Exploding Offers Suck
blog.ycombinator.com
blog.ycombinator.com
I've seen him employ this many times in practice and it has always worked out. I don't want to be responsible for anyone losing a deal, but remember: when someone offers you an exploding offer, it's because they really, really want you to take it. If anything, it should be a sign there's (a) more time to be had, and (b) plenty of room on the terms.
Any deadline claim has to be concrete and believable. The start of the YC program is a good example.
Couldn't it be because they've got a lot on their plate and after a certain period of time they want to free up their brain cycles and stop wondering if you're going to accept that deal?
Couldn't it be that you're barely preferred and making the deadline shows them that you're excited about the offer? Missing the deadline shows that you're not excited and they'll know to go with the second best candidate?
FWIW, I'm relating this to exploding job offers as I have no direct VC experience.
A job offer might be time limited if there's a planned start date though.
But anything's possible. If you're happy with the offer and don't want to risk losing it, take it!
But feigning indifference and giving you a short-term deadline for an offer you're unsure you can beat -- that's just a negotiation move, and personally, I would call them on it. Again, I don't want to be responsible for failed application of this :-)
If they gave you an exploding offer, then that signals that the emotion is "We really, really want you, and we're afraid someone else will snap you up." If it looks like someone else snaps you up and then you suddenly, miraculously become available a month later - what's the emotion? It's usually elation that you happen to still be available.
The one exception is people who are susceptible to sour grapes. "Well, we can't get you, therefore we didn't really want you in the first place." These offers disappear, but you often don't want to work for companies like this anyway, as it shows that management can't get over personal feelings of rejection to do what they'd judged rational a month earlier.
BTW, this is why it's usually not a problem to return to a past job that you've done well at and left on good terms. They liked you then, there's no reason why they wouldn't like you now.
In other words, candidates sometimes also need an answer within a certain timeframe (often for very legitimate reasons; a job change can often be a life-changing event) and that means that there are some real time-limits across all of the candidates (in both directions).
If you had several candidates of equal ability, would you still use an exploding offer? Otherwise, it seems to be less about "giving candidates an answer within a certain timeframe" and more about putting pressure on the candidate you really want.
>there's a risk of losing all candidates if I waited for an indefinite time on the strongest candidate.
Is there nothing in between an exploding short-term offer and an indefinite open-ended offer?
I would think you would. If you have 10 candidates but only want to hire 1, you can only issue one offer at a time regardless the fact that all 10 are equally qualified. While the first candidate would love to have all the time in the world to contemplate the offer, the employer and the other 9 candidates who are waiting in line don't want that.
If any of them have other offers, they might appreciate _some_ extra time to decide between them.
EDIT: Nevermind the previous bit--I was still thinking in the context of multiple simultaneous offers, which I guess is not a thing.
And if not, then if the first choice turns it down, you make an exploding offer to the second (to be fair to the next 8), and again to the third (to be fair to the next 7), etc. Is there ever a situation where an exploding offer is not in everyone's best interest?
The ideal scenario would be if it were socially acceptable to rescind offers—thus making the exploding offer unnecessary. An employer could make offers to everyone they're interested in, see who accepts, and then stay with them (essentially, allow parallel analysis on both sides). Instead, candidates can have multiple simultaneous offers while companies can only make offers sequentially. Hence the exploding offers.
1) yes 2) I don't think I've ever been in a situation where I had multiple candidates without any preference.
I'm assuming at the point where you make the offer, you and the candidate have established that you want to work with each other, and already agreed on compensation and terms.
Given that, you're already past the negotiation stage, and there is a time limit on when the deal can close. You need to hire one of your candidates, so it makes some sense to say "you have some-number-of days to accept this offer."
The key here is that you've already negotiated the agreement. In the past, I've had companies make me exploding offers with zero opportunities for negotiation.
Every time I've rejected such an offer, and every time it's been the right decision.
