I like YC as much as the next guy, but here's an important question: Why have we never seen a blog post saying that it's not worth it?
Even if YC has an extremely high satisfaction rate, the sheer number of startups they've funded has to have left at least one with a bad taste in their mouth.
I love hearing feedback like this and I almost never get tired of reading this article (especially when it has a good spin to it, like this). I'm just interested to hear a dissenting opinion. (If one is out there, please link me.)
I think the reason we don't often hear about borderline cases is that the market is truncated at the high end by later stage investors, who wouldn't allow the startups they'd funded to participate in YC even if they'd be net ahead as a result. I.e. I've seen more than one series A funded startup that we could have helped sufficiently to justify the dilution. But (as of this writing) no VC would let one of their series A funded companies do YC.
As for funding a large number of companies, that's net beneficial as long as we can devote sufficient attention to each one, because it means the alumni network they become part of is larger. And we know we're able to devote sufficient attention to each one because we can measure it in (a) office hour signups (I have office hours this afternoon and there are still open slots) and (b) how well each batch does after Demo Day (more startups in the summer 2010 batch have raised additional funding than any previous batch).
Most who decide it's not worth it would (or rather, should) do so ahead of time. I see.
Still, give a free car to a hundred people and at least one will complain about the color of the interior. There's gotta be a sour YC alumnni out there somewhere.
Even if he has no right blaming YC, I'd still like to hear his side of the story.
> YC had consulted and advised us every step of the way. When we had co-founder problems, they gracefully refused to take sides. When we wanted to make a new product, they advised us not to proceed without co-founders, and that we’d need to move to Silicon Valley to be fair to those co-founders. And finally, they didn’t expect a cent back, telling us to give all the money back to our later investors. Not once in my whole time at YC did I believe that they valued their investment more than they valued us, and they were OK with us closing down. YC is a class act.
Why do VCs refuse? Aren't VC's subject to the same equity equation rationale? Is there a difference between the answer they would give and the real answer?
> Why have we never seen a blog post saying that it's not worth it?
I can think of some reasons.
1) If your company doesn't make it, then you got investment and owe nothing, so complaining seems a little silly.
2) If your company DOES make it, chances are it's because of introductions via YC networking. If you somehow got funded and it wasn't YC-related, YC didn't hurt.
3) It's a self-selected group. There are those that are NOT a good fit for YC, and they don't apply in the first place.
4) Other-selection. Maybe YC only picks people who seem to have drunk all the kool-aid already.
5) Even if you felt screwed over, badmouthing YC would likely burn bridges. So it would just compound your problems.
6) Would a dissenting opinion be trumpeted or quashed by the editors here? Not being aware of any examples doesn't mean they aren't out there.
7) People don't want to do postmortems on their failures in general, and blaming others is generally seen as bad form, even if they really ARE to blame.
8) Brainwashing. Even people who join street gangs would almost never blame them for messing up the member's life. It becomes an in-group identity. YC ain't no street gang, and the social ties alone can be a huge thing for people who otherwise feel quite isolated, even if YC per se isn't their cup of tea.
9) There are so many difficulties that a million other things are more likely to screw up a startup than anything YC does.
10) Since focus is key, if YC gets you to focus obsessively for 3 months, that alone probably outweighs any negatives that may pop up. If your personal trainer or drill sergeant whips you into shape, then you got in shape, even if you think the process wasn't 100% optimal. The real tiger beats the paper one.
A big part of it is just psychologically "giving yourself permission" to make something THE priority. If you are doing a formal program, WITH A TIME LIMIT, friends and family understand that in a way they don't understand you just doing it by yourself, and won't bother you with distractions. And due to social conditioning, you have a LOT of psychological tweaks making YOU prioritize your own project over surfing and wasting time.
Note every term how few comments there are on this site from people doing the program. They don't have time to read "OMG Steve Jobs replied to my e-mail" and "37 ways I am better than you" posts or argue about them.
Nothing is perfect. If you go on Amazon or Yelp and look up reviews for high-end products or restaurants, there is always that one reviewer that complains the service is one millisecond to slow, the temperature is one hundredth of a degree short, and the experience isn't quite like the insane ideal they've built up in their head. But for most pragmatic people, a good high end product passes all reasonable standards of quality, so they don't bother going out of their way to find quirks and then complain about them.
YC is full of pragmatic people, by virtue of the interview process. This set is disjoint from the set of people that would give a BMW 7 series a one star review, because in order to build a successful business you need the types of people that focus on the right things. If someone held a gun to my head and asked me to list everything I was dissatisfied with at YC, I could probably find some quirks, but I'd really be grasping at straws. After they offered us investment without a single line of code or a single customer, welcomed us as if they knew us for years and not once questioned our decisions, gave us advice and introductions necessary to get the company off the ground, guided us to find additional investment when the country was in the worst recession since the Great Depression, after all these things, complaining that the quality of free food at dinners doesn't quite live up to a meal at Peter Luger would be... just plain strange.
Just my thoughts... I think a lot of the people that have a bad experience did so by their own actions. A lot of people flame out during YC... but that it's because of founder issues, personal issues, legal problems... etc.
