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Introducing a16z START

a16z.com

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Based on the info available, here are some of the differences between the new a16z START program and YC:

- No standard deal (looks like a16z will negotiate equity separately with each startup)

- Potentially double the check size (up to $1M compared to the standard YC $500k deal)

- Much smaller batch sizes (currently 11 in START, compared to 319 in YC W21)

- The obvious: different network connections, mentors, and track records

A16Z's superpower is branding and getting their name out there. Their fund returns are well below Sequoia & co

Not sure this "well below" knock is true in recent years – what's the best source of data?

But even if it was: is a VC's multi-decade record more valuable to a founder than other in-the-now considerations?

And, while ideally VCs & founders in the same firm rise with the same tide, cooperatively, synergistically, there can be a margin at which a VC's lower returns could mean higher returns for other owners, like the founders & team.

are fund returns tracked properly... anywhere? My experience with being a limited partner (LP) in ... places... is that each LP experiences wildly different returns based on what deals they are part of.

Its not like you invest in these kinds of funds at a certain watermark and hope your investment is at the time where things go up. you have no exposure to prior investments no matter how awesome or poor they were.

For funds that collect all the capital up front and close off, maybe thats fine.

For hedge funds (with a neat sidepocket) or other more open-ended funds it seems like you need multiple graphs based on when invested.

Exactly this: speaking from experience fund returns are highly bespoke and depend on the individual LP. People should be very weary of publicly stated returns, especially for VC funds.

> looks like a16z will negotiate equity separately with each startup

I suspect it won't be a negotiation given the power imbalance.

More a case of this is our terms and either you accept or leave.

I guess one can leave then? lol. In this market if they have a single digit cohort size they’re gonna be dealing with really good founders who have other options

It's still a pretty founder-friendly market. If you get an offer from a16z, or anyone else:

1) it doesn't hurt to negotiate. Worst case they stand firm.

2) if you get a $1m offer from a16z, chances are you will be able to get competitive offers from other firms too. So it's more about whether you like the partner you're talking to, whether you want to work with a16z or another fund, etc

(source: I'm a VC)

Another likely difference: expectations for additional fundraising. Paul Graham has advocated for startups to be "default alive" and YC has stated that they are neutral on whether startups choose to do additional fundraising rounds. In contrast, since a16z is a VC firm that is coming down market (and based on their track record), it seems very likely that they will encourage companies to delay profitability in favor of growth and to raise additional rounds (that a16z will participate in).

Link to Paul Graham's article on default alive or default dead: http://www.paulgraham.com/aord.html

That's a bunch of BS. Of course YC wants companies to raise additional funding, grow quickly and exit. That's how they make money. They just do it in a less obvious way - but if you watch their videos, read their blog posts etc. - they're all about hypergrowth. I mean, they even have a VC pitch deck template.

Serving VC pitch decks doesn't mean they want want hypergrowth + exits. Having just gone through the W22 batch - it really doesn't feel like they encourage growing quickly and exiting.

Hypergrowth is often what founders want. It's validation of product market fit (and of all the efforts).

It's interesting to see a16z launch an early-stage accelerator only a couple of weeks after Sequoia announced a similar program:

https://techcrunch.com/2022/03/20/sequoia-arc-outliers

Sequoia has been running a similar funding program in ASEAN and South Asia for 4 years now, https://www.surgeahead.com/introducing-surge/

from what I read on some of the administrators on Twitter the program has been (semi privately) running since last fall and there are already 10+ participants

now the decision to take it public may have been motivated by sequoia's launch

Same is true of Sequoia's program - it's been running in the US for years already, but was only recently made public.

Seems to me that this is yet another way that YC has pressured traditional VCs into being more founder-friendly.

Out of dozens of fairly lame attempts by others, this may very well end up becoming the most serious competitor to YC so far.

It'll all come down to who they get to run it, how well they run it, and if they can consistently get the attention of founders. A16Z certainly has the brand and money to make a real go of it.

I wonder if they know what makes YC special and if they can offer the first head-to-head alternative.

Edit: After another quick look, seems like they may just be targeting executives at existing successful companies, in which case they're not likely to create a legit alternative to YC at all. Oh well.

their application seems pretty simple to fill out (in some cases requiring less than 100 words of description) unlike YC app so I assume they want to funnel interest from as many founders as possible before deciding which apps to pick to fund.