As someone who considers himself an excellent negotiator (and gets paid to do negotiating) [1] I'd really caution someone from employing a technique that someone else uses that you don't have experience with. Negotiating is all nuance it's not engineering or an exact science. Go try and read a book on it if you want. (I can always tell someone who is fresh from reading a book.)
Actually exactly for this reasons:
"I don't want to be responsible for anyone losing a deal"
Of course, it's easy when someone else is taking all the risk.
"when someone offers you an exploding offer, it's because they really, really want you to take it."
Could be. But there are cases where this is not true. How lucky do you feel in interpreting all the signals based on a limited time as a negotiator?
And getting back to what Sam has said:
"Sometimes they say they have a fixed amount of desk space, but in practice, if a good company wants to join late, they always make room."
Things are never always clear cut. Very possible your company is borderline and you don't fall into a "must have" category. By even YC's own thoughts there are many more qualified companies than they can accept. Not everyone is a superstar that can write their own terms.
"Any deadline claim has to be concrete and believable."
How so? You ask them? You investigate? You poke around? General advice the specifics are much harder.
In any case the last thing you want to do (according to at least my method which might differ from another negotiators method) when you are negotiating is tip your hand. And if someone is bluffing the last thing you want to do is let them know or that you think that they are bluffing. As such saying anything that sounds like "prove it" is certainly a way to do that.
In negotiating often people claim something that isn't true and bluff. It's part of the game. The idea is not to make them prove it. The idea is to figure it out on your own and use it to your advantage.
[1] It's a game.
There's something to be said for the idea that losing a seed funding deal to term explosion is a dodged bullet, too.
All depends. Once again you could be right but I could also argue under the theory that "once you make a sale you close and get your ass out of dodge". Because things can and do change.
Keep in mind that an open offer not taken can be withdrawn. Or new information can come up which makes it less attractive or gives someone a reason to change their mind. I offer this not as specific advice given the topic but more generally that there are deals that are lost by "dicking around".
I've both seen this happen to others and have had it happen to deals I have done.
In one case Se______a Capital wanted to buy something that I had. I decided to go for a higher amount. Something happened and then they didn't want it at any price. Not even the original offer. Not at all.
Same technique I had used for years that never failed. But it failed in this case.
But there is a difference in my case. It's part of my business to sell what they were trying to buy from me. It wasn't a one shot deal. So I could afford to employ a method that had worked for me for years and be wrong in this one instance.
Read 'Getting to Yes' and 'Bargaining for Advantage.' Use the principles when making any large purchase or changing jobs.
Most retail cashiers can also give 10% discounts without approval. Find opportunities to negotiate.
Buy things on craigslist and be patient.
If you read the books, you'll also see more everyday situations and compromises as chances to use negotiating skills. There's no reason it needs to be money.
If you're in software you can also read patio11's valuable thoughts: http://www.kalzumeus.com/2012/01/23/salary-negotiation/
In addition to my own deals which I obviously work on, I also, some time ago, took on negotiating deals for others since it was fun to do. I ended up having enough takers that I started to have to charge for doing that. While the amount I am paid wouldn't make it attractive full time [1] (besides there are no residuals which I like) it still is something I do just to keep my mind active and since I have the flexibility to take chances where the outcome isn't as important. And to me, it's fun. I get a great buzz from having the correct analysis lead to a positive outcome. In some ways it's better than money.
Another thing that is good practice is simply to try and make deals for others that is to put deals together or what I might will call "shoot the gap". I do that all the time. I'll see something that I think could be helpful to 2 different people and without even getting paid for it I will try to convince both of them that they should get together on some business issue. Then when if reply or are negative I will try and overcome the objections to make a deal happen.
Risk always enters into negotiation. If you are willing to lose you can take more chances because you aren't as worried about going bust. If you can't lose (you really need something) you have to be more careful and can't be as reckless.
[1] Because in the end it's more money in my pocket doing things on my own account time wise although there is a great benefit to doing it for others as well I gather more data because there are more situations to work in and around.
