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Alternative perspective: Like many universities, the value of YC to founders is mostly signalling and network. What you actually learn at YC is a minor compone

by mgpc 9y ago

Alternative perspective: Like many universities, the value of YC to founders is mostly signalling and network. What you actually learn at YC is a minor component of the value (since you could learn most of it just by reading or watching videos) As YC batches get larger, the signalling value of being a YC company goes down. If everyone is special then nobody is. As YC batches get larger, I suspect the value of the YC network also goes down. This is maybe a little bit counter-intuitive, but I think a large influx of less highly-selected startups will dilute the network and prevent it from functioning effectively. Unfortunately YC is not completely aligned with founders here. There is a strong temptation for YC to increase batch size. YC gets 7% of a company for far below market price. So increasing batch sizes makes short-term economic sense. However, if YC increases batch sizes too much and harms its brand, it will eventually break its own model. So increasing batch sizes could be seen as form of spending down the brand equity. This all hangs on a few premises that may or may not be true: 1) You can't have larger batches while keeping quality constant. 2) YC doesn't directly influence the success of participants that much. 3) If the value of YC drops, good founders will eventually stop applying I suspect an argument like this has been going on inside YC for quite a while. And the blog post was written by the original founders to try to settle the dispute in favour of the pro-scale faction.

ausjke 9y ago
120K for 7% at SF area is indeed not attractive, not to mention you must move there and find your own working space etc. It might be interesting for the very early stage startups and money-hungry (no-kids-yet) young founders. Yes the connections and advice are priceless but still money talks the loudest for most start-ups.
- sillysaurus3 9y ago
  It might be interesting for the very early stage startups and money-hungry (no-kids-yet) young founders. This is who YC funds. That's like saying it might be interesting for technology companies. Except YC funds plenty of founders with kids.
  - nwenzel 9y ago
    I was 35 and had two kids when I went through YC in 2013. My cofounder was roughly the same age and also had two kids. We weren’t the oldest and we didn’t have the most kids. The idea that YC is just for 20-somethings and consumer/tech apps is a myth that may have been true early on, but is no longer based in reality. It does help to have a low personal burn rate. If you have high expenses, it’s difficult to quit a decently well paying job to start a startup. But that doesn’t have anything to do with YC. If anything, it’s marginally easier with YC backing because at least you can slow down the personal burn.
- sjg007 9y ago
  120k for 3 months to get to demo day to raise vc.
- chrischen 9y ago
  It used to be 13-21k for 7%.
- othersideofcoin 9y ago
  That effectively sets the average valuation at $1.7 million for every startup accepted into YC. While I'm sure there are exceptions, startups with really strong initial traction, that seems like a fairly reasonable (if not elevated) valuation.
- austenallred 9y ago
  Both my co-founder and I have kids. I would have given up 15% to do YC if I had to. The money is beside the point, but it’s enough, even in the Bay Area. It was, hands down, the best and most important thing our company has done. And we were profitable before YC began, so we didn’t need it.
  - ausjke 9y ago
    So why is the YC/120K the most important thing your company has done even though you don't need it financially, YC somehow helps you to expand quickly?
    - adventured 9y ago
      The YC provided money is the least important benefit to doing YC. The parent very specifically notes that money wasn't the most important thing, you appear to have glossed over that. The value of getting accepted and how that acts as a filtering mechanism to prime venture firms. The network: YC alumni, investors, executives in the industry, mentors, etc. In other words, getting into YC will usually: enable you to raise venture capital from the best VC firms far more easily; it'll open doors that you previously likely could not open (especially for newer entrepreneurs); it'll help you with recruiting talented and experienced employees (critical to success); it's a halo, by getting accepted into it, you get to borrow reputation from what YC has built up.
      - deleted 9y ago
        [deleted]
- agibsonccc 9y ago
  We aren't this either. 2 cofounders 6 people. 1 with a kid, startup around for roughly 2.5 years before doing YC. In a year since YC we've more than tripled the team to more than 30 people now, of which again: most have kids. Ultimately for us, the network among other things has been the best part. I would definitely do it again. That being said, my anecdotal opinion: A weak point for YC is enterprise. If you want additional customers, there are a few big YC companies, but not many. Even then, when we did it, we found some help and still got great advice. If you sell to startups though, it's actually a great way to get customers. Something that hasn't really been around long enough yet, but also potential is the new vertical accelerator. Our batch was a bit too early for it, but they are trying to solve real problems these companies h ave.
zaphos 9y ago
> (since you could learn most of it just by reading or watching videos) I think this misunderstands how most people learn -- people generally learn much more effectively by "active learning," aka actually trying to do the thing they are learning, and getting dynamic guidance alongside that active process, not canned lecture / video content.
mwseibel 9y ago
Here are my thoughts on the matter 1) I think the value of most universities (top universities) is the quality of the students they are able to attract. It turns out that becoming friends with smart and motivated people can be very very helpful. It also turns out that most skills in life are learned on the job - not in school. YC is very similar in this regard. 2) Being a participant in YC in '07 and 12 I can tell you that the value of YC increases as it gets bigger because there are more smart, motivated, and successful people to learn from and be motivated by. Also especially for b2b companies - there are a lot of potential customers - see Gusto. 3) YC has no incentive to increase in size if it can't maintain a high-quality program because top founders only want to participate in a program with other top founders. If we do something that convinces top founders to stay away - then we lose. 4) There is this strange assumption that YC had higher quality founders earlier in its life. I think that assumption is biased by the fact that it takes 10 years to build a successful company and so the breakout successes always look like they are from the distant past. 5) "a large influx of less highly-selected startups" - where is your data to back this up? There are significantly more applications to YC now than 10 years ago. The acceptance rate is significantly lower than it was before.
- dilemma 9y ago
  >3) YC has no incentive to increase in size if it can't maintain a high-quality program because top founders only want to participate in a program with other top founders. If we do something that convinces top founders to stay away - then we lose. It says right in the post - YC's goal is mass production of startups via incubation.
  - sillysaurus3 9y ago
    I think Michael is saying "Just like it would be dumb to increase the size of a factory too quickly, it would be dumb to increase the size of our batches too quickly."
  - kcorbitt 9y ago
    We're always looking for more ways to help more startups, sometimes within the framework of our original incubation program and sometimes without it. If YC lives up to its potential, I suspect the startups that actually end up going through our accelerator will be just a small fraction of all the ones we've meaningfully helped out in one way or another.
arikrak 9y ago
> Like many universities, the value of YC to founders is mostly signalling and network. What you actually learn at YC is a minor component of the value (since you could learn most of it just by reading or watching videos) While this sounds true to an extent, YC can provide more tailored feedback than a university generally does. Most of what one does in university is generic and can be learned through tutorials, but YC can provide custom feedback to a specific startup's situation. (And good educational programs will also focus on providing feedback on individual projects.)
staunch 9y ago
> It's not an insurance policy at all. It's a crazy tournament. It's a zero-sum tournament. If you were the president of Harvard or Stanford and you wanted to get a lynch mob of students, alumni, and faculty to come after you, what you should say is something like this: We live in this much larger, more global world. We offer this great education to everybody. So we're going to double or triple our enrollment over the next 15 to 20 years. And people would all be furious, because the value of the degree comes from massive exclusion. And what you're really running is something like a Studio 54 night club that's got an incredibly long line outside and a very small number of people let inside. It's branded as positive sum, everybody can learn, but the reality is that it is deeply zero sum. -- Peter Thiel (former YC partner) https://www.youtube.com/watch?v=1T-RkxC5pVU#t=4m35s https://www.youtube.com/watch?v=1T-RkxC5pVU#t=4m35s
- mwseibel 9y ago
  Peter Thiel doesn't work at YC - please check your facts: http://www.ycombinator.com/people/ http://www.ycombinator.com/people/
  - staunch 9y ago
    Okay, fact updated. Doesn't change his point at all. I don't see the "goodbye peter" blog post though so not sure how anyone would know he left. https://blog.ycombinator.com/welcome-peter/ https://blog.ycombinator.com/welcome-peter/
paragpatelone 9y ago
I also think another factor is over the past 10 years, there has more investor money thrown at early stage startups. That just means that it harder for companies to break out. Due to that fact I am not sure accelerators even YC will provide much more advantages.