There are a number of people with extensive startup experience on HN who don't think YC is worth it. Thomas and the guys from 37signals come to mind. There's a lot of experience and validation that comes from bootstrapping that YC doesn't provide.
i think it's probably due to the fact that you get as much out of YC as you put into it. If you need help they'll give it to you...they have those kinds of connections.
So the only thing it comes down to is money, and it's pointless to complain about that when you just flamed out and the equity is worth 0.
And if you are a success, you attribute a large part of it to the connections you got through YC.
or <tinfoilhat> they are afraid of getting on PGs bad side, and having him email every person in the valley, saying that they shouldn't work with you</tinfoilhat>
The thing is, if you need a really good advisor, you don't give away 6% of your company to do it. That's unheard of in Silicon Valley. If you want to bring on a great advisor, you'll probably only need to give up 1% (or a fraction of it).
I wouldn't consider YC until they let you stay in NYC (would cost me too much to leave in terms of present business (get on this Alexis (the East doesn't need an ambassador but rather an embassy))), but the % valuations they give are truly a drop in the bucket.
Yes companies get "screwed" by YC's initial valuation but in the long run it works out great for them. The demo-day investments, as well as the "@ev tweetability factor", are awesome things YC gives at a bargain of whatever % they ask for. And with that compiled into the equation, each % is probably worth 100k.
Do I think PG gets a piece of startups at a ridiculous deal? Yes. But that just shows PG and YC are the sort of folk you'd do well to listen to and partner with. And I can think of a few YC startups who came back for more.
I did YC summer 2009 (Bump). Of the 3 founders I was the most critical going in, mostly based on valuation. But unlike most investor relationships, the money is the minority part of the value provided. The majority is things money can't buy: advice/perspective, encouragement, the front row seats mentioned in the article, multiple networks, more. I didn't fully appreciate the quality of the intangibles until later. Now my advice is- if you can get in, just do it. Some people go through twice I hear, what is that saying.
I'm in a similar position to what he described, although have a huge problem in that we're down in South Africa.
We made it through to the interview round, and then declined when pg made the call that we'd have to interview in person (up until then we were certain video conference would be alright).
I am starting to debate my choice, but since we don't really need the program, a $3000 trip to the US for something we might not get into seems a little silly; but at the same time - that cost is nothing in the grand scheme of things.
For next time... You could have also used the time to:
A. Network your face off while in SF. Set up meetings with everybody you can. Investors if you're trying to raise. Other startups, hackers, etc.
B. Take a short vacation. I'm sure you deserve it.
At the moment we have too much going on here to consider any of that, especially if we planned on moving to the US for three months come January.
I could fly up mid-December if YC would be willing to let me pitch then (and then stay on if we make it), but I'm presuming thats not the best time to network -- if there is a good time.
Darius is the man. Agreed with him 100%. I'll also look at YC % as "advisory shares". You are actually getting a great deal considering the knowledge and experience from the whole YC alumni network.
"Advice" isn't a commodity. How much it's worth depends entirely on who it's coming from and whether they back it up with action. YC fight hard for the startups they invest in.
For that 6% you're not getting idle advice, you're getting YC on your team. It's a rare early-stage startup indeed whose value this wouldn't increase by more than 6.4%. For most, getting into YC is a state change and has profound effects.
Since by the looks of things you've created an anonymous account specifically to question whether YC is worth 6% of a startup, I think at this point you should either back up your assertions with something credible or be dismissed as a drive-by troll.
6% of What? 6% of an idea you have? Again, this is just my viewpoint... but I'd rather have a part of something instead of all of nothing.
If you're generating killer revenue, have other investors throwing you term sheets like roses at a matador... Then don't do it. Giving up 6% of your company might not make sense... unless there is a chance YC could help you significantly increase your revenue or valuations... and in that case the 6% is worth it.
Anyway, I don't mean to blow YC's trumpet. It won't make sense for everybody... it did for us and I'm really glad we did.
Well.. Depends really. The benefits you receive is not limited to that one company (people you meet, network, advice, etc)... Those transfer with you if you later start another company, and another. It could turn out to be really cheap in the long run.
I look at a YC investment (and most investments made by good angels) as less about the money and more about improving your chances of not dying. When you've got an early company, even if you're as far along as ColourLovers was, the biggest risk isn't that you will give up too much equity. The biggest risk is that you will die. And there are million reasons that you will die -- even for companies with great early traction. Things just happen.
But with backers like YC, you suddenly have a team of proven badasses that have a vested interest in making sure you succeed. So ask yourself, will YC _improve your chances of success_ by more than X%? If the answer is yes, take the deal. (Spoiler alert: the answer is yes.)
If you're going to get hit by antidilution clauses, of course forget it. Otherwise, it may be a equity based way to buy into an investor network. If you're far enough along, forget it and find a reasonably connected individual or boutique ibank.
Even if YC has an extremely high satisfaction rate, the sheer number of startups they've funded has to have left at least one with a bad taste in their mouth.
I love hearing feedback like this and I almost never get tired of reading this article (especially when it has a good spin to it, like this). I'm just interested to hear a dissenting opinion. (If one is out there, please link me.)