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Fellowship V2
- aerovistae 11y agoAwesome!
- aerovistae 11y agoYeahhhh downvote me. do it.
- dang 11y agoPlease don't bait other users by inviting them to downvote you or announce that you expect to get downvoted. https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html
- TheBiv 11y agoGreat format! $20k for 1.5% if the company ever IPO's or becomes more valuable than $100MM. I wonder what YC's normal stake is in a company after a company is valued at more than $100MM.
- philip1209 11y agoI wonder whether the converted equity includes pro rata rights, too
- TheBiv 11y agoCompletely agree...definitely interesting!
- mattkrisiloff 11y agoIt does not include pro rata rights. The convertible security is a version 1 though, so it's possible we'll iterate on it for future batches.
- roymurdock 11y ago> has a funding event or acquisition that values the company at $100M or higher. Would be interested to see how this is written into the contract - implied valuation of $100m through funding could be squirrely.
- BinaryIdiot 11y agoI was fully expecting the fellowship to eventually go down the path of equity but these terms sound far better than I would have expected. Nice job. I'm curious how the option to choose what you're applying for will work out. What if someone selects just YC Core and, while reviewing, a reviewer thinks they would be a really, really good fit for fellowship instead? Do those simply get tossed out? Seems like if you're reviewing all of them anyway you could ask the applicate for their preference (so a slight rewording) and still talk to them if they're willing to do a fellowship instead of core, etc. Just a thought.
- mattkrisiloff 11y agoLikely we would still ask the team if they're interested in doing Fellowship -- it would definitely be better if they indicated it upfront though; there's no cost to applying to both.
- BinaryIdiot 11y ago> Likely we would still ask the team if they're interested in doing Fellowship Good to know. I'd hate for someone to miss out because they hit the wrong option in the drop down (though I certainly agree you might as well apply to both).
- unexpand 11y agoGreat news. What are your minimum expectations for one to qualify ? update this answers my question: https://fellowship.ycombinator.com/faq/#who https://fellowship.ycombinator.com/faq/#who
- robotnoises 11y agoThis is a good high-level overview of the sort of people/things they are looking for: http://www.ycombinator.com/apply/#whowefund http://www.ycombinator.com/apply/#whowefund
- unexpand 11y agoThanks. That was what I guessed. When it comes to funding just ideas, it tends to be only about the team.
- chm 11y agoWhen is the third batch starting? I'm about to finish school and considering giving it a shot.
- kevin 11y agoIt's not definitively decided, but the third batch will probably start in July.
- pcmaffey 11y agoSo if applying to both, the expectation is you'd do one or the either, as the programs are concurrent...right? So then applying to both essentially means: hope for YC CORE, default to Fellowship?
- chm 11y agoPersonally I'm not interested in YC Core. The fellowship is perfect, its deal much better suited to my goals.
- Kinnard 11y agoThere are two different application dates listed here: https://apply.ycombinator.com/ https://apply.ycombinator.com/ (Mar 24) and here: http://www.ycombinator.com/apply/ http://www.ycombinator.com/apply/ (Mar 27) Please just pick the latter. Also, if it starts in July, why not make apps due in April?
- giarc 11y agoWill the same full time requirement apply for V3?
- hydandata 11y agoThis is amazing news! I was really worried about how the first run was going, because this format is just so great! It just makes sense. Kudos to all the teams for their performance, I am sure that had something to do with YC considering to do this again. I am super excited, and I really hope to apply this time.
