This article is rather thin on numbers or tangible benefits that actually developed because of joining YC as a "later stage" company. I'm not saying there isn't an argument to be made that joining YC late is a good thing, I just don't think this essay does that.
Descriptions of how YC is more pleasant as a late-stage company are not surprising. Of course it would be, but did YOU derive that much benefit that you couldn't have achieved on your own?
Could the team not have derived the same benefit by simply holding up for 3 months on their own, and getting their investors/board to be actively involved during that time as a sounding board?
The only real benefit I see being expounded is the connections YC offers for securing a series A. However, I'm skeptical that a solid business with pre-existing good connections (via their current investors and board) couldn't secure a reasonable series A without sacrificing 7% of their company. Simple arithmetic dictates that YC's value-prop needs to be amazing to justify sacrificing 7% in exchange for a more optimal series A.
Possibly slight off-topic grumbling... I automatically disengage when reading a post where the opening paragraph is just a high-five killing-it startup pitch. I understand we all gotta hustle, but it seems like the majority of posts by startups are just done for recruiting or to call attention to themselves. I click the links to get some good information, but wind up feeling like I'm being sold a vacation time-share (with the opportunity to work at the startup! :-)
> Applications for YC’s Winter 2016 batch are closing soon, and that has the team at WayUp (formerly Campus Job) feeling pretty nostalgic. During YC, the company grew faster than ever, we hit the crazy goals we set for ourselves, and we closed our Series A around Demo Day, bringing our total fundraising to $9.1M. And on top of all the traction, our team of 8 had a ton of fun.
Most startups begin life in total obscurity and only transcend that nameless wasteland through sheer cheerleading force. I get that it can feel a little rah-rah, but as a founder that function is firmly on your list of jobs.
It would be strange to read a founder-penned startup missive that didn't toot a few horns.
I feel like that quote is a relevant content considering the post is about how YC was good for their startup... and they're listing ways in which YC was good for their startup.
Meh, I disagree. 7% of equity can net some top talent, and I don't think any VC can claim to match what 7% worth of talent can bring. This is of course, only true if money isn't an issue, and for a later stage company, money won't be an issue. Instead, equity is the scarcer resource, and selling 7% of it for a measly 120k should be an absolute negative signal to future investors.
It's not that $120K is nothing, it's that they already had $1M in funding, which they must have gotten way more cheaply than the YC money. If you just value the company at the amount of money in the bank, the 7% stake they traded to YC is worth $70K today (of course it's more complicated than that - I'm just spitballing numbers).
The timing is different. If you got backed by YC late in the game, my assumption if I'm considered as a hire is that you got ripped off unless you negotiated heavily and successfully. The signal is completely different.
> Soon after launch, we thought we were “doing great” — we’d raised $1M in VC funding pre-launch, we had a team of 5, we had ~$12k/month in revenue (with a 100% take-rate), and we had tens of thousands of users.
In the context of the post's headline, I expected to see more than a five person company with about enough monthly revenue to maybe cover payroll for a mid-level developer in the Bay Area.
This really doesn't seem "too far along" for anything early-stage.
I get that YC makes sense for larger companies, but also am curious as to why YC is so inflexible on the terms of the investment. Capital is obviously not a constraint for YC, so why doesn't the fund just put up more money for the 7% for larger companies? One guess I have is that it makes it introduces friction and makes YC much less scalable, but also would attract more large startups.
One reason for this is that they're working with tens of companies per batch, and the way the application/interview process works doesn't give them a lot of time to wait for people to accept. If you make the deal negotiable, people will try to negotiate.
Given that this is the. major. problem. with raising money from institutional venture capitalists, it's not hard to see why someone trying to do lightweight capital for new companies would want to avoid that problem.
Remember also: they're doing two batches per year, the batch lasts 3 months, there's a lot of stuff that happens right after the batch, and the whole application/acceptance process is condensed down to a month as it is. There's not a lot of flexibility available in this calendar even as it is.
(Also: at least in earlier batches, there were IIRC companies that did negotiate the % YC was buying for their money).