by mgpc 9y ago

ausjke 9y ago

120K for 7% at SF area is indeed not attractive, not to mention you must move there and find your own working space etc. It might be interesting for the very early stage startups and money-hungry (no-kids-yet) young founders. Yes the connections and advice are priceless but still money talks the loudest for most start-ups.

sillysaurus3 9y ago
It might be interesting for the very early stage startups and money-hungry (no-kids-yet) young founders. This is who YC funds. That's like saying it might be interesting for technology companies. Except YC funds plenty of founders with kids.
- nwenzel 9y ago
  I was 35 and had two kids when I went through YC in 2013. My cofounder was roughly the same age and also had two kids. We weren’t the oldest and we didn’t have the most kids. The idea that YC is just for 20-somethings and consumer/tech apps is a myth that may have been true early on, but is no longer based in reality. It does help to have a low personal burn rate. If you have high expenses, it’s difficult to quit a decently well paying job to start a startup. But that doesn’t have anything to do with YC. If anything, it’s marginally easier with YC backing because at least you can slow down the personal burn.
sjg007 9y ago
120k for 3 months to get to demo day to raise vc.
chrischen 9y ago
It used to be 13-21k for 7%.
othersideofcoin 9y ago
That effectively sets the average valuation at $1.7 million for every startup accepted into YC. While I'm sure there are exceptions, startups with really strong initial traction, that seems like a fairly reasonable (if not elevated) valuation.
austenallred 9y ago
Both my co-founder and I have kids. I would have given up 15% to do YC if I had to. The money is beside the point, but it’s enough, even in the Bay Area. It was, hands down, the best and most important thing our company has done. And we were profitable before YC began, so we didn’t need it.
- ausjke 9y ago
  So why is the YC/120K the most important thing your company has done even though you don't need it financially, YC somehow helps you to expand quickly?
  - adventured 9y ago
    The YC provided money is the least important benefit to doing YC. The parent very specifically notes that money wasn't the most important thing, you appear to have glossed over that. The value of getting accepted and how that acts as a filtering mechanism to prime venture firms. The network: YC alumni, investors, executives in the industry, mentors, etc. In other words, getting into YC will usually: enable you to raise venture capital from the best VC firms far more easily; it'll open doors that you previously likely could not open (especially for newer entrepreneurs); it'll help you with recruiting talented and experienced employees (critical to success); it's a halo, by getting accepted into it, you get to borrow reputation from what YC has built up.
    - deleted 9y ago
      [deleted]
agibsonccc 9y ago
We aren't this either. 2 cofounders 6 people. 1 with a kid, startup around for roughly 2.5 years before doing YC. In a year since YC we've more than tripled the team to more than 30 people now, of which again: most have kids. Ultimately for us, the network among other things has been the best part. I would definitely do it again. That being said, my anecdotal opinion: A weak point for YC is enterprise. If you want additional customers, there are a few big YC companies, but not many. Even then, when we did it, we found some help and still got great advice. If you sell to startups though, it's actually a great way to get customers. Something that hasn't really been around long enough yet, but also potential is the new vertical accelerator. Our batch was a bit too early for it, but they are trying to solve real problems these companies h ave.

