The Best Deal In Startup Land
avc.com
avc.com
PLUS, there are virtually no costs of the YC process. You fill out an application: 1-2 hours. You interview: 10 minutes + travel time. You fill out some paperwork: 3-4 hours. Boom, you get a check and have a Delaware corporation. Maybe you don't get in and you're out a few hours of work.
Compare that to the fundraising process with anyone else. Of course, I'm preaching to the choir here. But I just wanted to add another data point.
I'll take it further. This is a good deal without the mentoring, although I can't imagine anyone finding your startup valuable without you taking good mentoring. Who is the kook that thinks a startup with no finished product, no users, certainly no "customers", so clearly no proven biz model, is even worth $500k?
Does Sarah Lacy have any first hand experience at the helm of a start-up? Based on her opinion I can't imagine so. As a person that has been doing startups for 20+ years, I can say its a no-brainer to give up 6% for a little cash and proven leadership.
1 - I had a great mentor years ago. His software company, which is still running strong for 20 years, gave 5% to each of several key employees (they had good salaries as well). He thought it a no-brainer and his success shows it.
2 - I had an investor in '98; things went sideways. The investor received both IT product/services from my startup plus 5% of my company in return for carrying my costs that year. When it became clear we needed to part ways, I called my old mentor to ask what to do. He told me to let the partner keep the 5% even if I didn't have to (I didn't and didn't even have to fight about it). He told me it was a small amount, it would get diluted over further investments and if those further investments never materialized, it meant the company is dying so the 5% is worthless anyway.
Sounds like one hell of a seed-deal to me. At least mine was much worse than that, I'd be curious to hear about others.
The barrier to YC for me personally was the whole relocation to the USA. I understand the reasons for that but can't see myself getting productive work done under such a drastic environmental change. If it wasn't for that I'd have been all over them - 25k for 6% is absolutely a no-brainer in the bootstrap phase.
I'd really like to be a part of YC someday soon–and I definitely wouldn't need the money. My problem is finding time to be away from my current company long enough to focus on and launch a new idea.
When I read that Sarah Lacy comment last night, I thought it was one of the more short-sighted comments I'd read on TC. Is that par for the course for her?
I don't know if this is your company you're talking about, or just a regular type job working for someone else. If it's your own company, then so far I've found that trying to clear time for a YC startup is forcing me to formalize and replicate other aspects of my current business, which is really good for it. So, it might be worthwhile to push for YC anyway; if nothing else, your existing business will thank you for it.
Good advice, thanks.
I hate it when that happens. :/
I don't see much of a reason to worry about that in the YC case. I'm not worried about them trying to take over the board or block an exit or forcibly change a product strategy.
That being said, as with the author, it is even more clear to me ycombinator itself is the best deal out there
It wouldn't make much sense to go to YC if for example you were building b2b enterprise apps or targeting non-english speaking market where YC lacks expertise, but other YC-style programs might be much more suitable.
On the contrary, I'm pretty sure YC are not only interested in such startups, they've funded some.
While that was possibly true of b2b+YC in the earlier days, they have since funded a number of those kinds of companies. Ours was among the early examples in 2007, and we certainly have no complaints about their contributions to our business. pg has said on several occasions that the reason they fund the kinds of companies they do (leaning heavily towards web 2.0 consumer businesses) is because that's who applies. Viaweb was b2b at its core, so one can't really say they don't know that kind of business.
Things like industry contacts can be critical (it can often be impossible to even get in to a company to pitch without an inside contact), lead times are very long, etc.
The challenges you face are often vastly different to most web 2.0 apps. Crossing the Chasm is a good book on the sort of challenge.
In those sort of circumstances you may well be better off finding a consortium of angels who are from your industry than joining a generic incubator style scheme (although obviously they have their own value).
So, yes, if you're building that kind of company, YC is probably not the right choice of investor. The scale of investment is also too low...enterprise sales guys with specific industry experience cost more per-month than YC invests. So unless they're also a founder and not drawing much of a salary, the math isn't going to work out.
Listen: You don't launch an enterprise product in 3 months. You launch a consumer product. MAYBE you launch a product for SMB, because that's what you are ( http://blog.asmartbear.com/blog/youre-a-little-company-now-a... ). In a few years, eventually you have enough market smarts and momentum to confidently sell stuff to big companies.
YC funds companies that can reach ramen profitability OR reach the point where they are worth investing in (angel or Series A). The B2B path is a longer (but maybe safer?) one. Eventually, you'll either get profitable, stall out and/or prove that it's worth spinning up a sales team (which may well require add'l funding).
Note: we are a 1.75 year-old YC company and we have lots of 5 and 6-figure deals in the sales pipeline. 12 months ago, I NEVER used the phrase "sales pipeline".
b2b YC companies include (off the top of my head): RescueTime, Frogmetrics, Xobni, Virtualmin, Snaptalent (deceased), etc.
For example:
* Adapters to connect Hospital ERP systems to Pharma companies
* Financial market liquidity masking servers that combine internal trade books with market trade books.
* Industry specific databases
* Warehouse logistics management
* Ultralow (microsecond) latency middleware
None of these are particularly sophisticated, and are all areas with active startups. But they're all in areas where the only companies who the software is useful to are large enterprises.
Great way to encourage reasoned discussion as opposed to groupthink.
(feel free to downvote this one though; as meta-discussions are off-topic unlike my previous comment)