6 ms·

“Y Combinator is not worth it”

117 points by DantesKite 5y ago

nunez 5y ago
> I’m building a better system; join the waitlist …and there it is. It’s hard to take this seriously given the pitch to compete against YC at the bottom.
detaro 5y ago
I guess related (but not the same twitter thread!) from a few days ago: https://news.ycombinator.com/item?id=30066969 https://news.ycombinator.com/item?id=30066969 (1152 points, 317 comments) "Stripe and YCombinator, the Mob Bosses of Silicon Valley, a thread:"
- deleted 5y ago
  [deleted]
- andreilys 5y ago
  Reminds me of Nietzche's quote "Enter society with a duel! Challenge the most fearsome/powerful opponent" Towards the end of this new thread, he seems to be promoting a waitlist for his own accelerator, so it does seem like this was a big PR push for him. Based on my twitter feed reactions it seems to have worked out quite well for him. No better way to get eyeballs than to court controversy.
  - rurban 5y ago
    Losing his job doesn't sound like it "worked out well for him".
- bko 5y ago
  From the original criticism, the author states how not being part of y-combinator screwed him out of being a hn darling and hampered other fund-raising efforts due to a similar product as stripe (a yc company) But in this criticism he brushes off the benefit of being associated with yc. Is it just that it's no longer true that companies competing with yc darlings are shunned by other VC?
  - dang 5y ago
    His statements about HN were false. I wrote a detailed explanation with lots of externally verifiable sources, if anyone cares: https://news.ycombinator.com/item?id=30070287 https://news.ycombinator.com/item?id=30070287
    - gundmc 5y ago
      Thanks for the information, dang. It's interesting that mods have so much discretion in keeping things on the front page or bumping them off the front page. Is there a transparency report you make available that shows cases when these adjustments are made and how often? I think that would also help quell fears that fingers are placed on the scale in favor of YC companies.
      - dang 5y ago
        > so much discretion in keeping things on the front page or bumping them off the front page I'm a bit confused—how'd you arrive at that from what I wrote at https://news.ycombinator.com/item?id=30070287 https://news.ycombinator.com/item?id=30070287? That was the false allegation, but the whole point is that it didn't happen. I'm happy to answer any questions about that case, any other case, or HN in general, but I don't recall that thread containing any point at which moderators intervened in that way.
        gundmc 5y ago
        Apologies for the confusion - what piqued my curiosity was a response you had further down in the thread here: https://news.ycombinator.com/item?id=30074537 https://news.ycombinator.com/item?id=30074537 Specifically: > The software downweights any story that has been on the front page for more than 15 hours, unless we specifically tell it not to (which we might do if the community was particularly enjoying it) and > ...but then moderators will notice it and push it below the front page. Since this is a kind of editorial action from the moderation staff, it would be interesting to see how this is applied.
tus666 5y ago
Well if you can get that 500k somewhere else, then take your business elsewhere. At the end of the day, everything is just a deal you can either agree to or walk away from. I get the point of this Twitter thread is to basically say just that, that YC is a bad deal, but so are lots of things in the world. The idea that you should always be looking for the best deal hardly needs to be stated. Is there a marketplace for investors in the world where startups can basically find the best offer, or auction themselves?
- nfw2 5y ago
  Absolutely this. The argument that 500k for 10% is always an overvaluation seems pretty bad. If you're a team of first-time founders and haven't found market fit yet, getting any investment from VC's might be a challenge. 500k is enough to give a company whose only real asset is hungry talent a fighting chance.
  - forgatmigej 5y ago
    Nowhere else on earth is hungry talent alone worth 500k. What an immensely privileged position to be in. And what an unjust system it must be for this to be possible, for fiefholders to play patrons in this way.
tomp 5y ago
TL;DR: they take too much equity (“14% of a multi-unicorn is a billion dollars” aka survivorship bias); batches too large (hard to stand out among 400 companies)
- thebooktocome 5y ago
  This is a misstating of the argument. They argue that 10-14% is a much larger stake than three other funding options.
  - algo_trader 5y ago
    What are those other funding options? He gives quite a rant, but doesnt mention a specific deal. The Backend link and the Miami incubators dont specify amounts. 14% is high - but that implies that your post-YC was not great. The previous 7% deal is also still available. Overall - he make the usual points, nothing new.
- IshKebab 5y ago
