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S16 here. I think the greatest value add was actually being able to work heads-down for 3 months knowing that you would almost certainly get investment on Demo

by dheera 4y ago

S16 here. I think the greatest value add was actually being able to work heads-down for 3 months knowing that you would almost certainly get investment on Demo Day. Almost all companies got investment, since YC was extremely selective back then (batch sizes were much smaller) and investors generally trusted YC's judgement. Prior to S16, this was probably even more true. If it weren't for YC one would have to spend 50% of their working hours having coffee chats and preparing demos, since investors generally had their own contorted idea of what a good demo is before they would invest, and it was usually not what the customer wanted. Being able to get twice as much work done in return for 7% was a good deal. I don't think that applies anymore, sadly, with the large batch sizes they accept now. Nowadays you'll have to waste half your summer having coffee, not have guaranteed investment, and still give away 7%. Not a good deal. Also, if you live in the bay area, it's fairly easy to come across most YC advice and get investor intros just by going to enough house parties with seasoned founder attendees.

chrisfrantz 4y ago
Nowadays you start with $500K though, which puts you in a much better position when speaking with investors as your initial runway isn’t as close to nil.
- dheera 4y ago
  Yeah. It's better, though $500K is still low for a couple founders plus company expenses, given how much rents and cost of living has gone up in the past 6 years. Especially if your startup isn't purely software, and involves some operational or hardware expenses, $500K is a no-go. It's also the ballpark of what 2 technical founders could easily make by working for ~6 months in the bay area, and not have to give away any equity at all. So if you're doing it for $500K, I'd say there are better ways to get $500K than giving up 7% of your company. Now if YC handed out $2M and cut their batch size by a factor of 4 (being more selective in their applications), I think it'd be a really good play for them.
  - therusskiy 4y ago
    Isn't running a business and especially a startup is supposed to be risky? "We have an idea that's not materialized yet, give us money so we can live comfortably and reap all benefits it it works out and not lose anything if it doesn't." - sounds like a wishful thinking.
    - dheera 4y ago
      > Isn't running a business and especially a startup is supposed to be risky? No, it is risky, and you want to actively eliminate as many of the risks as possible. Having a decent sized pile of cash is one way out of several of the risks. Supply chain shortages, founder medical expenses, mishaps and accidents, rising costs of living, personal emergencies happening to founders or employees requiring leave, there are a million things that will bite you if you don't have cash and runway. "Supposed to be risky" isn't a good way to think about it, IMO. A lot of the time you'll hear people romanticize a couple of fresh graduates living on couches in a garage, living on ramen, and building a unicorn, but the reality is that most billion-dollar companies weren't actually built that way, and it isn't the best way to optimize your chances of success.
      - upupandup 4y ago
        If something is risky, you should treat it as such. What I see people caught up in the startup/hustle/entrepreneur porn is the belief that they are different. No, statistics still show 95% of startups fail. You shouldn't be telling people to spend your youth on something that has 5% of less of success.
        dheera 4y ago
        It depends a lot on personal circumstances, and this is what I wish was mentioned more. For example, if you graduate with an engineering degree, can code, and don't have any grave medical conditions or loans to repay, I'd wholeheartedly encourage trying to start a company if you want to. It's risky in that the company would have a 95% chance of failing, but in that case you still learn a lot and it's fairly easy to land a job if you keep up your technical skills. If you're stably married, your partner earns a high income in a stable job, and is supportive, that's another case where I'd say go for it, take the calculated risk. In a lot of other cases, such as if you're knee deep in student debt, or (live in the US + have a medical condition + not a lot of savings), I'd advise building up a modest amount of savings first. It really depends.
faangiq 4y ago
This is a good way to look at the ROI.
snowmaker 4y ago
Actually, the percentage of companies that raise money at demo day has remained constant from S16 to now.
throwaway_4ever 4y ago
> just by going to enough house parties with seasoned founder attendees Do you think this is realistic getting access to these just by living in the Bay? I don't think so.
- dheera 4y ago
  > Do you think this is realistic getting access to these just by living in the Bay? Yes, if (a) you're nice and approachable (b) you're working on something interesting (c) are reasonably good at socializing, it's pretty easy to ask around and get looped in on such events. People here are pretty open about having interesting friends-of-friends show up to house parties.
  - throwaway_4ever 4y ago
    Hmm. I’ve lived in the Bay my whole life but I guess lack of (b) meant my social circle was always local normie friends or coworker FAANG types. Guess I need to (b), get more internet cred, and actually branch out to internet people rather than familiar territory.

