7 ms·

The Best Deal In Startup Land

75 points by jmorin007 17y ago

meterplech 17y ago
certainly the ycombinator clones are interesting and may even begin to make a difference. But, if the value proposition of ycombinator is essentially PGs talent, help, and networking, how much can the knockoffs really give you. That being said, as with the author, it is even more clear to me ycombinator itself is the best deal out there
- ig1 17y ago
  There are plenty of other talented and well connected angels out there. You have to remember that before yc PG was just another dot-com millionaire (well he had the essays + lisp fame + anti-spam fame but in business terms not that much). It wouldn't make much sense to go to YC if for example you were building b2b enterprise apps or targeting non-english speaking market where YC lacks expertise, but other YC-style programs might be much more suitable.
  - gruseom 17y ago
    It wouldn't make much sense to go to YC if for example you were building b2b enterprise apps On the contrary, I'm pretty sure YC are not only interested in such startups, they've funded some.
    - jasonlbaptiste 17y ago
      viaweb made software for businesses to setup shop online. though it was not a b2b app, it was not not a cutesy consumer app.
  - deleted 17y ago
    [deleted]
  - SwellJoe 17y ago
    It wouldn't make much sense to go to YC if for example you were building b2b enterprise apps or targeting non-english speaking market where YC lacks expertise, but other YC-style programs might be much more suitable. While that was possibly true of b2b+YC in the earlier days, they have since funded a number of those kinds of companies. Ours was among the early examples in 2007, and we certainly have no complaints about their contributions to our business. pg has said on several occasions that the reason they fund the kinds of companies they do (leaning heavily towards web 2.0 consumer businesses) is because that's who applies. Viaweb was b2b at its core, so one can't really say they don't know that kind of business.
    - ig1 17y ago
      Viaweb was targeted at small businesses which is a completely different market from large enterprise sales. I'm not talking about off the shelf business products that solve a standard problem, but if you're bringing a new unique solution to the market you really need a dedicated sales force. Things like industry contacts can be critical (it can often be impossible to even get in to a company to pitch without an inside contact), lead times are very long, etc. The challenges you face are often vastly different to most web 2.0 apps. Crossing the Chasm is a good book on the sort of challenge. In those sort of circumstances you may well be better off finding a consortium of angels who are from your industry than joining a generic incubator style scheme (although obviously they have their own value).
      - SwellJoe 17y ago
        Ah, yes. YC has never (to my knowledge) funded an enterprise service-oriented company, as you've described, and probably wouldn't. pg has also disclaimed having much good insight on enterprise businesses of this sort. So, yes, if you're building that kind of company, YC is probably not the right choice of investor. The scale of investment is also too low...enterprise sales guys with specific industry experience cost more per-month than YC invests. So unless they're also a founder and not drawing much of a salary, the math isn't going to work out.
      - webwright 17y ago
  - ig1 17y ago
    Has HN really turned into somewhere where people down-vote on-topic comments they disagree with ? Great way to encourage reasoned discussion as opposed to groupthink. (feel free to downvote this one though; as meta-discussions are off-topic unlike my previous comment)
- fredwilson 17y ago
  i think you make a great point. you can evaluate the "knockoffs" by who is engaged and actively helping the companies. saul and reshma at seedcamp are very good. brad, david, shawn at techstars are also quite good. i don't know all the programs well enough to do this for all of them. but that is critical to the success of the program. and Paul and Jessica (and Trevor who i've not met yet) are the model for sure
  - dangoldin 17y ago
    You are also getting the experience and knowledge of the other startups' founders. You're also a member of a tight knit group that will probably tend to help each other and keep each other focused when things go off track. You just get a different set of benefits from having a strong group of mentors.
    - fredwilson 17y ago
      great point. that is a huge part of why YC works so well
breck 17y ago
Right on. The YC experience is worth so much more than just $15k-25k. It's like giving some stock to part time consultants. Except the consultants are none other than PG, Jessica and Trevor, and they pay you $15-25k! Then you also get the seal of approval and doors instantly open. And you get to learn from others' mistakes and triumphs as you see first hand 20+ other startups thrive and die. Plus you get access to the YC alum network. PLUS, there are virtually no costs of the YC process. You fill out an application: 1-2 hours. You interview: 10 minutes + travel time. You fill out some paperwork: 3-4 hours. Boom, you get a check and have a Delaware corporation. Maybe you don't get in and you're out a few hours of work. Compare that to the fundraising process with anyone else. Of course, I'm preaching to the choir here. But I just wanted to add another data point.
callmeed 17y ago
As the YC FAQ states: "Half (maybe more) of the startups we fund don't need the money. ..." I'd really like to be a part of YC someday soon–and I definitely wouldn't need the money. My problem is finding time to be away from my current company long enough to focus on and launch a new idea. When I read that Sarah Lacy comment last night, I thought it was one of the more short-sighted comments I'd read on TC. Is that par for the course for her?
- thaumaturgy 17y ago
  > My problem is finding time to be away from my current company long enough... I don't know if this is your company you're talking about, or just a regular type job working for someone else. If it's your own company, then so far I've found that trying to clear time for a YC startup is forcing me to formalize and replicate other aspects of my current business, which is really good for it. So, it might be worthwhile to push for YC anyway; if nothing else, your existing business will thank you for it.
  - callmeed 17y ago
    Yes it is my own. And that's probably what I need to do. My hope was to take a 3-6 month "sabattical" this year, be off day-to-day stuff, and work on new ideas. Unfortunatley, I woke up the other day and realized it was September :) Good advice, thanks.
    - jjs 17y ago
      > Unfortunately, I woke up the other day and realized it was September :) I hate it when that happens. :/
jhancock 17y ago
"You could say that giving up 6% for $25k is a bad deal, that it values the business at less than $500k" I'll take it further. This is a good deal without the mentoring, although I can't imagine anyone finding your startup valuable without you taking good mentoring. Who is the kook that thinks a startup with no finished product, no users, certainly no "customers", so clearly no proven biz model, is even worth $500k? Does Sarah Lacy have any first hand experience at the helm of a start-up? Based on her opinion I can't imagine so. As a person that has been doing startups for 20+ years, I can say its a no-brainer to give up 6% for a little cash and proven leadership.
- jhancock 17y ago
  I'll add two more data points to 6% being a reasonably small amount. 1 - I had a great mentor years ago. His software company, which is still running strong for 20 years, gave 5% to each of several key employees (they had good salaries as well). He thought it a no-brainer and his success shows it. 2 - I had an investor in '98; things went sideways. The investor received both IT product/services from my startup plus 5% of my company in return for carrying my costs that year. When it became clear we needed to part ways, I called my old mentor to ask what to do. He told me to let the partner keep the 5% even if I didn't have to (I didn't and didn't even have to fight about it). He told me it was a small amount, it would get diluted over further investments and if those further investments never materialized, it meant the company is dying so the 5% is worthless anyway.
- moe 17y ago
  You could say that giving up 6% for $25k is a bad deal, that it values the business at less than $500k Sounds like one hell of a seed-deal to me. At least mine was much worse than that, I'd be curious to hear about others. The barrier to YC for me personally was the whole relocation to the USA. I understand the reasons for that but can't see myself getting productive work done under such a drastic environmental change. If it wasn't for that I'd have been all over them - 25k for 6% is absolutely a no-brainer in the bootstrap phase.
wheels 17y ago
The usual reason that you don't want to give up too much equity is because you're selling control of the company -- not because you're worried about losing a small percentage of your exit. The difference between $10.7 and $10 million isn't all that worrisome. I don't see much of a reason to worry about that in the YC case. I'm not worried about them trying to take over the board or block an exit or forcibly change a product strategy.