  They don't take 14% of unicorns though. They take 14% of essentially worthless companies that have a very small chance of becoming unicorns. That's how investment works; seems weird to call it out.
  - rosndo 5y ago
    The point is that there is much cheaper money out there.
baby 5y ago
That was underwhelming. He basically described how an incubator works. You just need to watch shark tank to understand that no deals are born the same. If you can get a better deal somewhere else, then go somewhere else; nobody said YC is the only incubator or way to create a startup here.
jrm4 5y ago
I mean, I like this website, but I've never understood why doing a digital business would require loads of investment. Scale is like the whole point of "digital." I supposed a more nuanced question would be -- has YC made any essentially good businesses? Like "something GOOD that literally would be very difficult to make without tons of extra dollars?" I strongly doubt it, but maybe?
- brightball 5y ago
  Time costs money.
- space_fountain 5y ago
  Isn’t scale exactly why. There are many digital companies that cost about the same amount to run if they have 5 users or 5 million. That means there will be many cases where you only start making money at scale
- vgeek 5y ago
  Aren't they following a similar model to modern colleges? Build the prestige and then coast? There have been recent threads detailing extension/open admission online colleges potentially diluting colleges' brands. With a few dozen companies per batch, it seems like you would get more attention and the air of exclusivity. Now there are hundreds per batch with companies that are essentially rehashes of other YC companies from 10 years back. For every novel idea company, there seem to be a dozen variations of market analytics (no, your Customer Data tracking platform is not unique) or niche infrastructure management (solving complexity created for the sake of complexity vs simply avoiding... Where have we ended up) companies. They're obviously looking for the decacorn type companies but so many seem to be best case scenario of acquireihires. If you ignore flashy tech and buzzwords, it has never been easier to build the software. What keeps getting harder is getting material visibility in the marketplace due to the huge influx of niche participants and small avenue of promotional channels.
ivraatiems 5y ago
How was YCombinator ever not a "lottery factory"? Isn't that the goal of their style of venture capitalism - cast a wide net and profit massively off the few good fat fish that come up?
- amelius 5y ago
  ... at the expense of hard working founders who put all their eggs in their one basket. "Work harder, and you will (read: might if you are very lucky) become a billionaire." This is very similar to every platform (like App Store) trying to win over workers by making them believe they can become rich on their platform, which of course is a statistical lie.
  - ivraatiems 5y ago
    But how's that different from any other venture capitalist? The idea, if I understand it, is that if you work out everyone will be so rich it won't matter what percentage they own, you'll still be incredibly rich. If it doesn't work, as it usually doesn't, well, you can't give away 10% of 0, so who cares? It's not just VCs playing the lottery, it's the founders also. I'm not saying I support it or think it's a good or healthy thing, but... isn't this the bargain people are willingly making?
    - amelius 5y ago
      The problem is that the investors/platforms make it seem that the odds of winning are more favorable. HN is an example of this: we mostly hear the success stories.
steve_adams_86 5y ago
His lens seems to be fixed around the potential of being a unicorn. What YC offers is frankly unprecedented for a lot of people in the world now. Whether they become a unicorn or not, the program is providing opportunities that aren’t as easy to find as this guy is suggesting. Taking 10-14% is huge, sure. I agree. For some people there would be no 10-14% to worry about without an opportunity like this in the first place. It’s about trade offs. To some people this will be totally acceptable. If it’s not to you, there’s no social contract that you have to go through YC. In fact, he more or less explains this in the tweets. If you have other options, great, use them. He seems fairly biased against YC for a handful of reasons. I’m not cheering for YC or anything. I just don’t perceive awful or corrupt motives. Of course they’re a business trying to profit from investing in startups. Of course they want ownership for what they put into the company. It all seems very transparent and easy to follow.
- rurp 5y ago
  The animosity in the tweets turned me off quite a bit. It's not like founders are being shoved into YC cohorts. It won't be the right fit for everyone, and founders probably know if the program is worth the cost in effort and equity. If YC isn't a good match for you... just don't apply!
jedwhite 5y ago
