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Comment by pg | Hacker News Reader

I was curious how this compares to doing YC. YC usually asks for 7%, in return for which groups get in the average case $18k. Every startup also gets an $80k note that converts in the next equity round. In the last batch the median startup raised $795k after Demo Day. We'll conservatively assume a $5m valuation cap, and (very) conservatively assume the next round valuation (when the $80k note converts) is also $5m. So if you can get into YC, in the average case you'll end up afterward having sold 22% of the company for $813k.

We do a lot more than help people raise money, of course, but financially that is what the median trajectory looks like.

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A significant difference is that a major part of the value of getting into YC is having successfully completed the selection process. There's a reason that when hiring and looking for funding, companies will usually include the year they went into YC. Given the value of the brand, it's likely that YC could offer less for more equity and still be oversubscribed.

Did you realize you're replying to Paul Graham?

I thought it pretty funny telling pg about his program. Of course I understand there are many more readers of the comment, but it still seems directed at him.

Honestly I cannot see casca's comment as trying to tell pg something about YC, more that casca is emphasising that YC is not exploiting its brand value; so a direct comparison (15% for 150K vs 22% for ~800K) could be seen either as pg does - "hey we are waaaaay better value", or as casca says "hey you are toooo cheap"

Anecdotally Henry Ford was told that the drive shafts in Model T's were outlasting the chassis, so should they improve the chassis to match? Hell no, drop the quality of the drive shaft and save some money.

I think pg would have made a bad Henry Ford.

Edit: there is however a clear need for fast, time boxed, fund raising. Kima is part of the YC-inspired move in that direction, and there is far far more talent and money out there than YC can handle, so there is scope for them. They are just pricing in the middle market, away from the luxury brands :-)

Henry Ford was cost conscious but not for the reasons one might think. Ford was once sued by his Shareholders because he was purposely selling his cars at a loss to the company. The Michigan Supreme Court held that Henry Ford owed a duty to the shareholders of the Ford Motor Company to operate his business to profit his shareholders, rather than the community as a whole or employees. http://en.wikipedia.org/wiki/Dodge_v._Ford_Motor_Company

While shareholders were worried about maximizing profits and dividends, Ford was thinking of bettering the World with $60M in capital surplus. Ford envisioned a World where every family could afford and benefit from a vehicle - he just intended to see to it they owned a Ford which simultaneously would have allowed him to employ more workers.

I think aggressively pursuing market share through subsidised products hardly counts as Nobel Peace Prize material. Bill Gates would not have needed to do all that exhausting philanthropy now...

I don't know... replace "car" with "water filter" and "America" with "Africa", and I think you might be able to see Ford's point of view.

I would love to see a Nairobi business woman become the next African billionaire selling water filters, mosquito nets and led lights to the whole continent, making a fortune and saving lives.

but I won't call her a philanthropist when she is picking out her next yacht. I will be pleased she lived however.

He's just commenting on it, and it's a reasonable comment at that. It's not like he's telling pg how to run his business.

Hello Paul

Great numbers, we really admire a lot what you're doing at YC but not all companies want to join an accelerator or relocate and not all companies are accepted by YC ;-)

We see Kima15 as a different offer for different founders all over the world who want to raise funding quickly and when they need it.

Wow, cool that you also read Hacker News.

If you don't mind me asking, given that you claim to fund 2 startups every week, how much access would a startup have to either yourself or Xavier? One reason why Kima appeals to me surely is the fact that you two are heading it. Would you actively sit on a board? If so, do you ever sleep?

Ah ah ;-) I love HN.

I'm not sleeping enough and have 10 children ;-)

All our startups are discussing with me by email all day. Not sure will be able to answer to everyone when we will have 800 startups but for the moment, that's ok because working exclusively by email.

We are not board member but are here to help all the time not only during boards ;-)

How do you think your program stacks up when compared to YC directly? Do you think an Airbnb or Dropbox would choose your program vs YC primarily because of the lower friction to money in the bank?

Also, if a company already has a v1 of the product, are you planning to do the same deal? (YC often accepts people who are post seed pre series a.)

AirBnb & Dropbox were very risky projects like any other projects in this planet. There are many hidden awesome companies on this planet and we are targetting this one.

I'm sure we will invest in a future AirBnb or Dropbox. We just need a little time ;-)

Oups, for your second question.

Kima15 is not dedicated to fund prototype only. Some companies with V1 are also great targets for it. All the projects we received since the launch 3 hours ago are all startups with a real product.

If the startup is at a later stage, we will be happy to check it through Kima Ventures. It can take just a little longer.

A startup has to be in the same place as its investors if they want to talk face to face, and empirically we've found this to be a necessity when talking about the subtle and complicated problems startups face. Email and Skype are such poor substitutes that they're a qualitatively different thing. Which means if a startup wants advice from its investors as well as money, they either have to raise money from local investors or one of them has to go to where the other is, at least temporarily.

Ideally investors can give advice too besides money - it's nice to get two things instead of one. But there is some value to investors who can only provide money, as well as some value to investors who can provide money + advice-distorted-through-skype.

