(More Explicit) Advice to Summer Applicants | Hacker News Reader

(More Explicit) Advice to Summer Applicants

83 pointspg39 comments

The exploding termsheets

http://ycombinator.com/exploding.html

have started to arrive. I just talked to a group who got one, and they hadn't realized we were willing to interview groups early when this happened.

So I should be more explicit: If you get an exploding offer, send us an email, and if we were going to interview you, we'll do it early.

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Exploding termsheets are beyond rude. They're aimed at minimizing your ability to negotiate. They prevent you from forcing several funding groups to arrive at the table at the same time and cause more pricing competition.

I recommend you consider that signing a term sheet is like entering into a relationship. Do you want a relationship with someone that's behaving badly beforehand? They're already on their best behavior.

Agreed-- EXCEPT in certain cases where there are only N slots to fill (like TechStars and some others).

Techstars, for example has 10 slots (I think). If they have 300 applicants and 10 slots, how do you think it'd work if they said, "take your time, let us know whenever". If they accept you, they aren't accepting the next startup on their list... And basically, they can't send accept/reject notices to folks until they fill all of their slots.

Or am I missing something? If a YC competitor has a fixed number of slots, is there a way they could NOT have an exploding term sheet (other than not have a fixed number of slots)?

If you have a fixed number of slots you have to have a deadline. The problem is when the deadline occurs. If the firm in question made their first round of offers expire in 20 days instead of 2, it would be a moot point.

Ah, that makes sense and seems startup friendly.

i.e. they offer first round of 10 companies and give 'em 20 days. 8 accept. They then work there way down an alternate list.

They could even have 2 types of acceptance. i.e. 10 offers and 20 alternates (so the rejected companies could get on with their lives). They could tell the alternates: "You didn't make the top 10, but you were really close. It's possible a slot could open up within 30 days. If it does, we might call you."

If it's TechStars, they purportedly have their deadline set based on academic calendar. You oughta try hopping in front of them to test that assertion. :-)

I'm just talking about the general case of exploding termsheets. If it's known ahead of time that they may get an offer that they have to take or reject BEFORE they apply, that's not an exploding termsheet.

> (YC asks people to decide that day whether or not to accept an offer from us, but we do this because at that point they already know all they need to, not to pre-empt other offers. There is no other seed firm that decides after us.)

How is this behavior any different? Offering last is a unique position which allows a group to already know the other options. It's not surprising that other firms also want decisions ASAP - they certainly don't want to be floating long term offers that function as backup plans for the best groups.

If YC wants seed funding to be synchronous like college admissions, then it should make its own process conducive - give time to accept an offer during which groups can interview elsewhere.

Because the terms and dates are known before people apply.

Do the other seed funding firms say that they'll float you an offer while you're awaiting YC's decision?

PS- I realize that with YC being the "gold standard" of seed funding, other firms will always want to get earlier commitment. But moralizing about adding stress makes little sense when other firms currently have no way to actually cooperate.

Of course they have a way to cooperate. All they have to do is make their offers expire later.

And interview later unless they want to make long-standing offers. Perhaps making YC have an explicitly longer acceptance period would encourage the reputable funds to interview concurrently, causing the games played by the disreputable ones to become more transparent?

I think the problem somewhat isn't so much with YC being the gold standard, it's that the amount of differentiation of the various accelerators is less than desirable.

They all do pretty much the same cash, at the same time, with the same relatively wide net, for the same percentage.

If on the other hand, one group focused, say, exclusively on mobile or e-commerce or B2B or infrastructure or started at a different time of the year, or offered more cash, or wanted a smaller slice I think suddenly they could make the time frame less relevant.

I could have missed something, but I don't think the YC terms are known until people get invited for interviews. The angel documents that YC uses are public, but I don't think the YC terms are. So, I don't believe teams at this point that are dealing with exploding termsheets do know the (potential) YC terms.

When we invite groups to interviews, we also give them a link to a page with all the documents, so they can have a lawyer look at them if they want.

I believe our terms are actually more founder-friendly than the series AA terms. We had to make the series AA terms neutral lest investors balk.

It's different because it doesn't force anyone to forgo other opportunities.

While we ask people to decide that day, we don't insist on it. As I explained earlier, if people have some specific reason they need more time, we've always given it to them.

http://news.ycombinator.com/item?id=528064

And when people do accept, we never ask for more than a verbal "yes"; we don't make groups sign an LOI agreeing to participate.

I hear a lot of what goes on behind the scenes in these situations, and I can assure you that it's not merely out of a desire for administrative neatness that other seed firms give applicants offers that expire quickly. It is 100% certain they do it to pressure people into deciding before they can talk to us. That is not the intention, or the effect, when we ask people to decide that day.

Ah, I hadn't realize this had been hashed out in another thread. I took exception to that excerpt because it sounded pretty hand-wavy; I've read your justification of why you ask for an immediate decision, and it makes sense up until you start introducing the possibilities of multiple offers.

Investors must smell blood in the water to be trying this nonsense. Do you think they'd be doing this in a better economy?

This isn't the first year they're doing it, so... yes?