I'm in the W22 batch. These tweets bear no relationship to reality. YC is unarguably transformative if you throw yourself into it and listen to the advice. The emotive nature of this thread probably speaks for itself. But for any startup considering issuing equity to anyone - YC or otherwise - there is a simple formula you can use that Paul Graham came up with: 1/(1 - n) He also put it way better than I can in his essay "Equity Equation": "You should give up n% of your company if what you trade it for improves your average outcome enough that the (100 - n)% you have left is worth more than the whole company was before." [1] [1] http://www.paulgraham.com/equity.html http://www.paulgraham.com/equity.html
- Flashtoo 5y ago
  Ignoring the merits of that specific rule of thumb, it seems unwise to take advice from a VC on how much equity you should give to VCs.
  - jedwhite 5y ago
    The rule applies to giving equity to anyone - co-founders, employees, investors, accelerators. As an investor in a company, a VC would have a vested interest in giving this advice only if it made their investment more successful by making the company more successful in future. I think it is sensible to judge advice and the substance of an argument on its merits, taking into account any industry expertise or relevant biases, rather than exclude it because someone was an investor at the time.
- tyre 5y ago
  I think it can both be true than a $500k SAFE is marginally worth it and also true that given YC’s existing ownership at 7%, centralizing more equity isn’t. At the end of they day you’re only going to raise so much in your next round and half a million is a lot of space taken up by one investor (who is already motivated to help you if you only do 7%.) I have a couple batchmates who opted out of doing YC again because the equity was too high and that was pre-additional 375k SAFE. On the other hand it is 500k less that you have to raise to close a round and 500k you have if you can’t raise or want to wait to raise. So he doesn’t not have a point. It depends a lot on the company. But to his accusation that YC only cares about the top 10 companies, I think this additional money—which is optional!— disproportionately helps the not-top ten.
deleted 5y ago
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conjecTech 5y ago
Well, Ryan decided to block me for a rather tame quote tweet, so I guess I'll repost it here: "YC are some of the kindest, most egalitarian people in SV. They've treated me well even after my company they invested in closed down. They give people a shot who wouldn't otherwise have one. If I were an investor who just handed this guy money at 250x revenue, I'd be nervous." Every time I see things like this, I look back at an email Trevor Blackwell sent me about a month after we closed down our company. YC was above 100 companies/batch at that point, and he wasn't one of the partners assigned to our company. He took time out to tell us he thought we were special and hoped we would try again at some point. That vote of confidence got me through one of the darkest periods of my life. Garry, Michael, Harj and Geoff have been equally kind. Maybe YC has changed since then, but I doubt it.
- deleted 5y ago
  [deleted]
- jedwhite 5y ago
  No, it's still like that. They are kind and and supportive and positive. We had some huge engineering screwups launching this week, and we've had nothing but kindness and support. Based on our experience so far, I'd sum up the YC ethos as "kind to people, blunt on the advice".
cryptodan 5y ago
I actually like the comment page style although it could use some redesign like blocks around replies and posts.
rkk3 5y ago
All established institutions are on the other side of the deal when you engage with them; wether it is an Ivy League school, IB, Big Tech or VC's. They all take something. There are some valid points, people might not be aware of but overall the YC deal still seems better than most alternatives. I think he is discounting how hard it is at that early stage, that first capital needs to come from somewhere. Also YC founders seem to be disproportionately have softer landings if they don't go supersonic Unicorn IPO. Maybe you don't stand out in the top 10 of your batch and instead get aqui-hired and only make 800k/yr.
jedberg 5y ago
I'm a small time angel investor (I write 8-10 $100K checks a year), so YC is really important to me. Almost all my checks are in YC companies. I don't have the time nor skills to do proper due diligence, but with YC I don't have to. Investing in a YC company provides me with already vetted founders who I know will have an incredible support network and are already well connected. Yes, I give up some upside because of how much YC already owns, but to me it's worth every penny for the service that YC provides to me as an investor and to the startup. That's the investor side of the equation, which if you believe this thread is his main complaint -- that it's too investor friendly. But I also get to see the founder side of the equation. Since I'm writing such small checks, a lot of my value to the company is offering help at the early stage, often with architecture review or product reviews, and sometimes even interviewing engineering candidates