We tried to hustle our way into YC after we got rejected
veed.io
veed.io
A big part of the onus of the original product, at least, as it was launched, was that it was "watermark free" and the way it was "sold" to end-users was that it was a free service. Now, I can understand the initial rationale here -- you want to get users, you start with free, and assume you'll pivot to paid options/add-ons at some point or get sponsorship or other revenue streams, or pretend it's still 2009 and that startups with no revenue can obtain ridiculous valuations and then be acquired by Yahoo or whatever.
The problem is, it's no longer 2009 and investing strategies have changed. Revenue has replaced users as the important growth metric for lots of investors. (There are exceptions, I'm aware, but this is a general trend we've seen over the last few years. Don't worry founders, the pendulum is bound to go back in the other direction in another few years.)
Now, I don't know what the team's original business plan was for this service, but based on the YC letter, it appears that they said "we'll start charging eventually" and that led to the question about why you aren't already trying that now, when you have 35,000 MAU. A fair question -- and one that really represents more of a question about business plan rather than lack of MRR.
But the team read this as "if we can show MRR, we can prove we're ready" -- except that wasn't and isn't the problem here. Yes, it's impressive that the team was able to hack together a payment gateway and offer a pro product in a weekend and obtain $500 in revenue (should be noted that this isn't recurring and it won't be clear what the actual recurring revenue is for several months), but the fact that it was done so haphazardly, and honestly, for what looks like the wrong reasons (it wasn't about "this is best for the business" it was about "this will get us into YC"), is the biggest red flag.
If you want to change a fundamental part of your product (no watermarks) and make it a pro feature to entice users to pay, you're welcome to do that. It may or may not work for existing users, and it's possible there are better ways to extract revenue/add value. The truth is though, this was an idea done at the last minute to try to secure placement in an accelerator, it doesn't appear to be born out of actual business rationale for the product.
Additionally, odds are that the best thing for the business (and founders) would being admitted to YC over any product change they could possible make.
They had non zero odds and I think it was a clever plan all things considered. If YC is looking at founders above everything else and less product, these young dudes seem to be cut from the cloth.
That's not necessarily true, as plenty of businesses fail because they don't have a business plan for their product. The world is littered with great products that failed because there was no business plan or the business plan wasn't sustainable. Obviously, having a business plan doesn't make a successful product (and I never one intimated otherwise), but in this case, the feedback from YC was about the business and not about the product.
>Additionally, odds are that the best thing for the business (and founders) would being admitted to YC over any product change they could possible make.
If by "best thing" you mean "could raise money to fund the product in absence of a business plan" -- you're probably right. Getting into YC or a similar accelerator would make raising money easier for sure. But getting in doesn't guarantee funding or success in any way shape or form.
>They had non zero odds and I think it was a clever plan all things considered. If YC is looking at founders above everything else and less product, these young dudes seem to be cut from the cloth.
I disagree that they had non zero odds. They were rejected and given a reason why. The response to that rejection didn't actually answer the critique by YC (and the founders don't seem to have understood what that critique was). You're right that the product doesn't always matter when it comes to who gets funding, but in this case, being "clever" just further proved that they didn't actually understand that core feedback, which is wholly independent of product.
Look, I hope these guys try again. I also hope they take up the offer for office hours and take that feedback into perfecting their business model and their product strategy so that they are more successful next time.
> Combining the non-zero and best thing for the biz.
These are kids who by being in YC get expert observation and access to a network that they would take a decade to build. The only scenario in which not getting in is better is if they strike some insane gold pocket and they are physically too busy to participate in YC. They had YC as a captive audience and there was precedent for flexibility, thats non zero.
same same. I hope this serves as the intro to a story titled "The time YC almost made another $5b."
I imagine reversing a rejection is different though. Most people, YC or not, have an ego and will stubbornly maintain their rejection even if it makes sense to change mind. This is just psychology. Colleges, dates, hiring managers all do it.
The TechCrunch article does state that they had an initial rejection after their late application.
> I put together an application, and made a video describing my product. I waited for a response, and several days later I got one: another “No.”
