7 ms·

I find myself asking non-YC companies why they aren't yet in YC Are there any legitimate excuses for a startup not to be in YC, other than rejection? I can't

by johnrob 16y ago

I find myself asking non-YC companies why they aren't yet in YC Are there any legitimate excuses for a startup not to be in YC, other than rejection? I can't think of any (especially when you read http://paulgraham.com/equity.html http://paulgraham.com/equity.html).

staunch 16y ago
If you've already taken money and your investors wouldn't be cool with it.
- paul 16y ago
  Then you have bad investors.
  - evgen 16y ago
    No matter how much YC kool-aid you may be quaffing, there are probably legitimate reasons for existing investors in an angel round to think twice about giving up some percentage of the company (e.g. 6%) for chump change and access to a "network" that they probably think they can provide just as well.
paul 16y ago
Not in my opinion :) If an established entrepreneur like Joshua Schachter starts a company, then I'm going to invest no matter what, but for everyone else... Watch the Facebook movie and imagine what would have happened without Sean Parker. (I think Zuck would have lost control of the company) YC provides that same kind of value (minus the drugs and women, unfortunately).
- ryanwaggoner 16y ago
  This comment is interesting to me. Does this mean you wouldn't invest in a company that YC rejected? Does it mean you wouldn't invest in a company that didn't even apply to YC? Are you going to be angel investing at all now that you've joined YC?
  - paul 16y ago
    I still invest in non-YC companies, but there's a much higher bar (e.g. I already know the founders, or they have a lot of traction).
    - d3x 16y ago
      "That said, finding the next Google and buying a 1% stake is my current billion dollar plan :)" Facebook, Google etc.. did not go through incubators and they were not started by "established entrepreneurs". If you are looking for a 1% stake in the next google do you think that your preference toward companies that go through incubators will cause you to miss the next big thing?
      - paul 16y ago
        YC is not an incubator, and nothing like it existed when Google and Facebook were started. As I mentioned in the parent comment, I think the closest match is Sean Parker, and he owns a very nice chunk of Facebook :) There's a very good chance that the next Google or FB will be part of YC, because YC is a smart deal for founders, and therefore it will attract the smart founders, and those are the people likely to start the next Google or FB.
        thewordpainter 16y ago
        paul - it sounds like you don't like to be the original investor going in with an unknown commodity -- that an accurate assessment? if not YC, what are other filters for you?
        d3x 16y ago
        "Because YC is a smart deal for founders, and therefore it will attract the smart founders" YC might be a good deal but that does not mean it will attract "the" smart founders. Yes it will and does attract some smart founders but just because you dont want to do YC does not mean you are not smart or that you are less likely to have the next big thing. If anything this "All smart founders will go to YC" attitude is one of the main reasons you are more likely to miss out on the next big thing. Whoever is out there creating the next big thing might not even know that YC exists and if he does there are a plethora of other reasons (life and work related) which may cause him/her to not want to apply. Even if they do apply PG has said his strong suite is not picking who gets in and they pass on good people all the time so you are not only hoping that you see the next big thing but that YC sees them too. All these additional criteria make it less likely that you will find the next big thing IMHO.
- joshu 16y ago
  wait, you don't provide drugs and women? i was misinformed.
  - Alex3917 16y ago
    All the drugs are down the street at the institute of transpersonal psychology. I think Myron and Jean Stolaroff live within biking distance as well.
    - joshu 16y ago
      what is this i don't even
      - Alex3917 16y ago
        You ever read What The Doormouse Said? It's all about how LSD influenced the birth of the Internet. Basically the Stolaroffs introduced all the most important technologists in silicon valley (e.g. Doug Engelbart) to LSD. These folks picked up on the mystical ideas that 'everything is one' and 'we're all connected', and set out to recreate this metaphysical vision using computer hardware. And now YC is building software that runs on this platform. Just goes to show that reality is not only stranger than we suppose, it's stranger than we can suppose.
        tedjdziuba 16y ago
        Ever read "Just So Stories"? :-)
        joshu 16y ago
        what's the unicode emoticon for bonghit noises?
        deleted 16y ago
        [deleted]
        mahmud 16y ago
- tedjdziuba 16y ago