75 points by jmorin007 17y ago

certainly the ycombinator clones are interesting and may even begin to make a difference. But, if the value proposition of ycombinator is essentially PGs talent, help, and networking, how much can the knockoffs really give you. That being said, as with the author, it is even more clear to me ycombinator itself is the best deal out there

ig1 17y ago
There are plenty of other talented and well connected angels out there. You have to remember that before yc PG was just another dot-com millionaire (well he had the essays + lisp fame + anti-spam fame but in business terms not that much). It wouldn't make much sense to go to YC if for example you were building b2b enterprise apps or targeting non-english speaking market where YC lacks expertise, but other YC-style programs might be much more suitable.
- gruseom 17y ago
  It wouldn't make much sense to go to YC if for example you were building b2b enterprise apps On the contrary, I'm pretty sure YC are not only interested in such startups, they've funded some.
  - jasonlbaptiste 17y ago
    viaweb made software for businesses to setup shop online. though it was not a b2b app, it was not not a cutesy consumer app.
- deleted 17y ago
  [deleted]
- SwellJoe 17y ago
  It wouldn't make much sense to go to YC if for example you were building b2b enterprise apps or targeting non-english speaking market where YC lacks expertise, but other YC-style programs might be much more suitable. While that was possibly true of b2b+YC in the earlier days, they have since funded a number of those kinds of companies. Ours was among the early examples in 2007, and we certainly have no complaints about their contributions to our business. pg has said on several occasions that the reason they fund the kinds of companies they do (leaning heavily towards web 2.0 consumer businesses) is because that's who applies. Viaweb was b2b at its core, so one can't really say they don't know that kind of business.
  - ig1 17y ago
    Viaweb was targeted at small businesses which is a completely different market from large enterprise sales. I'm not talking about off the shelf business products that solve a standard problem, but if you're bringing a new unique solution to the market you really need a dedicated sales force. Things like industry contacts can be critical (it can often be impossible to even get in to a company to pitch without an inside contact), lead times are very long, etc. The challenges you face are often vastly different to most web 2.0 apps. Crossing the Chasm is a good book on the sort of challenge. In those sort of circumstances you may well be better off finding a consortium of angels who are from your industry than joining a generic incubator style scheme (although obviously they have their own value).
    - SwellJoe 17y ago
      Ah, yes. YC has never (to my knowledge) funded an enterprise service-oriented company, as you've described, and probably wouldn't. pg has also disclaimed having much good insight on enterprise businesses of this sort. So, yes, if you're building that kind of company, YC is probably not the right choice of investor. The scale of investment is also too low...enterprise sales guys with specific industry experience cost more per-month than YC invests. So unless they're also a founder and not drawing much of a salary, the math isn't going to work out.
    - webwright 17y ago
- ig1 17y ago
  Has HN really turned into somewhere where people down-vote on-topic comments they disagree with ? Great way to encourage reasoned discussion as opposed to groupthink. (feel free to downvote this one though; as meta-discussions are off-topic unlike my previous comment)
fredwilson 17y ago
i think you make a great point. you can evaluate the "knockoffs" by who is engaged and actively helping the companies. saul and reshma at seedcamp are very good. brad, david, shawn at techstars are also quite good. i don't know all the programs well enough to do this for all of them. but that is critical to the success of the program. and Paul and Jessica (and Trevor who i've not met yet) are the model for sure
- dangoldin 17y ago
  You are also getting the experience and knowledge of the other startups' founders. You're also a member of a tight knit group that will probably tend to help each other and keep each other focused when things go off track. You just get a different set of benefits from having a strong group of mentors.
  - fredwilson 17y ago
    great point. that is a huge part of why YC works so well

