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Is Y Combinator worth it?

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Re: Is Y Combinator worth it?

#101

Post by Zenbit_UX »

doh wrote: post #91
justinclift wrote: post #86

Earlier quoted context omitted.

Ouch. Especially with the one which led you through 9 months of due diligence, then refused to sign. I'm kind of surprised they didn't string you out for a while longer, then offer to buy the entire operation when you were forced to fold. Have seen that done before - on purpose - by a place that knew the value of the operation and figured they could get the whole thing cheaply that way. And did so successfully. :(

You know, I think that was the plan. We were in such a dire financial situation that I believe they were planning to come back with just that. (I say this mostly because these guys were strategics rather than a traditional VC). However my hurt ego got in place and I refused to take any calls and I blocked all their emails. Who knows what would’ve happened if I didn’t.

Hurt ego or not, blocking them fucked up their plans and might have made them at least contemplate doing this to someone else in the future. I'm sure their costs for those 9 months weren't entirely free either.

Re: Is Y Combinator worth it?

#102

Post by vmception »

doh wrote: post #64
langitbiru wrote: post #47

Earlier quoted context omitted.

"abusive investors" -> Tell me more about them.

I believe this was meant as a sarcasm, but in a chance that it wasn't here are some extreme cases (these are all different investors): - they asked me to pay for attendance in their seminar that will teach me how to raise money before they consider investing - I got stood up for a meeting with no word from the person. He followed up two weeks later that they are not interested. 3 years later we met at an event thrown…

Yeah, sounds about right.

We should have more of these stories. I've seen it all. I've worked with co-founders that couldn't tell we were getting the run around when it was plainly obvious to me.

I've worked with other startups in advisory roles seeing the same things from all their leads.

Re: Is Y Combinator worth it?

#103

Post by joncrane »

gabereiser wrote: post #31

Let’s use another analogy here: YC makes F1 race cars, some of the best in the world. Proven time and time again to be fast. You, the driver, need to be able to handle it in order to achieve optimal results. Accelerator X makes race cars too, but a different class - possibly even a different style all together. Again, as the driver, you need to be able to handle it for optimal results. Question is, what, as a driver,…

>Still looking for my pit chief.

Do you mean crew chief? That's what they're called in NASCAR.

I think they are called race engineers in F1.

Re: Is Y Combinator worth it?

#104

Post by brainless »

marcinzm wrote: post #52
msoad wrote: post #49

Earlier quoted context omitted.

As an engineer I would love to work for a company that makes money and pays me from that money.

Curious, why does it matter if your paycheck comes from VC money or revenue money? In the end the same amount comes to your bank account.

A VC is taking a hundred bets and expects just one to win, rest all die.

A Founder is playing 1, only one bet. I would rather go with the Founder that can build a strong business with revenue.

Re: Is Y Combinator worth it?

#106

Post by kirillzubovsky »

aerosmile wrote: post #79
samblr wrote: post #68

Let's compare seed valuations & dilutions of : a YC company vs Non YC Company YC : takes 7% for 125K and then let's say you raise $1m at $12m post money. Total diluted 15%. Non YC : If you want to raise $1m for same 15% dilution - your post money would be $6.5m. So these are pure numbers[1] With YC, I guess Founders' gain a network, bay area connections etc [1] : https://docs.google.com/spreadsheets/d/1kxOBF0CPhcktmg…

Highly underrated comment. A lot of people are approaching this topic from a philosophical point of view, which tells me that they haven't gone through YC's Demo Day and don't understand how it's different from other incubators' Demo Days. It's very different - there is an entire cottage industry of YC-only or YC-preferred funds built around this event, and if you play your cards correctly, those funds will be fighti…

Although definitely very helpful to YC folks (YCS12 here), I do find it kind of funny that YC-preferred funds have emerged, since they introduce the same biases YC was meant to remove.

It's a natural process, and there is no such thing as not being biased (as it is a bias in itself), but the signaling of being part of YC is definitely huge, especially first time, and for outside of the Bay.

Investors are people too.

Re: Is Y Combinator worth it?

#107

Post by doh »

Zenbit_UX wrote: post #101
doh wrote: post #91

Earlier quoted context omitted.

You know, I think that was the plan. We were in such a dire financial situation that I believe they were planning to come back with just that. (I say this mostly because these guys were strategics rather than a traditional VC). However my hurt ego got in place and I refused to take any calls and I blocked all their emails. Who knows what would’ve happened if I didn’t.

Hurt ego or not, blocking them fucked up their plans and might have made them at least contemplate doing this to someone else in the future. I'm sure their costs for those 9 months weren't entirely free either.