- startupfounder 11y agoThis is going back to YC's roots and I love it! If you are scrappy, $20k can get you extremely far at a cost that is "basically" zero (1.5% stake that only converts upon a liquidity event of $100M+ or IPO). Remember, PG "...started Viaweb with $10k..."[0] in 1995 and "Julian got 10% of Viaweb" for that investment. Viaweb sold to Yahoo! for $49M[1]. The whole reason why YC exists is because PG got a $10k investment! Back in 2005, pre YC, PG started the Summer Founders Program and invested $20k in each group. "Another of our hypotheses was that you can start a startup on less money than most people think. Other investors were surprised to hear the most we gave any group was $20,000. But we knew it was possible to start on that little because we started Viaweb on $10,000."[2] The first version of Viaweb.[3] I keep finding examples of the seeds of YC and they get me really excited. You can see a photo from 2005 from the SFP and YC's roots here[4] [0] http://old.ycombinator.com/start.html http://old.ycombinator.com/start.html [1] https://en.wikipedia.org/wiki/Viaweb https://en.wikipedia.org/wiki/Viaweb [2] http://paulgraham.com/sfp.html http://paulgraham.com/sfp.html [3] http://web.archive.org/web/19961120231442/http://www.viaweb.com/ http://web.archive.org/web/19961120231442/http://www.viaweb.... [4] http://ep.yimg.com/ty/cdn/paulgraham/sfptable.jpg http://ep.yimg.com/ty/cdn/paulgraham/sfptable.jpg
- hakeeem 11y agoLove it!
- waterlesscloud 11y agoPlus $20k with remote allowed can go waaaaaaay further than $20k and must be in SV.
- wuschel 11y agoSounds great! Thumbs up for leading the way, YC.
- nightski 11y agoOr it's one-two months of consulting income post-tax for a single developer. Bootstrapping is incredibly easy nowadays.
- bro_dong_app 11y agoIs Michael O Church invited?
- pyb 11y agoGreat ! Have you got a target number of startups in this 3rd batch ?
- bjornsing 11y ago> Instead of taking our equity up front, we’re going to be issuing a convertible security that only converts into shares when the company 1) goes IPO or 2) has a funding event or acquisition that values the company at $100M or higher. [...] it’s both founder friendly [...] Is it (founder friendly)? It places YC (even more) firmly on the VC side of the classic VC/founder conflict: VCs want founders to go big or go home, or as pg puts it "VCs want to blow you up, in one sense of the phrase or the other." [1] Not that I don't think YC can handle it, but still. 1. http://paulgraham.com/aord.html http://paulgraham.com/aord.html
- jrowley 11y agoI wonder if YC will see accept any companies/ideas that have a low probability of of reaching IPO / acquisition at >= $100M. Plenty of good companies aren't going to reach this scale but could certainly use their expertise and cash.
- kevin 11y agoThis is not something we actively try to predict, even with the Core program. Airbnb, for instance, would have been missed if we thought like this. As ever, we primarily optimize for funding great founders.
- j45 11y agoReally like this. If a great founder switches ideas while in their fellowship based on advice and market conversations, it seems like there would be no issue with doing so.
- TearsInTheRain 11y agoThey are giving the companies 20k for 1.5% stake so they would make 1.5 mil when their investment pays off. 1.5 mill /20k = 1.3%. They only need 1.3% of the companies they invest in to pay off to make money so I think they will be fine investing in low probability companies. 1.3% is 1 out of 75.
- datamoshr 11y agoThis is fantastic! In particular I think the remote aspect is one of it's greatest selling points. While I agree there's a certain upside to being based close to your investors, the upside of reduced living/travel costs makes this greatly accessible. The equity structure also seems greatly in line with some of the inherently low cost startups that this will bring to the table. I'm excited to see what comes out of these early batches.
- bchjam 11y agoHow would this work for people considering non-profits?
- kevin 11y agoThe fellowship program is currently not available to nonprofits at this time.
- teej 11y agoPlaying devils advocate - how is this program supposed to be considered in context of "don't join an accelerator to get into YC"? From 1000 feet away it reads as "don't join another accelerator except for YC".
- katm 11y agoThe point of that piece was that joining another accelerator isn't a pre-requisite to applying to yc.
- deleted 11y ago[deleted]
- argonaut 11y agoJoining another accelerator and not being accelerated. You missed that part.
- deleted 11y ago[deleted]
- tomasien 11y agoAt least the ostensible point was that an accelerator that tells you it can help you get into YC is not telling the truth. FWIW there's an incubator in my hometown that takes 0 equity that has had an amazing track record of getting companies into other accelerators (including YC) so I'm not sure it's universally true.
- argonaut 11y agoThis is just outside speculation, but I think it's consistent. I fully expect that if you go through YC Fellowship and make no meaningful progress (e.g. you were not accelerated), that would make it less likely for you to get into YC Core. Of course, this time YC has a financial/reputational incentive to help you make progress.