Which could be their first mistake. YC gets a lot of signal by requiring people to clearly answer so many questions. YC's questions are really good and it wouldn't have been a bad idea to wholesale copy them like some other's have. Not least of all because then founders could apply quickly using copy-paste.

I suspect someone could out-compete YC just by obtaining the YC application data and funding on that basis alone, eschewing the interview process entirely as it very possibly introduces more noise than signal. It'd take some guts though, kinda like starting YC in the first place took guts.

I don’t think the length or complexity of the YC app is a barrier for anyone with a shot to build a successful startup, with the possible exception of an English language barrier.

> After another quick look, seems like they may just be targeting executives at existing successful companies

May I ask how you came to this conclusion?

YC asks primarily questions about the company applying (but also has founder profiles attached). This A16Z program only asks questions about an individual applying, and seems most interested in their corporate pedigree.

The "Meet our STARTers" carousel shows: Cofounder of Rappi, Former Global Head of Ecommerce at Rappi, Former Business Unit Head at Rappi, Former VP Product at Ethos, Former Chief Strategy Officer.

It appears to be something like an open invitation for a "Entrepreneurs in Residence" type program than a YC-style startup program.

A lot of VCs think hiring the executive team at a successful startup is a good recipe for success. As far as I know this hasn't proven to be true, although of course there are surely some examples.

Can anyone who has applied or completed YC in the last couple of years speak to the class sizes? The idea of a much smaller cohort is attractive, but not sure if YC has felt large?

Ideally would also like to hear from people who didn't get in or decided not to go through the program, since I recognize that asking for YC founder's opinions on a forum paid for by YC is not a neutral location :)

I was in YC >5 years ago when batches were in person and in the large-two-digit range. The experience of YC is completely different. The class sizes are in the hundreds and many times I've spoken to founders who didn't know another company in their batch existed.

It's a highly optimized assembly line for getting a company to give a 1 minute pitch. They said they'd never do remote, for good reason, then (understandably) flipped when the pandemic happened. But the downsides of remote didn't disappear when covid appeared...

This doesn't mean that founders don't love YC or that it's not worth it. It doesn't mean that parts of YC haven't gotten better over time. Again, highly optimized. It doesn't mean YC isn't a huge boon to your company's reputation.

But if you're looking for small, focused mentorship then YC is no longer the same place.

If anyone from a16z is monitoring this thread, there is a 404 from the apply page, the link to "find out more here".

I'm keen to find out more before I fill out the application.

> our team has received over 1,000 applications and welcomed 11 START entrepreneurs into the a16z family

1% chance eh? Welp, I'll never be exclusive enough to make it through

Keep in mind that most applications are not impressive & are dismissed without much thought. Only a few are even interesting enough for a second meeting. If you're interesting & you know it, your odds are better than you think.

"If you were the president of Harvard or Stanford and you wanted to get a lynch mob of students, alumni, and faculty to come after you, what you should say is something like this: We live in this much larger, more global world. We offer this great education to everybody. So we're going to double or triple our enrollment over the next 15 to 20 years. And people would all be furious, because the value of the degree comes from massive exclusion. And what you're really running is something like a Studio 54 night club that's got an incredibly long line outside and a very small number of people let inside. It's branded as positive sum, everybody can learn, but the reality is that it is deeply zero sum." [1]

[1] https://www.theatlantic.com/business/archive/2015/07/peter-t...

While the school I went to had larger admissions when controlled by degree, quality was maintained by failing out a huge chunk of the student body. Getting a rejection letter is much more humane.

Beyond that, exclusive clubs often come with good perks: in this case, the assumption that the outcome of conversation and networking will be relatively high.

Exclusive clubs aren't about providing perks to those who get in, its about maximizing club profits by only having patrons buying bottle service and other expensive add-ons.

Its to get more rich people to sign up.

Eh. I went to a community college that let basically everyone in, and failed out ~95% of their computer programming course. I graduated, and I likely would not have gotten in in the first place if they went with the exclusivity model of universities (my last year of high school was terrible, and that's all they really looked at). Most people who didn't make it in this program went to more general programs so they still got something out of it. I'm now working at a large tech company.

