Ask HN: Is $5k really worth 5%? | Hacker News Reader

Ask HN: Is $5k really worth 5%?

12 pointsquellhorst29 comments

A good software developer contractor can gross 10k in a month. Is something like ycombinator worthwhile to give up 5% for $5,000 per founder?

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Well, apart from the fact that you got your math wrong (its $5k + $5k per founder) I'll give you a few other reasons why YC is worthwhile.

1) Introductions to prominent VC's/Angels if you want to obtain further funding

2) As a result of the process of getting into YC, it can somewhat validate your idea

3) Having to pull it off in 3 months can really light fires under people's asses

4) PG seems like a genuine bloke who really wants to help people. The mentoring aspect would be worthwhile.

5) Constant feedback. You'd be surrounded by a lot of other YC alums who are very switched on people... Good things to be learned all round

I'm sure there are other reasons I failed to mention, but I think I covered the basics.

EDIT - also, read PG's essay on the subject.

http://paulgraham.com/ycombinator.html

Don't forget extra coverage. Many of YC sites getting covered by Techcrunch would have never been able to get covered without being part of YC

I guess there's always PG's Rice & Beans to look forward too! :)

http://news.ycombinator.com/item?id=525529

This has been answered before. YC isn't about the money; it's about the advice and connections. If those things increase the probability of your company's success by more than 5%, YC is a good deal. If you can do better on your own, do it.

The support that YC provides is definitely more valuable than the money they provide. With that being said, however, you can't discount the benefit of having that extra cash. $5,000 for 5% equity essentially valuates your company at $100,000. Ask yourself, would anybody outright pay that much for what you have built? On top of that, YC also provides an additional $5000 to cover living expenses. Thats a deal if I've ever seen one.

Your question is nonsense.

I'll assume for a moment that you are presently a "good software developer contractor" and you currently gross "$10k" a month.

Given that, $10k a month is your opportunity cost for doing something else, for instance, doing a startup.

That fact has little to do with your question "is ycombinator worth 5% of my biz for ~$15k"?

If you want to do a startup, then you'll be giving up your $10k a month to build something that scales beyond your time. I recommend doing this, if you have the risk-tolerance for doing a startup.

IFF you decide to do a startup, THEN you have to decide how to fund it. YCombinator offers your team ~$20k for 5% of the company to kick off your startup efforts. Plus, they offer you the "prestige and access" you'll get due to YCombinator. The alternative is bootstrapping, or "normal" funding channels.

From what I know about YCombinator, it's definitely an outstanding opportunity if you can get your idea accepted. If you're young and inexperienced and mobile, do it.

Alan

Many will point out the fact the introductions and the opportunity to work with other startups are worth more than the money. I want to say the money is worth it too.

We are self-financed and so we do contract to pay our living expenses. It is working great for us, but often we will get sucked in client projects. Those distractions have been costing a lot in term of growth. 5% for the intros and money to just focus on your idea for 12 weeks is certainly worth it.

Making influential people into stake holders is always a good thing. It would be worth it for $0, in fact, it might be worth paying Y Combinator to take your stock.

Sorting out $15k is the easiest part of an early phase startup. YC seems to mostly focus on the harder parts.

I believe its more about the experience and opportunities that are opened up to you than the money. You can earn $5k pretty easily but where does that get you?

It can push you from 'thinking about starting the company' to 'starting a company.' If you're a 'thinking about starting a company' person, then it is worth it just to force you to switch modes.

Also, the adage "it's better to have half of something than all of nothing" has never let me down. I've always been very generous with stock and it has always paid off -- for me anyway.

If you and your company are good enough to be accepted by YC, then it probably is, both for you and for YC. It's the classic win-win proposition. YC will probably get a return on their money, and your company will be worth enough more that your share, now 95% instead of 100%, will be worth quite a bit more than it was before their investment.

If you sign on an adviser, you might give them a comparable percentage for $0K. It's worth it in the right cases.

Absolutely not.

But Demo Day is worth a lot more than 5%.

... if you believe you're going to get funding, and if taking funding is what you want to do.

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

This depends on many factors, pretty much all of which can only be answered by you. If you think that the YC route may be worthwhile, then you'd do well to apply, and if not, bootstrap or go off on your own.

The money is not the draw. The chance to be mentored, and get money earlier are to me. I would pay more than 5% of the current venture to benefit from being mentored by these people for long to come.

The real question is whether $5k + $5k/founder AND startup school is worth 5%.

AND 2x demo day AND YC alum network (tapping people on shoulders to try and get introductions to others you need) AND instant coverage by many blogs AND idea pre-validation if you try to pitch later.

... just saying. I'm applying next round and for me, the money is low on the list of what I like about the YC prospect. It's a nice thing to have don't get me wrong, but it's really one of the smaller pieces of the pie in my opinion.

mu.

The right question is something like "Is ycombinator worth the equity it will cost my company?"

While other people have talked about what ycombinator is worth, the right answer to that question also depends on the meaning of "my company".

Is an elite college worth $150k?

No.

It can be. Depends what you make of it.

This was my point. It's an unanswerable question, because the costs and benefits are too individualized.

Yes. It is. The connections you get out of an elite college worth more than that.

I disagree strongly that the connections are the source of the value, at least for undergrad. You're assuming that everyone who goes to an elite college is rubbing elbows with the wealthy. In reality, the people who are able to utilize college in this way are those who are already from wealthy backgrounds. Upper-crust kids don't go to Ivies looking to be "connections" for middle-class strivers.

I think that an elite college degree is worth $150k for most people, but I don't think it's the connections that add the value, so much as the prestige of the degree, the recruiting opportunities, and the information learned (mostly outside the classroom) about how the economy and society actually work.

"the recruiting opportunities, and the information learned (mostly outside the classroom) about how the economy and society actually work"

The recruiting opportunities are part of the connections too. The information that you learned outside of class is mostly from your connection outside the class too.

This may not be a strong case for a local resident in US. For my case, I did have a stronger connections(friendship) than in my country(Malaysia). I am sure that I cannat achieve what I have done so far here if I decided not to further my college in US.

Yes.

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