- kevin 11y ago
- robotnoises 11y agoSo excited to see another round of YC Fellowship! Excited to get a chance to apply, but more excited that this likely means that the Round 1 experiment has worked to a degree.
- wesleyfsmith 11y agoSo I take it then that working remote with founders was actually much more successful than the folks at YC originally thought it would be? Because I remember sama saying that he was very skeptical the remote thing would work.
- S4M 11y agoHopefully this will have repercussions on remote jobs and there will be more of them.
- ryanSrich 11y agoIndeed... > Many people say we don’t need immigration reform because people can work remotely. While remote working works well for a lot of companies, and I expect it to continue to work better as time goes on, it doesn’t work well for all companies (for example, it would not work for YC), and it shouldn’t be the only option. It also sends money and competency out of our economy. The common answer of “let the US companies open overseas offices” always sounds to me like “further slow US economic growth and long-term viability”. - http://blog.samaltman.com/policy-for-growth-and-innovation http://blog.samaltman.com/policy-for-growth-and-innovation
- Inthenameofmine 11y agoIs it global or US-only? I guess US C Corp needed for this?
- giarc 11y agoThe first fellowship did not require incorporation, I imagine V3 will be the same.
- n00b101 11y agoHow can there be a convertible note without incorporation?
- Kinnard 11y agoYou don't have to be incorporated to apply and be selected. But you do have to be incorporated to accept the deal and the money.
- Inthenameofmine 11y agoAah, this makes a lot more sense. Still, the questions remains. Does it need to be a US C Corp?
- Kinnard 11y agoThat's still unclear from https://news.ycombinator.com/item?id=10975187 https://news.ycombinator.com/item?id=10975187 I'd guess yes but perhaps Kevin can ring in.
- mattkrisiloff 11y agoTeams have to incorporate, though they don't have to be incorporated yet to apply. There are a couple instances with F2 where we've allowed international teams to keep their pre-existing co structure, but it's still strongly preferred that teams are Delaware C Corporations.
- lettergram 11y agoHow would applying for both work? i.e. First, we review the app for YC Core, then we review it for fellowship if they aren't accepted to YC Core? Or is it a single review, then bucketed into two categories. Or is it one quick glance, bucketing, then review. I ask because each one can pretty dramatically impact the outcome. For full disclosure, I'll be applying to both anyways, but I am curious.
- audace 11y agoWhat are the dates for this batch? I can't seem to find it on the fellowship page as it hasn't been updated.
- sethbannon 11y agoInteresting choice on the equity side. If I'm reading this correctly, and YC gets 1.5% when the company IPOs or has a $100M or more funding event then, functionally, it's as if YC is taking much more than 1.5% now, because they're not taking on the dilution they would otherwise be as the company went through successive rounds of financing.
- jparker165 11y agoRight. All equity sold until this triggers takes a haircut. This is especially weird if the 1.5% is taken post-money: companies will want to trigger the conversion as soon as they can reach the $100M valuation (or IPO in Canada even sooner).
- tomblomfield 11y agoYes - I was confused about this as well. I would guess that YC's traditioanl initial 7% equity stake would typically be diluted to around 3-5% by the time a company sells or IPOs. So 1.5% of sale/IPO is clearly less than that, but it still feels a bit weird.
- wasd 11y agoGiven the number of companies exit at 100m vs exit 1-99m is huge. They're taking a bet at the earliest possible time and are only making money in the case of extreme success.
- mikekchar 11y agoIt's a 75:1 return on investment for those that make it to a 100M exit. They just need to make sure that they can pick better than 1 in 75 to break even. If they can get 1 in 25 they'll get a 300% ROI. If they can get an exit within 5-10 years, then that's very competitive against other investments.
- jsprogrammer 11y agoNot if those successive rounds are contingent on them diluting.
- karlcoelho1 11y agoThe working remote idea is really good, since rent becomes a lot cheaper (SV is overpriced). Because of that, the $20k will last way longer for the teams!
- Kinnard 11y agoI think this changes the market dynamics for startups. All of the wannabe accelerator out their are going to have to double, or in some cases up by an order of magnitude, their deals. It might dramatically incentivize people who were on the brink to start companies. I'm curious what this'll mean for the culture of entrepreneurship.