In this case, it sounds like their users may have been feeling baited and switched, having invested their time into the product only to have to pay to continue using it without watermarking.
If my understanding of the above is accurate, then they may have already destroyed their trust relationship with their current users..
$50 per year is reasonable. By posting about their project and having that carried on ycombinator, they maybe got the biggest audience of sympathetic users they could ask for. It's a great bit of viral marketing, and I expect they'd see a spike in interest from independent investors as well as a spike in paid memberships.
YC is an accelerator, and as such, needs to accelerate /something/. If you join too early, then it's almost a distraction to getting the product out and talking to users. However, hit the sweet spot and YC is an invaluable resource to help you grow.
On the other hand, YC opens the door to so many opportunities and great people, that even if you're too early, the net result is still a pure positive for your career and startup.
The worst case scenario is a newly accepted YC startup with a little bit of traction... just enough traction that they aren't willing to change ideas/markets and not enough traction for them to actually know they have product market fit. It's the uncanny valley of product-market fit. These companies with a little bit of progress can spend months or years of their life chasing what they later realize was a mirage.
When a new YC company enters the batch with very little or no traction (and can move incredibly fast) they will longterm outperform companies accepted with small traction most of the time. Based on the hundreds of companies I have personally funded at YC, speed is the single most predictive variable of if a startup will succeed - not traction at time of accept.
Doing YC at their early state was perfect because it was the perfect environment to come up with an idea like Brex.
Moving fast is something we are working at hard at. From a technical and creative perspective.
Correct me if I am wrong. When you say moving fast, do you mean being nimble and quick at pretty much everything, with the goal to find product-market fit?
May I ask which speed exactly you are referring to?
Originally it was enough to have a few people, an idea, and a prototype. I think that was the model for the most successful YC companies currently out there (Dropbox, Airbnb, Stripe, PagerDuty). Some didn't land on their actual idea on product until after the batch (Twitch).
There are certainly companies that come in with a baked product and the start of some real users/customers who then use their time in YC to juice their numbers and raise big rounds at crazy valuations right at the close of the batch. However, I think what YC offers that is unique (and a real strength) is that they back completely unknown founders very early in their process of building a product and a company and give them the connections and advice to help build something big.
The YC series A program strikes me as more of an accelerator.
Now this is my opinion. I start a startup to be my own boss and change the world on my OWN terms. Why the hell, should I go to YC to hire a boss?
To grow faster? To learn how to grow?
BULLSHITT! I can do both of those without their help -- call me arrogant, I don't care.
Do you mind if I ask what your independent success trajectory in your own business has looked like?
My hope is that MRR is sufficient, but not necessary for acceptance!
1. Startup has no revenue whatsoever, but ostensibly have good product. They go pitch to investors and get rejected, likely because they have no revenue.
2. They hack around for 1 (!) weekend and get their MRR to $500. Five hundred bucks. They now go back to investors and say: hey look, we now have revenue (peanuts really), can we get funding please?
In what world would those $500 be expected to make a difference? How is that a proof of anything? I expect even really inept startups can somehow pull together $500 revenue from friends and family.
I suppose I just don't get how $500 in revenue could be seriously considered the tipping point between rejection to acceptance for investment?
To my layman reasoning, this is incredibly naive, but I'd like to be proven wrong.
Focusing on growth is great but what has happened here feels to me like an inversion of accepted business logic. It seems like there wasn't a thought given to revenue before receiving this feedback.
The funny part about that is how this little bit of $500 MRR would have definitely helped this small team pay their grocery bills, and they could have been benefitting from that months ago if they just...thought about how businesses exist to make money.
The desperation to get into YC feels like an episode of American Idol, where the contestant may not remember what the benefits of being on American Idol are in the first place.
Looking at their site, it's got a few misspellings, a dead link, and some really strange ways of communicating that they used to have no watermarks, but now they have watermarks.
The product seems slick but incredibly limited as well. I'm not sure the idea of a video editor being web based is actually incredibly useful over an installed app.
Finally, they're charging $50 a year for a product that does less than iMovie (pre-installed on 50% of smartphones sold in the USA) or Adobe Premiere Clip (free).