Playing Diplomacy (and similar games) works for some.
P.S. I'd like to get in touch for some thoughts on negotiation.
http://www.amazon.com/No-Only-Negotiating-System-Need/dp/030...
And there's a reason that's the title :-).
Exactly. It sets the tone for how the relationship is going to develop and relationships like that you can miss like a toothache. Better to take your time and see what it is that they're afraid you'll figure out if you think about the offer a bit longer.
If you want to take it off list: dwyer.ed@gmail.com :)
And geez there's a boatload of things to take into account and they have to become second nature (like playing a sport or self defense) so you just have to spend time and practice all the time and keep practicing.
I actually keep my own notes on all my thoughts and techniques that pop into my mind.
Here is one as example.
Timing. Timing is important. I take into account not only how quickly someone replies but how quickly I reply or get back to someone. There is a reason and a strategy behind what people do in most, but of course not all cases. Even the time of day they reply and the length of the reply and exactly the words they use as well. Say when you propose something how quickly do they get back to you? All context in different cases means different things.
Also timing as far as when you spring things upon people.
For example I'm currently in the process of getting my bathroom quoted for remodeling. I've settled on a particular vendor that I'm pretty sure I will use. We've been going back and forth on details for probably 6 to 8 weeks. They've given me pricing and I haven't asked or said anything regarding getting a discount. At all. I also haven't asked for any exact details on products they are using. I don't care at this point.
What I will do is most likely bring up a discount at the very end of the process. When they have already spent time on the deal and don't want to lose it. [1] I will also bring up other factors to them (non monetary but convenience for us) at the end. I know they won't be as likely to blow off those concerns after the big investment in time they have made.
[1] After listening to my war stories my ex wife used the same technique against me when we were ready to sign our divorce papers. At the very end as we sat there the deal all done and papers ready to sign she said "I'll only sign if you also pay for my trip to XYZ". While I could have walked she knew me well enough to know that I wouldn't and actually I was kind of proud that she had listened and learned. Which is another point in order to negotiate you have to know as much as you can about the motivations of the other side as possible. (So research is important).
Here's the thing. Mark Cuban can walk away from any deal, at anytime and not feel like he is missing out.
So, while you are certainly getting the shorter end of the stick with an exploding offer...It's usually coming from a place where the person making the offer has enough leverage to be ok with losing the deal.
In this case, waiting will make you lose the deal.
Sometimes, a good enough offer is better than a slightly better offer.
More importantly, as Robert Ringer says, "The results you get out of a negotiation is inversely proportionate to how intimidated you are when negotiating."
Unfortunately I didn't follow this advice when recently buying a car.
It sounds like the "exploding offer" another scumbag car dealer pressure tactic. Car dealers will do anything, including lying, to prevent you from negotiating efficiently.
I've gotten a dealer to sell me a car under dealer price by e-mailing every car dealer in the area on the 29th of the month, saying I was looking to buy a (specific model of a) car immediately. All you have to do is find the one dealer who is 1-2 cars away from hitting their bonus target. It is rational for them to sell to you under cost because they will more than make it up in the bonus; it is rational for you because well, it's under cost.
One of the more interesting points in the entire thing came in the first minute where they point out that things like the end-of-month sales impact the entire US economy because it has to do with auto sales, and GM and steel working and etc follow up the chain. Weird to think of it like that.
But every car dealership in ever country has sales quotas to meet. You just have to find out when they are.
So whenever you are buying something from a corporation, try to figure out if they are ahead or behind in sales. They can get really desperate to make the numbers. If the product is selling faster than they can make it, all bets are off. That popular stuff stays a full retail. Nobody will discount since production is limiting their sales, not demand.
