Why I turned down my Y Combinator interview • Hacker News Board

Re: Why I turned down my Y Combinator interview

#91

Post by CalChris » Thu, Mar 21, 2019, 7:28 PM UTC

rsweeney21 wrote: post #88

CalChris wrote: post #64

Earlier quoted context omitted.

Approval of the Preferred Majority required to ... including a Company Sale. However, that is a Series A term sheet. When you turned down YC, wasn't that at the seed stage? You would have still retained control until you converted later. But are you saying that even only accepting a SAFE puts you on an inevitable path?

If you raise seed funding, the expectation is that you will continue to raise money to fuel your growth. Even if your SAFE or convertible note doesn't have those terms in it, your first priced round will and all previous investors will inherit those rights through their preferred stock.

Expectation is one thing and Term is another. Is it possible to raise seed funds with the expectation of early profitability? This is very much like your approach but still with a seed investment just without Series A handcuff terms.

Google did something like this. They wanted to avoid VC as much as possible and when they did get an A round it was on their terms.

Re: Why I turned down my Y Combinator interview

#92

Post by eerburu » Thu, Mar 21, 2019, 8:19 PM UTC

But how are the chances of an exit with a company of that scale?

How big is the market for "niche" companies being acquired for USD 50m, if it was bootstrapped? It seems that there are a lot of acquisitions or acquihires in that range if you are VC funded and are working on innovative tech that makes sense for bigger companies to acquire. But if you are focusing on revenue/profits, and lets say you get to $6-$10m usd in revenue, who are gonna buy you? And an IPO doesn't seem factible since you are not big enough. And if you are outside USA its even a harder sell. I guess it could happen that a lot of transactions of "niche" companies exists in that price range but they are not publicized by journalism because they lack relevance, and that would give you a biased perspective of lower sales of companies, but I wouldn't be that sure of that hypothesis. So, what do you think about the odds of exits strategies for a $30-50m bootstrapped startup?

Re: Why I turned down my Y Combinator interview

#93

Post by rsweeney21 » Thu, Mar 21, 2019, 8:35 PM UTC

eerburu wrote: post #92

But how are the chances of an exit with a company of that scale? How big is the market for "niche" companies being acquired for USD 50m, if it was bootstrapped? It seems that there are a lot of acquisitions or acquihires in that range if you are VC funded and are working on innovative tech that makes sense for bigger companies to acquire. But if you are focusing on revenue/profits, and lets say you get to $6-$10m usd…

If you are profitable, there are a truckload of people that will want to buy you. Private equity, other companies, holding companies.

Look at it this way - say I'm super wealthy and I have $100M sitting in my bank account. It earns a tiny interest rate at the bank. Where can I put it to work for me so that it's growing? One option is to buy a company for $100M. For $100M I can buy a company that produces $10M/year in profit (roughly speaking). Now I'm earning a 10% annual return on my investment. I might even be able to grow the company, so when I sell it 5 years later, I sell it for $200M. So I've taken my $100M and turned it in to $250M.

That's the great thing about profitable companies. There is almost always a buyer.

Re: Why I turned down my Y Combinator interview

#94

Post by icedchai » Thu, Mar 21, 2019, 8:46 PM UTC

eosophos wrote: post #86

jasode wrote: post #24

>Venture backed companies only have about a 1% chance of reaching a $1B valuation. [...] I’m sorry, but you aren’t the 1. You are the 99 and your startup isn’t going to become a unicorn. [...] Why play a game that has such terrible odds of winning? Because people have always liked to pursue things that interest them regardless of the odds . (cue Han Solo's "Don't tell me the odds!" ) Why do aspiring writers work on n…

Why won't banks provide loans?

Most early stage companies have no assets, so there's too much risk. Banks want real assets as collateral (inventory, buildings, etc.)

Re: Why I turned down my Y Combinator interview

#95

Post by idlewords » Thu, Mar 21, 2019, 9:50 PM UTC

tptacek wrote: post #76

idlewords wrote: post #69

Earlier quoted context omitted.

Funny what happens when you have stupid amounts of institutional money pour into a sector for 15 years.