for them. Because of the close relationship, sometimes I end up becoming friends with the founders I invest in. Which lets me see how YC helps them as founders. Need help connecting with someone at company X? There's almost always another YC founder who can make the intro. Need more money? YC has got VCs on speed dial for you. Need media coverage? There are journalists from highly respected outlets asking YC for good stories every day. Even basic stuff, like, "I need an accountant" or "I need a lawyer who can handle this special type of law" can be much easier solved with a quick intro from YC. Getting into YC just makes everything else about doing a startup so much easier. It doesn't make it easy, because startups are never easy. But it takes away a lot of the low level friction.
- ykevinator2 5y ago
  - systemsignal 5y ago
    It’s their choice and desire, why would it be shameful to help support them…
  - dang 5y ago
    Please don't cross into personal attack. It's against the site guidelines (https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html), and we're trying to avoid the online callout/shaming culture here (https://hn.algolia.com/?sort=byDate&type=comment&dateRange=all&page=0&prefix=true&query=online%20shaming%20by%3Adang https://hn.algolia.com/?sort=byDate&type=comment&dateRange=a...).
robocat 5y ago
https://threadreaderapp.com/thread/1487500943511932941.html https://threadreaderapp.com/thread/1487500943511932941.html I was in an incubator program, and there were two serious problems with it, which if you join YC are potential problems too: Problem 1. The belief by founders that they could get good advice from others. This is a dangerous attitude to have programmed into yourself, because when starting a business you must stand on your own feet and trust your own opinions. Listening to others is fine, but it is to easy to cripple yourself by believing in the advice of successful people, and listening to the wrong advice. You need to make your own mistakes. That tightrope is an essential skill as an owner, and I don’t know how it is taught, especially to neophytes. I saw other founders learn to doubt themselves because they were not subject experts in so many areas of their business, and that doubt was damaging to them and their businesses. Yes Listen; yes respect the advice of others; no do not take advice without being careful to validate it for your businesses’ needs. I did also see some founders ignore excellent advice, but at least their businesses died honest deaths without interference! Problem 2. Incubators push businesses to get funded. The push is probably mostly organically due to the atmosphere of competition between founders, plus the expectation that it is just what you do, but also the incubator chiefs push for it. I saw many other companies take money to grow, and then lose control and end up with no meaningful return for their efforts. The problem with all investors I have seen in my country is that they push companies in queer directions, because VC tends to be ego driven: VC investors in New Zealand have strong opinions and they often kill companies. We bootstrapped, which has limited the size of the businesss, but bootstrapping de-risked our returns and we have comfortable lifestyles (albeit without the potential for superyachts and blow). I agree that giving away 1[0-9]% to YC is a lot, but getting $500k of distraction free money is a mighty big carrot. https://randle.substack.com/p/playing-different-games https://randle.substack.com/p/playing-different-games (scroll down to meme of VC with knife behind back, and read below) talks about the benefits of Tiger Global’s hands-off approach to founders where they don’t take board seats. “[Tiger Global] lacks the potential downside that comes from a new highly-involved investor who ends up being more of a drag than a help, or even worse ends up being actively malignant to the board and business.“. One benefit of YC that is not mentioned is bargaining power: if you are using a growth funding model, and you are successful enough to get to the later stages, I would hope that having YC on your side would give you fantastic leverage. Maybe YC’s ownership is not large, but it is enough that they will will avoid the vultures. Also the VCs know that screwing over YC is a high risk manoeuvre because it affects the VC’s other investments or potential for investments - if you are a successful startup without backing then your business could easily become another lonely victim. One thing I am unsure about is the rules for YC dilution: I think that YC is undiluted at your first round, which is not in alignment with founders. I presume after the first round that YC dilution matches founder dilution. Another aspect is that YC shares are preferential, while founders and options are common shares. So YC incentives can be mismatched with founders. The only thing keeping YC honest is the internal integrity of the YC business, and YC’s care for their own reputation for integrity (not shafting founders).
ykevinator2 5y ago
Who is he?
qwertyuiop_ 5y ago
Sour puss