I'm glad both models exist because I would have been completely excluded if they did not.

How is a rejection letter more humane than getting a chance to prove yourself?

If everybody is screening on the same factors so that rejection letters are highly correlated, it would definitely be inhumane to only have that model

They’re not the same factors, even if they are correlated though! Besides, there’s almost always a transfer pathway available for the false negatives.

I mean the main thing is like a third of people at these schools are legacies at this point so pretending that the screening is for ability to take classes is not 100% right

I much prefer the failing-out approach over the rejection-letter approach. With the latter, you exclude those who would excel but look bad on paper, in favor of those who won't but look good on paper.

Yeah what’s wrong in wasting a couple years of a students time and a bunch of their money when you could have saved them the trouble.

I think it very much depends on how the "failing out" is done. If its just a standard grading scheme and there is the potential for 100% of the class to pass (if they all do well on the content), then I think its actually great to give as many people the chance as possible.

But, some of the classes I took early on in college had extremely difficult grading curves based on the middle/top students in the class, which I didnt think was fair at all. Trying to weight each individual class so a certain % of people pass is a terrible act imo, as it will vary year to year. I passed all of the classes, but I still feel sorry for the kids who failed just because our year had more smarter students that the previous/next years.

My experience was absolute thresholds from F to C-, and a relative curve above that. Seemed fair. And seemed practical when I was on the other side doing the grading.

The flaw in that thinking is that it isn't the best people or ideas, it is the exclusive club that leads to opportunity, a curated fixed market.

Exclusivity is rarely the reason why something is innovative, in many cases it prevents innovation and good products. Due to bias it may overlook what is actually "good" compared to that which comes from a broader set and net.

Open markets where anything can be published, where the only exclusivity is the money pushing it, have more entries, more products. Sure there are more bad products but the good products are better than any controlled or curated market could produce due to this bias. Not only that, the bad products might be good one day and would have been curated out in other platforms. The top 1% of open markets will always beat the top 1% of curated markets, largely because what is good may be outside the bias.

An example of this would be games on Steam, from indies to large companies. The more innovative are always smaller, unknown or unexpected games where more risk can be taken.

Another example would be startups are better at many things than large companies, anything that involves research and development that may have some risk. Sometimes the companies that never get funding come up with the better solutions due to the scrappiness and non saturated funding environment.

The established players and curation systems or large borgs of bias, are too uppety to know what is good across the broad market. False fixed markets are a wall to new ideas and products. In the end curated markets have a weak spot, the larger groups will work overtime to limit the challengers that aren't in the biased path so they don't get beat by competition, they are ultimately anti-competitive at scale.

Open markets are democratic and bottom up, closed curated markets are authoritarian and top down.

In short, for products, exclusives suck.

These acceptance rates are misleading. A lot of those applications probably have no MVP and founders have no skills. If you filter to only those people who 1) have a product with some degree of traction or interest and 2) people who have qualified backgrounds, either in previous startups or FAANG or something else that gives them credibility, I think you'll find the acceptance rate is a lot higher.

Will this program also teach startup founders how to sell unregulated securities as a business model?

Couple of questions I can’t find answers to:

1) What companies are the first batch of 11? Or put another way, will we learn who is in each batch at some “graduation” point? Whether the founders grow or not, I would love to see the program practicing transparency from the start.

2) After so much interest in crypto, I can’t really seem to see visible crypto investments in their fintech area. Is crypto supported at all by this program?

Good question for point 2. I'm working on TradeCast (https://tradecast.one) which is NoCode for auto crypto trading. At some point I may seek investment, but outside of the crypto community itself, I'm not sure that there's any interest.

I've seen this shared all over today, but no where have I seen any terms/valuation shared.

Does anyone have more information?

$1M in seed funding, but at what valuation? I hope the terms are near market.

If they were "below market", wouldn't founders... go get the market rate from someone else?

And who would be that someone else ? There is really only YC, 500 Startups etc. which are highly competitive and accept you only at certain times of the year.

Plus fundraising is extremely time consuming and not every startups wants to throw away 3-6 months.

But then that's "the market", isn't it?

