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> 55% of the batch raised money before YC At this point, it seems like YC is just optimizing on execution risk, and only care about those startups where market

> 55% of the batch raised money before YC At this point, it seems like YC is just optimizing on execution risk, and only care about those startups where market risk is eliminated (more or less). If someone has already invested in more than half the batch, YC's already has a pointer about a big well defined market (or expected to be), just needs a team which can execute well. People used to apply to YC because they would be able to get support without a network. If a startup has to raise funds before getting into YC, I don't know, just does not sound right. This may also be the reasoning behind accepting many startups on just basis of an idea(29%) provided they worked in big-tech or hot startups previously[1], and working on problems in Dev Tools and B2B Saas space (similar to problems they solved already, or seen). Market is defined, they are just looking for good executioners. (In dev tools and Startup related Saas tools, market is other companies of the batch on occasions.) [1]: YC indexes heavily on anyone from an Ivy League college, or who has worked at FAANG, or unicorn startups like Uber. Going through their companies list, ex-FAANG/Ivy leaguers building a dev tools (or planning to) is the most repeated pattern.

deleted 5y ago
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dang 5y ago
With a sample that large you have to be careful not to draw conclusions too quickly. Just looking at the recent Launch HNs I see a bunch of startups that go way beyond just "execution risk": Launch HN: Carbon Crusher (YC W22) – Carbon Negative Roads - https://news.ycombinator.com/item?id=30793076 https://news.ycombinator.com/item?id=30793076 - March 2022 (93 comments) Launch HN: Charge Robotics (YC S21) - Robots that build solar farms - https://news.ycombinator.com/item?id=30780455 https://news.ycombinator.com/item?id=30780455 - March 2022 (79 comments) Launch HN: AirMyne (YC W22) – Capturing CO2 from air at industrial scale - https://news.ycombinator.com/item?id=30712229 https://news.ycombinator.com/item?id=30712229 - March 2022 (192 comments) Launch HN: Living Carbon (YC W20) – Trees that capture and store more carbon - https://news.ycombinator.com/item?id=30672841 https://news.ycombinator.com/item?id=30672841 - March 2022 (256 comments) Launch HN: Micro Meat (YC S21) – Technology for scaling cultivated meat - https://news.ycombinator.com/item?id=30627418 https://news.ycombinator.com/item?id=30627418 - March 2022 (194 comments) Launch HN: Phase Biolabs (YC W22) – Converting CO2 to Carbon-Neutral Chemicals - https://news.ycombinator.com/item?id=30557288 https://news.ycombinator.com/item?id=30557288 - March 2022 (88 comments) These all happen to be climate-related but I'm pretty sure that's just a coincidence. One thing's for sure, YC is just as interested in funding high-risk-high-potential-value startups as it ever was.
- ankit219 5y ago
  You may be right. I was drawing the conclusion from the stat about 55% prefunded startups, but that still leaves 45% w YC as first investor (45% of 414 is a sizeable 186). If you add 29% as only idea based, still leaves 66 at least which had product and YC as the first cheque. A couple of years ago that was close to the batch size. Probably in the absolute numbers, they are still funding those moonshots. Thanks for the list. Many seems very promising. So are some of the others like Andy which had a post yesterday.
- cinntaile 5y ago
  Is there a Launch HN list button hidden somewhere? It would be handy to have one just like we have for Ask HN or Show HN. Edit: There is! https://news.ycombinator.com/lists https://news.ycombinator.com/lists
  - dang 5y ago
    Not really a button but yes, the list: https://news.ycombinator.com/launches https://news.ycombinator.com/launches.
- jonwalch 5y ago
  These are my favorites from the batch.
theptip 5y ago
Isn't this theory contradicted by the next bullet? > 29% of the batch were accepted with only an idea Perhaps the proportion that had already raised is because YC are writing more and bigger checks, which gets them access to "later-stage" (still early) companies.
bko 5y ago
I was surprised by this: > 10% had more than $50k of monthly revenue when accepted If I had started a company that was bringing in 50k a month (600k a year), I would feel weird about being part of a group where 29% of the cohort is there on just an idea. Especially considering everyone gets the same deal. Surely 50k in monthly revenue is a better signal than someone that just has an idea and worked at some company before. I may be over stating its significance. Maybe those companies are movie pass business models, selling $10 bills for $5 so the revenue doesn't really mean anything
- forgingahead 5y ago
  Seems like YC has simply become a credential for future fund-raising, like "Harvard" or something else on your resume. No sour grapes at all, full credit to pg, Jessica, and the rest for building it to be wildly successful like that, but yes founders should think hard about why they would do something like YC and if the trade-off is worth it. While "YCXX" has always seemed like an interesting signal especially around these parts, personally my own radar is that anything post YC15 is less likely to grab my attention, because the original YC founders were less/no longer involved. Nothing wrong with the new generation of folks running it, but having followed this space since their early days, there is still a certain cachet that comes with the "OG" batches of YC, which were small and seemed more impactful, compared to the later ones.