Also, understand flooring costs. Often a dealer of expensive stuff like cars, trucks, motorcycles, RVs etc gets a line of credit from a large bank for "flooring". This is the roughly 1% per month fee the dealer pays to the bank for interest for the line of credit. If that unit has 12 months of flooring charge against it, people can get really good deals. They just want to clear stale inventory and will take a loss to do so.
I've worked with sales teams where "I need to hit target this month" was used as a cover story to offer a moderate discount to a buyer without creating (too much of) an expectation that such discounts would available in the future, or suggesting that the company was getting desperate to close.
That is, it was a partly-but-not-entirely-true story to justify an exploding offer.
I suppose what I'm driving at is to please consider buying a ute (like a Ford Falcon pickup with a big v8), because there are starving drivers in America.
Of course, companies that haven't set their own quarter ends (my employer's quarter ends on a different day than the calendar quarter) are also subject to a similar larger-scale rush-to-target by Wall Street.
Otherwise sales would just be a rolling commission with no end dates.
Edit: This is why getting introduced to an investor puts you in a much stronger position than soliciting them directly.
This is essentially true in any decision-making situation, not just financial negotiations.
I was a really crappy grad student, but I went into my dissertation defense knowing exactly what I was bringing to the table and it went very well. Ditto for the better job interviews I've had.
That, and most of the deals he (a Billionaire) is talking about investing in on Shark Tank involve him doling out incredibly small and insignificant sums of money for equally small and insignificant (in his eyes) returns.
He really doesn't care if you take the offer or not on Shark Tank, because even if you do and you succeed beyond your wildest dreams, it's not going to make him any richer than sitting through a Dallas Mavericks game would.
Verbally reject the offer or the deadline?
Can you give us some examples?
I understand that it is most likely the deadline, but from the sounds of it the strategy should be a little more complex.
Currently it sounds like:
Someone: We would need an answer in 10 days?
Your friend: I can't reply in 10 day.
--- 12 days later ---
Your friend: The answer is yes.
Someone: We'll give you the money.
The success rate of this exchange seems questionable.
Your friend has to do a bunch of stuff in 10 days to satisfy Someone. There's opportunity cost associated with that, and there's no guarantee of money yet.
Just saying no relieves a lot of that pressure. Someone has to decide if they're really interested. If you get No right away, you've saved yourself 10 days of pointless work. If they accept the new timeline, they're probably more interested than you realized.
It's kind of like poker. If you're not sure enough to make a tough decision, you can always make somebody else make a tough decision instead.
edit
Assuming no information about Someone, they're level of interest X might be .01, or .99 - they have at least a little interest, because they're meeting you.
Making a demand lets you calibrate your understanding of X a little bit. Outright rejection indicates X was really low to begin with.
Maybe they have some regulatory constraint, and the date is a huge hassle to change. Well, X is less than that cost of change. In that case, they'd tell you.
In the OK, state, you you're likely better than .01, but you don't get a ton of information about how much better. If they explain why the timeline is they way it is, it's Y effort to change those dates, you can adjust X to the new level proportional to how much extra work you've made them do by missing the deadline. - They're at least that interested.
I understand and agree with letting somebody else make a tough decision.
I was a little concerned with the OP's explanation as OP made it (almost) sound like a one size fits all strategy.
High quality investors and hiring managers don't make offers to people they're not highly interested in.
Odds are much higher that interest is close to 0.99 than 0.1.
It is without question that most people applying to incubators apply to a few of them, in case they don't get into the (obviously) best one, YC.
Its my guess that some of the less exciting incubators give these exploding term sheets to make the founder think:
"Damn, I got into Incubator X but I have to say yes in 48 hours. I wonder if I will get accepted into YC also when answers go out in 2 weeks. Should I risk walking away with nothing, or just take the offer I have now..."
Would not be surprised to see more incubators doing this anyways, with or without exploding term sheets. They will likely just move up the dates their sessions start (and the date you need to say yes by), to make sure its before YC answers go out.
