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Comment by tptacek | Hacker News Reader

Union bylaws obligate me to point out that with a similar expenditure of effort and planning, you could "raise" more than twice as much money as a YC "round" by consulting for a month, and then simply start your company.

The market does not care whether your friends are "top quality players" who make important contributions. You are not a unique snowflake. If your product or service offering works, you will win.

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You can't raise the networking opportunities nearly as easily. The social motivators to work like hell and launch as soon as possible are also worth more than the actual cash.

You know what's harder than getting motivated, and networking with successful entrepreneurs? Everything else about running a company.

With the caveat that you shouldn't really give a shit about what I think, my objection to this process is that it turns starting a company into yet another "thing you apply to", like college and grad school and a job at Google. Starting up is simultaneously much easier than YC can make it sounds like, and much harder.

I get your point from a sister thread. "Don't waste time on your application - build your product"

But I disagree. Here is why: expressing your idea is one form of product development.

Writing down your idea in a way that other people understand is absolutely essential. Similarly, practicing for demo day means getting the exact phrasing of a 7 minute talk absolutely perfect. That might seem like a waste of time, until you realize that you'll be able to pitch at the drop of a hat for the life of the company as a result.

>Similarly, practicing for demo day means getting the exact phrasing of a 7 minute talk absolutely perfect.

When I was a student of Toastmasters, I came across the treasure chest of dot-com era (2001) VC pitches from SpringBoard Enterprises ("Women-Capital-Connections").

I feel that many of the video clips of pitches in their Learning Center's Video Archive demonstrate the power of a confident, polished, professional, articulated pitch.

I'm happy to have found them again on Google. RealPlayer streams (Use Real Alternative instead of Real Player)

http://www.springboardenterprises.org - Learning Center - Video Archive or http://64.45.59.230/learning/lc3.asp?pid=699

KimFisher of AudioBasket.com - http://eventuring.org/Video/real/opsv00audiobasketa.rm

Julz Chavez, Get Real Girl, New York 2001 (0:42 min) Chavez describes her two market segments and focuses on her addressable market. http://eventuring.org/Video/Real/marny001getrealgirla.rm

Yes, most of the pitches are for failed B2B enterprises but you can't dismiss the presenter's drink-the-kool-aid-style fervor (remember that?)

People spend a lot of time trying to sound slick for investors. You may find that customers are more forgiving of your rough edges. Either way, real investors are going to be a lot more convinced by your traction than your talk.

I wish it was that easy...

Raising money beyond bootstrapping is very difficult unless you are referred by a credible source, which is what YC is. Its about the referrals and connections and the associated attention that comes along with them, not so much the money. I'd give up 6% of my startup if I could personally connect with all of the important angels in SV and Boston, probably even if no money was involved.

But, like you say it all really comes down to the product. That I'll agree with.

I see this argument a lot from YC fans, but I never see the two big problems with it addressed:

(1) The overwhelming majority of VC A-rounds don't go to YC companies.

(2) A majority of YC companies don't seem to get funded --- defined here as "an A round of over $1MM".

Graham knows more about (2) than I can claim to, and I could be wrong, but my sense of it is that I am not.

The normal route to funding for News.YC readers seems to be:

(1) Bootstrap (2) Prototype (3) Customers (4) Adult Supervision (5) Funding

(4) --- a CEO who knows how to talk to VC --- sounds demeaning, until you realize that it pales in comparison to (5), which dominates both the normal and the YC graph (note edge to (0) FAILURE at every vertex).

1.) means nothing without also knowing what percentage of companies seeking funding are from YC. Hypothetically, if there are 2000 companies seeking VC funding, 20 companies that get into YC, 100 companies funded, and 10 of those funded companies are from YC, then only 10% of VC A-rounds went to YC companies. Yet your chances of getting funding given that you got into YC are 50%, yet your chances of getting funding otherwise are 5%. Most entrepreneurs would give up 6% of their company for a 10-fold increase in the chance of getting funded.

It is much easier to figure out what percentage of VC A-rounds go to YC companies than it is to apply to YC: VCs publish their portfolios, often before companies even launch. We did pretty much that when we started:

http://www.matasano.com/f38a0ad3a3d5c1a4a666.png

(n.b.: large). Instead of YC A-rounds, we were looking for security A-rounds. It took a few hours. This is very OCD, but hey, you can spend a few hours doing nothing on IRC.