  - beambot 5y ago
    In many places outside Silicon Valley, you'll find that local investors are reluctant to deviate from 1x revenue or 10x EBITDA for "venture investing" valuations -- which are really more akin to mature company / PE-style worldviews. For companies working in those environments, you could easily justify YCombinator as a conduit to Silicon Valley investor networks with loftier valuations & hypergrowth mindsets.
    - forgingahead 5y ago
      Certainly makes sense - though the piper needs to be paid eventually though - loftier valuations eventually need to be justified, else companies eventually suffer a down-round or worse, founders get kicked out or the entire company gets shut down. Seems like a Russian-Roulette way of playing business - hope you can exit with strong wealth before you find the chamber with the bullet in it.
lvl102 5y ago
To be fair, it’s ridiculously cheap to start something right now. Even 8-9 years ago, you only needed low six figures to jumpstart something. Now? I am pretty sure the biggest hurdle is opportunity cost for founders not the actual funding needs. This is referring to mostly SaaS of course.
- ryanSrich 5y ago
  The only real cost is time for building a SaaS company. You can pretty much get by without paying for anything. Granted, buying the premium versions of certain products makes life a lot easier, but it's by no means required. Of course, as you launch, you'll likely have to pay for some server cost, but even then, you'll most likely be covered by credits for the first year. For B2B SaaS, your first big costs are going to be advertising. Even just running ads against your own company name is a few hundred per month with Google. At that point though hopefully you're generating enough revenue from a few customers to cover the cost.
gumby 5y ago
> At this point, it seems like YC is just optimizing on execution risk From YC's side the cash outlay is the same either way so why not put a lot of it into something lower risk? But what's more interesting to me is from the team's side: clearly they are spending a large amount of equity (<7%) in exchange for some networking and the opportunity to be on the stage on demo day. Seems very expensive, but if you have built a SaaS business away from the deep investor and customer pools, it could really be worth it.
jedwhite 5y ago
We're in the current W22 batch with Andi. We raised a small amount of funding after getting accepted to YC but before the batch started. I would guess that is a non-trivial percent of the "raised money before YC". I think it's the other way around really. You're much more interesting to investors once you're in YC, not more interesting to YC once you have investors. We're not from Ivy League colleges (drop-outs). Never worked at FAANGs or unicorns. Not a dev tool. Definitely huge risk (new search engine taking on Google). I think YC cares about what they say they care about - making something people want. That's it. That's the secret. Having a small number (even 10s) of people who really love what you're making matters more than all the other signals you list.
- ankit219 5y ago
  You mean you got accepted into YC, then a few investors heard about you, and decided to fund you before you start the batch or take the YC deal? I did not think of it like that. Any insights as to why you would accept money just before entering YC, given there is a high probability you would get more money at higher floor through YC. Also, while I like what Andi is doing (some marketing terms aside), it's not a market risk (if you call yourself a search engine[1]). The market definitely exists, and is a Trillion $ one, with Google already dominating it. It depends on your execution ability as to how you capture it according to your strategy (which currently looks smart), but if you can't, the reason would be you could not outcompete Google, and not "the market is too small or does not exist". A typical market risk problem would be Airbnb for example. Edit: All the best for the demo day [1]: You can also be called a smart assistant. This way it has market risk, but carries negative connotation as the existing ones aren't as good. You know your strategy best, and I think it's a 10x better experience if I get the answer without having to open the link.
  - jedwhite 5y ago
    In our case it was friendly parties. But the YC validation made it straightforward, and I think would help anyone raising before the batch. We were an early admit so we're an unusual situation that way. And thank you. You're right that execution is all that matters for us. Our most important thing is focusing 100% on what our users want, and iterating as quickly as we can toward product market fit based on feedback. So we are a classic case of "code and talk to users" as all that matters.
ryanSrich 5y ago
They most likely have to do this as they scale in order to fund some of the moonshots they're looking at.
gamerDude 5y ago
I think this is actually a feature not a bug. YC can mitigate risk for many companies who still get great value out of it, while also investing in moonshots knowing that they will get enough of their money back from the less risky ones. That means YC and the world gets to see where the moonshots go by supporting the less risky!
- ankit219 5y ago
  I don't think there is anything wrong with it. They can do whatever they like, just that it felt weird given what YC promised earlier (not sure if they promise the same thing now). The other aspect of this is their target market (Seed investors) is also very much market risk averse, and invest heavily in execution risk businesses. They like their Saas multiples and GM very much.