I also think the point of these sorts of seed programs is to offer early money that doesn't take 3-6 months of distraction-from-building to fundraise.

The problem is that they only accept startups at specific times of the year.

So often you've just missed that window and have to wait 3-6 months.

What you’re saying is explicitly false about the a16z START program, which says its applications are always open on a rolling basis.

Also, as much help as a program like YC can be, if you ‘wait’ between sessions, rather than keep making as much progress as you can, you may not be what they’re looking for. (Longtime YC observers will also know that for good applicants, they sometimes act outside the normal deadlines/cycles.)

Are you using your creativity, & skill in arguing, to convince yourself things are harder than they are?

Not sure what you're even talking about.

No one is saying do nothing between applications. Just pointing out that it takes time to apply, opportunities coming around a few times a year and for many startups lack of funding can hurt/kill them.

The time it takes to apply for these seed programs is days not months. Many (including a16z START & 500startups) don't limit applications to "a few times a year" nor "accept you only at certain times of the year".

And the 'etc' of your claim "[t]here is really only YC, 500 Startups etc" hides a ton of options, including this a16z START program, programs from other VCs, TechStars, & a world of other seed-level options from other individual, syndicate (AngelList), or regionally-motivated investors. And, plenty have always-open rolling, or diverse staggered, investment windows.

So you never have to "throw away 3-6 months" or "wait 3-6 months" if you're making demonstrable progress on a good concept.

(Sure, once you've got a big burn rate, fundraising is likely to be a year-round time-suck with many-month closing cycles. But that's not the "even if you don’t yet have a fully formed idea and haven’t yet quit your day job" point this early-seed "market" targets.)

there are thousands of pre-seed investors at this point

The advice I got, which helped me: Series A intros come from Seed investors. Seed intros come from domain specialist angels. So start with angels who know your niche.

If you don't know how to do that, join a pre-seed coaching program like https://www.lindsayt.com/ this costs $1000 for 6 months of weekly calls and comes with tons of training that you don't realize you need, and will put you into contact with dozens of other founders.

Another one - https://www.primary.vc/firstedition/posts/cohort-four-primar... this is free, there is an application but you can still have a job

>> I hope the terms are near market.

What is "market" - anyone able to put tangible numbers to this?

pre-seed market is $0 until founder is powerful enough to drive it higher. Markets measure power

Probably $1M on a capped SAFE. They’re unlikely to price rounds that early

Anyone got a guess what the terms might be - how much quity they want, if the terms are likely to be onerous?

Is there any chance for another a16z Crypto Startup school? Their videos[0] from the last one(mid-2020) are still one of the best crypto/web3 resources.

[0] https://www.youtube.com/watch?v=2wxtiNgXBaU&list=PLM4u6XbiXf...

Am I missing something? It looks like the application page [0] only has room for a single founder. I would think a16z would want to know about the co-founders as a group.

[0]https://info.a16z.com/apply-a16z-START.html

What does this mean?

"If founding a technology company is a dream of yours—even if you don’t yet have a fully formed idea and haven’t yet quit your day job—we want to hear from you!"

It means in theory they are letting people apply without an idea/company. YC tried this years ago, I believe they found it wasn't effective.

It's basically the "fund the team not the idea".

> YC tried this years ago, I believe they found it wasn't effective

Do you have any details of this?

They funded people who could build but had no ideas themselves. The entire batch was a dud. Not people who had basic ideas and wanted funding.

www.joinef.com [entrepreneur first] has been wildly successful with this model since 2012. They pool together founders pre-idea a couple times a year and have them start companies together in batches. If you get investment I believe the deal is 80,000 GBP for 10% - aggressive deal but worth it considering their network.

https://antler.co has a similar model

Kinda funny to see this promoted on a site hosted by Y Combinator.

Well, it’s certainly of interest for those here.

I had no idea there were venture-scale returns in arms reduction

How is this different than their other funds meant for startups?

It's AH so... more hype when they want to advertise it?

Accepting applications from absolutely anyone "over the transom" is the biggest innovation behind YC's success. It's not a small thing, and something major VCs have historically refused to take seriously.

If you can own the complete life-cycle of a "start-up", why not? From start to finish (hopefully an IPO), they will own you.