On the same hand, I am not sure what you expect other incubators to do. YC is hands down the most prestigious incubator to get into and everyone knows that. So, you have a bunch of other incubators that have to think scrappy to get people into their programs. These guys don't just want YC's cast-offs, after all.
If YC was to start doing rolling acceptances for a start date, it would solve the issue of other people doing exploding term sheets. If I apply to YC today for the winter batch and can interview and get a yes in a few weeks, then the motivation for other incubators to do this behavior is gone.
YC partners need to realize they are the cause of other incubators giving out exploding term sheets. I know YC likes to make a event of doing all the interviews/acceptances on one day, but it would certainly be much more entrepreneur friendly to have it be rolling admissions. The start dates for sessions can still remain the same of course.
There's no obvious benefit of ED to an incubator interested only in financial returns.
Top schools like Harvard have non-exclusive Early Action offers.
That is thoughtfully provocative. I have literally zero evidence to go from, but I suspect that Y Combinator is like Harvard or Yale: they could get rid of the group that they actually admit and go for the next tier, then achieve similar outcomes. (In other words: there are so many strong applicants that they can't take them all.)
This is just to say that even taking YC's cast-offs could be perfectly acceptable. YC is dominant for now, but it's not hard to imagine a world in which there are a few accelerators which are true YC peers (just like Harvard, Yale, Princeton, and Stanford are variously preferred by different people with real differences in preference).
You have to remember that investing in companies is a lottery game. Most angels/vc's profits are made on that 1 in a million company with a 1000x return.
If YC wants access to truly the best companies, they need to institute a rolling admissions. Otherwise, these scrappy second tier incubators will get lucky a few times when a nervous founder takes a bird in the hand over two in the bush. The policy only hurts YC itself.
If this were true, YC would be the size of Exxon. Picking A+++ companies is a heuristic.
IMO, there is still too much luck involved to make this true to the extent it matters in this case. YC has picked several things that didn't pan out, and of course several that did. There have also been multiple follow ups from YC rejects that went on to be much more successful than some companies that WERE picked
Sounds like a terrible expected ROI ;)
I agree with this, and I don't think that actually needs much evidence. It follows straight from assuming that:
- YC has prestige and is recognized as a top accelerator (which is true)
- YC is competent at picking strong applicants (which also appears to be true)
- there is no magical cutoff in the applicant pool where applicants below it are significantly worse than above it, and the cutoff point happens to be exactly at the point where YC stops accepting people (proposing the opposite would require serious evidence)
How exactly did you determine that may I ask?
Just one anecdote out of many of how YC has gone to many lengths to protect founders.
Since that experience, I've realized that it really doesn't do accelerators any good to introduce these conditions in their funding offers. It creates a bad reputation amongst founders in the increasingly competitive field of accelerators. And founders ultimately need to pick based on what they think will have the most impact to their business. Compete on benefits you can offer to founders, not legalese.
There's a child-like expectation that once the deal is signed or agreement is made that it's over. It never is, that's just the beginning. If you're expecting that everything is finalized as soon as an agreement is made, regardless of the conditions, then you're simply bad at business and taking risks that you haven't yet realized.
(Of course this isn't true in Europe. They love taking contracts extremely literally, and their economies suffer enormously for it.)
An equivalent is that you shouldn't expect someone to follow through on a decision they didn't buy into.
Perhaps all that's needed is more high-visibility guidelines like what YC is doing now. Perhaps we need better platform for evaluating investors from the founders perspective, instead of networks that really only care about evaluating startups.
Either way, the situation seems to be getting worse, with the continued explosion of accelerator programs around the world. I hope we find an effective solution.
Of course PG helped you wriggle out of your DreamIt acceptance. He sees you as an investment. Who wouldn't try to protect their investment?
In several cases, just as a consequence of the calendar, the timing of when we've given offers out can create tension for a company, particularly if it lands in between the YC interview notification and the actual YC interview. When it's come up in the past I've aways encouraged founders to notify YC and see if they can either take the interview early or if our timeline permits, to let them take their YC interview knowing that they have a standing offer from me regardless.
