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Is Y Combinator worth it?

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Re: Is Y Combinator worth it?

#121

Post by robocat »

marcinzm wrote: post #111
robocat wrote: post #110

Earlier quoted context omitted.

> 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). Als…

If you want expected returns then I'd argue that FAANG (or late stage startups) makes a lot more sense than a bootstrapped company. Same guaranteed monetary outcome, they're likely to pay much better and look much better on your resume. Startups offer higher potential return for lower average return than FAANG. Bootstrapped companies, unless you're a founder, offer neither. edit: This is explicitly about employees at…

I strongly agree.

People joining or founding a startup business also tend to extremely overestimate their ability to pick a winner. You have to be smarter or luckier than a VC.

The point of a bootstrapped business is to be making enough money within a short period to know you can pay fair wages. Derisking. If a business isn’t paying wages and doesn’t take VC money, then it shouldn’t be called bootstrapped, it is still a startup (with sweat equity and opportunity costs instead of VC).

Also it has been my experience that successful bootstrapped businesses are usually started by people that have worked in an industry, then founded a new business starting with the best people they had worked with. That is a good strategy. Edit: https://hbr.org/2018/07/research-the-average-age-of-a-succes...

In my experience in Christchurch New Zealand, watching founders and first employees for startups that have taken VC cash, the expected return on equity is very low for them.

I see massive winners’ bias in most thinking and media.

Getting in to YC validates something that an individual cannot easily determine: what are my own chances of winning the startup lottery? If YC picks you, that is a strong signal that you have the right skills. The signal is extremely noisy though (fail after accepted, succeed although rejected). Edit: anecdotally I saw a young founder with what I thought was a good bootstrap opportunity in NZ get accepted into YC where he promptly crashed due to lack of knowledge of the US market and culture.

Re: Is Y Combinator worth it?

#122

Post by s11doingfine »

closeparen wrote: post #40
_adamb wrote: post #12

Earlier quoted context omitted.

My guess is that lots of the no-status ones there are chugging along just fine. No exit, no death. I'm part of Tovala (W16) and in our case, no-status means still in business. I can confirm that's the case for a handful of others too. In our case, YC was super valuable. We've never been more focused than when going through the program. They make available so many resources you're desperate to grow and try things so y…

At some point “chugging along” rounds down to “failure” for employees with equity compensation. Particularly at 10 years when it expires.

I will avoid getting into too much detail. I am in the "old guard" at one of the S11 batch companies who are "chugging along". a few points:

- most people who were around early enough for their grant to begin expiring by now moved on, so the standard termination clause already kicked in.

- some of those who have left did exercise, and understood the risk they took by doing so.

- those who are still here and are approaching that expiration have plenty of leverage to renegotiate.

not all companies in YC are unicorns, and they don't have to be. we are positioned very well, despite taking some time to get there.

Re: Is Y Combinator worth it?

#123

Post by triceratops »

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…

Bootstrapped companies can do profit-sharing though. They don't necessarily have to pay less money.

Re: Is Y Combinator worth it?

#124

Post by josh_carterPDX »

You could ask the same question for virtually ANY accelerator program out there. And at the end of the day the answer is, "it depends."

Every founder and every company is different. If you are a first time founder and your network is limited then these programs open a network you could never penetrate on your own.

For seasoned founders these programs help to connect you with resources as if you had additional team members meaning (if you took advantage of it in the right way) you could easily scale your business quickly.

If you are a founder who is sensitive to your early valuation then an accelerator may not make sense.

Every founder needs to sit down and collect as much input as they can to make the most informative decision to help grow their business.

Re: Is Y Combinator worth it?

#125

Post by drodio »

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,…

Tell me what this means: `I’ve tried a few times to start. Still looking for my pit chief.`

Specifically what’s kept you from starting?

There’s a whole community of people who can help you. Start by starting.

In case it’s helpful; some resources: http://go.drod.io/startups

Re: Is Y Combinator worth it?

#126

Post by drodio »

mathattack wrote: post #34

My inclination is that for most 1st Time founders, the 7% in dilution you give up is immediately gained back with a better valuation in the subsequent round. There are also other benefits to the Halo - recruiting, credibility with customers, peer network, etc. And.... You may learn something.

I’m a 4th time founder (but first through YC) and also found it to be very valuable.

We spent too much time coding behind closed doors in previous startups.

Re: Is Y Combinator worth it?

#127

Post by drodio »

newera2016 wrote: post #84

We built our $100mm startup after getting rejecting in YC interview back in 2014. Even since than I am actively involved in YC. We submitted our new startup's application this fall. Lets hope they hear us this time.

What’s it called? I’ll recommend you, if you previously built a $100MM company. Email me or DM me on Twitter.

Re: Is Y Combinator worth it?

#128

Post by drodio »

amacneil wrote: post #57
dustingetz wrote: post #15

> If your company is really successful, you may find yourself in a position where you need to negotiate some of those pro-rata rights in order to make the round work (i.e., make enough room to accomodate new new investor demand). ... early seed-stage commitment may upset other investors. Other angel/seed/Series A investors can become unhappy when having to live on a cap table alongside YC. What's this about?

YC takes 7%. Lead seed investor wants to take 15-20% to make it worth their while. Lead series A investor wants to take 15-20% to make it worth their while. Other investors and option pools each round increase dilution further. Founder doesn't want to give up 50-60% of company by their series A, so because they gave YC 7% they must either convince the lead investors to take a smaller percentage, or convince YC or see…

Yep.

Re: Is Y Combinator worth it?

#129

Post by drodio »

crsv wrote: post #58

I think if you’re young, don’t have an established family and don’t have any real experience as a founder then YC is something that will be an incredible benefit to you on many levels. Once you’re outside of those demographics, the value falls off dramatically IMO.

I sold my last company https://drodio.com/socialize-was-acquired-by-sharethis-heres... and Armory was my 4th startup. I also probably don’t qualify as “young” having been doing startups since 2000.

I found YC to be extremely valuable for all the reasons I shared.

A side story: After I sold my last company in 2013, I met a guy (who worked at the acquiring company) that had big startup ambitions. We were on a bike ride one day (probably around 2015) and I told him I was going to apply to YC the following year to do a startup. He scoffed, and said the same things as you above — “YC is for young founders w/o experience.” He said he, too, was going to do a startup, but not apply to YC.

Fast forward five years. Armory is growing very fast. My buddy is unemployed after spending $350k of his own money attempting his startup.

Was YC the difference? Impossible to say. But I know my story is true, and I’m thankful for the intense focus YC provided — even for a startup veteran like me, with a successful exit, who didn’t necessarily think he needed it.

Re: Is Y Combinator worth it?

#130

Post by pedalpete »

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…

Can you enlighten as to the assumption that the YC backed startup has a $12m post and non-yc has a $6.5m post?
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