Why we applied to YC despite having gone through another accelerator | Hacker News Reader

Why we applied to YC despite having gone through another accelerator

karthikmanimaran.com

48 pointskarthikm27 comments

As a YC B2B alum, not totally impartial, but also not totally uninformed. I think you may have the wrong take-away from your experience.

I'm sorry you had a bad experience in LA. I agree a lot of the stuff you wrote about that accelerator sounds like unconscionable bullshit. The amazing thing is it is far from the worst I've read about. I'm glad you realize it was crappy.

Yes, there are ways to bootstrap a B2B business: early sales/revenue. The risk is becoming a consultancy, or losing your market to someone who is better funded. I wouldn't say you have to raise (even for consumer), but I also wouldn't say you shouldn't, and in the current market, raising is probably the best choice for someone who fits the scale/size/winner-take-all model, even in B2B.

2.9%? Why does a specific percentage matter? If someone takes 10% and tanks your business, that's bad. If I could get YC level value-add (network, advice, reputation) as a developer tool company focused on startups for 25% of common from a huge value-add investor, I'd seriously consider it. But of course I'd rather take YC for 7% and all the other YC benefits.

This is a good example of how bad many accelerators are, but extrapolating based on that experience to thinking that he knows anything about YC is a major error. This is a bit like saying, "I had a bad time drinking bleach, therefore you should avoid all liquids."

Most accelerators are profit generating initiatives that while started to be beneficial are unable to scale and fulfill their purpose.

Accelerators are actually a terrible business because you only make money if you get a big hit (which most won't), and even then it can take 10 years or more to realize the gains. I predict most will disappear in the next 5 years.

What's your advice for a new accelerator (or any investor for that matter) in measuring if they are doing well? The problem is one of retarded measurement of success. It feels like you are doing well because you are deploying money, you are being highly selective, etc. But you can still be slowly dying without noticing. What are some good predictors? You guys at YC have some heuristics for identifying good founders, but I believe it would be hard for new accelerators/investors to use those, because they are highly subjective and I would argue most new accelerators/investors will not know how to assess those founders characteristics when they are getting started. Would you advice people to experiment for a few years (literally being willing to loose all the money invested) just to develop that ability to measure, and be ready to be a good accelerator/investor a few years down the line?

I don't think YC cares about growth, or if you're early/late stage (yeah I know this goes against what the president said..but hear me out). We also got refused being a B2B startup with extreme growth and only less than 6 months old solving a real world problem. The difference is that our startup was boring web SaaS, without any crazy tech or AI. If you look at their latest batch most companies are hardware, biotech, energy, or some batshit crazy algorithm AI buzzwordy startup. They're going deep and risking a lot, and this is probably what I would do too if I had a big fund 8 years later.

Quora got in YC after already raising many rounds and through other accelator..but that was 2 years ago when YC wasn't 100% crazy tech only yet: http://techcrunch.com/2014/05/11/quora-y-combinator/

Aside from your confusing logic, it drives me nuts that half my screen is your body shot while I'm supposed to be reading your blog post. Very distracting. Sorry if this is nonconstructive.

your body shot shouldn't occupy more than 3% of the screen ;)

2.9%

I had to close the tab because I did not want my colleagues to think why am I looking at this guy.

I assume you plan on raising money? In your case, you would likely get even more than a 6% valuation bump, making YC worth it on that alone.

I think there are some key details missing in this post which make it hard to tell why you were in fact rejected. In addition to the accelerator, you've also been going at it for 3+ years, and are only now hitting 1M For B2B, that is unfortunately on the really slow end of things for growth (read Jason Lemkins quora posts for whay to expect for typical bootstrapped busineeses). The fact that you're a leader already in this market, and growth is that slow, is maybe an indicator the market doesn't have much potential. On the other hand it might also just be that you're in a market that is new, so the potential is there and others just don't see it.

I'm fairly down on Quora, but ~everything https://www.quora.com/profile/Jason-M.-Lemkin has written looks pretty amazing -- I wish he'd write a book or something.

I suspect he's too busy investing and slinging tickets to his annual conference. Conference Money > Book Money.

Nice thing about that conference: they're letting people volunteer and get free entrance.

He is in the process of writing a book at the moment.

https://mega.nz/#!ip0WXAZR!ynjFWvnvojT0bmG7maTszjFybuG_Yr1De...