Unfortunately this is a multibillion dollar company. I'm pretty sure they didn't even flinch.

The only negative thing to them I know of is that one of the top US law firms dropped them because of this. They felt that this was very disgraceful behavior and sent us both a note that they need to protect their reputation with founders and they will no more work with them.

Re: Is Y Combinator worth it?

#108

Post by vmception »

marcinzm wrote: post #52
msoad wrote: post #49

Earlier quoted context omitted.

As an engineer I would love to work for a company that makes money and pays me from that money.

Curious, why does it matter if your paycheck comes from VC money or revenue money? In the end the same amount comes to your bank account.

In my early 20s I mistakenly feel into the trap of thinking certain kinds of rounds were validation or better.

Like, for some reason, I criticized and looked down on a company for having a convertible debt round instead of a "real Series" where they sold equity.

Or I criticized a company for not having X, Y, Z investors closing rounds.

The reality is that I found myself in situations, as an employee, where I had to actually explain myself to founders about my thoughts on why revenues were important. That particular startup failed to sell more equity in the necessary time period and closed up shop.

In more broader circumstances, the dilution and liquidity preferences are more harmful to founders and employees.

And as a founder, I specifically do non-dilutive things, such as doling out %'s of specific revenue streams or % of products created. Obtaining the same support and sometimes capital or things booked as unearned income, while keeping much more control or total control and upside.

Re: Is Y Combinator worth it?

#109

Post by doh »

vmception wrote: post #102
doh wrote: post #64

Earlier quoted context omitted.

I believe this was meant as a sarcasm, but in a chance that it wasn't here are some extreme cases (these are all different investors): - they asked me to pay for attendance in their seminar that will teach me how to raise money before they consider investing - I got stood up for a meeting with no word from the person. He followed up two weeks later that they are not interested. 3 years later we met at an event thrown…

Yeah, sounds about right. We should have more of these stories. I've seen it all. I've worked with co-founders that couldn't tell we were getting the run around when it was plainly obvious to me. I've worked with other startups in advisory roles seeing the same things from all their leads.

I hear you. I seen worse unfortunately. Especially when founders are not white men (like myself). The way that some of my female founders friends were treated was orders of magnitude worse (if that's even possible). One friend wrote about her experience [0].

[0] https://medium.com/sparking-conversation/how-raising-a-2-m-s...

Re: Is Y Combinator worth it?

#110

Post by robocat »

marcinzm wrote: post #51
mediaman wrote: post #20

Earlier quoted context omitted.

Would you disqualify companies that had bootstrapped successfully, were profitable, and did not take any outside money? Not a judging question - I understand the value of a good investor's due diligence and backing in improving the odds of sane leadership. But it's interesting to think how that can impact a successful, self-funded copmany's access to talent.

As someone else said, as an employee my goals align better with investors than with bootstrap founders. I want good salary and equity that will grow rapidly in value and be liquid in reasonable time. I also want some reasonable measure that my equity is in fact growing in value. Even if the company doesn't go liquid in reasonable time with outside investors the chance of them being able to buy my stake at fair market…

> as an employee my goals align better with investors than with bootstrap founders.

If you are a gambler, VC equity is best. If you want to maximise your expected returns, equity in a bootstrapped company is better IMHO.

VCs have their risks spread across multiple investments, where you will only be able to work for a limited number of companies before burnout or ageism hits you (if you don’t win a D10 die roll). Also VCs get liquidation preferences. Finally, when younger we undervalue money in our wallet and the value of our own time: $200k at 20 (if invested) is often worth a lot more to you than $x at middle age; and as you get older you tend to start valuing your vacation time very highly!

Work through the numbers for your time investment (time is your pot because we all only have x years) using the Kelly Criterion[1] and you will be surprised to see what drops out as the optimal strategy. I would be interested to see a Monte Carlo simulation of outcomes where we can choose different strategies.

Edit: many people seem to be chasing money and joining the cult of startup to achieve high status. If you care about status, there are far more optimal paths than chasing a big equity payout. One thing I notice as I get older is that money is a very poor proxy for status, and that you tend to find your peer group earns about the same regardless of earnings, so chasing $ for status is loser’s race. Disclaimer: I just want to not work if I don’t have to and to be able to spend my time on my own goals. That requires enough $ for a nice house, some fun, and a comfortable retirement - and it appears I have got that via being a cofounder of a bootstrapped company.

Edit 2: The IRS would have the stats on actual returns for startup employees over the whole sample population. That would be fascinating to know!

[1] https://en.wikipedia.org/wiki/Kelly_criterion

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