- mej10 11y agoIt is also far more family friendly. It is almost impossible for someone with a family to do YC Core without substantial savings and financial stability. YC Fellowship adds an additional stepping stone. No idea if this was intentional, but it is very welcome either way.
- j45 11y agoNo 2 businesses were built the exact same way and I think a program like this does open the door wider to those who may not be able to make the YC Core door.
- arcanus 11y agoAssuming one hit in the entire fellowship program, at which point: 1.5e6/2e4 = 75 fellowships So each 100MM 'hit' funds 75 fellows. Would be hard to imagine they expect to do much better than that in terms of hit rate, so naively, the program seems to mostly be revenue neutral.
- andreasklinger 11y agoplus it is very good leadgen for core plus it helps to avoid that people run into very bad decisions at early stage plus it keeps yc interesting for early stage startups even though core expects more and more advanced startups
- tptacek 11y agoIf a company "graduates" from YC Fellowship to YC Core, will YC be taking the standard YC Core equity on top of the 1.5%, or will it be some different number?
- exw 11y agoThat is a great question - my guess is that they will just revert to the standard YC Core terms, given that YC states in their Fellowship terms that they are hoping that Fellowship companies will then also go through the YC core program. Put a different way, I am assuming that YC believes that a company that also goes through the core program would have a higher chance of success, so they would not want to provide a disincentive that would reduce the chance of a Fellowship company also going through YC core...
- ulasbilgen 11y agoIs there any specific reason that there're not much YC companies working on gaming? I can only assume that the gaming startups maybe seen as less predictable than the tech ones, but seeing all entreprenourship and indie gaming booming and they're not meeting, makes me wonder. My opinion is that nobody yet able to crack the gaming funding as YC did for tech startups.
- aerovistae 11y agonot many
- melling 11y agoIsn't it a very competitive market with low margins? Lots of companies already make games. It's well established. Maybe you have better insight on the market? Where are the $100 million to $1 billion dollar companies? What can be done differently? I know we had one big ipo last year. Don't most end up like Zynga?
- ulasbilgen 11y agoI think Zynga might not be a good example, in my opinion it's a company that doesn't care about their customers enough. Any company takes that road will face the similar results. I'm not exactly sure if it's a market with low margins also, with mobile phones, cheaper PCs and more accessable consoles the gaming business is getting bigger. In every business there're big players, but look at SuperCell, in 3 years they were valued more than 4 Billion, actually SoftBank bouth 51% of Supercell for 2.1B. Wargaming, Riot Games are the other examples. I think we still couldn't figure out how to iterate quickly and find winning games, like we did in lean startup model. As an example you can manage to develop a game and do a soft launch to see the retention values for under 50K USD, talking about mobile games. So with a very basic calculation a small studio can iterate through 8-9 games with 500K USD investment, and I think optimizing these iterations are also possible.
- meric 11y agoI don't think investing in gaming startups is about getting a return from a 100m or 1b company. It's about investing in games. I think an individual game is analogous to the typical startup. Minecraft is a $2.5b one[1]. Here's a list of 11 games grossing $3b or more: http://www.businessinsider.com.au/the-11-top-grossing-video-games-of-all-time-2015-8?r=US&IR=T#/#2-pac-man-arcadeconsolesmobilepc-1980--128-billion-111110 http://www.businessinsider.com.au/the-11-top-grossing-video-.... Riot Games had $1.3b revenue in 2015, and has had VC funding. I think that's what you're asking for. [1] http://recode.net/2014/09/09/game-on-why-microsofts-2-5-billion-minecraft-deal-could-be-a-steal/ http://recode.net/2014/09/09/game-on-why-microsofts-2-5-bill... [2] https://en.wikipedia.org/wiki/Riot_Games https://en.wikipedia.org/wiki/Riot_Games
- hhw3h 11y agotypo in the first paragraph--"annoucements" should be "announcements"
- jukeinst 11y agoCan someone explain what are the differences between a YC Fellowship and a YC Core company? Is it metrics, how far they are along, founders, etc.? Are there different things that YC looks for when evaluating a company for one vs another? What constitutes as a company being ready for YC Core? Thanks!