deleted 5y ago

[deleted]

dang 5y ago

With a sample that large you have to be careful not to draw conclusions too quickly. Just looking at the recent Launch HNs I see a bunch of startups that go way beyond just "execution risk": Launch HN: Carbon Crusher (YC W22) – Carbon Negative Roads - https://news.ycombinator.com/item?id=30793076 https://news.ycombinator.com/item?id=30793076 - March 2022 (93 comments) Launch HN: Charge Robotics (YC S21) - Robots that build solar farms - https://news.ycombinator.com/item?id=30780455 https://news.ycombinator.com/item?id=30780455 - March 2022 (79 comments) Launch HN: AirMyne (YC W22) – Capturing CO2 from air at industrial scale - https://news.ycombinator.com/item?id=30712229 https://news.ycombinator.com/item?id=30712229 - March 2022 (192 comments) Launch HN: Living Carbon (YC W20) – Trees that capture and store more carbon - https://news.ycombinator.com/item?id=30672841 https://news.ycombinator.com/item?id=30672841 - March 2022 (256 comments) Launch HN: Micro Meat (YC S21) – Technology for scaling cultivated meat - https://news.ycombinator.com/item?id=30627418 https://news.ycombinator.com/item?id=30627418 - March 2022 (194 comments) Launch HN: Phase Biolabs (YC W22) – Converting CO2 to Carbon-Neutral Chemicals - https://news.ycombinator.com/item?id=30557288 https://news.ycombinator.com/item?id=30557288 - March 2022 (88 comments) These all happen to be climate-related but I'm pretty sure that's just a coincidence. One thing's for sure, YC is just as interested in funding high-risk-high-potential-value startups as it ever was.

ankit219 5y ago
You may be right. I was drawing the conclusion from the stat about 55% prefunded startups, but that still leaves 45% w YC as first investor (45% of 414 is a sizeable 186). If you add 29% as only idea based, still leaves 66 at least which had product and YC as the first cheque. A couple of years ago that was close to the batch size. Probably in the absolute numbers, they are still funding those moonshots. Thanks for the list. Many seems very promising. So are some of the others like Andy which had a post yesterday.
cinntaile 5y ago
Is there a Launch HN list button hidden somewhere? It would be handy to have one just like we have for Ask HN or Show HN. Edit: There is! https://news.ycombinator.com/lists https://news.ycombinator.com/lists
- dang 5y ago
  Not really a button but yes, the list: https://news.ycombinator.com/launches https://news.ycombinator.com/launches.
jonwalch 5y ago
These are my favorites from the batch.

theptip 5y ago

Isn't this theory contradicted by the next bullet? > 29% of the batch were accepted with only an idea Perhaps the proportion that had already raised is because YC are writing more and bigger checks, which gets them access to "later-stage" (still early) companies.

bko 5y ago

I was surprised by this: > 10% had more than $50k of monthly revenue when accepted If I had started a company that was bringing in 50k a month (600k a year), I would feel weird about being part of a group where 29% of the cohort is there on just an idea. Especially considering everyone gets the same deal. Surely 50k in monthly revenue is a better signal than someone that just has an idea and worked at some company before. I may be over stating its significance. Maybe those companies are movie pass business models, selling $10 bills for $5 so the revenue doesn't really mean anything

