Pitching your early-stage startup
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Pitching your early-stage startup
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Re: Pitching your early-stage startup
#2Since the guide is partly focused on the YC application process, I have one thought (potentially misconception) that I would like others to weigh in on. For context : I'm working on a Disqus alternative with a focus on privacy, so no ads, no tracking scripts ( https://www.indiehackers.com/@ploggingdev/building-my-first-... ). I started working on it a little over two weeks ago and am a few days away from launching. So by the application deadline, I would have only onboarded beta users. Being a single founder who has been working on a product for less than 3 weeks, even if I follow all the advice and craft a well written YC application, I just don't see why YC would consider funding me instead of the numerous other applicants with serious revenue and something that might resemble product-market fit. In other words, I think when talking about crafting a YC application, it's important to discuss that there exists a certain baseline above which such guides really make sense. Sure, I could apply the actionable advice to my application, but will it move the needle at all when I'm a single founder with an MVP? On the other hand the only impressive part about the application might be that I built it in under 3 weeks and onboarded beta users. Thoughts?
Re: Pitching your early-stage startup
#3Also worth checking out Patrick's tweet storm following his tweet about this new resource -> https://twitter.com/patio11/status/909800194509758464
Re: Pitching your early-stage startup
#4> Do not cite gross merchandise volume (GMV) as revenue; if you facilitate a transaction between two parties and collect a fee then the total transaction is GMV but only your cut is revenue.
I thought revenue was a "protected" term, like how it's described in the books. In that case isn't GMV the same as revenue? Since that's the money you actually invoice. And your cut is "net revenue", profit or something instead.
Re: Pitching your early-stage startup
#5Since the guide is partly focused on the YC application process, I have one thought (potentially misconception) that I would like others to weigh in on. For context : I'm working on a Disqus alternative with a focus on privacy, so no ads, no tracking scripts ( https://www.indiehackers.com/@ploggingdev/building-my-first-... ). I started working on it a little over two weeks ago and am a few days away from launching. S…
I wouldn't jump to say that your story is exactly limiting in terms of why you should or should not apply. If you had launched your product with beta customers, but they were in fact all paying, I'd say that time frame actually makes you even more interesting, not less. Much of the "magic" that happens in technology occurs over remarkably short periods of time when you look at "when the work happens". But, in reality, I'm assuming you've been noodling on the Disqus alternative for a long while, and you just felt comfortable now putting down pen to paper.
The bigger concern I would have with applying to YC in your case is the existential question, "Should I take VC money or not?" What I don't see above is an understanding of the why behind financing. How will financing accelerate your business? If I give you $1M, what will you do that makes it worth $10M in X timeframe? While not necessarily a deal breaker for a lot of seed funds, I think anytime one is looking at taking on multiple hundreds of thousands of dollars of investment, they should have some basic answer to that question.
Re: Pitching your early-stage startup
#6> Do not cite gross merchandise volume (GMV) as revenue; if you facilitate a transaction between two parties and collect a fee then the total transaction is GMV but only your cut is revenue. I thought revenue was a "protected" term, like how it's described in the books. In that case isn't GMV the same as revenue? Since that's the money you actually invoice. And your cut is "net revenue", profit or something instead.
I think the difference in these cases is that the business never owned or controlled the merchandise being sold. For example I would expect a real estate agent to report their commission as revenue rather than the price of the house sold. However, the price of the houses sold may make good marketing material.
Re: Pitching your early-stage startup
#7> Do not cite gross merchandise volume (GMV) as revenue; if you facilitate a transaction between two parties and collect a fee then the total transaction is GMV but only your cut is revenue. I thought revenue was a "protected" term, like how it's described in the books. In that case isn't GMV the same as revenue? Since that's the money you actually invoice. And your cut is "net revenue", profit or something instead.
Even though I agree with you in financial terms. GMV shown as revenue doesn't make much of a sense to picture how much a company would do in future which would be something of VC's interest. Of course, A few years back every Uber of X and ecommerce company managed to raise $$$$ showing GMV and maybe it's time to bring some robustness and understand the importance of unit economics. So considering the 'cut' as revenue the inflated number that exaggerates the picture is eliminated (even though both these numbers are directly proportional)
Re: Pitching your early-stage startup
#8> Do not cite gross merchandise volume (GMV) as revenue; if you facilitate a transaction between two parties and collect a fee then the total transaction is GMV but only your cut is revenue. I thought revenue was a "protected" term, like how it's described in the books. In that case isn't GMV the same as revenue? Since that's the money you actually invoice. And your cut is "net revenue", profit or something instead.
Uber deals with this by calling their topline "Gross Bookings" (which includes the driver portion of each ride) and then starting a new P&L below that with Revenue as the new topline.
The GAAP guidance instructs companies to make the determination whether they're the principal or the agent with the following criteria:
1. You are the primary obligor in the sales transaction. This means, are you responsible for providing the product or service, or is the supplier? If you’re doing the work or shipping the product, you can probably record at gross.
2. You have general inventory risk. If you take title to the inventory before you sell it to the customer, and you take title to any returns from customers, you can probably record revenue at gross.
3. You can select suppliers. This one is important, since it implies that there isn’t some key supplier operating in the background who’s actually running the transaction.
4. You have credit risk. This means that if the customer does not pay, then you absorb the loss, and not a supplier. However, if you’re only at risk for losing a commission if the customer doesn’t pay, then you’re probably looking at recording the revenue at net.
5. If you get to set the price, then you probably have control over the entire transaction, and you can record the revenue at gross.
6. The amount you earn is fixed. This indicates a commission structure, which is sometimes set up as a fixed payment per customer transaction. If you earn a percentage of what the customer pays, this is also an indicator that you report revenue at net. In either case, you’re really just an agent for someone else.
7. The other two guidelines for reporting at net are just the reverse side of some earlier guidelines. If a supplier has credit risk, or if a supplier is responsible for providing products or services to the customer, then you’re probably looking at reporting revenue at net.
There's a pretty comprehensive document from the 'Emerging Issues Task Force' of the FASB here:
http://www.fasb.org/jsp/FASB/Document_C/DocumentPage?cid=121...
Re: Pitching your early-stage startup
#9Since the guide is partly focused on the YC application process, I have one thought (potentially misconception) that I would like others to weigh in on. For context : I'm working on a Disqus alternative with a focus on privacy, so no ads, no tracking scripts ( https://www.indiehackers.com/@ploggingdev/building-my-first-... ). I started working on it a little over two weeks ago and am a few days away from launching. S…
I wouldn't jump to say that your story is exactly limiting in terms of why you should or should not apply. If you had launched your product with beta customers, but they were in fact all paying, I'd say that time frame actually makes you even more interesting, not less. Much of the "magic" that happens in technology occurs over remarkably short periods of time when you look at "when the work happens". But, in reality…
> The bigger concern I would have with applying to YC in your case is the existential question, "Should I take VC money or not?" What I don't see above is an understanding of the why behind financing. How will financing accelerate your business?
So it goes back to my earlier point about a baseline for getting accepted which my application would not cut since I don't have hard data to show CAC, LTV and other relevant metrics. It's certainly not set in stone as a small number of very early stage companies do get accepted, but in general products have to be much further along to have a serious chance of acceptance, or at least that's the impression I get.
Re: Pitching your early-stage startup
#10Since the guide is partly focused on the YC application process, I have one thought (potentially misconception) that I would like others to weigh in on. For context : I'm working on a Disqus alternative with a focus on privacy, so no ads, no tracking scripts ( https://www.indiehackers.com/@ploggingdev/building-my-first-... ). I started working on it a little over two weeks ago and am a few days away from launching. S…
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