If you're accepted to YC, can you negotiate the percentage?
I know that the amount of funding is fixed, but the percentage that YC takes doesn't seem to be. Anyone from the previous batches successfully negotiated the percentage that YC asked for?
But, do take pity on pg--he's frazzled on that day. He calls everybody personally. I was impressed by how nice he managed to stay through the whole process (and even moreso now that I've seen first-hand how crowded pg's life is with people who want to be around him).
We went in knowing that we'd say "no" if the offer involved more than 6% equity...but it rarely does, so that wasn't a big concern. We're glad we weren't one of the "no" groups.
You get 15 minutes or so to present your idea. One minute of that presentation should be about how much money you need to get started. I would not inflate that number, but I would not artificially constrain it to fit the "fixed" limit that YC has. I can't speak for YC, but I would guess that they aren't going to turn down a deal just because the founders demonstrated a need for $7500 per person instead of $5000 each, or whatever the details are. Similarly, if your idea is the best idea they've ever seen, then are they really going to be so rigid about the percentage? Especially if you offer a percentage before they do?
I realize PG said flat out "no" above. But, doesn't Mr. Graham strike you as somebody that has a "rules are meant to be broken" mentality? Don't you think that this is exactly the type of arbitrary rule that is easily broken without too much fuss?
We should go back and see if the predictions implicit in the offers correlate at all with how the startups have done.
6% seems like a 200% profit if each yc startup generates a 1 million dollar investment.
If the VC deal rate is closer to 1 in 10 or 1 per year, it looks like you need one $10 million dollar deal a year, each of which needs to have a potential of $250 million eval, or $25 million a year in revenue before the VC will be interested.
So my question is, if a team can demonstrate "real" projections with lower than average risk, and demonstrate a 2 year projection of greater than $25 million a year would you consider an offer of less than 6%?
My second question is, since we are in the Midwest, "What exactly is a rockstar?" ;-) We have Billy Corgan, and Garbage to be proud of, but the coasts seem to be more keen on the idea of the "rockstar," so, what are the characteristics of a "tech" rockstar?
...decisions will include the amount we'll invest and the percent of the company we'd want for it. We usually invest $5000 + $5000n, where n is the number of participating founders (i.e. 2 founders get $15,000, 3 get $20,000), in return for between 2% and 10% of the company. The median is 6%.
The money itself is NOT the reason to sign up for YC.
BATNA- "Best Alternative To a Negotiated Agreement"
Your BATNA: To keep doing what you're doing, and not get rich by fulfilling your dream.
YC's BATNA: To fund someone else that is about 99% as good as you.
You have a lot more to lose by walking away, therefore YC holds an incredible amount of power in the negotiation.
They just have a smaller chance of it happening. As a YC-funded group, you have a 100% chance of pursuing your dream. If you aren't funded by YC, your chances of that are significantly smaller.
As a serial startup founder with 2 VC backed companies behind me (one as a founder) and 2 bootstrapped companies (both as a founder, one current, thriving, and multiple years old), let me respectfully call bullshit upon you.
To support my calling down of The Bullshit upon you, let me focus your attention on two completely obvious facts of the industry:
Fact the (1)st: the Overwhelming Majority of thriving web startups are not YC-funded.
Fact the (2)st: the Overwhelming Majority of YC applicants do not collect $16,000 (one solid month of consulting dollars for a skilled developer) from Paul Graham.
If your dreams don't survive not collecting a vanity round from Paul Graham, your dreams are weak and don't belong in the industry to begin with. I leave you with that thought.
I define "success" as being able to quit my day job and work on the startup full time. Anything after that is gravy.
My chances of being able to do that if I'm accepted to YC: 100%
My chances of being able to do that if I'm not accepted to YC: 25%
The 25% is more than enough to keep me going and to keep my inspired. But I'd still have a better shot if I got accepted by YC.
To restate the original point: I feel like some of the people on this forum approach starting a business the same way they approach applying to college, or to grad school. That is not how it works. Your success is not gated on the "grownups" in the admissions office, or the department, or Y Combinator, making a decision about you.
If you catch yourself thinking about it that way, stop. Even if you get your 2 month's consulting dollars out of Y Combinator, nothing else in business works that way. There's no professorship to apply to once you get funded. You actually have to engage the market and win.
http://paulgraham.com/webstartups.html
Section 2.
unless the % seems way out of kilter, it's probably not worth optimizing this or cutting yc down (after all, they're making rapid fire phone calls down a list of people who would gladly take your spot. things like your option pool and follow on investments will be the dominating factors in your dilution anyway.) they definitely earn their chunk, and contribute _vastly_ more than the equity they take, even at the highest end.