117 points by DantesKite 5y ago

> I’m building a better system; join the waitlist …and there it is. It’s hard to take this seriously given the pitch to compete against YC at the bottom.

detaro 5y ago

I guess related (but not the same twitter thread!) from a few days ago: https://news.ycombinator.com/item?id=30066969 https://news.ycombinator.com/item?id=30066969 (1152 points, 317 comments) "Stripe and YCombinator, the Mob Bosses of Silicon Valley, a thread:"

deleted 5y ago
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andreilys 5y ago
Reminds me of Nietzche's quote "Enter society with a duel! Challenge the most fearsome/powerful opponent" Towards the end of this new thread, he seems to be promoting a waitlist for his own accelerator, so it does seem like this was a big PR push for him. Based on my twitter feed reactions it seems to have worked out quite well for him. No better way to get eyeballs than to court controversy.
- rurban 5y ago
  Losing his job doesn't sound like it "worked out well for him".
bko 5y ago
From the original criticism, the author states how not being part of y-combinator screwed him out of being a hn darling and hampered other fund-raising efforts due to a similar product as stripe (a yc company) But in this criticism he brushes off the benefit of being associated with yc. Is it just that it's no longer true that companies competing with yc darlings are shunned by other VC?
- dang 5y ago
  His statements about HN were false. I wrote a detailed explanation with lots of externally verifiable sources, if anyone cares: https://news.ycombinator.com/item?id=30070287 https://news.ycombinator.com/item?id=30070287
  - gundmc 5y ago
    Thanks for the information, dang. It's interesting that mods have so much discretion in keeping things on the front page or bumping them off the front page. Is there a transparency report you make available that shows cases when these adjustments are made and how often? I think that would also help quell fears that fingers are placed on the scale in favor of YC companies.
    - dang 5y ago
      > so much discretion in keeping things on the front page or bumping them off the front page I'm a bit confused—how'd you arrive at that from what I wrote at https://news.ycombinator.com/item?id=30070287 https://news.ycombinator.com/item?id=30070287? That was the false allegation, but the whole point is that it didn't happen. I'm happy to answer any questions about that case, any other case, or HN in general, but I don't recall that thread containing any point at which moderators intervened in that way.
      - gundmc 5y ago
        Apologies for the confusion - what piqued my curiosity was a response you had further down in the thread here: https://news.ycombinator.com/item?id=30074537 https://news.ycombinator.com/item?id=30074537 Specifically: > The software downweights any story that has been on the front page for more than 15 hours, unless we specifically tell it not to (which we might do if the community was particularly enjoying it) and > ...but then moderators will notice it and push it below the front page. Since this is a kind of editorial action from the moderation staff, it would be interesting to see how this is applied.

tus666 5y ago

Well if you can get that 500k somewhere else, then take your business elsewhere. At the end of the day, everything is just a deal you can either agree to or walk away from. I get the point of this Twitter thread is to basically say just that, that YC is a bad deal, but so are lots of things in the world. The idea that you should always be looking for the best deal hardly needs to be stated. Is there a marketplace for investors in the world where startups can basically find the best offer, or auction themselves?

nfw2 5y ago
Absolutely this. The argument that 500k for 10% is always an overvaluation seems pretty bad. If you're a team of first-time founders and haven't found market fit yet, getting any investment from VC's might be a challenge. 500k is enough to give a company whose only real asset is hungry talent a fighting chance.
- forgatmigej 5y ago
  Nowhere else on earth is hungry talent alone worth 500k. What an immensely privileged position to be in. And what an unjust system it must be for this to be possible, for fiefholders to play patrons in this way.

tomp 5y ago

TL;DR: they take too much equity (“14% of a multi-unicorn is a billion dollars” aka survivorship bias); batches too large (hard to stand out among 400 companies)

thebooktocome 5y ago
This is a misstating of the argument. They argue that 10-14% is a much larger stake than three other funding options.
- algo_trader 5y ago
  What are those other funding options? He gives quite a rant, but doesnt mention a specific deal. The Backend link and the Miami incubators dont specify amounts. 14% is high - but that implies that your post-YC was not great. The previous 7% deal is also still available. Overall - he make the usual points, nothing new.
IshKebab 5y ago
They don't take 14% of unicorns though. They take 14% of essentially worthless companies that have a very small chance of becoming unicorns. That's how investment works; seems weird to call it out.
- rosndo 5y ago
  The point is that there is much cheaper money out there.