- Serow225 11y agoAwesome. At the super-early stage, 20kUSD can be huge boost compared to the amount of time/work/pain trying to secure similar funding from traditional institutions that don't understand startups at all. Maybe someone will have time to update the fellowship page[1] with these new details, since they're quite different? [1] https://fellowship.ycombinator.com https://fellowship.ycombinator.com
- zura 11y agoRegarding applying without an idea: https://fellowship.ycombinator.com/faq/#noidea https://fellowship.ycombinator.com/faq/#noidea "We tried this once with YC, and it didn't work well." Any post-mortems about this?
- danieltillett 11y agoGiven this it is strange the conventional wisdom is ideas are cheap. Why let evidence get in the way of ideology.
- rl3 11y agoStrongly believing in an idea forms the backbone of conviction. Without conviction, the founder(s) will arguably be less motivated and thus less effective.
- danieltillett 11y agoOr the more likely possibility that if you could not come up with a good idea in the years before entering YC you are unlikely to come up with one in a couple of months during YC. My limited observation is there is little correlation between the quality of the idea and how hard a startup team works.
- garry 11y agoIdeas remain a multiplier on execution. This illustrates a different phenomenon we encountered: Founders with no ideas at all often fail to come up with a compelling one when prompted.
- danieltillett 11y agoThis means that ideas must be more than a multiplier - they must be a requirement of success just like execution. It does illustrate that good ideas really are not cheap.
- pedalpete 11y agoI guess this is also the announcement that YC applications are open. Is this earlier than normal? I was preparing to fill out the application toward mid-March for the Summer YC batch, but stoked to learn about the fellowship which is a better fit for me at this stage. Also good to see the 'thing you hacked' question had been removed, I never liked that one when I had applied in the past (it's been a few years though, so maybe that was removed a while ago).
- staunch 11y agoDespite what some confused people say, there's actually not enough seed funding. Many thousands more teams would try their hand at creating something, given the kind of help that successful startups have all required. Most would fail and try again. A few of them would change the world. A team of skilled and committed people should not have difficulty raising $50k to work on something important. When the same team can easily get paid $500k+/yr working for existing companies, but can't raise seed funding, there's a big opportunity being missed. The big shift in Silicon Valley will come when a firm decides to fund every worthy startup on their merits alone, doing away with the "culture fit" based screening process that everyone uses today. Any top investor could raise a large fund and back every single worthy startup.
- garry 11y agoI agree that there is a big opportunity here but suspect long term this will be solved in a different way: more great benevolent former founder seed investors will emerge and more startups will be funded.
- vruiz 11y agoI'm almost tempted to apply, but the application form is really discouraging for single founders.
- staunch 11y agoIf you did have a co-founder, they would encourage you to do it anyway, or offer to do it. There are good reasons to favor teams over individuals.
- pedalpete 11y agoI'm also a single founder, but apply anyway. Are you averse to finding co-founders? I haven't found any yet, and I might or might not. I'm open to the possibility, and I believe YC may be a great place to make connections to finding a co-founder.
- vruiz 11y agoI usually have strong opinions on how to run things, and one of the main reasons I've been investing time, money and effort into building a prototype is precisely to be able to put my own ideas to test.
- pedalpete 11y agoI've been in great and poor working relationships. I've had co-workers who either don't add anything, or who actually reduce the amount of work or direction a project can progress. I've also had (far fewer) working relationships where the you 'leap-frog' each other, pushing the entire project forward in leaps and bounds. It's the second thing that I'm looking for in a co-founder. This is why I think being a part of yc or a fellowship might help. YC is apparently expert at picking great people, so it is a pre-filter of amazing people,who likely have a further network of amazing people. (not that my network isn't great, but most of my people don't share my interests).
