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> But $120k is just not a lot of money. The real value of YC is the signal that getting accepted sends to other seed investors. This idea (first quoted sentenc

> But $120k is just not a lot of money. The real value of YC is the signal that getting accepted sends to other seed investors. This idea (first quoted sentence) needs to die. It is toxic to the early-stage ecosystem. Any amount of money is a ton of money. Period. You can ignore the hustling that Jobs or Zuckerberg did for literally a couple of thousand dollars - read Zuckerberg's contracts at the time he was at Harvard making facebook. Look at the timing jobs "Stole" $5000 from Woz and founded Apple with it (making his friend a multimillionaire in the process). The reality is that no windfall bonus from Atari of less than $4300 - which is money that Jobs had 0, absolutely 0, access to, from any other source - equals no Apple. Look at the dates. You can also ignore what companies actually spend the YCombinator seed money on when it was $14K-$20K, at a time that the YC badge easily added $200K+ to a YC company's average valuation - a badge that doesn't bring instant liquidity. How many YC companies would not exist if YC only added its badge to the valuation, and not actually given any money.[1] What you can't ignore is that there are people who are working a day job while owning and building a company - working that day job because any amount of money, even part of a single full time earner's after-tax salary, is a ton of money. Just try raising it. [1] Imagine if the YC admission read: "Congratulations! This admission is easily worth $200K in extra valuation. With the YC badge, you should have no trouble raising money. We are therefore not making any cash investment, not even $12K, but rendering only services. We welcome you to the bay area on (date)."