I've had some people mention to me that this is merely bolstering these companies' applications to YC, but I don't view it that way and regardless of which program they end up in, it's the right thing to do imo. It's actually worked out quite well and I'm happy with the companies that chose Techstars in those scenarios over YC, and also completely happy for the companies that chose YC.
I always found the justification of having all the information a bit self centered. Founders have all the information... about YC, but not about other options.
That said, as a YC alum, I think you should almost certainly say yes if accepted.
as much time as the founders want has been the unofficial policy for awhile, but i thought it was time to share it.
I think the post would be stronger if it acknowledged this fact.
Am I missing something?
That all said, I'm very much against exploding offers. The person offering the deal may have a reason to do so but you should resist the urge to rush to a decision.
F|R: I read that when you call Y Combinator winners, the founders have only five minutes to accept. ("If people turn us down," he says, "as far as we're concerned they've failed an IQ test.") Have startups turned you down? Are there any that have turned Y Combinator down and still gone on to succeed with a liquidity event?
Graham: You're confusing two separate things. The reason people are supposed to decide quickly whether or not to accept is that they already know everything except the percent we'll ask for. They've already seen the deal terms, and they already know as much as they're going to know about YC before actually working with us. So they should already know when we call what percentage they'd be ok with. Since all they have to do is subtract one integer from another, five minutes should be enough.
The "IQ test" quote refers not to how fast they have to decide, but the amount of equity we usually ask for. In the median case it's 6%. If we take 6%, we have to improve a startup's outcome by 6.4% for them to end up net ahead. That's a ridiculously low bar. So the IQ test is whether they grasp that.
There was one startup that turned us down because they received an acquisition offer during the weekend when we did interviews. It was a pretty good offer. I'd have taken it in their position, and they did. But other than that I don't know of anyone who turned us down and went on to succeed. There have only been about three others who turned us down.
If another is shooting for 10 and gets 7, that's a 30% drop which is probably enough to mess with the economics of the accelerator. Similarly, if they make 12 offers planning for a certain acceptance rate and end up with all 12, they're at 120% capacity, which also might be enough to mess with the economics.
I still think exploding offers suck, but YC is in a much stronger position to be relaxed about them than others.
If you don't want me to think about something, I figure you know I would probably decide against your offer (if I did think about it).
As others have noted, there may be compelling reasons to require an offer be accepted on a short timeline or not at all. In fact, as raised elsewhere in this thread, YC itself used to require acceptance the same day the offer was made.
From an entrepreneur's perspective, given two offers at equivalent valuations and terms it's rational to take the offer at the more established accelerator (e.g. YC) over a less well known one. It's also less important for large accelerators to allocate each open position in each cohort, and thus easier for larger accelerators (e.g. YC) to tolerate losing a few deals last minute.
Again, I agree with the points made in the post, but it's important to note that making longer term offers the norm plays in YC's favor.
"Exploding offers suck. Founders should be able to choose the investor they want to work with, not have to make a decision based on time pressure."
and investors should be able to choose the founders they want to work with. And accelerators are the one's who make it all about the calendar. So they inject the notion of time and deadlines (YCSpring12 etc)
"where an accelerator tries to force a company to make a decision about a funding offer before the company has a chance to finish talking to other accelerators."
The risk here is that sounds like sour grapes.
"after we make you an offer, we’ll give you until the beginning of our program to decide (though most companies accept quickly, because you can’t start having office hours with us and participating in other ways until you accept). We ask companies to be transparent with us about needing more time--we won't rescind our offer. It’s usually about 45 days from interview to the start of the batch."
- We use "soft" deadlines. You don't get access to important resources until you say yes. And yes look we have 45 days from interview to the start of the batch (there's that pesky calendar coming into play)
"We encourage all other accelerators to join us on this. It should be an easy yes. Exploding offers are the wrong thing for founders, and an accelerator that does the wrong thing for founders will not last long."