  Well you're only making 10% using YC as your filter.
  - vessenes 16y ago
    This is silly, and also mean. The man has put $1mm of his personal money into funding startups. I bet you that almost all of these startups had close to zero revenue. Furthermore, he's politely answering questions in this low-noise, low-traffic forum! I bet almost nobody got that kind of access to funders in 1999. Secondly, if you actually parsed through the article, you're considering book value of his un-exited investments to be $0. Do you have any investments like this you've made? I might be interested in taking them off your hands for an _excellent_ price compared to their $0 value.
    - tedjdziuba 16y ago
      Angel investing is not altruism, it's business. I don't do angel investing because I'm not comfortable with the risk profile, and to hear that a popular angel is only making 10% reaffirms my analysis.
      - vessenes 16y ago
        While investing is business, the blog post is definitely altruism, which is why I encouraged you to be more polite. I re-read the article to make sure my second point also holds: the 10% (over three years, so really more like 3% if you are looking at IRR) is only calculated on actual current exits. About half his portfolio is still indeterminate. Barring seriously weird circumstances, he will do very well overall on this crop of investments, especially considering that he started in 2006. That said, keep on with your current strategy. Everyone has a place.
        joshklein 16y ago
        "Only" made 10%, and starting in 2006 and proceeding directly through to the world bottoming out? I think the previous commenter you are responding to must have been joking.
joshu 16y ago
i can think of several reasons - startup is outside yc's sweet spot - founders already have a good network - timing is wrong
- jamiequint 16y ago
  With respect to #2: Even if you have a strong network already (barring a previous exit) you could probably get at least a 6.4% (1/(1-.06)) bump in your Seed or Series A valuation just with YC's brand in this funding climate.
  - joshu 16y ago
    For me personally, I doubt it. I think the article you are referencing has significant problems, but I won't go into them here.
    - paul 16y ago
      He did say, "barring a previous exit", which excludes you.
      - jackowayed 16y ago
        Also, I'd guess that Josh would get a much better deal from YC if he did apply.
  - Eliezer 16y ago
    A 6.4% bump only buys you back the 6% of equity that you lost if you're selling the entire company during the Series A.
    - jamiequint 16y ago
      Good point. I modeled it to check it out. Its not a perfect model, but should give a pretty accurate illustration of your point: http://bit.ly/hyior9 http://bit.ly/hyior9 [Google Spreadsheets]
kenjackson 16y ago
At least from my understanding there's a relocation component to it. I've certainly been in startups where the non-financial cost of relocating is larger than the return one would be from being in YC. In fact, I suspect that is probably one of the biggest reasons why many startups don't do it. Also "enterprise" startups (those not targeting consumers) I think will gain a lot less from being in YC.
ryanwaggoner 16y ago
Off the top of my head: 1. Incompatibility with current investors 2. Unable to move to SF (long list of reasons) 3. Incompatibility with YC philosophy Regarding #3, YC has a certain way of viewing the world and doing things and I think it's definitely valid to just disagree with them enough that you wouldn't want to sell them 6% of your company.
jmtulloss 16y ago
Established founders is certainly a good reason I think.
cookiecaper 16y ago
I wouldn't participate in YC because I have a pregnant wife and young son, and I am not interested in leaving them alone while I take a semester of YC. YC doesn't provide that much money and YC isn't the only way an entrepreneur can find a support network.
- jamiequint 16y ago
  I don't think Paul's point is that YC is incredibly valuable because of the support network, although that is definitely a factor. Its that you won't get screwed around by investors as much and simply in terms of seed/Series A valuation differentials between YC and non-YC companies (all other things being equal) you'd probably be getting a better deal (in terms of equity ownership) even if YC's average valuation was 50% what it is.
cookiecaper 16y ago
This thread: http://news.ycombinator.com/item?id=2054847 http://news.ycombinator.com/item?id=2054847 discusses WakeMate's recent safety recall of chargers. There was some discussion there regarding whether YC is a good match for hardware companies or not, given its small investment and YC's lack of experience with hardware.
flashgordon 16y ago
Actually Id have thought geography (combined with family and work) would have been one of them, but I think I am just not ballsy enough to pack up and move across the ocean!
BerislavLopac 16y ago
Here's one: YC is way too expensive for some startups.