Agreed. I was previously a founder with a company in an incubator in which we were able to negotiate the terms of the deal. One founder spent 3 months basically trying to negotiate the terms and at the end we didn't take that funding and it was like lighting 3 months of time of fire on equity discussions that didn't matter if we weren't successful. If you only have 2-3 founders, it's a major distraction/waste of time up front when you really need to be taking advantages of whatever the incubator provides (connections, mentorship, pilots, etc.) and executing. If there are no advantages, don't join the incubator. If you don't want to take VC funding, you probably shouldn't join an incubator/accelerator since VC connections are usually the few consistent things the incubator can provide.
The cynic in me says because they have the brand name and they can be stingy.
The reality is likely that they are conveying their values through the investment terms. They want startups to be lean, fast, and high growth. Money makes you lazy. They're saying they'll teach you the actually valuable stuff in the program. YC also says they'll help you raise more investment money if you need it, which is true, I suppose...
I don't think it's wise to give YC the "standard" 7% when you are ahead of most other applicants.
I don't know if they did it or not, but I would have negotiated the % before accepting.
Hi! I'm part of a 17 people team of a company that is applying to YC. And as we are based outside the US it is prohibitive to move all team to San Francisco.
I fully support the 3 founders going to YC, while the rest of us stay here working hard and communicating remotely.
What do you think? It is viable/worthy for the 3 founders to do YC with a 14-people remote team?
Though I don't know your company, I do believe it is viable for the 3 founders to do YC with the rest of your team remote. Even in our batch, I can think of at least one company that was in a similar situation to what you're describing, and they got a lot out of YC.
It is still valuable even if the entire team isn't able to be in California. It comes down to the founders and the team committing to regular and open communication, making sure that the founders and team stay in touch and that the founders are able to share as much of what they are learning as possible with the team. Keep in mind, there are many companies that operate entirely remotely--Stack Overflow and Automattic, to name a couple. All it takes for your company to succeed working remotely is to build a good remote culture.[1] Your company, and therefore you and the rest of your team, will still get value out of YC from everything the founders will learn and can share with you, as well as from the YC network, mentoring, community, and branding that will stay with the company for the rest of its existence.
We were lucky that we were able to be able to bring our whole team--but that doesn't mean it's a prerequisite. Many companies can't bring their whole teams, for all kinds of different but valid reasons.
Most were very supportive, especially David and Adam who are mentioned in the post, but not 100% of our investors were completely bought in. One concern that was brought up I mentioned in the article--it could be a big distraction to uproot the entire team and move to California for three months, when we already had some traction and a team in New York.
The team's complete support and unanimous decision to do YC made us more confident that rather than be a distraction, living in a house together in California would immensely improve our productivity and motivation. To commit ourselves to that, we decided as a team that we would work 13 out of 14 days during YC--we only took one day off every two weeks. In the end, we worked really hard but had a LOT of fun, and we accomplished so much more in those three months because we were living and working together. Also, missing the worst NYC winter on record while working in the sun was pretty nice.
> Quora CEO Adam D’Angelo tells me “YC invested an amount that was similar to their standard $120k. They invested as part of the Tiger round.” That $80 million round valued Quora at $900 million, so the startup only traded away approximately 0.013%.
This advice is obviously correct, but it is kind of like stating that you're never too rich to apply to Harvard.
What I mean is that obviously YC is a structured program that is very, very well-connected, and unlocks vast, unlimited potential for any company. Anyone given this opportunity gets huge benefits from it, even the people - companies - who are starting with the most advantages.
Yes, but there is still a cost to doing YC--7% is a lot for many founders to stomach, especially if you already have some traction and have already raised. Not to mention it's much harder to move a full team of 8 people to California than a small team of 2-3 founders.
Companies in that position, like we were, often ask if it's worth it. I wrote this article to answer that question: Yes, it's still worth it.
I rather think you miss my point. For every company at your stage who thinks it might be a bad round, ten are dying to get in - there are few to no ways to make as large and fast connections. I suppose it depends on company's long-term plans.
Descriptions of how YC is more pleasant as a late-stage company are not surprising. Of course it would be, but did YOU derive that much benefit that you couldn't have achieved on your own?
Could the team not have derived the same benefit by simply holding up for 3 months on their own, and getting their investors/board to be actively involved during that time as a sounding board?
The only real benefit I see being expounded is the connections YC offers for securing a series A. However, I'm skeptical that a solid business with pre-existing good connections (via their current investors and board) couldn't secure a reasonable series A without sacrificing 7% of their company. Simple arithmetic dictates that YC's value-prop needs to be amazing to justify sacrificing 7% in exchange for a more optimal series A.