If you stayed subscribed to this product for 6 years you'd have broken even by just buying Final Cut Pro, assuming they don't ever raise the price.
I'm not really surprised that YC had revenue concerns.
1. The product is something that people will pay for
2. The team can sell it, at least a little bit
Both are huge validations of a startup
Put differently, if I believe in the idea behind a startup, I'm willing to overlook the fact that they have no rapid growth yet. If the idea is not enough to convince me, a miserable $500 is sure as hell not going to make a difference. It's too little in too short a time. It says zero about customer retention or satisfaction, etc. It's akin to taking two data points, zero revenue and $500 MRR and then extrapolating the growth. Nobody but a fool would believe such a metric.
If they went away, hustled hard for 2-3 months and got to say 50-100 paying customers (with that number consistently growing), good reviews or some feedback that customers actually like the product, I'd be more inclined to think of it more than just a fluke.
And honestly, seeing something like this would make me less confident in a startup, because as I said in another comment, the impetus for charging seems to be completely tied to getting accepted by YC, rather than trying to build revenue for the business. "Let's just hack our way to $500 then we can show we have revenue and the objection they listed will be moot and we'll get accepted."
The better move would be to have a solid plan for a pro product, start charging, be able to show growth in paying users, and then reapply for the winter YC class showing those data points.
In practice, this is actually much harder than you'd expect. Also, competent VCs will probe to understand who made the purchase, and whether they're likely to do it again.
"Therefore, we thought that if we can get first paying users and MRR over the weekend and get back to YC next Monday morning, they would see that we had achieved MRR in only a few days. Additionally, we would look like a team who could move fast, listen to feedback and get stuff done."
The reason they were rejected is because they had no MRR. They were also told they need to move fast.
They proved over 1 weekend that they can get $500 in revenue and move fast.
It's the notion that they got feedback, moved fast to implement feedback, and showed that users were willing to pay on day 1 with a half-baked MRR plan.
Also their reply email hits all the points they were rejected: https://ghost-veed-blog.s3.eu-west-2.amazonaws.com/2019/06/S...
They did all this in 48 hours as 2 developers.
It's very hard to make the first dollar. Customers want to see other people pay you first. That's why many startups fill their websites with logos of big-brand clients, even if they're making very little from each.
The surest way to grow fast is to have a free product. I realize that not a lot of time can go into this feedback, but this struck me as pretty contradictory on its face.
Assuming that is the case the business model would have to change to pro features or add. Maybe VC would be more comfortable on some data on all this.
The feedback was “why have you waited so long” not “this was too early for you to apply”
The fact that the founders bent that around in their heads after changing their actions, to me, indicates they aren’t quite getting what the email implied.
But what do I know, I’ve never gotten in to YCombinator or launched a successful startup.
I think they got the point precisely
I don't believe the feedback they got was that they should be charging, and they aren't yet, therefore "the best time to plant a tree..."
The question they got was "Why aren't you charging yet?", because by product and market, it seemed they ought to be. The correct answer is "This is our market, this is our business plan, this is why it makes sense for us to not be charging yet." The question is one of rationale, which could be judged as being good or bad, but still the question is "why?"
Their actions revealed that they didn't have a solid rationale. So without any more reasoning than "because it seems like YC is criticizing us for not charging," they quickly started charging. Did YC's criticism actually change their business strategy? Their knowledge of the market? Anything that should have plugged into the question of whether they should be charging? If the answer is "no," then they launched a significant change to their product without any good reason and, in my opinion, validated YC's opinion.
I interpreted that they were concerned about the thinking that went in to making the decision not to begin charging people sooner.
I felt supported in that interpretation when the founders ended the article by saying perhaps their company was at too early a point for the program.
The feedback seemed to imply they were too far along to have not started charging, so interpreting that to mean they were not far along enough could mean the feedback was responded to with direct action but the underlying thinking remains unchanged.
Like I said, I have no idea if I’m right, but if I am then the last conclusion paragraph validates the YC interviewer’s concern that there’s a deeper problem about how the company is being approached.