by johnrob 16y ago

staunch 16y ago

If you've already taken money and your investors wouldn't be cool with it.

paul 16y ago
Then you have bad investors.
- evgen 16y ago
  No matter how much YC kool-aid you may be quaffing, there are probably legitimate reasons for existing investors in an angel round to think twice about giving up some percentage of the company (e.g. 6%) for chump change and access to a "network" that they probably think they can provide just as well.

paul 16y ago

Not in my opinion :) If an established entrepreneur like Joshua Schachter starts a company, then I'm going to invest no matter what, but for everyone else... Watch the Facebook movie and imagine what would have happened without Sean Parker. (I think Zuck would have lost control of the company) YC provides that same kind of value (minus the drugs and women, unfortunately).

ryanwaggoner 16y ago
This comment is interesting to me. Does this mean you wouldn't invest in a company that YC rejected? Does it mean you wouldn't invest in a company that didn't even apply to YC? Are you going to be angel investing at all now that you've joined YC?
- paul 16y ago
  I still invest in non-YC companies, but there's a much higher bar (e.g. I already know the founders, or they have a lot of traction).
  - d3x 16y ago
    "That said, finding the next Google and buying a 1% stake is my current billion dollar plan :)" Facebook, Google etc.. did not go through incubators and they were not started by "established entrepreneurs". If you are looking for a 1% stake in the next google do you think that your preference toward companies that go through incubators will cause you to miss the next big thing?
    - paul 16y ago
      YC is not an incubator, and nothing like it existed when Google and Facebook were started. As I mentioned in the parent comment, I think the closest match is Sean Parker, and he owns a very nice chunk of Facebook :) There's a very good chance that the next Google or FB will be part of YC, because YC is a smart deal for founders, and therefore it will attract the smart founders, and those are the people likely to start the next Google or FB.
      - thewordpainter 16y ago
        paul - it sounds like you don't like to be the original investor going in with an unknown commodity -- that an accurate assessment? if not YC, what are other filters for you?
      - d3x 16y ago
        "Because YC is a smart deal for founders, and therefore it will attract the smart founders" YC might be a good deal but that does not mean it will attract "the" smart founders. Yes it will and does attract some smart founders but just because you dont want to do YC does not mean you are not smart or that you are less likely to have the next big thing. If anything this "All smart founders will go to YC" attitude is one of the main reasons you are more likely to miss out on the next big thing. Whoever is out there creating the next big thing might not even know that YC exists and if he does there are a plethora of other reasons (life and work related) which may cause him/her to not want to apply. Even if they do apply PG has said his strong suite is not picking who gets in and they pass on good people all the time so you are not only hoping that you see the next big thing but that YC sees them too. All these additional criteria make it less likely that you will find the next big thing IMHO.
joshu 16y ago
wait, you don't provide drugs and women? i was misinformed.
- Alex3917 16y ago
  All the drugs are down the street at the institute of transpersonal psychology. I think Myron and Jean Stolaroff live within biking distance as well.
  - joshu 16y ago
    what is this i don't even
    - Alex3917 16y ago
      You ever read What The Doormouse Said? It's all about how LSD influenced the birth of the Internet. Basically the Stolaroffs introduced all the most important technologists in silicon valley (e.g. Doug Engelbart) to LSD. These folks picked up on the mystical ideas that 'everything is one' and 'we're all connected', and set out to recreate this metaphysical vision using computer hardware. And now YC is building software that runs on this platform. Just goes to show that reality is not only stranger than we suppose, it's stranger than we can suppose.
      - tedjdziuba 16y ago
        Ever read "Just So Stories"? :-)
      - joshu 16y ago
        what's the unicode emoticon for bonghit noises?
        deleted 16y ago
        [deleted]
        mahmud 16y ago
tedjdziuba 16y ago
Well you're only making 10% using YC as your filter.
- vessenes 16y ago
  This is silly, and also mean. The man has put $1mm of his personal money into funding startups. I bet you that almost all of these startups had close to zero revenue. Furthermore, he's politely answering questions in this low-noise, low-traffic forum! I bet almost nobody got that kind of access to funders in 1999. Secondly, if you actually parsed through the article, you're considering book value of his un-exited investments to be $0. Do you have any investments like this you've made? I might be interested in taking them off your hands for an _excellent_ price compared to their $0 value.
  - tedjdziuba 16y ago
    Angel investing is not altruism, it's business. I don't do angel investing because I'm not comfortable with the risk profile, and to hear that a popular angel is only making 10% reaffirms my analysis.
    - vessenes 16y ago
      While investing is business, the blog post is definitely altruism, which is why I encouraged you to be more polite. I re-read the article to make sure my second point also holds: the 10% (over three years, so really more like 3% if you are looking at IRR) is only calculated on actual current exits. About half his portfolio is still indeterminate. Barring seriously weird circumstances, he will do very well overall on this crop of investments, especially considering that he started in 2006. That said, keep on with your current strategy. Everyone has a place.
      - joshklein 16y ago
        "Only" made 10%, and starting in 2006 and proceeding directly through to the world bottoming out? I think the previous commenter you are responding to must have been joking.