- abalone 11y agoSo can we itemize the exact benefits of this type of deal versus taking a somewhat bigger stake up front? I can think of a couple: 1. In the case of a sub-$100M exit, where perhaps founders are getting squeezed, every little bit of extra equity counts. YC graciously forgoes their stake in the company. That's unquestionably good. 2. In the case of a big exit, YC essentially bypasses dilution and targets a fixed post-dilution equity stake, regardless of how much subsequent investment the company took on. That lets founders retain more equity early on and thus be that much less diluted, while still getting YC ballpark what they'd like to get in the end. So that's nice. But how might subsequent investors feel about YC getting the same fixed percentage of a IPO'ing Series B vs. Series E stage company? Could this possibly complicate funding down the line? Is it "too good" of a deal for YC in the Series E case? (I admit the absolute amount here is fairly low, and YC is "special" in the industry. But I'd want to sketch out the consequences in detail before taking the deal.. someone "pays" for these founder and YC benefits.) Another (scary?) thought: might more investors demand this sort of deal down the line? Would a seed or Series A or Series B investor ask for fixed percentages of IPO/acquisitions? I can't even fathom how that would scale or complicate taking on investors.. Does this only work of it's a special one-time thing?
- exw 11y ago> But how might subsequent investors feel about YC getting the same fixed percentage of a IPO'ing Series B vs. Series E stage company? Could this possibly complicate funding down the line? Is it "too good" of a deal for YC in the Series E case? They won't care. Basically all later investors have anti-dilution provisions, to they get exactly the same deal (though they have to pay for it, while YC gets it "for free") - put a different way, if the company is doing well (and they would have to be for potential $100M+ exits), all they care about is that they have a certain % of the company to make their economics work, so YC getting 1.5% of proceeds won't matter to them.
- 50CNT 11y agoMy guess is, the brand of YC on your startup will more than offset the complications these terms create. Being a YC company is a strong qualifier in this magical world of unicorns and angelic investment. I'm fairly certain that there will be investors mimicking this deal structure, but whether there will be founders willing to take it is another question. Just because YC can get away with it doesn't mean Joe IPO can.
- neuromancer2701 11y agoHow would the fellowship apply to hardware startups? I am a in the basement hacker working on my idea. Even with 20k, I can't quite my 9-5 job. I would think after I have finished the Fellowship( in parallel with my job) the idea would be flushed out enough that I would be more comfortable of going all in, e.g. committing into YC core. What about a longer time frame for these types of ideas? especially considering hardware lead times, etc.
- hkhanna 11y agoWill YC be publishing a copy of the convertible equity instrument? If not, can you tell us if it expected to be a SAFE, or will it take the form of a convertible note?
- jgord 11y agoAs a practical experiment in Inequality, I invite YC to expand your incredible program into a third group : invite some college graduates from the poorest and most violent neighborhoods in america, fund them to work in small teams on their startup.
- tim333 11y agoThough I don't think they are dissuading people from poor and violent neighborhoods from applying at the moment.
- erikpukinskis 11y agoTrue, but they're not marketing to them. They're marketing to rich people, by using HN, the tech sphere, etc. If YC was interested in poor people they wouldn't do marketing the way they do. They also gear the application to rich people by making it just a form on the Internet. That's perfect for people who have enough privilege to figure out what an application should look like but it doesn't work for people who don't yet know what to say to someone like YC, or that YC even exists. That suggests YC only wants applicants who are already connected to their social network, or have close cultural ties to the YC community. Of course a poor person could technically apply. YC just isn't doing the work to make that probable. It's the difference between mechanical possibility and psycho-social possibility.
- chaostheory 11y agoYoung poor people have access to the Internet, with that they also would have access to YC; even a lot of homeless people have Internet access. The only poor people without Internet access are poor, older people, which is due to a combination of ignorance and indifference. > YC just isn't doing the work to make that probable. I could be wrong but regardless of background, YC is looking for people who overcome obstacles. Internet access in the 1st world is one of the easier obstacles to overcome.
- erikpukinskis 11y ago
- deleted 11y ago[deleted]
- wellboy 11y agoHmm! Thinking about this from a UX perspective, does it make sense for applicants to apply for YC core, but not for the fellowship. Is there an upside to that that makes sense or wouldn't it be better to put startups into fellowship by default if they are more suitable to that at that stage.
- dineshp2 11y agoVery excited to hear that YC is continuing the fellowship program and the changes they have made continue to remain founder friendly. It would be interesting to see how this model involving remotely located teams and small amounts of funding is implemented/replicated by the other early stage accelerators.