Ask HN: Is the Y Combinator model dead thanks to Kickstarter-like crowd funding? | Hacker News Reader

Ask HN: Is the Y Combinator model dead thanks to Kickstarter-like crowd funding?

20 pointstav22 comments

As of a few moments ago, the Diaspora project passed $50,000 — five times what they'd asked for, and it seems that people are still giving... there's 20 days left for them to keep doing so!It's been exciting to see them double their "investment" in less than 24 hours and proves that it is possible to crowdfund startups.So my question is whether such successes totally invalidate the Y Combinator model?And, on a related vein, what sort of support infrastructure would people like to see with the crowd funding + social media approach?Thanks!

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I think you're missing a huge benefit to having investors, which is that you're able to consult with them and get advice, and they have a very real motivation to give you good advice and to help you if they can.

YC also has the benefit of a large (and pretty successful) alumni network, and a lot of the YC people I've seen talking/writing about their YC experiences have listed that as a huge positive.

edit: Nothing's stopping you from applying to YC too, but the original question was whether or not this invalidates the YC model, and this is why it doesn't.

Well they are actually getting investors at the moment, and they might get sage advice by people who are willing to do so on the net.

I suspect the valuable advice might well be buried in the noise, and take more time to sort out than you would get if you were just dealing with a couple of big investors.

That, and bigger investors have more at stake, so it is in their own interest to see you do things right quickly.

What stops them from applying to a VC or a seed stage investor like YC?

Yes and no. Others have already said 3 times now that the value of YC is not in the money, and I agree with that for the most part. But what Kickstarter does is it allows you to 'divorce' the advisory/networking roles and the funding roles.

There are plenty of people that can mentor but they may not be in a position to fund for a variety of reasons (for instance not being an 'accredited investor'). Like this you could actually hire them to give their advice, rather then to come to them for both money and advice, as well as a network.

So kickstarter may very well spell the end of the incubator, but via a completely different route.

Companies like YC thrive on the scarcity of the combination of people with the money to invest and the time to mentor.

If Diaspora fails the model will likely collapse though, they're a poster child for this model now, they had better succeed or die (figuratively speaking of course) trying.

No going back for them.

edit: and don't underestimate the power of being 'YC funded' for follow up rounds.

Kickstarter is a great thing to push people to get things done that they might not otherwise do on their own.

YC is a great way to kick your startup into high gear as well.

But that's where the similarities end.

They are not substitutes for one another. YC is also not a company. It is a pre-seed stage venture firm (with amazing advice from PG, Jessica and co) and a network of entrepreneurs who help each other.

I don't even think that it is inconceivable that a group funded through kickstarter knocks on YCs door for guidance in return for 5% + some more dough. The chances of success have already improved because of kickstarter, so kickstarter could be a pre-pre-seed stage idea validator, to see if something has legs or not before you even apply to YC.

I'm not sure Kickstarter is that tied to Diaspora. Depending on which community's blogs / trade press you read, there's a lot of interest in it from people who've never heard of Diaspora. Lots of people in the game industry are watching various indie-game-funding Kickstarter experiments, for example, and whether any of them pan out will be the main thing that'll determine whether people from that industry will take it seriously in the future.

They're not tied, but right now I'd wager Diaspora is the single largest project that kickstarter has launched, if they fail then there will be some backlash.

Of course it should be obvious that kickstarter has zero influence on the success or failure of the companies that people pledge to, but I think if a large number of people pledge and see their money go to waste that it will be associated with the model rather than with that particular company.

Time will tell.

Yeah, I agree it'll have a large influence, just more in some areas than others (Kickstarter has made separate waves in separate communities, and this is just its first big wave in the web-tech community). By money it's not the largest project, though; there've been 3 or 4 other >$50k projects. Here's one (a film): http://www.kickstarter.com/projects/838077230/stuffer-0

edit: I could probably agree that if Diaspora totally fails, Kickstarter won't be seen as having much cred in Silicon Valley. Mostly I guess my point is that whether Kickstarter has viability as an alternative funding model for films, novels, music, or indie games (the areas it's been most focused on) is a question that won't be much influenced by Diaspora's success/failure.

http://www.kickstarter.com/projects/by/popular?time=all

Interesting figures. I think if this keeps up at all like it is doing now it will be the largest project by tomorrow evening.

I'll be watching closely, but now I have to get some z's (3:30 am here). Thanks for the exchange!

No.

YCombinator's value isn't the money, it's the vast network of connections and deep experience they can provide.

While true, a different interesting question might be: will crowdsourced funding make angel investors who aren't YCombinator less in demand? I don't think every angel investor has the same reputation/connections YC has, and some really do bring mainly money to the table.

I would assume it would impact those investors. Investors without connections are sometimes more of a pain in the ass than not having money at all.

One seems to be a way of throwing some loose change at an idea you think might be neat. The other is a carefully developed way of identifying and assisting projects that have a good chance of developing into profitable businesses.

Losing sight of the fact that someone has to actually make money from these things at some point is precisely what gives you internet bubbles. From everything I've read about YC it's all about focusing down to build something that someone wants to buy. That's a world away from accepting donations from people who think something cool might come of it.

Aside from the personal consultations, experience, expertise, and connections that YC offers over Kickstarter (which are all vastly important), I suspect it is much more difficult to raise funding through crowd funding than through angels & VCs, relatively speaking.

There's also the question of whether or not they'll know how to most effectively use that funding. Consultation from experienced people like those at YC would help there too.

Diaspora is an edge case. All the press they've gotten have catapulted their popularity enough to raise this amount. And more power to them too; they have a valiant goal and I hope they can execute on it well.

But I wouldn't try to raise funding for a for-profit startup through crowd funding, unless perhaps your startup has an apparent, believable, and widely-desired benefit to society. I'd love to be proven wrong, but this argument only has a sample size of 1 so far.

In this case people are voting with their dollars. Most startups won't have the benefit of a controversy generating a wave of press behind their cause.

Are there already sites that take pledges for software projects (successfully; I think there have been failed attempts)?

The value of Y Combinator isn't the money.

One obvious disadvantage: with Kickstarter, you're ploppping your business plan on the net at a very early stage. Makes it quite easy to poach.

Seems like a very relevant debate. Indiegogo and Kickstarter seem to be paving the way for micro investing.

it's not really "investing" though, is it. it's giving people money. there is no exchange of equity involved in the kickstarter transaction (nor is it allowed, according to their TOS, I think).

Wave of democratization. Too early to tell.

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