> Two months later we got an email saying that a partner would like to speak to us.
This is a tangent, but I want to share something about my YC interview experience for anybody ever in this position.
I filled out my application in February for the NYC interviews. They passed on me for the early NYC interviews, but ~2 months later I got an email for Mountain View interview.
During my interview, I was asked what my revenue was two months ago, and what it was last month. When I gave my answers it created immediate disarray between the three interviewers.
I walked through my numbers and could tell something was visibly wrong, but time was ticking and I had to steer back to the product, vision and growth.
When I got my rejection email, the lead-in reason was that the revenue wasn't clear (and to clarify, we are doing VERY well with revenue growth).
A bit perplexed, I went back to my application and realized what had happened. The YC application asks for "what was your revenue last month, two months ago, three months ago, etc)"
The partner was trying to get me to talk about what caused a 100% revenue spike (and again, we're not talking about small revenue here) between February and March. But when filling the answers out in February, those questions are anchored to December and January. That spike was just onboarding customers.
As I personally had to live through the hell of onboarding these customers from December to January, it never occurred to me that he was asking about that spike while looking at my "last month" and "two months ago" revenue.
I read my application a lot the week leading up to my interview. It never occurred to me change my answers to realign with the two month gap between when I filled it out and when it was accepted. I'm not sure I would even do that now, knowing what happened.
So the upshot is this: if you fill out your YC application well in advance, be prepared to speak to your financials (and company as a whole) both as are they are today, but also as they appear in your application, because the answer to "what was your revenue last month" is different depending on whether the partner is referring to your application, or the last calendar month.
I wrote a in depth essay about the whole experience shortly afterward while it was fresh in my mind. I'll likely publish it as a blog because I think it addresses quite a few things in a YC interview that I hadn't heard/thought of during my prep (and I've read all the prep blogs that have been written).
The financials are actually the easy part to reconcile - for most companies, the product growth that happens in two months should be the delta you're trying to close in that conversation (it was, for me).
If you're growing at the rate described then what exactly are you hoping to get out of YC that you couldn't get from networking without giving up 7% of your equity?
And I do a agree it's a good thing - the YC program I interviewed with began June 3. From the day of the interview to June 3, we 6Xed our revenue. Trust me, I'm wasn't the least bit discouraged by a rejection.
Is it worth it? probably. but maybe not.
There's a one time cost of learning all that stuff, and then each year you just reuse those same templates and skills with a new logo/graphics from your design guy.
If this is something your team/volunteer group/etc. rarely does, then it's probably worth just paying conference badges. It's a trade-off.
If it's a non-profit thing, consider open souring the process and CC licensing the designs to help others doing the same thing.
It takes me anywhere between 5–15 minutes to set things up, and my biggest annoyance throughout the process is dealing with CSV character encodings.
I think the main value the service provides is that it provides "guaranteed" next-day delivery. My print shop gives me a fair amount of crap for not sending my badges to print a few days in advance.
On the other hand, it's so much less work for organisers to print blank white boxes, and let attendees fill in their own preferred names at check-in.
The true cost of a full time office worker employee once all taxes and benefits are factored in are usually going to be a lot higher than that. This would make the service a lot more worth it.
OTOH if that employee is underutilized, their time is effectively free, so the only thing you would be paying for is (hopefully) quality and consistency.
Our (enterprise) business customers dont care about price much, they care about things going smoothly for an event which has a ton of moving parts.
We serve a similar demographic.
[1] For example: https://www.marcopromos.com/product/3-4-cotton-no-flip-lanya...
I guess it's the same kind of magic that makes the USB port always be the wrong orientation, then you flip it and it's wrong again, and it's only right after you flip it twice.
If I'm there on a founder badge, for example, it's difficult to chat up investors because they're wary of hearing the 400th pitch from a random startup guy when I really just want to talk and make a connection.
This may be more annoying for me than most because I'm often at conferences as someone's guest, so the badge type rarely matches with my goals for attending.
That's the easy version. The overkill version uses Kafka, BigQuery and AWS SNS. (/s)
The intersection between the set of business opportunities that can work bootstrapped and set of business opportunities that work when strongly funded might be much smaller than one would naively assume.