- We're the pre-eminent accelerator and other accelerators should play by the same rules as that way we'll stay the pre-eminent accelerator!
"And founders should think very hard about joining an accelerator that puts forth a short-fuse offer."
Once again makes me feel like they're losing out to this tactic and it's hurting. And a bit of FUD?
Are you creating startups that have to go out and compete in a very competitive world? Seems like insulating them from making important business decisions is a little counter intuitive.
Again, I'm sure Sam's motives are pure. This is a little tin can ear to me and whiny.
1 - If you're good enough to be accepted by one incubator, you have an incubator-worthy idea and team. If they go away, another will arrive.
2 - The person forcing your hand is trying to use their temporary leverage over you until you have leverage over them. It sets the tone of the relationship on leverage.
3 - That said, people with lower acceptance rates (whether it's accelerators, colleges, etc) have to play yield games. Harvard yields ~80% of admits so they can wait their time because they are confident of admits, and it won't impact their capacity. Amherst accepts ~40%, so they have to play the waiting-list game. The 2nd tier accelerators have to play waiting list games, and that's what drives this behavior. 48 hours is unreasonable, but a few weeks isn't. (Or having a formalized waiting list too)
There's a simple way of looking at this type of behavior: If someone is willing to go negative on you at the beginning (evidenced by 'denying' you an investment because you didn't take it when they wanted you to take it) then you should assume they will be willing to go negative on something else of a similar or greater magnitude at a later date.
It's also common practice for companies to extend exploding offers to new hires. Replace "accelerators" with "companies" and "founders" with "hires" and you get a very similar argument for not forcing people to take a job until they've completed their own decisionmaking process (this ultimately benefits the company as well, in my opinion).
I wonder, don't you think the shot clock offer is real even though they've been talking longer than we've seen?
This is very much unlike a college or a vocational class, where all participants are in more or less same stage.
First, the desk space argument is very real. Y Combinator takes 60+ companies and has no real space constraints since they do not offer office space. Other accelerators take far fewer companies and do have office space, so they need to know ahead of time 1) that their batch will be full and 2) that each company has passed their own due diligence process.
Also, as with term sheets, founders can take their offer from one accelerator and shop it to others. It's happened before (with people I know), who take an offer from one accelerator and use it to trigger FOMO from the other.
Couldn't an accelerator just position it's start date before Y Combinator's decision date, and therefore not need an exploding offer but have the same effect?
Exploding offers should be reasonable, and I'm not against being fair to founders. But doesn't democratizing this essentially involve accelerators colluding to have the same offer/acceptance date?
Are offers that "explode" only a few days in duration?
I think exploding in this sense is more "this offer comes off the table at midnight" kind of stuff.
We still have that house, 12 years later. It's finally worth what we paid for it again. Sigh.
Steer clear of them.
"Senator? You can have my answer now, if you like."
Almost every offer of every kind 'explodes' at some point. It's the duration until the explosion that varies. I'm sure YC will make you reapply for future consideration, just as companies can not be expected to honor your employment offer if you defer for a year.
No one wants to be forced into a decision at gunpoint, which is essentially what a short notice exploding offer becomes. Part of this is also dependent upon the length of the interview process and how much detail is given. If you interview with a company 10 times over a 6 week period, I don't think a short window for acceptance is overly limiting for most candidates.
We often see candidates trying to expedite the offer process in order to receive offers around the same time. Candidates are at their most advantageous position when they hold multiple active job offers, and they have the opportunity to leverage them off each other (I'm not suggesting this tactic). Yet when companies try to expedite the acceptance process, suddenly we feel that there is something dubious at play. Candidates want companies to make quick (and positive) hiring decisions, yet want to take their time to maximize their ability to shop for offers.
More senior talent is less of a commodity than an entry-level candidate, so you might expect more junior level candidates will see exploding offers more often than senior candidates. Senior talent can also leverage their experience a bit more in order to get windows increased if necessary.