zaphos 9y ago

> (since you could learn most of it just by reading or watching videos) I think this misunderstands how most people learn -- people generally learn much more effectively by "active learning," aka actually trying to do the thing they are learning, and getting dynamic guidance alongside that active process, not canned lecture / video content.

mwseibel 9y ago

Here are my thoughts on the matter 1) I think the value of most universities (top universities) is the quality of the students they are able to attract. It turns out that becoming friends with smart and motivated people can be very very helpful. It also turns out that most skills in life are learned on the job - not in school. YC is very similar in this regard. 2) Being a participant in YC in '07 and 12 I can tell you that the value of YC increases as it gets bigger because there are more smart, motivated, and successful people to learn from and be motivated by. Also especially for b2b companies - there are a lot of potential customers - see Gusto. 3) YC has no incentive to increase in size if it can't maintain a high-quality program because top founders only want to participate in a program with other top founders. If we do something that convinces top founders to stay away - then we lose. 4) There is this strange assumption that YC had higher quality founders earlier in its life. I think that assumption is biased by the fact that it takes 10 years to build a successful company and so the breakout successes always look like they are from the distant past. 5) "a large influx of less highly-selected startups" - where is your data to back this up? There are significantly more applications to YC now than 10 years ago. The acceptance rate is significantly lower than it was before.

dilemma 9y ago
>3) YC has no incentive to increase in size if it can't maintain a high-quality program because top founders only want to participate in a program with other top founders. If we do something that convinces top founders to stay away - then we lose. It says right in the post - YC's goal is mass production of startups via incubation.
- sillysaurus3 9y ago
  I think Michael is saying "Just like it would be dumb to increase the size of a factory too quickly, it would be dumb to increase the size of our batches too quickly."
- kcorbitt 9y ago
  We're always looking for more ways to help more startups, sometimes within the framework of our original incubation program and sometimes without it. If YC lives up to its potential, I suspect the startups that actually end up going through our accelerator will be just a small fraction of all the ones we've meaningfully helped out in one way or another.

arikrak 9y ago

> Like many universities, the value of YC to founders is mostly signalling and network. What you actually learn at YC is a minor component of the value (since you could learn most of it just by reading or watching videos) While this sounds true to an extent, YC can provide more tailored feedback than a university generally does. Most of what one does in university is generic and can be learned through tutorials, but YC can provide custom feedback to a specific startup's situation. (And good educational programs will also focus on providing feedback on individual projects.)

staunch 9y ago

> It's not an insurance policy at all. It's a crazy tournament. It's a zero-sum tournament. If you were the president of Harvard or Stanford and you wanted to get a lynch mob of students, alumni, and faculty to come after you, what you should say is something like this: We live in this much larger, more global world. We offer this great education to everybody. So we're going to double or triple our enrollment over the next 15 to 20 years. And people would all be furious, because the value of the degree comes from massive exclusion. And what you're really running is something like a Studio 54 night club that's got an incredibly long line outside and a very small number of people let inside. It's branded as positive sum, everybody can learn, but the reality is that it is deeply zero sum. -- Peter Thiel (former YC partner) https://www.youtube.com/watch?v=1T-RkxC5pVU#t=4m35s https://www.youtube.com/watch?v=1T-RkxC5pVU#t=4m35s

mwseibel 9y ago
Peter Thiel doesn't work at YC - please check your facts: http://www.ycombinator.com/people/ http://www.ycombinator.com/people/
- staunch 9y ago
  Okay, fact updated. Doesn't change his point at all. I don't see the "goodbye peter" blog post though so not sure how anyone would know he left. https://blog.ycombinator.com/welcome-peter/ https://blog.ycombinator.com/welcome-peter/

paragpatelone 9y ago

I also think another factor is over the past 10 years, there has more investor money thrown at early stage startups. That just means that it harder for companies to break out. Due to that fact I am not sure accelerators even YC will provide much more advantages.