Start-ups Rejected By Y Combinator (And Investors) Flock To YC Reject
blogs.forbes.com
Edit: title
blogs.forbes.com
There's a very valid reason to invest in companies that aren't YC companies. The $150K burden that most of the YC W11 companies took is one reason. If a company has $150K to play with out the door, it's not exactly bootstrapping it. If a company isn't bootstrapping things, it can have deluded visions of grandeur and won't always build an efficient or sustainable product. Money can buy hype in the short-term but hype doesn't build value in the long term.
In other words, YC isn't about scrappy underdogs any more. And if there is one thing the valley can always make room for, it's the scrappy underdog.
While I personally think YC is a great program with a lot to offer, which is why I applied, they don't have the resources to take on every group that applies. It also wouldn't be in their best interest. I was skeptical about YC Reject at first and wasn't sure about applying or looking for work and working on my startup part-time but I'm considering it more and more now.
The problem here is that everyone is looking at acceptance/rejection as bi-implication when it's not. Getting in implies you're probably good, but getting rejected doesn't imply you're probably bad.
So the real question here is, can these people learn to first evaluate their applicants, and then support the ones they fund, anywhere near as well as YC does? I think the YC formula is not going to be anywhere near as easy to duplicate as they seem to think.
So the investor's knowledge about your project determines the founder or teams quality? YC applicants disclose more than that they want to do a startup, does that the automatically improve the odds that they're good? What specifically makes them "good" anyhow? YC Rejects would be disclosing more than they want to do a startup and in fact it's been noted that the angel would review applicants and determine who gets in.
The problem is that the prior probability that you're good is already low, not that the conditional probability that you're good given that you're rejected by YC is any lower.
Based on what exactly? Why is it more likely that your not good to begin with?
So the real question here is, can these people learn to first evaluate their applicants, and then support the ones they fund, anywhere near as well as YC does? I think the YC formula is nit going to be anywhere near as easy to duplicate as they seem to think.
It doesn't have to duplicate the YC formula in order to be successful as even YC proves that their formula doesn't automatically lead to successful startups. I do think that the YC staff and alumni network is a huge asset but that doesn't preclude others from providing valuable resources. The rest remains to be seen.
Sorry, I guess I was a little too cryptic. No, the investor's state of knowledge doesn't determine the team's quality; it determines the investor's estimate of the team's quality, and thus the likelihood that the investor will invest.
Why is it more likely that you're not good to begin with?
Simple: most startups fail. The vast majority, in fact.
It doesn't have to duplicate the YC formula in order to be successful
Perhaps not, but note that YC has been considerably more successful than most angel groups. There must be something out of the ordinary they're doing.
I'm curious how you're defining YC's success compared to other angel groups. YC is a pretty amazing group, no doubt, but being great at publicizing and helping storm up investor interest in a startup can't be the only measure. Not that I'm trying to insinuate that's all YC is good at because I'm not.
Huh?! That's putting a lot of words into the author's mouth. These companies may or may not be great, but it's true that they are not vetted in any way other than they've heard of YC and took some time to fill out an app. I hope they all succeed, but it doesn't seem out of line to suggest that companies NOT accepted/interviewed by YC aren't inherently fundworthy when compared to those that are.
YC has a tremendous amount of experience and their intuition and insight I'm sure leads to better decisions regarding startups, but they're in no way infallible.
I suppose my main point is that there are plenty of good companies that are fund worthy that don't get into YC for various reasons. One of those reasons being that YC doesn't have the time or resources to take them in. The YC model has been successful but there is still an underserved market here and that is why others are popping up, not that there is a bubble necessarily as the author suggests. There's no reason why angels wouldn't "invest in companies that are not vetted by Y Combinator?".
The point is, granted that YC will improve your chances of success, just like being on american idol will help make you a success, but most stars next year will not be from american idol or from YC.
I consider the YC interview process to be a useful filter. Anyone can apply to YC and anyone can be rejected. I applied 2-3 years ago and was rejected. Last year, my cofounder and I got the interview but didn't get into the program. To me, getting the interview means that the YC folks thought there was something interesting in the proposal, but decided not to fund the company because of limited space for the round or the personalities of the founders.
If YCReject was oriented at people who got the interviews but not the program, that would at least be an interesting signal. It might tell investors that these people garnered YC's interest and might be worth a second look. However, I don't see how letting everyone who's application was rejected into an alternate program provides any kind of useful filter at all.
On the upside, they are looking at a pool of people that got it together enough to apply to YC with 1 or 2 ideas, got rejected and still want to give it a go. That means they are a least willing to push back a setback and not simply spamming ideas looking for money. On the down side, some of the best people / ideas have been removed. Overall it's probably a better group of people and ideas than would apply to a less well known funding source.
More to the point, though, I think much of the value of YC is in the network of alums and mentors they provide. Unless there is some buyin from those mentors (or others of their value) then I don't think there's much point to YCReject except as a team to cheer you through the low points.
If you don't see any value in this group, just don't invest in any of the companies... other people might, most won't. The market is - in the end - the only filter that matters. What is there to be concerned about?
But I find it bizarre and a bit upsetting that YC has become the be-all, end-all (at least on HN). There were great startups before YC and there will be great ones after YC. I'd like to echo the sentiment of others who have said the following: If getting into YC (or TechStars or whatever else there is) was part of your strategy, then you're probably not going to succeed. The value they add is immense, but they are by no means king makers. Many YC companies will fail, and some will succeed and those that succeed might just as well have done so without YC.
That said, though, there are many of us with good ideas that are asking ourselves right after YC application decisions "What now?" Similar programs that we can immediately start pursuing after being rejected from Y Combinator at least offers a back-up plan.
Can it be a bubble if everybody is asking whether it's a bubble? This metabubble stuff makes my head hurt.
Instead what yc needs to do is accept a control group and see if there is any correlation between being chosen and eventual success. Then again...