IIRC his number is $2-3mm ARR after 24 months bootstrapped in SaaS at the lowest end.

I do not understand how YC is anything at all like Paypal.

It's like how when PayPal is processing your payments and they connect you with really successful people who take in the same kind of payments so you can learn from them and get their advice, and then connect you with other people who just take in a lot of payments in general for their advice too.

This also struck me. It seems as though YC gives you $120K, advice, contacts and exposure. Obviously it's worth $120K plus whatever the other happens to be worth. They take equity from the company in return.

Paypal offers a necessary service to a company (payment). They charge a service fee.

I'm not going to say YC isn't useful or worth the equity for some people. However, you've got think that a $120K loan is pretty damn cheap these days. Also, I pay my accountant a few thousand a year and he gives me incredible business advice. Possibly I'm just lucky, but I suspect that young founders do not really understand the options they have open to them for growing a business.

I view my accountant as a necessary business expense. I even get to write off the money I pay him from my income. That's more like Paypal. Similarly, on a loan, I have to pay interest. That's a cost (and possibly necessary expense). If I need to pay a consultant to help me improve my image or make contacts, that's a cost.

Giving away part of your company for a service? Not at all like Paypal :-) Personally, I'd rather pay an expense than give up part of my company. Obviously depends on the situation, though.

Now it's not so convincing piece of advice when you say "Never do an accelerator", when you just applied for one and got rejected, is it?

I thought about that as well. I think it may be defensiveness and anger - rather than a logical statement. Those feelings are natural, so I don't fault him - but at the same time, rejection is a part of startups at every turn and I think we have to get over it, and figure out how to use criticism constructively.

YC has always valued persistence - so I'm sad that he applied and wrote that, since he might have been able to get in the next time, and I think YC likely would have helped his ability to recruit and valuation, especially given the changing markets. But regardless, I always have respect for startup founders (esp after 3 years of hard work) - so we should all wish his team luck.

This guy not only tells people not to YC after he applied and got rejected, but also publicly bashes someone (the LA accelerator) who did their best to help him (Doesn't matter if it didn't work out. They did their best to help their portfolio companies and this guy says it was a "gimmick") I wouldn't like to work with this guy

Hard to use that to say he's not a great person to work with. The LA accelerator might have been egregious, and he may be doing a service to other entrepreneurs by publicizing it (there are a lot of incubators today, and entrepreneurs should beware). I do hope in the LA incubator's case that he gave actionable feedback privately long ago.

I totally agree on the cognitive dissonance with bashing YC and saying to never to do it, after getting rejected recently. But I can realize how it might not be a fully rational perspective (he'd probably argue that he's more educated now, and that's why he's changed his mind since applying - my gut is there's some emotions involved, since I can't see a ton of benefit to him to write this so publicly).

Since he didn't link to it himself, for those curious, Karthik's company is https://welink.com/ - location-based social media monitoring. e.g., sentiment within a sports stadium or shopping mall.

You missed an opportunity to explain what your startup does, no link in the blog entry, blog only contains that one entry. Also +3 years at it is not a good indicator for getting at YC which as per Sam's post prefers very early startups but good luck anyways.

To play devil's advocate, Airbnb was in business for at least two years already before they got into YC.

Yes, one can argue, times have changed a lot since then as the applicants pool have significantly increased. One other the thing, founders were extremely impressive; so, Airbnb may be an outlier.

Posted this on his comment form:

Karthik, disclosure, I was a YC founder.

It doesn’t seem very thoughtful to say never pay more than 3%, full stop. If you get more than 3% value out of the incubator, it’s often a good idea to pay more than 3%. You should make the decision after talking to many people who’ve chosen the incubator, and there are many companies that will say they got much more than 7% benefit out of YC – and also companies that didn’t.

It’d be great if every incubator charges much less than they do today, but I’m doubtful it’s a perfectly competitive market, with stickiness in things like alumni networks and reputation (it does seem like it has some similarities to the education market). Entrepreneurs would obviously benefit from more competition amongst incubators – and maybe you’re right that change is at hand.

I’m sorry that you didn’t get in to YC specifically (and maybe it wasn’t the right idea to apply, if you felt so strongly about how incubators provided so little value) – but I hope you won’t let your disappointment and anger get in the way of thoughtful business decisions, including in cases like future customer rejections.

Anyway, back to building our businesses – good luck with your own!

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