The number of "a16z partner" announcements on twitter lately make me think a16z is becoming something of a joke.

growing a company is a joke?

have you seen the profiles of these new "partners"?

Partner at other VC firms = General Partner at a16z. Pretty much everyone, including associates and principals, have the title of "Partner" at a16z.

One of the four investment themes: "American Dynamism: Investing in founders and companies that support the national interest".

Haha. No thanks.

Are there any seed funds that invest in "supporting human progress"?

A patriotic American might say that supporting the national interest actually does support human progress. There’s plenty of evidence against that, but some evidence for it might be the immense number of people pulled from poverty under to the American rules-based international order.

A pacifist European might balk at the a16z brand and support companies funded by a less nationalistic VC, exit their liquidity pools in crypto etc.

Sequoias seed program is SV + London. Very nice.

Pacifist Europeans might do well to realize the long peace was and is enforced by US nuclear weapons. At a certain point you become a protectorate; and some gratitude is reasonable.

A weak America is a dead Europe.

Not just nuclear weapons. NATO, huge military installations all across Europe and carrier groups patrolling all around. That coming after WWII lend-lease, direct military intervention and the Marshall plan.

The pacifist European needs to learn about geopolitics.

Warmongering imperialist country leverages military power to exploit the rest of the world = honorable peace bringer.

Get out with your American exceptionalism.

Please explain how the US exploits Germany.

they prevent them from buying russian gas

I mean, they haven’t stopped.

The thing which is exceptional is the amount of money and effort spent on defense by America compared to NATO allies or the rest of the world. Roughly 2x to 3x on a per capita or percent GDP basis of any European nation. More in total than the next 11 nations combined.

It is not through awesomeness but simple resource dedication which buys peace, which some conveniently neglect or pretend wouldn’t matter if the situation were much different.

Europe relies on this exceptional spending and benefits from it, having a disproportionately strong power encourages peace.

Pax Americana exists for a reason.

It's not just America though, any sufficiently imperialist nation can create a peace; Pax Romana, Pax Sinica, Pax Britannica, Pax Ottomana all exist.

Nah. America is going to get another nationalist president, the EU will go its own way. The future does not look like the past.

It took less than 30 years for the first EU country to leave, and not exactly a small one.

Europe has been around for a hell of a lot longer than the US. Seen countless bloody wars, and almost dang near wiped itself off the map less than 100 years ago. On top of providing the source material for the US to begin its course as a proto-european country. Language, art, culture, engineering know-how, state-craft, law, even religion and guns.

The US is essentially a version 1.2 of Europe.

I mean, sure. That doesn’t change the fact that Europe is largely a protectorate of the US.

Sort of an Eloi-like existence.

Military investment has created things like the Internet, for example.

>but some evidence for it might be the immense number of people pulled from poverty under to the American rules-based international order.

And a 100x times people pushed into poverty, murdered and countries ruined because of it. I always wondered how countries like North Korea thrive and then I look at US which answers all my questions.

By what standard does North Korea thrive?

If that verbiage turns you off, it's likely that both your time, & A16Z's time, has been saved by discovering that incompatibility up front.

I'm not a fan of the US' record in many areas, especially oppressive, murderous aggression in other countries. I view the alternatives and marvel at how terrible human beings are, because they're all worse than the US. So that theme isn't really a deal breaker as far as I'm concerned.

I can't be the only person thinking, "sure… share my novel business ideas with Amazon… the company known for pushing vendors out of their store with 'own-brand' look-alikes—among many other undesirable behaviors in a business partner."

Am I missing something? Isn’t a16z Andreesen Horowitz? How is Amazon involved?

Not op so not sure. But i think the logic here is sharing your idea with a powerhouse vc may get that idea leaked to their network and particularly, someone that can execute on it.

I think every investor ever will tell you ideas are worth 0 without execution. No entrepreneur I am aware of will keep their ideas secret. You will have to sign an NDA if you're trying to dig deeply into their solution which is the more valuable piece.

I won’t lie. I saw a16z and somehow just translated that as “Amazon,” despite knowing exactly who they are (and having pitched to them–not personally–at a previous startup).

I9g a16z S3T ...f2y

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