I think there was less money in the sector for the first 10 years or so of YC than there was during the dot-com era, so I don't know that it's true that the opening of funding markets to first-time founders is a consequence of too much VC funding.

YC exists because a dude made it big in the initial dot-com bubble. With every subsequent wave of windfalls, you get a larger pool of founders who struck gold and now want to play investor, and over a sustained length of time with no bust, that leads to a pretty founder-friendly ecosystem for funding. But the whole arrangement relies on there being ample institutional money available and no downturns sips from juicebro

Re: Why I turned down my Y Combinator interview

#96

Post by tptacek » Thu, Mar 21, 2019, 10:27 PM UTC

idlewords wrote: post #95

tptacek wrote: post #76

Earlier quoted context omitted.

I think there was less money in the sector for the first 10 years or so of YC than there was during the dot-com era, so I don't know that it's true that the opening of funding markets to first-time founders is a consequence of too much VC funding.

YC exists because a dude made it big in the initial dot-com bubble. With every subsequent wave of windfalls, you get a larger pool of founders who struck gold and now want to play investor, and over a sustained length of time with no bust, that leads to a pretty founder-friendly ecosystem for funding. But the whole arrangement relies on there being ample institutional money available and no downturns sips from juiceb…

I don't disagree with that diagnosis but think that's more a question of how money within the VC sector is allocated, not how much money is being allocated to VC in the first place. Like you, I see a lot of money going to people wearing cargo shorts and brightly colored sneakers and then getting plowed back into the startup casino. I'm just saying, that money used to go to country club investment bankers; it didn't --- at least until recently --- get diverted from the broader economy.

Re: Why I turned down my Y Combinator interview

#97

Post by [deleted] » Thu, Mar 21, 2019, 11:17 PM UTC

chubot wrote: post #50

Joel Spolsky wrote about this 16 years ago: https://www.joelonsoftware.com/2003/06/03/fixing-venture-cap... The fundamental reason is that VCs do not have goals that are aligned with the goals of the company founders. This creates a built-in source of stress in the relationship. Specifically, founders would prefer reasonable success with high probability, while VCs are looking for fantastic hit-it-out-of-the-ballpark…

[deleted]

Re: Why I turned down my Y Combinator interview

#98

Post by muzani » Thu, Mar 21, 2019, 11:31 PM UTC

tin7in wrote: post #56

"Venture capital gets so much attention in the media that it’s easy to forget that it’s not actually necessary." I'm running a small bootstrapped company and am helping a friend's project with fundraising. Some of my friends are also VCs in London, so I see both sides of the table. Very often I am part of discussions about fundraising with founders who barely have any traction with their products but are obsessed wit…

indiehackers.com is all about product building and bootstrapping

Re: Why I turned down my Y Combinator interview

#99

Post by muzani » Thu, Mar 21, 2019, 11:34 PM UTC

m_ke wrote: post #68

edouard-harris wrote: post #61

Earlier quoted context omitted.

Among many of YC's advantages, they do signal boost your company in a lot of important ways. But if you don't make something people want, no accelerator in the world will save your company from dying.

My statement was conditioned on getting into YC, which is really hard to do if your product sucks or has no traction. Even with a weak product you'll be in a much better position because you'll able to meet with a lot of other founders/potential customers and get valuable feedback.

Their filter process is based more on the founders. The product and idea is just part of evaluating the founders. It often happens that someone goes in with bad ideas and product. Some pivot their way out. Some can't.

Re: Why I turned down my Y Combinator interview

#100

Post by muzani » Thu, Mar 21, 2019, 11:43 PM UTC

VCs are useful in the longer scale of things. Sure you can build a $100M company or so bootstrapped, but by that time your competitor will be at $1B.

Whether or not you want this depends on the product you're doing. Several companies tried to make an operating system for touchphones. Out of them only Android was acquired and successful in the long run. Plenty of digital game distribution platforms tried to grow, but were choked out of the market by Steam.

The author is working on contracting specializing in American companies. The market for that is big enough. Or if you were, say, a community based baby stuff e-commerce, which can compete with Amazon, that works too.

The other thing to note is that YC partners say they go big to have the most impact on society.