breck 17y ago

Right on. The YC experience is worth so much more than just $15k-25k. It's like giving some stock to part time consultants. Except the consultants are none other than PG, Jessica and Trevor, and they pay you $15-25k! Then you also get the seal of approval and doors instantly open. And you get to learn from others' mistakes and triumphs as you see first hand 20+ other startups thrive and die. Plus you get access to the YC alum network. PLUS, there are virtually no costs of the YC process. You fill out an application: 1-2 hours. You interview: 10 minutes + travel time. You fill out some paperwork: 3-4 hours. Boom, you get a check and have a Delaware corporation. Maybe you don't get in and you're out a few hours of work. Compare that to the fundraising process with anyone else. Of course, I'm preaching to the choir here. But I just wanted to add another data point.

callmeed 17y ago

As the YC FAQ states: "Half (maybe more) of the startups we fund don't need the money. ..." I'd really like to be a part of YC someday soon–and I definitely wouldn't need the money. My problem is finding time to be away from my current company long enough to focus on and launch a new idea. When I read that Sarah Lacy comment last night, I thought it was one of the more short-sighted comments I'd read on TC. Is that par for the course for her?

thaumaturgy 17y ago
> My problem is finding time to be away from my current company long enough... I don't know if this is your company you're talking about, or just a regular type job working for someone else. If it's your own company, then so far I've found that trying to clear time for a YC startup is forcing me to formalize and replicate other aspects of my current business, which is really good for it. So, it might be worthwhile to push for YC anyway; if nothing else, your existing business will thank you for it.
- callmeed 17y ago
  Yes it is my own. And that's probably what I need to do. My hope was to take a 3-6 month "sabattical" this year, be off day-to-day stuff, and work on new ideas. Unfortunatley, I woke up the other day and realized it was September :) Good advice, thanks.
  - jjs 17y ago
    > Unfortunately, I woke up the other day and realized it was September :) I hate it when that happens. :/

jhancock 17y ago

"You could say that giving up 6% for $25k is a bad deal, that it values the business at less than $500k" I'll take it further. This is a good deal without the mentoring, although I can't imagine anyone finding your startup valuable without you taking good mentoring. Who is the kook that thinks a startup with no finished product, no users, certainly no "customers", so clearly no proven biz model, is even worth $500k? Does Sarah Lacy have any first hand experience at the helm of a start-up? Based on her opinion I can't imagine so. As a person that has been doing startups for 20+ years, I can say its a no-brainer to give up 6% for a little cash and proven leadership.

jhancock 17y ago
I'll add two more data points to 6% being a reasonably small amount. 1 - I had a great mentor years ago. His software company, which is still running strong for 20 years, gave 5% to each of several key employees (they had good salaries as well). He thought it a no-brainer and his success shows it. 2 - I had an investor in '98; things went sideways. The investor received both IT product/services from my startup plus 5% of my company in return for carrying my costs that year. When it became clear we needed to part ways, I called my old mentor to ask what to do. He told me to let the partner keep the 5% even if I didn't have to (I didn't and didn't even have to fight about it). He told me it was a small amount, it would get diluted over further investments and if those further investments never materialized, it meant the company is dying so the 5% is worthless anyway.
moe 17y ago
You could say that giving up 6% for $25k is a bad deal, that it values the business at less than $500k Sounds like one hell of a seed-deal to me. At least mine was much worse than that, I'd be curious to hear about others. The barrier to YC for me personally was the whole relocation to the USA. I understand the reasons for that but can't see myself getting productive work done under such a drastic environmental change. If it wasn't for that I'd have been all over them - 25k for 6% is absolutely a no-brainer in the bootstrap phase.

wheels 17y ago

The usual reason that you don't want to give up too much equity is because you're selling control of the company -- not because you're worried about losing a small percentage of your exit. The difference between $10.7 and $10 million isn't all that worrisome. I don't see much of a reason to worry about that in the YC case. I'm not worried about them trying to take over the board or block an exit or forcibly change a product strategy.