baby 5y ago

That was underwhelming. He basically described how an incubator works. You just need to watch shark tank to understand that no deals are born the same. If you can get a better deal somewhere else, then go somewhere else; nobody said YC is the only incubator or way to create a startup here.

jrm4 5y ago

I mean, I like this website, but I've never understood why doing a digital business would require loads of investment. Scale is like the whole point of "digital." I supposed a more nuanced question would be -- has YC made any essentially good businesses? Like "something GOOD that literally would be very difficult to make without tons of extra dollars?" I strongly doubt it, but maybe?

brightball 5y ago
Time costs money.
space_fountain 5y ago
Isn’t scale exactly why. There are many digital companies that cost about the same amount to run if they have 5 users or 5 million. That means there will be many cases where you only start making money at scale
vgeek 5y ago
Aren't they following a similar model to modern colleges? Build the prestige and then coast? There have been recent threads detailing extension/open admission online colleges potentially diluting colleges' brands. With a few dozen companies per batch, it seems like you would get more attention and the air of exclusivity. Now there are hundreds per batch with companies that are essentially rehashes of other YC companies from 10 years back. For every novel idea company, there seem to be a dozen variations of market analytics (no, your Customer Data tracking platform is not unique) or niche infrastructure management (solving complexity created for the sake of complexity vs simply avoiding... Where have we ended up) companies. They're obviously looking for the decacorn type companies but so many seem to be best case scenario of acquireihires. If you ignore flashy tech and buzzwords, it has never been easier to build the software. What keeps getting harder is getting material visibility in the marketplace due to the huge influx of niche participants and small avenue of promotional channels.

ivraatiems 5y ago

How was YCombinator ever not a "lottery factory"? Isn't that the goal of their style of venture capitalism - cast a wide net and profit massively off the few good fat fish that come up?

amelius 5y ago
... at the expense of hard working founders who put all their eggs in their one basket. "Work harder, and you will (read: might if you are very lucky) become a billionaire." This is very similar to every platform (like App Store) trying to win over workers by making them believe they can become rich on their platform, which of course is a statistical lie.
- ivraatiems 5y ago
  But how's that different from any other venture capitalist? The idea, if I understand it, is that if you work out everyone will be so rich it won't matter what percentage they own, you'll still be incredibly rich. If it doesn't work, as it usually doesn't, well, you can't give away 10% of 0, so who cares? It's not just VCs playing the lottery, it's the founders also. I'm not saying I support it or think it's a good or healthy thing, but... isn't this the bargain people are willingly making?
  - amelius 5y ago
    The problem is that the investors/platforms make it seem that the odds of winning are more favorable. HN is an example of this: we mostly hear the success stories.

steve_adams_86 5y ago

His lens seems to be fixed around the potential of being a unicorn. What YC offers is frankly unprecedented for a lot of people in the world now. Whether they become a unicorn or not, the program is providing opportunities that aren’t as easy to find as this guy is suggesting. Taking 10-14% is huge, sure. I agree. For some people there would be no 10-14% to worry about without an opportunity like this in the first place. It’s about trade offs. To some people this will be totally acceptable. If it’s not to you, there’s no social contract that you have to go through YC. In fact, he more or less explains this in the tweets. If you have other options, great, use them. He seems fairly biased against YC for a handful of reasons. I’m not cheering for YC or anything. I just don’t perceive awful or corrupt motives. Of course they’re a business trying to profit from investing in startups. Of course they want ownership for what they put into the company. It all seems very transparent and easy to follow.

rurp 5y ago
The animosity in the tweets turned me off quite a bit. It's not like founders are being shoved into YC cohorts. It won't be the right fit for everyone, and founders probably know if the program is worth the cost in effort and equity. If YC isn't a good match for you... just don't apply!

