YC interview advice
sam.bluwiki.com
sam.bluwiki.com
Actually we're not as down on ads as other investors seem to be. We liked Heyzap, and they make money from ads.
"The last thing you want to do is argue with the partners."
That's an overstatement. We don't like people who supinely agree with everything we say. That's as bad as refusing to listen to anything we say. What we look for is a middle ground: people who respond intelligently to our suggestions.
Some of the suggestions we make are stupid. If people agree with those, we conclude they're stupid. (We don't do this on purpose to catch people. We just don't understand very well yet what each group is doing.)
The real problem is when a team turns out not to have enough determination to see a startup through. Startups are hard; most people wouldn't be determined enough.
When a group we've funded seems demoralized, we try to encourage them. It takes a few iterations to tell whether a group is just suffering from a temporary setback, or whether they intrinsically lack energy. If by Demo Day they've gotten nowhere, we start to think it may be the latter. But we're naturally optimistic. Usually groups give up before we give up on them.
At least more so then other answers you might hear.
Doesn't mean there aren't good businesses to be built on ads. Just that there tend to be many not good ones.
If you're "ramen profitable", why do you need a VC at all? You're self-sufficient by that time, you have proven your product - you should be talking to a bank, not YC.
Regardless, there are still good reasons to seek VC investment when profitable. Several YC startups are going down that path. A bank might lend you $10-50k if your net is $2k/month while a VC might invest $1-5 million.
I don't think it's ironic at all. VC investment involves a risk calculation, profitability means a lower risk but in return the VC should be willing to accept a higher valuation.
We're raising money currently, and our investors have told us that revenues would come quite distant in terms of variables on if they'd invest. They love a great team, a huge user base and a lead on the market. Sure, having revenues extends your runway, but most investors seem to be of the opinion "users now, profits later".
I guess my question is, would a VC prefer a massive unmonetized user base, or a much smaller user base with revenues?
Oh I agree of course. VC will be judging you on future potential; a bank will be judging on current performance. If you need a million dollars to really scale up, you need the VC. Facebook or Youtube come to mind, they could have never achived what they have without VC.
But if you don't need the huge cash injection, if you just need to incrementally ramp things up slowly, then VC is not your only option; that's all I'm trying to say.
What do they need money for?
A case could certainly be made that they took too much money, and I would agree with that, but they did need money from somewhere.
Conservatism is rife in the banking sector at the moment but at the same time, making loans is their job, after all.
Banks aren't in the business of betting on the success or failure of companies. They're in the business of liquidity.
I was actually thinking in terms of personal loans, which have less onerous collateral requirements since the debtor can't simply walk away from the loan, but I guess I am making assumptions about the creditworthiness of the founders in that instance, too.
It does kind of beggar belief that a couple of smart middle class kids with an obviously working business plan couldn't get someone to loan them a few grand. I guess you can't count on it, though. Point ceded.