tptacek 13y ago
Sorry, I just don't agree. 120k barely makes expenses for 1 FTE. Not only that, but it's also an amount of money that a strong freelancer can generate on top of living expenses in a particularly well-utilized year.
- logicallee 13y ago
  You're simply empirically wrong [about the 'amount' of money that represents, whether it is large enough to make a substantial difference], and your anchors[1] are not only irrelevant and misleading in an early-stage context, but extremely toxic.[2] What was Google's first check in the amount of? $100K. It was a ton of money. As Wikipedia points out, "The first funding for Google as a company was secured in August 1998 in the form of a US$100,000 contribution from Andy Bechtolsheim, co-founder of Sun Microsystems, given to a corporation which did not yet exist." They used that to raise "On June 7, 1999, a round of equity funding totalling $25 million", about 10 months later. Pop quiz. Which was more money, the $100K in the first context or the $25M in the second? Well, as I've heard they never did spend much of that $25M, it sat in Google's bank account while they grew and raised further rounds.... But that $100K? That was a ton of money. Basically, you are wrong that it was not a ton of money, your anchors and comparisons are toxic and misleading, and if he had not cut that check then Larry and Sergey would not have created Google. That is what actual reality shows us. You simply do an incredible disservice to all early-stage startups by talking in these terms. I gave you several actual examples of far less than $120K being a ton of money in an early-stage context. As little as $5000 being a ton of money. I also specifically stated that if, say, $20K, weren't a lot of money, then it would make no difference empirically if YCombinator did not actually pay that cash. And YC companies wouldn't have either relied on or even actually spent that cash. But it does make a difference, and they did. As I specifically point out: your FTE expenses are completely irrelevant, and even part (less than 100%) of the after-tax portion of a single FTE salary is a ton of money. (In an early-stage context.) To imply otherwise does a huge disservice to all first-time, early-stage founders everywhere. The very idea is toxic and needs to die. [1] The meaning of anchor I use is: http://en.wikipedia.org/wiki/Anchoring http://en.wikipedia.org/wiki/Anchoring [2] Your figures both about (1) the cost to the company of a fully loaded FTE senior engineer and (2) the amount that a good freelancer can generate above living expenses in a year, are irrelevant and do not need to be argued. I will grant both as irrelevant to the discussion.
  - tptacek 13y ago
    Your comment is very emphatic, but you didn't rebut either of my points: * 120k will barely pay the fully loaded cost of a single engineer * A good freelancer can generate 120k above living expenses in a year Your response was "the fully loaded cost of an engineer is irrelevant". That's a weird argument, given that the cost of engineers dominates the expenses of early-stage startups.
    - waterlesscloud 13y ago
      That's cool and all, but what matters to a very early stage startup isn't the cost of hiring an engineer, it's covering the founders' living expenses and whatever business expenses arise (which may be very small). You know this, so I'm not sure why you're off on a tangent about things that don't normally apply in these situations.
      - tptacek 13y ago
        There was a long comment here, but I found a better way to make my point: If I gave you $120k to start a company with 1-2 other people, and you had no other funding commitments, I don't think I'd be changing your odds all that much. But I have no trouble believing that when YC gives founders $120k, they are changing the odds significantly.
        deleted 13y ago
        [deleted]
        tptacek 13y ago
        Well, that's a whole lot of repeated assertion, and I respect the effort, but you're not making a great case for yourself. It would help if you read my comments more carefully. The one you just replied to was particularly simple. Almost the only thing it says is that being a part of YC improves the odds. But the 120k isn't what's doing that.
- newsum 13y ago
  Exactly. move into your mother's house. become a 1099 contractor at $100/hr+. save, save, and save. a year later there's your bootstrap funds + credit cards, excess of 100K. Outsource design/dev if necessary, launch it, raise a large seed round/series A, valuation 4m+ You don't have to give away anything. be an entrepreneur.
  - deleted 13y ago
    [deleted]
    - tptacek 13y ago
      I'm confused. What part of working for a year and saving up $100k ruins your chances of starting a company? Am I reading too much between the lines, or do I also need long hair and a full beard like Wozniak? 37signals started that way, for what it's worth. Not by living with their parents, of course; by bootstrapping a consultancy. PlentyOfFish started that way. Braintree started that way. Come to think of it, so did Github. And didn't Mailchimp bootstrap, too? I think maybe the impedance mismatch here is that you assume I'm saying companies need to raise more than 120k to start. They don't, if they start out profitable. But that's not the normal YC startup strategy: those companies depend on the ability to run for a year, maybe many years, before generating profits. Against that strategy, 120k is not very meaningful. Which is why 'pg and now 'sama are always at pains to point out that people shouldn't apply "for the money".
      - danieltillett 13y ago
        If you can you should always bootstrap. I have started several companies over the years and everyone of them was bootstrapped. The process might be slower, but the advantages are so much greater retaining control.
    - deleted 13y ago
      [deleted]
  - ricardobeat 13y ago
    And do that before you have kids.
- eldavido 13y ago
  Maybe. I have a roommate in SF. He's freelancing, I'm working at a company. He's making more cash than I am, but I'm working on building a company (as an employee) that's shipped multiple iterations of a category-leading product, raised $XX million in VC, and hired almost 100 people. I'm not disputing that a good freelancer can clear $120k net of taxes and living expenses, just that that's the best path to take, if the end goal is to be an entrepreneur.
  - tptacek 13y ago
    Are we sure we're talking about the same thing? I'm not suggesting a freelancer can net $120k in a year. That's easy. I'm suggesting a freelancer can net $120k plus living expenses in a year --- a number perhaps closer to $200k-225k. The reason I think that I that I know a lot of people who do --- many of them outside my (particularly lucrative) specialty. Practically every established consultancy in the US throws off numbers like that year in year out, as a routine. Which is one reason a lot of consultancies end up spinning up product teams.
- mikeg8 13y ago
  An idea-stage startup should not be paying a FTE 120k. That is lunacy and engineers need to start to understand this. More equity, lower salary until there is money coming in would help more companies survive longer while they look for product-market fit.
  - tptacek 13y ago
    I don't doubt that you're right about this, but I'm using the (lowball) estimate of the cost of a single developer as a benchmark for the amount of money we're talking about. Also: I'm not sure what you call someone who takes half salary in exchange for equity. It's probably not "cofounder", but "employee" doesn't fully capture it either.
morgante 13y ago
To be honest, I imagine they'd all still exist even if YC gave no funding. A program like YCVC would exist (because VCs put inordinate trust in YC) and startups would get the funding they need. And, let's be honest, $120k really isn't a lot of money. Sure, it might be more than my net worth right now—but as an engineer I could easily save up that amount in less than 2 years.
Iftheshoefits 13y ago
That $120k has to buy incorporation and legal fees, business operating expenses, and living expenses for at least 2 founders for three months. It's significantly better than $17k plus a note, but it's still a small enough amount that the program effectively selects for founding teams who either don't need the money (e.g. already have substantial financial means from other sources) or haven't got anything to lose (e.g. 20-somethings fresh out of school, or still in it). That excludes a huge talent pool.
- ZenPro 13y ago
  This. This x100. We are in a crazy scenario where we are seeking a Series A with a good product in a validated market fit. The investors have essentially said unless you are eating ramen noodles and scraping by we are not interested. ^^ That attitude essentially rules out anyone with a family, prior commitments or debts from college/life. Why would a funding round not earmark a portion for a fair (albeit lower than market) salary?
SocksCanClose 13y ago
... actually a "ton" of money is technically £2000, or $3365 at the 22APR14 exchange rate. $120,000 is therefore ~35.66 tons of money.
- _deh 13y ago
  A ton is £100, you're thinking of an Archer.
uiri 13y ago
I just want to raise the point that your Apple example doesn't take inflation into account. The $4300 in 1975 is roughly $18.5k (to within $500) in today's dollars. This is inline with YC's previous seed funding of $17k. I have to agree with you that what is "a lot of money" is entirely relative; I don't think that $5k in today's terms is a lot of money by any startup's standards but any amount upwards of $15k or so is definitely "a lot of money" to a larval startup.
ScottBurson 13y ago
I don't think you're expressing yourself very well, but I do think you have an interesting point. I would put it this way: if you want to start a company, and you manage to raise, say, $30k from friends and family, you should be very much encouraged, not discouraged. That's not to say you won't want to raise more later, but this may very well be enough to get you off the ground.