Agreed, most of the investors I've worked with provided zero benefit through advice. Often investors are out of touch with trends, they have their heads in the financial clouds and can rarely get past their infatuation with hockey sticks. Obviously some investors have a clue about the technology, but not in my experience - won't name names for obvious reasons.

Agree with you, it's certainly better to be at the same place, but there are hundreds of counterexamples of huge successes with VCs not living near the companies. In Europe, Israel, Russia, we have plenty of them.

We are also investing with a lot of local investors and they are sometimes managing the local relationship (or mostly making things worse :-()

Last but not least, many of our companies are targeting a local market (China, India, Pakistan, Switzerland, France, Argentina, UK, Germany...). They have nothing to do in the Silicon Valley.

The YC model is awesome. No doubt on that. but there is room for many other models. (and thanks God, we invested in Rapportive before they went to YC ;-)).

Check also what my partner is building : 1000Startups, the biggest incubator in the world in the center of Paris http://1000startups.fr/en/

As far as I can tell, YC isn't much of an option if you aren't located in US. Besides most of the start-ups go down the drain not because they lacked advice but because they ran out of money. So congratulations for creating an option that can be considered by those who have no intention/ability of moving to US.

http://1000startups.fr/en/

Wow! That's twice as powerful as 500 Startups

I'm just guessing trust is a big factor here. I'm more likely to trust someone I've met.

It's not unreasonable to assume that founders receiving Kima15 funding also go on to raise a sizable equity round later. I think the offers can be simplified by saying YC is ($18k + YC program) for 7%, and Kima15 is ($150k + Kima15 network) for 15%.

That means the YC program needs to be worth $52k more than the Kima15 network/brand for the lower valuation to make sense. I wouldn't be surprised if it is, but we'd really need stats on the subsequent funding rounds of Kima15 companies to compare them in this way.

One of our companies FormLabs raised $19M after our seed round ;-) You can imagine the kind of valuation they got... Pret d'Union, French Lending Club clone raised $5M Sparrow has been acquired by Google

Very difficult to compare both programs and it's not the goal to compete against anyone.

What about the novelty aspect? AngelList is cool right now. Who wants to be just another YC graduate, standing in a long line with teenage fart app founders dying to rub elbows with the Wizard of Oz.

Financially YC is a force multiplier. Not just incidentally, but by design. So it's misleading to treat it in isolation. And while anyone could raise additional funding after any round, in the YC case the numbers are known. Unless there is some fairly dramatic economic change, the median startup we fund can count on raising several hundred thousand dollars at a valuation (cap) of way more than a million.

I'd say the difference is all about time.

Kima is awesome for startups, who need a cash infusion RIGHT NOW. This can often save a startup and make the difference between the startup shutting down and it becoming a billion dollar company.

With YC, it's a very long process as it roughly takes 4 months from applying to money in the bank.

So Kima can give startups a fat cash injection, which is good for startups who know exactly what to do and just need cash, nothing else. YC is more for long-term startup building, getting into a community, relocating, becoming a Silicon Valley startup etc.

"With YC, it's a very long process as it roughly takes 4 months from applying to money in the bank."

That's not true. Startups get the initial $18k + $80k on acceptance.

Ok true, then it would be 1 month application period, 2 weeks for an interview invite, 2 weeks to have the interview, so it would be around 2 months vs. 2 weeks, 4 times longer.

But that's fine, because your expertise is a more long-term approach over several months, Kima's expertise are burst-investments. You have completely taken up the "hatching investments" space, Kima will completely take up the burst-investment space.

I think is the next logical step of startup investments after accelerators. Just as we've now seen accelerators popping up everywhere (and now dying down), we could see Kima-clones popping up everywhere soon.

Let me disagree. Applications are 6 months apart, this makes it for new applicants statistically ~3months + the time until acceptance makes roughly 4months.

Considering that lots of startup founders apply many times before being accepted, the median is easily in the years range.

The median application is submitted about 2 days before the deadline.

It seems misleading to consider multiple applications, since we're talking here about the time between applying and getting money or a no.

Are you referring to the median funded application or the median submitted application?

You had mentioned the day before the deadline applications are submitted at a rate of one per minute, which is bound to bring the median closer to the deadline, but only YC knows how many of the applications submitted during the last 2 days were funded. The median funded application could be submitted 2 months before that for all we know.

If it's the median funded application, shouldn't you be correspondingly alarmed YC-funded startups apply 2 days before the deadline? Would setting more deadlines (having more funding cycles) generate more YC startups?

Useful data, PG! I agree the value of YC is far higher than Kima15. But given the level of competition to get into YC, I would say you have lower risk profile than Kima15.

I think they probably fit a nice spot for founders who can't get to YC but are looking for funding. Overall it's win for founders.

The comparison of 15% for 150k vs 22% for 813k is unfair because it suggests that $5m valuation is entirely because of YC. The fact that many YC companies don't raise clearly indicates that YC helps but not a sufficient factor.

Since YC companies' approx valuation is $5m, the 80k note will take about 1.6% equity. So I would say YC is offering 98k for 8.6% (18k + 80k for 7% + 1.6%).

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