Would you care to share how you identified the opportunity and estimated potential revenue?
Many YC startups don't charge anything. Here is one that seems still to be figuring stuff out (https://www.54gene.com/). One that seems to be figuring out who and how much to charge (https://ultralig.ht/). In fact, I'd like that someone goes through the startups and deduce how many of these are making any money or have strategies to make any money.
Here is what I think is going on: YC is trying to be polite (bullshitting) about the rejection. They won't straightforward tell you: You suck. Or you are not sexy enough to be in bed with. And it's fair enough. When was the last time a potential hookup told you they won't have sex with you because your face is ugly or you have an ugly belly.
YC probably picks up on intuition. You can't judge a dog for 10 minutes. They are using subconscious cues based on their experience. They are looking for founders. The startups with high MRR are probably suckers for scaling that made it at monetizing a product to market. YC takes them (expensive %7 for cheap mentoring) because they can afford that.
You can't change the built-in neural networks inside YC brains. They might be going against their intuition on the diversity front because data has suggested they should or they are trying to look cool.
What this team did is basically show up next morning and have a black t-shirt because they figured out that I don't like guys in white t-shirts. That's not going to make me like them. Probably hate them more. It shows lack of consciousness and maturity. This is not a government position with cold requirements where you need to check the boxes.
Personally, I love the hustle. It was absolutely worth a shot, and by the next batch they'll have a lot of data to show. Most great first-time founders have no idea what the hell they're doing, and it's totally forgivable for them to have waited a bit longer than necessary to start charging. They responded to feedback from smart people who know what they're talking about, and are moving ahead.
I hope these guys do well, I like the hustle also!
When YC interviewed and rejected my company, they stated candidly that they didn’t think our team could execute. In retrospect, I agree with their judgment at the time, and appreciate that they were polite and honest with their feedback.
I think one of the good things about YC, is if you try to optimize for getting into YC, you're actually building your startup in a constructive manner.
Imagine if FB had a premium plan in 2008, they wouldn’t have made it.
In this case it probably makes sense to charge early on, but it doesn’t look like they did much research on the decision
How would you even research such a decision if not ask very experience startup founders and investors?
It’s not a guarantee of success, but it definitely helps you build the relationships you need to participate in the “global domination” game (which is the game you’re playing, because that’s the game investors are playing).
who's at the top of the HN leaderboard?
It was worth money.
Therefore, they have left a lot of money on the table.
In my opinion, they're still not charging enough but they'll work that out. Keep at it OP.
Some personal experience: I applied to YC for 8 times over the past few years. Got one onsite interview (late 2017). Got rejected. I documented that onsite interview experience here: https://broadcast.listennotes.com/my-y-combinator-interview-...
Probably YC is not a good fit for everyone. I stopped applying to YC since then. My small startup is doing well now, so I'm happy :)
So this is likely not the reason for the rejection.
I would have even more worries about these founders after this stunt because it shows a lack of self awareness and strategic insight.
I'm in no way affiliated but Id guess YC is looking for foundational advantages and paradigm changing ideas in their companies. You can't pivot to those in 2 days.
Before they implemented the feature it was unclear if anyone would pay, after they implemented the feature it was clear that at least some people would pay.
VCs aren't infallible judges, otherwise they'd put all their money into Facebook and Amazon and none into Juicero and Theranos.
Also YC even asked to meet them before the next round, so it might have intrigued them.
They are also displaying company logos under 'Trusted by thousands globally' that obviously are not paying customers since they didn't have subscription plans before.
But if you’re a VC-style company, and you’re trying to grow fast (and if you’re not you do not want to go through YC) then your business model is by definition “EAT ALL THE MARKET”.
If you’re an early stage company, even if you can bite off a big chunk of market, it’s fairly certain the YC old boys network can help you bite off another big, non-overlapping chunk.
Anywhere in the sub-$100M valuation range, that’s probably worth 6% just in terms of getting out in front of other growing competitors (or competitors-to-be). It doesn’t change your path, but it changes the dates on the graph.
