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Do you think YC would make sense for a company that doesn't intend to raise money beyond the YC investment? I have an idea for a b2c product I want to build th

Do you think YC would make sense for a company that doesn't intend to raise money beyond the YC investment? I have an idea for a b2c product I want to build that has a few paths to revenue (and a possible b2b offshoot), as well as acquisition by FAANG (or FAANG-adjacent). Is there something about taking investment from YC that prevents me from turning around and selling it for $2M after building it out a bit more? Alternately, as a solo founder, if I got to a point of $10K MRR I'd be happy to just keep doing what I'm doing, but I guess I'd have an obligation to continue trying to grow? edit: to clarify, I'd be using the $125K 7% part of the investment without necessarily dipping into the additional $375K in this situation. But maybe I'm not understanding how the MFN provision works

acecreamu 4y ago
Any investor would hate this idea, it's a terrible deal for them, and YC are smart enough to get it out of you. The whole business of VC is to sell later at the higher price. If they give you money at val of 5M+ and you sell for 2M - they are in loss.
- pcthrowaway 4y ago
  It's not val of 5M though? It's ~1.7M IIUC. 7% for 125K, an additional 375K can be invested though, with additional equity attached. Is that not right? edit: Investors are also expecting to take a loss on many of the investments. 2M is one exit option, which still gives them +17% return on investment I know that's not the standard type of exit YC are looking for, and I'm open to growing a bit more, but not as interested in taking additional investments. Final exit could end up being 10M for all I know. I just think this growth at all costs attitude needs to change a bit with the current economy. I'd be happy to take $80K for a 7% investment also, but they have a standard deal which I think perverts the incentives and, frankly, leads to outcomes where they're pushing you to take more investment even if you could just have a sustainable business pulling in 10-30K MRR or something
- tptacek 4y ago
  The whole business of business is to sell later at a higher price.
  - turbonaut 4y ago
    In some businesses selling earlier at a higher price is also acceptable. It’s only the delivery that is later (or indeed concurrent).
  - robocat 4y ago
    Surely the majority of businesses are small, and are more about making profits every year, rather than selling shares? I don’t usually see one-liner comments from you.
robocat 4y ago
YC only invests in companies that aim big, and have a big opportunity. So you would have to lie to get them to invest, and they likely would catch you out lying. http://paulgraham.com/growth.html http://paulgraham.com/growth.html and http://paulgraham.com/mean.html http://paulgraham.com/mean.html gives you some idea (also see http://paulgraham.com/articles.html http://paulgraham.com/articles.html ). Giving 7%, but getting say 20% extra when you sell, could be financially sensible (depending on your other costs and benefits). Do you think it is worth lying?
- pcthrowaway 4y ago
  I have no intention of lying, I'd rather bootstrap or shop for other investors who don't have the same expectation of 'growth potential'. The YC model is.. it's own thing.. seems like in the current economy, they need every company to be a potential unicorn, which works out for them because they're doing it at scale, and the ones that deliver, deliver outsized returns. But possibly doesn't work out as well for the founders, because the 9/10 that don't deliver, are forced to run their company into the ground chasing a moonshot vs. a sustainable lifestyle business, and don't get to reap the rewards they might get from the latter business model
  - robocat 4y ago
    Agree. I have yet to see YC publish figures on founder returns - they mostly talk about the successes. https://jaredheyman.medium.com/on-the-life-and-death-of-y-combinator-startups-d58aa03421f0 https://jaredheyman.medium.com/on-the-life-and-death-of-y-co... Amazing video on bootstrapping: https://youtube.com/watch?v=otbnC2zE2rw https://youtube.com/watch?v=otbnC2zE2rw There are funds trying to succeed at the many-small-successes model of investing - personally I am skeptical (from my own experience) because the natural failure rate is so high (before stressors due to investors). Edit: and there is a strong negative selection bias - small software businesses asking for money is a loud signal that they are much less likely to be successful at all IMHO. Relevant article about Mittelstands ”We need a middle class for startups”: https://neilthanedar.com/we-need-a-middle-class-for-startups/ https://neilthanedar.com/we-need-a-middle-class-for-startups... and my comment https://news.ycombinator.com/item?id=31350478 https://news.ycombinator.com/item?id=31350478

acecreamu 4y ago

Any investor would hate this idea, it's a terrible deal for them, and YC are smart enough to get it out of you. The whole business of VC is to sell later at the higher price. If they give you money at val of 5M+ and you sell for 2M - they are in loss.

pcthrowaway 4y ago
It's not val of 5M though? It's ~1.7M IIUC. 7% for 125K, an additional 375K can be invested though, with additional equity attached. Is that not right? edit: Investors are also expecting to take a loss on many of the investments. 2M is one exit option, which still gives them +17% return on investment I know that's not the standard type of exit YC are looking for, and I'm open to growing a bit more, but not as interested in taking additional investments. Final exit could end up being 10M for all I know. I just think this growth at all costs attitude needs to change a bit with the current economy. I'd be happy to take $80K for a 7% investment also, but they have a standard deal which I think perverts the incentives and, frankly, leads to outcomes where they're pushing you to take more investment even if you could just have a sustainable business pulling in 10-30K MRR or something
tptacek 4y ago
The whole business of business is to sell later at a higher price.
- turbonaut 4y ago
  In some businesses selling earlier at a higher price is also acceptable. It’s only the delivery that is later (or indeed concurrent).
- robocat 4y ago
  Surely the majority of businesses are small, and are more about making profits every year, rather than selling shares? I don’t usually see one-liner comments from you.

robocat 4y ago

YC only invests in companies that aim big, and have a big opportunity. So you would have to lie to get them to invest, and they likely would catch you out lying. http://paulgraham.com/growth.html http://paulgraham.com/growth.html and http://paulgraham.com/mean.html http://paulgraham.com/mean.html gives you some idea (also see http://paulgraham.com/articles.html http://paulgraham.com/articles.html ). Giving 7%, but getting say 20% extra when you sell, could be financially sensible (depending on your other costs and benefits). Do you think it is worth lying?

pcthrowaway 4y ago
I have no intention of lying, I'd rather bootstrap or shop for other investors who don't have the same expectation of 'growth potential'. The YC model is.. it's own thing.. seems like in the current economy, they need every company to be a potential unicorn, which works out for them because they're doing it at scale, and the ones that deliver, deliver outsized returns. But possibly doesn't work out as well for the founders, because the 9/10 that don't deliver, are forced to run their company into the ground chasing a moonshot vs. a sustainable lifestyle business, and don't get to reap the rewards they might get from the latter business model
- robocat 4y ago
  Agree. I have yet to see YC publish figures on founder returns - they mostly talk about the successes. https://jaredheyman.medium.com/on-the-life-and-death-of-y-combinator-startups-d58aa03421f0 https://jaredheyman.medium.com/on-the-life-and-death-of-y-co... Amazing video on bootstrapping: https://youtube.com/watch?v=otbnC2zE2rw https://youtube.com/watch?v=otbnC2zE2rw There are funds trying to succeed at the many-small-successes model of investing - personally I am skeptical (from my own experience) because the natural failure rate is so high (before stressors due to investors). Edit: and there is a strong negative selection bias - small software businesses asking for money is a loud signal that they are much less likely to be successful at all IMHO. Relevant article about Mittelstands ”We need a middle class for startups”: https://neilthanedar.com/we-need-a-middle-class-for-startups/ https://neilthanedar.com/we-need-a-middle-class-for-startups... and my comment https://news.ycombinator.com/item?id=31350478 https://news.ycombinator.com/item?id=31350478