I don't think they should be offended as much as they should be curious as to why the company employs such tactics (assuming again that the window is short).
As a candidate, what would be the best tactics to achieve that objective? Say I have 6-8 candidate employers, from mature startup to enterprise in size, and I'm moderately senior. My approach would be to do the phone screens with them all, and narrow it down to about 4 companies to interview with in person, then do that all in a single week, planning on accepting somewhere at the end of the next week.
Once in the interview process, you can try to expedite some interview processes while slowing down others. So you might ask one company to push an interview up and another to push an interview back. Once an offer is about to be presented, asking questions can help delay a bit as well - you could ask all your questions at once in an email if you want a speedy reply, and you could ask questions in a live meeting or call (that requires scheduling) if you want to buy yourself a few days.
If anything, they should be less offended. Companies are often simultaneously hiring multiple junior developers, so it's less necessary to make purely sequential offers.
Technical leads, on the other hand, are typically hired for a specific need. Given their cost, companies rarely are hiring multiple leads simultaneously. Hence, parallelism of offers is impossible. Plus, since all senior devs are in high demand, employers want to make offers to as many as possible—before someone else snaps it up.
Hence, exploding offers are a completely justifiable hiring tool.
In an early-stage company, even two days is a lot for a high-level executive hire. At the point that an offer is made, the interview process should have been so thorough that it can be accepted within hours.
I can understand why a recruiter might take the company's side.
I would encourage any client that a policy of having all offers explode in 2 days would be bad from a PR perspective and probably result in losing good talent.
If it happened once, and the company had a strong business justification, I personally would not think that this singular action would reflect the company's overall business tactics. Again, it would have to be a good reason - perhaps one that even protects another candidate or current company employee.
If you have no other options then likely you already made a series of mistakes. Exceptions exist but don't happen often enough to go and make a series of qualifications here, adding pressure is similar to being blackmailed, the only reasonable course is to refuse to play.
Exploding offers are unfortunate and a significant negative data point about the behavior of the organization but they are not the only data point. The above answer will defuse the threat and give you the upper hand in the negotiation so you can make the right decision for your team, whether it's 'yes' or 'no'. This is helpful for exploding offers in any circumstance - jobs, M&A, etc.
As a side note, while short-horizon offers are terrible, it is reasonable to have some expiration date. Techstars Seattle, for example, has 10 slots and while they might be able to add an extra one or two, logistics don't allow for the kind of flexibility that YC has[1]. I believe there's a good way for an accelerator to handle this ethically:
1) Tell applicants when the decision date is when they apply (so they can plan accordingly) rather than surprising it on them as a negotiating tactic
2) Provide all relevant information when they apply, so they can consider the possibilities in advance, versus (for example) springing restrictions, valuations, or fees on them when they get the offer
3) Allowing enough time between the acceptance and the notification for the team to make a good decision - a week seems reasonable.
YC's behavior is exemplary here; their model and position in the industry lets them be super-flexible. Other programs may not have the ability to be quite as flexible but that doesn't mean they're unethical if they're thoughtful about their implementation.
[1] My understanding as a mentor for the program - I don't have inside knowledge
Its not difficult to balance these factors. Just ask, "how long do you need to consider this deal?" "Two weeks? Four weeks?" "If you need more time, just give me a call."
isn't that 'not the best thing for accelerators' in the long run as well? if you're using a strategy which is clearly not win-win, you're going to lose _good_ deals to people who aren't doing that - so you'll get stuck with a portfolio of companies run by founders not smart enough to see this for what it is. enjoy, sucker!
Why should accelerators should do what is best for someone else, not themselves?
The world is full of expiring offers of all kinds; they are everywhere. Rarely does any kind of offer stand for as long as we would like. Expiry of offers is the norm.
Also, Golden Rule: he who has the gold, sets the rules.