That’s assuming you are a VC-mindset company (centralize revenue streams around a few owners, grow fast, get liquid).
There are other kinds of companies who “will not need YC soon” but mostly those companies shouldn’t want YC in the first place.
There was a time when I thought positive feedback from a VC meant something. 2 startups and $16M in VC funding later I've realized that it doesn't. Having a VC tell you your startup is awesome is like having your mom tell you your startup is awesome. They have no incentive to be honest with you and every incentive to have you walk away with a positive impression of the firm.
Founders REALLY need to stop looking to venture capitalists for validation of their business. Your metrics are all the validation you need, especially if those metrics are profit or revenue. Putting confidence in the feedback of a VC can cause you to ignore warning signs.
Even if they write you a huge check, it doesn't mean you have a good business. All it means is that you are good at fundraising.
Positive feedback is nice but it should have zero effect on whether or not you pursue a business idea - if you weren't going to pursue the idea without it, there are probably fundamental reasons for that, that should probably override the reasons behind the positive feedback anyway.
They don't feel that they can be frank and just say: "We think you're probably bad founders based on the fact you have been very slow to charge customers."
Just remember that they're attempting to judge the potential of a team of human beings in 10 minutes. Realize how fundamentally flawed (and demeaning) that concept is. It's quite possible, and even likely, that their interview selection process is worse than random chance.
Of course, they think they're good at picking. But this belief is based on the theory that the companies that they don't pick will succeed even without YC's help i.e. that there would be an embarrassing anti-portfolio.
Since many of YC's most successful founders acknowledge that they wouldn't have succeeded without YC, that theory is obviously bunk.
IMHO the YC application and selection process is reasonably good. It's something approaching a crowdsourced process. The interview is them injecting their egos into the process, to the detriment of themselves and founders.
The problem is perpetuated because the people that do luck their way in are then immediately convinced that the system works. After all, it did select them, it must be pretty darn good. This is the destructive power of ego.
Someone could beat YC at selection simply by copying them and removing the interview part of the process (i.e. just accept the top N applications). Crowdsourcing is going to most closely approximate the customer point of view, and that's what ultimately matters for startups.
It's okay that YC is kind of bad at their core function. They're still good enough to stay in business and it's their prerogative. It's just a shame that they're not improving and that there isn't anything better, yet.
(Yes, it's "in the cloud". So?)
Honest question (as someone very ignorant about the business world), why do people spend money on this stuff? And why do so many people (based on the comments here) act like it's OK to create such products (i.e. products that bring literally nothing innovative or useful to the table)? By OK I mean ethically, considering that there are so many more pressing problems in the world.
Just to be clear, I want to understand that you're asserting:
1) It is morally unethical to create a non-innovative product
and
2) It is morally unethical to work on something other than "a pressing problem" in the world, as you define pressing problems
?
Or are you saying,
1) In a world with "more pressing problems", it is unethical to work on something as low-value as a non-innovative product
?
And for context: what projects do you feel are ethically acceptable ways for people to spend their time on, and what do you do?
Coding burnout? Refine your pitch deck and cold call materials. Designing burnout? Pick up the phone and sell. Isolation burnout? Go pitch at a local pitch event or find advisors at a business plan competition.
When you switch focus like this, you free up exhausted parts of your brain and body to give them a chance to recover without disconnecting from your startup, and you get a cross-pollination effect, where each of these activities informs one another very nicely.
I smile when I read "X% MoM growth" and the starting numbers are obviously very little. I think it's a BS metric when presented this way.
Besides that, congrats on hitting 35k MAU. Not a small feat.
I hate the all day interview, but if you are coming from overseas then maybe give them more than 10 mins.
I mean, it seems like an impressive story, but when I read it, all I see is potential technical debt.
I don't think I'd like to be back in startup culture. I really like solid testing, and I hate moving so fast that we don't create that safety net.
On the surface it might be true but it doesn't matter if the alternative is you (or your startup) dying. Ultimately only the authors know their circumstances and the trade offs they have to consider.
But yes, startups may not be for you.
At least you didn’t ended loosing one of your dragons because of it.