My point is, I think your numbers are wrong, and no way do 10% of all A-rounds go to YC companies. Do YC companies have a 50% chance of getting an A-round within 12 months? I guess Graham can tell us.

Most entrepreneurs would not give up 6% for a 10-fold chance in simply getting funded. You will find this hard to believe, but I'll report it to you firsthand: some companies turn down the opportunity to get funded. We haven't even gotten into the terms discussion. Say 50% of YC'ers get funded. What percentage of them get good deals, and what percentage get tranched, 3x prefs, tiny valuation, and loss of the board? 0% of bootstrapped companies have those problems.

Late edit: there are more than 100 VCs on that radial chart. So much for 10/100=10%.

Do YC companies have a 50% chance of getting an A-round within 12 months? I guess Graham can tell us.

Off the top of my head, I'd say the ratio is about that, of companies that want to raise series A rounds. Most don't actually want to. They don't need that much money, so they go with angels because it's so much less restrictive.

This is all besides the point --- I think it's interesting to think critically about YC, but really, who cares?

I'm saying, to the person who said "I wish it was that easy", it is exactly that easy. Most of the companies YC "funds" don't need VC to start up, which is good, because YC doesn't give you that kind of money anyways.

There are lots of paths to success. Look at virtually any Mac software startup; none of them get VC, and they accomplish ridiculous things. Which is harder to build, Reddit or Quicksilver? Reddit was Graham's "hello world" for Arc.

"You will find this hard to believe, but I'll report it to you firsthand: some companies turn down the opportunity to get funded."

Not all that hard: my last employer turned down VC financing. And I'm going a similar route with my own startup: I'm not averse to VC financing, but only after achieving "product/market fit". There's no sense taking other people's money for an idea that may not fly, and I can change direction more easily without employees or investors.

I still would like to see actual numbers for the 4 quantities I mentioned. My point is not that you're wrong, it's that without that data, you can't draw a sound conclusion either way.

"What percentage of them get good deals, and what percentage get tranched, 3x prefs, tiny valuation, and loss of the board?"

One of the advantages of YC, as I see it, is that this is far less likely to happen. YC brings bargaining power: if a VC screws over a YC startup, you can bet that YC will not be bringing any future deal-flow to that VC. You don't have this advantage as a lone startup, regardless of how good your product is. Never underestimate the power of incentives in getting people to behave properly.

Is there any evidence, at all, that YC "sponsorship" improves deal quality? "Most" YC startups don't take A rounds (Graham). About 50% of those that try to, fail (Graham). If YC takes 20, and we generously assume 9 of them go for A-rounds, and 5 of them obtain them, what percentage of them get good valuations?

How many YC "sessions" have there been so far? If each produces 4-5 funded companies 6 months later, this isn't a hard question to answer. For instance, most companies publish their boards of directors. Let's see which ones got screwed.

I wrote a whole essay about that one. Short version: at the seed end of the startup funding continuum, money is not the active ingredient.

http://www.paulgraham.com/ycombinator.html

6% of 0 is 0, so you've picked an attractive time to make that argument. Your readers should just know that 6 months after starting their company, 6% of their company is 1-6 rock star team members. It could also be $1-6MM in a reasonable happy outcome.

I'm not trying to debate whether YC is a good deal; I'm objecting to the idea of spending more time and effort applying to YC than building an offering.

At least for me, those two were exactly the same thing. If you don't have a prototype, that should be one of the very first steps in your business. If you do, great - you have everything you need to apply.

> you could "raise" more than twice as much money as a YC "round" by consulting for a month

However, you'd be one month behind in development. For a start-up, that could be critical.

Same goes for spending a month finessing your YC application. tptacek's point is that the time spent getting into YC could be better spent building your product.

If the first month is critical, you're probably picking a crappy segment to chase. Yeah, the window's closing on social networks. Go do something else.

Its not the first month thats critical, its the last month. Any plan with an extra month at the end has more chance of success. The problem with a startup is that the total amount of time available is rarely known in advance.

"You are not a unique snowflake"

I love the fight club tone...

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