I am really envious of the "Y Combinator Experience". Is there any way to get introductions to the various connections, go to the mentioned startup meetups (we are located in San Francisco), and get some friendly advice, without giving up equity?
I don't want to give up 5-10% of my company and the ~$10k would not make a difference, however I would love to be more involved in the community, and am particularly jealous of this paragraph:
"When you’re accepted into Y Combinator you are part of a community of 172 startups, that take every opportunity to help one another. Being part of this community is invaluable. Six months after our session of Y Combinator ended, the founders of S09 regularly meet, and I would consider us a close group of friends."
Is there any way for a non-YC startup to become an honorary member of this group?
I couldn't give a damn about giving up equity. If they didn't have a stake in you, then there wouldn't be as much motivation for them to make you succeed, would there? Founders need to be less greedy about this equity thing. It's more about whether your chances of success are amplified enough by what you give up, i.e. Expected Value.
If you don't want to give up equity for that little of an amount, and you've got something, then go pitch an angel investor directly. YCombinator is not the end all be all. I think it's important for newbs like us to get our feet wet so we have an idea of how much (or how little) bargaining power we have, and where we stack up against other entrepreneurs. Finally, everything in this world is negotiable. You could apply and work out the numbers with them, and I don't think there's a requirement to accept if you're accepted (correct me if I'm wrong).
What I would envy is not getting into that sort of club. For a moment (however small that moment is), it makes you wonder how you could ever possibly make up for not having that advantage (that being said, lamenting about such a thing is unbecoming of an entrepreneur, and the motto of "be endlessly resourceful").
I really don't understand why people get so hung up on the 5-10% thing. This is seriously a bargain, to the point where all the YC founders are arguably actually ripping pg off.
He only gets 5-10% of your current company, while you get his help, a ton of connections, and the YC networks and friendships for life
Oh please. It's a big chunk of equity. It's not a bargain and nobody is ripping pg off. It's great that pg is helping startups on terms that both he and the startups that accept the investment understand. Portraying it as charity or martyrdom is absurd, though. YC themselves don't.
At 6% for $17k, a two founder startup is valued at $283,000 by YC. Thats a huge over valuation. Ideas aren't worth a quarter million dollars on paper.
It is NOT a big chunk of equity for startups. If you think it is, you haven't failed enough times to know better. Cause when you fail, you get to keep 100% of nothing.
It's a big chunk of equity for the money. Now, you can argue YC invests in very early stage, very high risk companies and the big chunk of equity is warranted and that's fair enough. It's still a big chunk of equity. How much equity did Andy Bechtolsheim get for his famous $100k cheque to the Google founders?
Friend, hindsight is always 20/20. We don't know for a fact whether or not Google would be worth billions if they didn't get angel investing, so that example is moot.
But we do know the rate at which startups fail. We see that everyday. If you've been involved in startups, you've experienced it. The problem is, your looking at equity as a piece of the pie, trying to keep as much pie to yourself as possible. The relative size of your slice doesn't matter. Its the absolute size of the pie that matters.
Woah now. Okay, I apologize for calling you "friend".
Fact is, we all have different risk tolerances. I can tell you to play your pocket aces aggressively, but if you want to slow play them, thats up to you.
I did my best to rationalize with you why the numbers don't matter in the big picture. The best question to ask yourself is: can I create more value than the value of the stake that I give up? If the answers yes, then give up the stake, whatever the number. Most of us believe we'll get at least equal value, and that giving up 5%-10% is worth it. Thats why the numbers mean nothing to us, we don't equate 5% to being a lot because we know our new 95% will be worth more than the previous 100%.
I never said it was charity, I simply said that in my opinion the terms are better for the founders. I don't think there's a single YC founder that would disagree with me. And I'm sure there isn't a single successful YC founder that would disagree with me (which is the theoretical point where the equity would come back to bite you).
If your company is already doing amazing or you're already some sort of super hot shot, then of course its not a good deal. Jeff Bezos does not need to go through the YC program. But I don't see a bunch of Balmers and Bezos' complaining about the YC terms, I see a bunch of people that need precisely what YC provides.
I simply said that in my opinion the terms are better for the founders
Right, I simply said that opinion is absurd and flies in the face of the very idea of running a business like YC. And it is a business, right, we agree on that?
And I'm sure there isn't a single successful YC founder that would disagree
Why on earth would a successful YC founder disagree? They've been successful. This is the definition of selection bias.
Why on earth would a successful YC founder disagree? They've been successful. This is the definition of selection bias.
Wow. I can't believe I have to explain this.