joshu 16y ago

i can think of several reasons - startup is outside yc's sweet spot - founders already have a good network - timing is wrong

jamiequint 16y ago
With respect to #2: Even if you have a strong network already (barring a previous exit) you could probably get at least a 6.4% (1/(1-.06)) bump in your Seed or Series A valuation just with YC's brand in this funding climate.
- joshu 16y ago
  For me personally, I doubt it. I think the article you are referencing has significant problems, but I won't go into them here.
  - paul 16y ago
    He did say, "barring a previous exit", which excludes you.
    - jackowayed 16y ago
      Also, I'd guess that Josh would get a much better deal from YC if he did apply.
- Eliezer 16y ago
  A 6.4% bump only buys you back the 6% of equity that you lost if you're selling the entire company during the Series A.
  - jamiequint 16y ago
    Good point. I modeled it to check it out. Its not a perfect model, but should give a pretty accurate illustration of your point: http://bit.ly/hyior9 http://bit.ly/hyior9 [Google Spreadsheets]

kenjackson 16y ago

At least from my understanding there's a relocation component to it. I've certainly been in startups where the non-financial cost of relocating is larger than the return one would be from being in YC. In fact, I suspect that is probably one of the biggest reasons why many startups don't do it. Also "enterprise" startups (those not targeting consumers) I think will gain a lot less from being in YC.

ryanwaggoner 16y ago

Off the top of my head: 1. Incompatibility with current investors 2. Unable to move to SF (long list of reasons) 3. Incompatibility with YC philosophy Regarding #3, YC has a certain way of viewing the world and doing things and I think it's definitely valid to just disagree with them enough that you wouldn't want to sell them 6% of your company.

jmtulloss 16y ago

Established founders is certainly a good reason I think.

cookiecaper 16y ago

I wouldn't participate in YC because I have a pregnant wife and young son, and I am not interested in leaving them alone while I take a semester of YC. YC doesn't provide that much money and YC isn't the only way an entrepreneur can find a support network.

jamiequint 16y ago
I don't think Paul's point is that YC is incredibly valuable because of the support network, although that is definitely a factor. Its that you won't get screwed around by investors as much and simply in terms of seed/Series A valuation differentials between YC and non-YC companies (all other things being equal) you'd probably be getting a better deal (in terms of equity ownership) even if YC's average valuation was 50% what it is.

cookiecaper 16y ago

This thread: http://news.ycombinator.com/item?id=2054847 http://news.ycombinator.com/item?id=2054847 discusses WakeMate's recent safety recall of chargers. There was some discussion there regarding whether YC is a good match for hardware companies or not, given its small investment and YC's lack of experience with hardware.

flashgordon 16y ago

Actually Id have thought geography (combined with family and work) would have been one of them, but I think I am just not ballsy enough to pack up and move across the ocean!

BerislavLopac 16y ago

Here's one: YC is way too expensive for some startups.