Being accepted or not by YC has very little bearing on whether a startup can be successful or not, I do not expect there to be any significant correlation between YC rejected companies and accepted ones (in terms of success).
They simply have a limited amount of time.
What I do think you will find is that those that are bitter about a rejection tend to cluster around the failure point, mostly because they will be looking to externalize their reason for failure. That may come in many different guises, such as 'we would have succeeded if we had been accepted' or 'we will prove they should have accepted us'.
Just take it as an opportunity to accelerate do not worry too much about who gets accepted and who does not.
YC likely got it wrong a number of times, as long as they use objective criteria (only known to themselves) and gut calls on who they choose to work with (which can just be a personal feelings issue) they are totally free to make their decisions.
> I do not expect there to be any significant correlation between YC rejected companies and accepted ones
That's a pretty bizarre statement. You mean to imply that the YC folks have exactly zero predictive power in the success of a startup? That seems pretty crazy.
I agree that being rejected by YC doesn't by any means block one from future success, but the selection process is better than, say, random sampling. If nothing else, there have to be a fair percentage of just plain dumb ideas that get filtered out or patterns that emerge for people who aren't likely to pull something off that they can predict with some degree of accuracy (no matter how small).
If YC could reliably pick the winners from a given set of applications they would be a complete outlier in the venture capital market.
I assume they're excellent judges of character, that they try to stack the odds as good as they can in their favour in the choices that they make.
Sure the selection process is better than random sampling, after all, you first get to discard the obviously bad stuff, I took it as read that we would not include those in any meaningful sample.
But the tremendous amount of applications means that YCs capacity to accept, mentor and nurture will probably be vastly outnumbered by the flood of people applying.
Let's say we reduce it to an extreme situation, two companies apply, there is only room for one. Both are 'pretty good', but there is a better personal click between one of them and YC. So, that company gets selected.
In the longer term that is not a way to predict success, the other company has just as good a shot at being successful as the one that got chose, in spite of the 'goodies' that YC brings to the table.
In the end it is mostly up to the market and the founders.
The very best time when it helps to have an experienced investor on board is in times of trouble, that is when it really pays off, after all, if the investment is large enough then it is their worry as well and they may have more experience.
At the level of investment that YC does I doubt that there is such a commitment that the problems of the startup are synonymous with a problem for the investors.
A second big benefit is that it may help to get further funding because of contacts etc. once a moderate stage of success is reached.
Of course the plain dumb ideas get taken off the top, but every now and then even a plain dumb idea gets to make it big.
There are plenty of well documented examples of VCs that said 'no' to a winning team.
If there ever will be a VC that manages to correctly identify only the winners then that would amaze me completely, as far as I can see they're as fallible as any other process to select 'winners'.
They do their best but in the end nobody gets to beat the 'industry average' by any considerable margin. Especially not in the seed stage investors.
VCs routinely hold the speech to say what it is that 'they bring to the table' and that their involvement makes a difference.
Maybe. For the most part the companies that I know of that were successful with an investment were only more successful, they would have succeeded anyway, regardless of whether they found a backer or not. The success factors that counts most are team and market, not the investors.
I'm sure investors would like to think otherwise, but that's the way I see it.
Any investor that wants to make the case that the company that they invested in would not have made it if they had not invested are discounting the biggest factors and overselling themselves.
I assume YC is presented with a glut of choices, there would probably be a triage stage that runs something like this:
1) nonsense (say 60%)
2) maybes (say 20%)
3) positives (say 20%)
Of the positves YC can due to resource constraints only accept a certain number, say for the sake of the argument that YCs resource constraints allow it to accept half of them, or 10% of the original group.
If after that you follow the 10% that got accepted with the 10% that did not as a control group then I expect both groups to do equally well in terms of success, in other words the 'hit rate' should workout roughly the same in both groups.
YC will find that it has invested in some duds, most of them will be so-so and there will be a very limited amount of take-offs, in the other group the ratios will be very similar.
A way to estimate what jacquesm is referring to might be to keep a record of which participants were marginal applicants and which were clearly in. Since you have limited places the in-out divide should be arbitrary. You can just measure only those on the 'in' side of it.
*If you numbered the top applications, you might be able to tease out some interesting conclusions about your ability to tell things in advance.
But do you keep tabs on your 'control group' or do you part ways?
The statistics would be very interesting.
I assume that plenty of projects that did get off the ground would have done so regardless of YC investing in them, and plenty of projects that YC invested in that have tanked would have done so anyway.
An effect does not even imply that it has to be positive, though I would assume that to be the case if there is one. But it might even be negative, though it would take a fair amount of research to prove that one way or the other.
Do you stay in touch with the (potential) founders that you reject and do you keep track of their eventual success or failure ?
Edit: And if you do keep track how many of the ones that you rejected have succeeded vs the ones that you have funded ?
They simply have a limited amount of time.
What I do think you will find is that those that are bitter about a rejection tend to cluster around the failure point, mostly because they will be looking to externalize their reason for failure. That may come in many different guises, such as 'we would have succeeded if we had been accepted' or 'we will prove they should have accepted us'.
Just take it as an opportunity to accelerate do not worry too much about who gets accepted and who does not.
YC likely got it wrong a number of times, as long as they use objective criteria (only known to themselves) and gut calls on who they choose to work with (which can just be a personal feelings issue) they are totally free to make their decisions.
It's their time and money after all.