jedwhite 5y ago

I'm in the W22 batch. These tweets bear no relationship to reality. YC is unarguably transformative if you throw yourself into it and listen to the advice. The emotive nature of this thread probably speaks for itself. But for any startup considering issuing equity to anyone - YC or otherwise - there is a simple formula you can use that Paul Graham came up with: 1/(1 - n) He also put it way better than I can in his essay "Equity Equation": "You should give up n% of your company if what you trade it for improves your average outcome enough that the (100 - n)% you have left is worth more than the whole company was before." [1] [1] http://www.paulgraham.com/equity.html http://www.paulgraham.com/equity.html

Flashtoo 5y ago
Ignoring the merits of that specific rule of thumb, it seems unwise to take advice from a VC on how much equity you should give to VCs.
- jedwhite 5y ago
  The rule applies to giving equity to anyone - co-founders, employees, investors, accelerators. As an investor in a company, a VC would have a vested interest in giving this advice only if it made their investment more successful by making the company more successful in future. I think it is sensible to judge advice and the substance of an argument on its merits, taking into account any industry expertise or relevant biases, rather than exclude it because someone was an investor at the time.
tyre 5y ago
I think it can both be true than a $500k SAFE is marginally worth it and also true that given YC’s existing ownership at 7%, centralizing more equity isn’t. At the end of they day you’re only going to raise so much in your next round and half a million is a lot of space taken up by one investor (who is already motivated to help you if you only do 7%.) I have a couple batchmates who opted out of doing YC again because the equity was too high and that was pre-additional 375k SAFE. On the other hand it is 500k less that you have to raise to close a round and 500k you have if you can’t raise or want to wait to raise. So he doesn’t not have a point. It depends a lot on the company. But to his accusation that YC only cares about the top 10 companies, I think this additional money—which is optional!— disproportionately helps the not-top ten.

deleted 5y ago

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conjecTech 5y ago

Well, Ryan decided to block me for a rather tame quote tweet, so I guess I'll repost it here: "YC are some of the kindest, most egalitarian people in SV. They've treated me well even after my company they invested in closed down. They give people a shot who wouldn't otherwise have one. If I were an investor who just handed this guy money at 250x revenue, I'd be nervous." Every time I see things like this, I look back at an email Trevor Blackwell sent me about a month after we closed down our company. YC was above 100 companies/batch at that point, and he wasn't one of the partners assigned to our company. He took time out to tell us he thought we were special and hoped we would try again at some point. That vote of confidence got me through one of the darkest periods of my life. Garry, Michael, Harj and Geoff have been equally kind. Maybe YC has changed since then, but I doubt it.

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jedwhite 5y ago
No, it's still like that. They are kind and and supportive and positive. We had some huge engineering screwups launching this week, and we've had nothing but kindness and support. Based on our experience so far, I'd sum up the YC ethos as "kind to people, blunt on the advice".

cryptodan 5y ago

I actually like the comment page style although it could use some redesign like blocks around replies and posts.

rkk3 5y ago

All established institutions are on the other side of the deal when you engage with them; wether it is an Ivy League school, IB, Big Tech or VC's. They all take something. There are some valid points, people might not be aware of but overall the YC deal still seems better than most alternatives. I think he is discounting how hard it is at that early stage, that first capital needs to come from somewhere. Also YC founders seem to be disproportionately have softer landings if they don't go supersonic Unicorn IPO. Maybe you don't stand out in the top 10 of your batch and instead get aqui-hired and only make 800k/yr.