by dheera 4y ago

chrisfrantz 4y ago

Nowadays you start with $500K though, which puts you in a much better position when speaking with investors as your initial runway isn’t as close to nil.

dheera 4y ago
Yeah. It's better, though $500K is still low for a couple founders plus company expenses, given how much rents and cost of living has gone up in the past 6 years. Especially if your startup isn't purely software, and involves some operational or hardware expenses, $500K is a no-go. It's also the ballpark of what 2 technical founders could easily make by working for ~6 months in the bay area, and not have to give away any equity at all. So if you're doing it for $500K, I'd say there are better ways to get $500K than giving up 7% of your company. Now if YC handed out $2M and cut their batch size by a factor of 4 (being more selective in their applications), I think it'd be a really good play for them.
- therusskiy 4y ago
  Isn't running a business and especially a startup is supposed to be risky? "We have an idea that's not materialized yet, give us money so we can live comfortably and reap all benefits it it works out and not lose anything if it doesn't." - sounds like a wishful thinking.
  - dheera 4y ago
    > Isn't running a business and especially a startup is supposed to be risky? No, it is risky, and you want to actively eliminate as many of the risks as possible. Having a decent sized pile of cash is one way out of several of the risks. Supply chain shortages, founder medical expenses, mishaps and accidents, rising costs of living, personal emergencies happening to founders or employees requiring leave, there are a million things that will bite you if you don't have cash and runway. "Supposed to be risky" isn't a good way to think about it, IMO. A lot of the time you'll hear people romanticize a couple of fresh graduates living on couches in a garage, living on ramen, and building a unicorn, but the reality is that most billion-dollar companies weren't actually built that way, and it isn't the best way to optimize your chances of success.
    - upupandup 4y ago
      If something is risky, you should treat it as such. What I see people caught up in the startup/hustle/entrepreneur porn is the belief that they are different. No, statistics still show 95% of startups fail. You shouldn't be telling people to spend your youth on something that has 5% of less of success.
      - dheera 4y ago
        It depends a lot on personal circumstances, and this is what I wish was mentioned more. For example, if you graduate with an engineering degree, can code, and don't have any grave medical conditions or loans to repay, I'd wholeheartedly encourage trying to start a company if you want to. It's risky in that the company would have a 95% chance of failing, but in that case you still learn a lot and it's fairly easy to land a job if you keep up your technical skills. If you're stably married, your partner earns a high income in a stable job, and is supportive, that's another case where I'd say go for it, take the calculated risk. In a lot of other cases, such as if you're knee deep in student debt, or (live in the US + have a medical condition + not a lot of savings), I'd advise building up a modest amount of savings first. It really depends.

faangiq 4y ago

This is a good way to look at the ROI.

snowmaker 4y ago

Actually, the percentage of companies that raise money at demo day has remained constant from S16 to now.

throwaway_4ever 4y ago

> just by going to enough house parties with seasoned founder attendees Do you think this is realistic getting access to these just by living in the Bay? I don't think so.

dheera 4y ago
> Do you think this is realistic getting access to these just by living in the Bay? Yes, if (a) you're nice and approachable (b) you're working on something interesting (c) are reasonably good at socializing, it's pretty easy to ask around and get looped in on such events. People here are pretty open about having interesting friends-of-friends show up to house parties.
- throwaway_4ever 4y ago
  Hmm. I’ve lived in the Bay my whole life but I guess lack of (b) meant my social circle was always local normie friends or coworker FAANG types. Guess I need to (b), get more internet cred, and actually branch out to internet people rather than familiar territory.