I don't think it has much to do with the economy. The desperation comes from the fact that the seed funding business is national. I explained the dynamics here:

http://news.ycombinator.com/item?id=528924

I hope this is not TechStars because I really like their operation as a viable alternative to ycom from what I've seen and read. Exploding term sheets seems pretty short-sighted, and not something anyone should do if they are embodying the motto of "helping young entrepreneurs". If a "mentor" is going to use force tactics, they've lost my respect and I certainly have no interest in giving them 5pts for a lousy 20k. Rather just sell my car and bike all summer than deal with that type of investor.

I think this applies to most people (at least for me), ycom is a #1 choice for two reasons: 1) Huge respect for PG for his knowledge generosity and true leadership qualities 2) ycom's presence and relationships in the media.

So my personal note to yclones: figure out YOUR value add so people want to come to you. Force is not the answer, it's shows weakness in your operation.

Why don't you move the dates up for everybody?

Mainly because we're not finished yet reading all the applications. When someone gets an exploding termsheet, we can all read their application immediately, but we can't do that for everyone.

Also, Robert flies in for the real interviews. When we interview people early, we have to do it without him.

He's located in Boston?

Yes; he's a professor at MIT.

Gotcha.

Also, purely curious question: when you're looking through applications, is there a bar of "this is how many people we'll interview"? Or do you set a bar for quality-of-app, then take as many people as place above that bar?

There's a numeric bar for how many people we'll interview, based on how many groups we can physically talk to in 3 days. We usually interview 50 to 60 groups; it's hard to talk to more than 20 per day. At interviews, though, we care more about quality than numbers. We wouldn't reject a good group because we were over some number.

Are there any stats on if more people get accepted on Day 1 or Day 2 or Day 3, in the mornings, afternoon's or in the evenings?

For startups that were accepted, if the startups that interviewed prior and/or after were accepted?

Well, people who interview when there's a full moon tend to get in, but of course it all depends on what pg had for breakfast that particular day.

Joking aside, it's probably best not to publish that kind of thing so that people inadvertently worry about something they can't control. The only reason to do those sorts of stats might be for pg & co. to check and make sure they don't have some sort of biases, but it doesn't seem likely.

some context.

The first part regd. time of the day was asked since PG mentioned (not sure if it was an essay or a comment on HN) that he used to get mundane stuff done during the day, and then code from 9 pm to 3 am.

This is not to say, PG ignores the early interviews and kicks it into high gear for the evening ones; just that if you look at the results, are there any insights or patterns.

Re. the 2nd one, look at #9, Cialdini cites the case of the real estate broker.....: http://www.vinvesting.com/docs/munger/human_misjudgement.htm...

I agree that YC should not publish these stats, but if they did learn anything interesting that could be shared with everyone, it would make a good read.

Hopefully there's little to no bias based on scheduling, but even if there was, publishing the statistics would only exacerbate the problem.

Not only would PG et al be thinking about this while the interviewed people ("This doesn't really seem interesting, but is that just because they're the 18th pitch today?"), but it would also distract the startups, when all they should be focusing on showing YC how awesome they are.

As far as I can tell, the people at YCombinator are extremely qualified to pick the best companies out of the group, and they generally do a pretty great job of it.

You really should not look that far into it. They will choose good teams and ideas above anything else.

The startups that come out of YC are excellent, and I am not questioning that.

Anecdotally, I feel like we made a mistake choosing to be the first interview on Day 1 last season. You only get 10 minutes and they (as you'd expect) weren't quite yet "in the zone" regarding the daily schedule and interview rhythm, so our interview probably wasn't as focused as the later interviews got. We had lots of fun talking with them, though, and the "first interview of the season" could have easily swung the other way in terms of being a good time to present.

But, maybe because they hadn't gotten warmed-up yet, we didn't even get to talk about the startup idea we came to talk about. We shouldn't have mentioned our existing site, but they seemed so excited about it that the 10 minutes was over in a flash without getting to the business idea we submitted.

No matter when you interview, though, know that you don't get those 10 minutes back. Focus on what you think has the highest percentage chance to get you accepted. For us, we started off with an exciting idea that just happened not to be aggressive enough for that particular round.

This year might be better off because you've already submitted a video that gives you a headstart, but make the most of your interview time, regardless of timeslot.

Not YC specific, but from what I've heard from friends that have pitched VCs fairly often, earlier is better because that way you're not the n-th pitch they've heard that day.

I know when I've been at startup events where there's a lot of groups pitching I'm much more attentive for the first ones. Pitch #24 has to really be something for me to even remember what they're doing.

I was talking about the future rounds.

Why don't you be the first one to offer term-sheets?

It probably wouldn't cure the problem. The others would just move their dates even earlier.

You should test that hypothesis. There's only so far they can push ahead.

Wouldn't it help applicants in the future, if the current round of folks that applied to multiple programs to list:

1. The last day to accept for a particular program

2. The ones that offer exploding termsheets

2. Is this generally known in advance? I'm under the impression that exploding termsheets appear on a company-to-company basis.

The idea is to figure out the list of firms that provide exploding termsheets.

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