tptacek 13y ago

Sorry, I just don't agree. 120k barely makes expenses for 1 FTE. Not only that, but it's also an amount of money that a strong freelancer can generate on top of living expenses in a particularly well-utilized year.

logicallee 13y ago
You're simply empirically wrong [about the 'amount' of money that represents, whether it is large enough to make a substantial difference], and your anchors[1] are not only irrelevant and misleading in an early-stage context, but extremely toxic.[2] What was Google's first check in the amount of? $100K. It was a ton of money. As Wikipedia points out, "The first funding for Google as a company was secured in August 1998 in the form of a US$100,000 contribution from Andy Bechtolsheim, co-founder of Sun Microsystems, given to a corporation which did not yet exist." They used that to raise "On June 7, 1999, a round of equity funding totalling $25 million", about 10 months later. Pop quiz. Which was more money, the $100K in the first context or the $25M in the second? Well, as I've heard they never did spend much of that $25M, it sat in Google's bank account while they grew and raised further rounds.... But that $100K? That was a ton of money. Basically, you are wrong that it was not a ton of money, your anchors and comparisons are toxic and misleading, and if he had not cut that check then Larry and Sergey would not have created Google. That is what actual reality shows us. You simply do an incredible disservice to all early-stage startups by talking in these terms. I gave you several actual examples of far less than $120K being a ton of money in an early-stage context. As little as $5000 being a ton of money. I also specifically stated that if, say, $20K, weren't a lot of money, then it would make no difference empirically if YCombinator did not actually pay that cash. And YC companies wouldn't have either relied on or even actually spent that cash. But it does make a difference, and they did. As I specifically point out: your FTE expenses are completely irrelevant, and even part (less than 100%) of the after-tax portion of a single FTE salary is a ton of money. (In an early-stage context.) To imply otherwise does a huge disservice to all first-time, early-stage founders everywhere. The very idea is toxic and needs to die. [1] The meaning of anchor I use is: http://en.wikipedia.org/wiki/Anchoring http://en.wikipedia.org/wiki/Anchoring [2] Your figures both about (1) the cost to the company of a fully loaded FTE senior engineer and (2) the amount that a good freelancer can generate above living expenses in a year, are irrelevant and do not need to be argued. I will grant both as irrelevant to the discussion.
- tptacek 13y ago
  Your comment is very emphatic, but you didn't rebut either of my points: * 120k will barely pay the fully loaded cost of a single engineer * A good freelancer can generate 120k above living expenses in a year Your response was "the fully loaded cost of an engineer is irrelevant". That's a weird argument, given that the cost of engineers dominates the expenses of early-stage startups.
  - waterlesscloud 13y ago
    That's cool and all, but what matters to a very early stage startup isn't the cost of hiring an engineer, it's covering the founders' living expenses and whatever business expenses arise (which may be very small). You know this, so I'm not sure why you're off on a tangent about things that don't normally apply in these situations.
    - tptacek 13y ago
      There was a long comment here, but I found a better way to make my point: If I gave you $120k to start a company with 1-2 other people, and you had no other funding commitments, I don't think I'd be changing your odds all that much. But I have no trouble believing that when YC gives founders $120k, they are changing the odds significantly.
      - deleted 13y ago
        [deleted]
        tptacek 13y ago
        Well, that's a whole lot of repeated assertion, and I respect the effort, but you're not making a great case for yourself. It would help if you read my comments more carefully. The one you just replied to was particularly simple. Almost the only thing it says is that being a part of YC improves the odds. But the 120k isn't what's doing that.
newsum 13y ago
Exactly. move into your mother's house. become a 1099 contractor at $100/hr+. save, save, and save. a year later there's your bootstrap funds + credit cards, excess of 100K. Outsource design/dev if necessary, launch it, raise a large seed round/series A, valuation 4m+ You don't have to give away anything. be an entrepreneur.
- deleted 13y ago
  [deleted]
  - tptacek 13y ago
    I'm confused. What part of working for a year and saving up $100k ruins your chances of starting a company? Am I reading too much between the lines, or do I also need long hair and a full beard like Wozniak? 37signals started that way, for what it's worth. Not by living with their parents, of course; by bootstrapping a consultancy. PlentyOfFish started that way. Braintree started that way. Come to think of it, so did Github. And didn't Mailchimp bootstrap, too? I think maybe the impedance mismatch here is that you assume I'm saying companies need to raise more than 120k to start. They don't, if they start out profitable. But that's not the normal YC startup strategy: those companies depend on the ability to run for a year, maybe many years, before generating profits. Against that strategy, 120k is not very meaningful. Which is why 'pg and now 'sama are always at pains to point out that people shouldn't apply "for the money".
    - danieltillett 13y ago
      If you can you should always bootstrap. I have started several companies over the years and everyone of them was bootstrapped. The process might be slower, but the advantages are so much greater retaining control.
  - deleted 13y ago
    [deleted]
- ricardobeat 13y ago
  And do that before you have kids.
eldavido 13y ago
Maybe. I have a roommate in SF. He's freelancing, I'm working at a company. He's making more cash than I am, but I'm working on building a company (as an employee) that's shipped multiple iterations of a category-leading product, raised $XX million in VC, and hired almost 100 people. I'm not disputing that a good freelancer can clear $120k net of taxes and living expenses, just that that's the best path to take, if the end goal is to be an entrepreneur.
- tptacek 13y ago
  Are we sure we're talking about the same thing? I'm not suggesting a freelancer can net $120k in a year. That's easy. I'm suggesting a freelancer can net $120k plus living expenses in a year --- a number perhaps closer to $200k-225k. The reason I think that I that I know a lot of people who do --- many of them outside my (particularly lucrative) specialty. Practically every established consultancy in the US throws off numbers like that year in year out, as a routine. Which is one reason a lot of consultancies end up spinning up product teams.
mikeg8 13y ago
An idea-stage startup should not be paying a FTE 120k. That is lunacy and engineers need to start to understand this. More equity, lower salary until there is money coming in would help more companies survive longer while they look for product-market fit.
- tptacek 13y ago
  I don't doubt that you're right about this, but I'm using the (lowball) estimate of the cost of a single developer as a benchmark for the amount of money we're talking about. Also: I'm not sure what you call someone who takes half salary in exchange for equity. It's probably not "cofounder", but "employee" doesn't fully capture it either.