forgingahead 5y ago
Seems like YC has simply become a credential for future fund-raising, like "Harvard" or something else on your resume. No sour grapes at all, full credit to pg, Jessica, and the rest for building it to be wildly successful like that, but yes founders should think hard about why they would do something like YC and if the trade-off is worth it. While "YCXX" has always seemed like an interesting signal especially around these parts, personally my own radar is that anything post YC15 is less likely to grab my attention, because the original YC founders were less/no longer involved. Nothing wrong with the new generation of folks running it, but having followed this space since their early days, there is still a certain cachet that comes with the "OG" batches of YC, which were small and seemed more impactful, compared to the later ones.
- beambot 5y ago
  In many places outside Silicon Valley, you'll find that local investors are reluctant to deviate from 1x revenue or 10x EBITDA for "venture investing" valuations -- which are really more akin to mature company / PE-style worldviews. For companies working in those environments, you could easily justify YCombinator as a conduit to Silicon Valley investor networks with loftier valuations & hypergrowth mindsets.
  - forgingahead 5y ago
    Certainly makes sense - though the piper needs to be paid eventually though - loftier valuations eventually need to be justified, else companies eventually suffer a down-round or worse, founders get kicked out or the entire company gets shut down. Seems like a Russian-Roulette way of playing business - hope you can exit with strong wealth before you find the chamber with the bullet in it.

lvl102 5y ago

To be fair, it’s ridiculously cheap to start something right now. Even 8-9 years ago, you only needed low six figures to jumpstart something. Now? I am pretty sure the biggest hurdle is opportunity cost for founders not the actual funding needs. This is referring to mostly SaaS of course.

ryanSrich 5y ago
The only real cost is time for building a SaaS company. You can pretty much get by without paying for anything. Granted, buying the premium versions of certain products makes life a lot easier, but it's by no means required. Of course, as you launch, you'll likely have to pay for some server cost, but even then, you'll most likely be covered by credits for the first year. For B2B SaaS, your first big costs are going to be advertising. Even just running ads against your own company name is a few hundred per month with Google. At that point though hopefully you're generating enough revenue from a few customers to cover the cost.

gumby 5y ago

> At this point, it seems like YC is just optimizing on execution risk From YC's side the cash outlay is the same either way so why not put a lot of it into something lower risk? But what's more interesting to me is from the team's side: clearly they are spending a large amount of equity (<7%) in exchange for some networking and the opportunity to be on the stage on demo day. Seems very expensive, but if you have built a SaaS business away from the deep investor and customer pools, it could really be worth it.

jedwhite 5y ago

We're in the current W22 batch with Andi. We raised a small amount of funding after getting accepted to YC but before the batch started. I would guess that is a non-trivial percent of the "raised money before YC". I think it's the other way around really. You're much more interesting to investors once you're in YC, not more interesting to YC once you have investors. We're not from Ivy League colleges (drop-outs). Never worked at FAANGs or unicorns. Not a dev tool. Definitely huge risk (new search engine taking on Google). I think YC cares about what they say they care about - making something people want. That's it. That's the secret. Having a small number (even 10s) of people who really love what you're making matters more than all the other signals you list.

ankit219 5y ago
You mean you got accepted into YC, then a few investors heard about you, and decided to fund you before you start the batch or take the YC deal? I did not think of it like that. Any insights as to why you would accept money just before entering YC, given there is a high probability you would get more money at higher floor through YC. Also, while I like what Andi is doing (some marketing terms aside), it's not a market risk (if you call yourself a search engine[1]). The market definitely exists, and is a Trillion $ one, with Google already dominating it. It depends on your execution ability as to how you capture it according to your strategy (which currently looks smart), but if you can't, the reason would be you could not outcompete Google, and not "the market is too small or does not exist". A typical market risk problem would be Airbnb for example. Edit: All the best for the demo day [1]: You can also be called a smart assistant. This way it has market risk, but carries negative connotation as the existing ones aren't as good. You know your strategy best, and I think it's a 10x better experience if I get the answer without having to open the link.
- jedwhite 5y ago
  In our case it was friendly parties. But the YC validation made it straightforward, and I think would help anyone raising before the batch. We were an early admit so we're an unusual situation that way. And thank you. You're right that execution is all that matters for us. Our most important thing is focusing 100% on what our users want, and iterating as quickly as we can toward product market fit based on feedback. So we are a classic case of "code and talk to users" as all that matters.

ryanSrich 5y ago

They most likely have to do this as they scale in order to fund some of the moonshots they're looking at.

gamerDude 5y ago

I think this is actually a feature not a bug. YC can mitigate risk for many companies who still get great value out of it, while also investing in moonshots knowing that they will get enough of their money back from the less risky ones. That means YC and the world gets to see where the moonshots go by supporting the less risky!

ankit219 5y ago
I don't think there is anything wrong with it. They can do whatever they like, just that it felt weird given what YC promised earlier (not sure if they promise the same thing now). The other aspect of this is their target market (Seed investors) is also very much market risk averse, and invest heavily in execution risk businesses. They like their Saas multiples and GM very much.