jedberg 5y ago

I'm a small time angel investor (I write 8-10 $100K checks a year), so YC is really important to me. Almost all my checks are in YC companies. I don't have the time nor skills to do proper due diligence, but with YC I don't have to. Investing in a YC company provides me with already vetted founders who I know will have an incredible support network and are already well connected. Yes, I give up some upside because of how much YC already owns, but to me it's worth every penny for the service that YC provides to me as an investor and to the startup. That's the investor side of the equation, which if you believe this thread is his main complaint -- that it's too investor friendly. But I also get to see the founder side of the equation. Since I'm writing such small checks, a lot of my value to the company is offering help at the early stage, often with architecture review or product reviews, and sometimes even interviewing engineering candidates for them. Because of the close relationship, sometimes I end up becoming friends with the founders I invest in. Which lets me see how YC helps them as founders. Need help connecting with someone at company X? There's almost always another YC founder who can make the intro. Need more money? YC has got VCs on speed dial for you. Need media coverage? There are journalists from highly respected outlets asking YC for good stories every day. Even basic stuff, like, "I need an accountant" or "I need a lawyer who can handle this special type of law" can be much easier solved with a quick intro from YC. Getting into YC just makes everything else about doing a startup so much easier. It doesn't make it easy, because startups are never easy. But it takes away a lot of the low level friction.

ykevinator2 5y ago
- systemsignal 5y ago
  It’s their choice and desire, why would it be shameful to help support them…
- dang 5y ago
  Please don't cross into personal attack. It's against the site guidelines (https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html), and we're trying to avoid the online callout/shaming culture here (https://hn.algolia.com/?sort=byDate&type=comment&dateRange=all&page=0&prefix=true&query=online%20shaming%20by%3Adang https://hn.algolia.com/?sort=byDate&type=comment&dateRange=a...).

robocat 5y ago

https://threadreaderapp.com/thread/1487500943511932941.html https://threadreaderapp.com/thread/1487500943511932941.html I was in an incubator program, and there were two serious problems with it, which if you join YC are potential problems too: Problem 1. The belief by founders that they could get good advice from others. This is a dangerous attitude to have programmed into yourself, because when starting a business you must stand on your own feet and trust your own opinions. Listening to others is fine, but it is to easy to cripple yourself by believing in the advice of successful people, and listening to the wrong advice. You need to make your own mistakes. That tightrope is an essential skill as an owner, and I don’t know how it is taught, especially to neophytes. I saw other founders learn to doubt themselves because they were not subject experts in so many areas of their business, and that doubt was damaging to them and their businesses. Yes Listen; yes respect the advice of others; no do not take advice without being careful to validate it for your businesses’ needs. I did also see some founders ignore excellent advice, but at least their businesses died honest deaths without interference! Problem 2. Incubators push businesses to get funded. The push is probably mostly organically due to the atmosphere of competition between founders, plus the expectation that it is just what you do, but also the incubator chiefs push for it. I saw many other companies take money to grow, and then lose control and end up with no meaningful return for their efforts. The problem with all investors I have seen in my country is that they push companies in queer directions, because VC tends to be ego driven: VC investors in New Zealand have strong opinions and they often kill companies. We bootstrapped, which has limited the size of the businesss, but bootstrapping de-risked our returns and we have comfortable lifestyles (albeit without the potential for superyachts and blow). I agree that giving away 1[0-9]% to YC is a lot, but getting $500k of distraction free money is a mighty big carrot. https://randle.substack.com/p/playing-different-games https://randle.substack.com/p/playing-different-games (scroll down to meme of VC with knife behind back, and read below) talks about the benefits of Tiger Global’s hands-off approach to founders where they don’t take board seats. “[Tiger Global] lacks the potential downside that comes from a new highly-involved investor who ends up being more of a drag than a help, or even worse ends up being actively malignant to the board and business.“. One benefit of YC that is not mentioned is bargaining power: if you are using a growth funding model, and you are successful enough to get to the later stages, I would hope that having YC on your side would give you fantastic leverage. Maybe YC’s ownership is not large, but it is enough that they will will avoid the vultures. Also the VCs know that screwing over YC is a high risk manoeuvre because it affects the VC’s other investments or potential for investments - if you are a successful startup without backing then your business could easily become another lonely victim. One thing I am unsure about is the rules for YC dilution: I think that YC is undiluted at your first round, which is not in alignment with founders. I presume after the first round that YC dilution matches founder dilution. Another aspect is that YC shares are preferential, while founders and options are common shares. So YC incentives can be mismatched with founders. The only thing keeping YC honest is the internal integrity of the YC business, and YC’s care for their own reputation for integrity (not shafting founders).

ykevinator2 5y ago

Who is he?

qwertyuiop_ 5y ago

Sour puss