morgante 13y ago

To be honest, I imagine they'd all still exist even if YC gave no funding. A program like YCVC would exist (because VCs put inordinate trust in YC) and startups would get the funding they need. And, let's be honest, $120k really isn't a lot of money. Sure, it might be more than my net worth right now—but as an engineer I could easily save up that amount in less than 2 years.

Iftheshoefits 13y ago

That $120k has to buy incorporation and legal fees, business operating expenses, and living expenses for at least 2 founders for three months. It's significantly better than $17k plus a note, but it's still a small enough amount that the program effectively selects for founding teams who either don't need the money (e.g. already have substantial financial means from other sources) or haven't got anything to lose (e.g. 20-somethings fresh out of school, or still in it). That excludes a huge talent pool.

ZenPro 13y ago
This. This x100. We are in a crazy scenario where we are seeking a Series A with a good product in a validated market fit. The investors have essentially said unless you are eating ramen noodles and scraping by we are not interested. ^^ That attitude essentially rules out anyone with a family, prior commitments or debts from college/life. Why would a funding round not earmark a portion for a fair (albeit lower than market) salary?

SocksCanClose 13y ago

... actually a "ton" of money is technically £2000, or $3365 at the 22APR14 exchange rate. $120,000 is therefore ~35.66 tons of money.

_deh 13y ago
A ton is £100, you're thinking of an Archer.

uiri 13y ago

I just want to raise the point that your Apple example doesn't take inflation into account. The $4300 in 1975 is roughly $18.5k (to within $500) in today's dollars. This is inline with YC's previous seed funding of $17k. I have to agree with you that what is "a lot of money" is entirely relative; I don't think that $5k in today's terms is a lot of money by any startup's standards but any amount upwards of $15k or so is definitely "a lot of money" to a larval startup.

ScottBurson 13y ago

I don't think you're expressing yourself very well, but I do think you have an interesting point. I would put it this way: if you want to start a company, and you manage to raise, say, $30k from friends and family, you should be very much encouraged, not discouraged. That's not to say you won't want to raise more later, but this may very well be enough to get you off the ground.