 10% for $125K+375K with prerequisite that the demo day VC also gets 10%, triggers $125K+375K SAFEs, and requires an additional 10% to be set aside for the option pool:
If we consider that YC's $125K investment is Pre-seed and the demo day YC's $375K + VC money investments are Seed:
_____
PRE-SEED (Accepted to YC)
YC 1 ($ 125K) ---- 0% (SAFE didn't convert yet)
Founders ---------- 100%
Total Investments: $ 125k
Valuation: Isn't set yet (or $ 1 785 714 / Post money based on the non-converted yet safe)
_____
SEED (Demo Day)
YC 1 --------------- 5.6% ($ 125K SAFE converts)
YC 2 ($ 375K) ---- 4.29% ($ 375K SAFE converts)
VC ($ 700K) ------ 10%
Option pool ------- 10%
Founders ---------- 70.11%
Total Investments: $ 1 200 000
Valuation: $ 7 000 000 / Post money
_____
To sum it up, to keep around ~70% of the startup after YC, one needs to target ~$7M post money valuation at the demo day with $700K investment from a VC for another 10% and option pool of 10%. If a startup needs more VC money and doesn't want to lose a bigger share it's worth targeting at valuation higher than $7M and starting at least at $10M post money to get $1M investment.
Please, correct me if I missed something.
Calculations are done based on Safe Conversion Financing section in the The Y Combinator Deal [1]:
Step 1: Price for the round is set and the two SAFEs are converted;
Step 2: A stock option pool is created;
Step 3: New money is invested in the company.
It was a pleasant surprise to find out in the text that the priced round itself, and the creation or increase of the stock option pool, will dilute YC’s ownership. It means that 7% for the $125K SAFE at step 1 due to the dilution become 5.6% (considering that new VC gets 10% and the option pool is 10%). As also $375K percentage after step 1 is also decreased due to dilution.
We were W22. It was a HUGE batch and we were raising at a large valuation, during the boom, so the YC standard deal didn't make financial sense for us.
IIRC as soon as we signed the deal they would have 10x'd.
Overall, I think not signing was a mistake. But YC is very expensive.
I have no input on the value of YC and the companies they back, but it's frustrating how their hiring posts on HN itself isn't allowed to be commented on. Maybe then we'd have a better feedback loop on their incubation.
Anyone have similar insights about Entrepreneur First? Btw I still don't understand if during the program they you a salary anyway or only if they end up taking a stake in your company.
>"Remember: accelerators and their help are temporary but the equity you give away forever"
True!
But the other side of that argument ("The opposite of a fact is falsehood, but the opposite of one profound truth may very well be another profound truth." -
Niels Bohr) -- is that some entrepreneurial endeavors require the assistance of multiple specialized parties without whose help the entrepreneurial endeavor will not succed, and:
Owning only part of a business venture that is successful -- might very well be more valuable -- than owning all of a business venture that is unsuccessful...
In other words, a founder who accepts capital for equity (AKA "Debt") in whatever form -- is paying a percentage of future rewards for a better chance at initial success, and faster growth once that initial success has been achieved...
Now, the counter-counter argument to the one I make above, which is applicable to myself, which is applicable to a few other founders, is that we don't want to give away any equity in our future companies -- thus our trade-off is one of guaranteed or near-guaranteed (or at least easier) potential early success and faster growth curves (what we give up) -- in exchange for doing things the hard way, doing things the old-fashioned way, doing things the debt-free way -- at the expense of time (and watching many other people who took other people's money be more successful in the short and mid-term) -- but NOT at the expense of education -- a real and practical business education that could not be had at most universities, at most institutions of higher learning, even in their MBA programs...
So which of these two approaches is right?
Well, I don't think either one of them is wrong -- it all depends on the individual or individuals involved and their personal preferences, goals and values...
The only one differentiator between the two, perhaps, could happen many years in the future -- a company which has sold too much of its equity could become the subject of a hostile takeover...
A single founder who has never given so much as a single percent of equity -- will have his company taken from him over "his (proverbially) dead body"...
That differentiator is ownership -- true ownership -- of a company...
Still, there is value in "team lifts", and putting together teams to accomplish what single founders cannot accomplish alone...
The article discussed how SVB made loans to "tech" start-up founders who had just received funds from "tech" VC, the bank's primary customers.
First, cults require some "reality-distortion" to use Steve Jobs' term. Close people off from the outside world, e.g., traditional banks.
"These companies put a priority on breakneck growth, shift strategies frequently and celebrate failure as a learning opportunity. They are often worth billions before ever turning a profit, and they can go from silly idea to behemoth at astonishing speed. Most crucially, they rely on a tight network of money, workers, founders and service providers to function.
That unique and often irrational reality required a specialized bank."
What about the common, rational reality that we all share. The one that informs us that, e.g., MLM, cults, Ponzi schemes, and the like are not what we want. For example, the reality of getting a mortgage for a first home.
"SVB's dominance was well known at Y Combinator, a start-up incubator. Dozens of tech founders who participated in Y Combinator last year were told to open bank accounts at SVB, and they were introduced to SVB bankers at Y Combinator events, said three people who took part in Y Combinator's 2022 class of tech entrepreneurs over the summer.
One described a cocktail hour mixer in which he was introduced to an SVB banker who could provide a loan to his start-up once he graduated from Y Combinator's program. Six months later, when he needed a loan to buy his first home, he went to SVB. The bank looked at his company's valuation, based on the money it had raised in its first round of funding, and spoke to investors of his company. It granted a loan after two other banks turned him down, he said.
SVB's home loans were significantly better than those from traditional banks, four people who received them said. The loans were $2.5 million to $6 million, with interest rates under 2.6 percent. Other banks had turned them down or, when given quotes for interest rates, offered over 3 percent, the people said."
Let's see. "Tech" VC use a special bank. The special bank's customers are generally only either "tech" VC or "tech" start-up founders. The "tech" VC deposit funds into "tech" start-up founder bank accounts. Then the special bank loans money (that likely came from "tech" VC) to "tech" start-up founders, based on dubious valuations made by the bank's "tech" VC customers. The entire scheme is fully insulated from the reality of the outside world.
Someone I know who studied finance read this NYT article and commented that the term "venture debt" reminded him of "EBITDA",^1 specifically Munger's comment about replacing every instance of the acronym EBITDA with the words "bullshit earnings".
YC is 100% what you make of it. It's not a lean back experience.
I did not meet most of the companies in my batch but I've gotten to know many founders through YC that I would not have otherwise. Founders that have been source of advice and support.
Network of clients - yep don't go into YC expecting to sell to other YC cos. It is easier to get warm intros through the network though.
YC advice, office hours specifically - it's what you make of it too. Expecting a group partner to know your space in great detail is unreasonable but if you recognize that they've seen hundreds of companies with similar problems and make use of that pattern matching, you can get very valuable advice. Some of the advice I did not take and did the opposite and it was the right decision. And some advice that I did not take was exactly right, but I only saw it in retrospect months later.
Fundraising - being a YC company definitely opens doors, and also helps protects you from bad actors who have to think twice before fucking with a YC co. Very valuable for any first-time founder. You have someone to sanity-check everything, terms you're not sure about etc. The bump in valuation is real too.
I'd do YC again in a heartbeat.