As I already explained in my previous post, this is simply the only truly useful metric, not selection bias. People care about equity after they succeed, not when they fail. No one sits around crying that they wished they had a larger percentage of nothing. In fact, you know what, I bet pg would be willing to make an agreement with you that after you officially close your company he'll gladly give you that 5-10% back, that way you'll be happy either way.
Go and ask any YC founder who is currently successful, whether its chugging along fine or had any form of exit, I don't think you'll find any of them worrying about those percentage points. The ones who've failed clearly don't care and certainly don't ridiculously blame their failure on YC taking too much of their company. Better yet, they're making use of those same connections and opportunities on the next startup they're working on, and for free this time.
You do, because it's silly. By the same token go and ask any founder who did not take YC funding and was successful.
People care about equity well before they succeed. Talk to any investor.
Go and ask any YC founder who is currently successful
Explain to me, again, how this is not selection bias?
To clarify, I think YC makes a lot of sense for a lot of startups. However, I am not sure if my startup would be a good fit for YC. It is slightly older, already profitable, etc. YC seems to invest really, really early on, which is why 5-10% and a small amount of cash makes sense.
However, even though I am not part of YC, I'd love to meet up with fellow SF startups -- I have never found an online community I identify more with than HN. Also, surely many people who give advice to YC startups are not on the payroll and would be happy to talk to me, if I had their contact info.
Maybe I'm wrong since I'm not part of the group, but I feel like the identity of "young, full-time startup" is much more important than "young, full-time startup [yc funded]".
Well, if your startup starts to generate significant cash, giving up even a fraction of a percentage of equity as preferred stock (with typical preferred stock rights) is the difference between paying yourself a startup founder's salary and paying yourself as much as you possibly can. In other words, you're shutting the door on a very common way of getting wealthy, the one the vast majority of successful small business owners use.
Certain things about taking investment are binary - percentage ownership is nothing, investor's rights are everything.
I've heard that this is so. I've also heard that a YC investment also carries certain contractual terms that approximate the investor's rights that come with preferred stock. I'd have to see actual deal docs to judge.
If YC is truly taking only common stock and has only the rights of a common stockholder, it's a good deal.
I've heard this same exact argument from friends who were justifying why they were hazing for fraternities in college. Not a criticism, just an observation.
The for life was meant to apply to all the things listed. The point being, you'll probably form more than one startup in your career, and the connections will be just as good after YC as during.
Not exactly. In hindsight, maybe my post was offensive, but I did not intend it to come off that way. I am not looking for the full YC package (I'm not sure if my startup is even eligible to apply). What I meant was specifically
- I would like to hang out with like-minded, serious startup folk in San Francisco.
- I would like to meet a seasoned entrepreneur and have a chat about my plans.
- I would like an introduction to a few investors to bounce some ideas off of.
For those three things, I am not willing to give up 5-10% of my startup, which is profitable, and relatively mature compared to YC investees. Additionally, I am sure a full-fledged YC investment offers far more than those three points. ;)
There are events in San Francisco almost everyday where you can meet startup folks. Not to downplay YC but the YC community is just a small part of the startup community in the Bay Area.
With regards to meeting seasoned entrepreneurs, just go to events and you'll meet them. Most of them are very generous of their time because they just want to help fellow entrepreneurs.
Just remember though especially with meeting investors that you are one of thousands in the Bay Area that wants a face-time with them.
I haven't really talked to investors. I ask myself why I am worth their time. In my opinion, I haven't done enough to warrant an audience with them. Well, not yet. ;-)
The only ones I know of are Startup at Berkeley and various video game developer meetups. WWDC and GDC are the only two conferences I currently go to. I'd be grateful for any specific recommendations! :)
I really don't think theres any way to replicate the Y Combinator experience without being apart of YC.
If you want introductions and advice, you need an angel with a background similar to PG (made money in tech, invests in startups).
The reason the alumni are so close is because they all go through something very hard together. I don't think YC was planning for such a supportive alumni network, rather, its just the magic that follows when something special is created.
Alternatively, what might be some key ways of creating that camaraderie and supportive network outside of the YC experience? I imagine a sense of achievement or difficulty (in it being challenging to gain entrance) might take a group beyond "regular meet-up" status?
The YC founders are a pretty cohesive group, so if you get into their circle you get a lot of the benefit. This goes for SV/SF based startup founders generally, too.
Since it's such a closed group, if you make friends with people at one meet up you'll end up expanding your circle to several. There are some open meetups (e.g. Hackers and Founders) and also meetups on technologies (e.g. SF Javascript).
I too am jealous of the Y Combinator Experience. To rectify this I have submitted my application. I don't have a degree from MIT either, and this blog post has helped me remove some of my concerns. Thanks Ryan.
I don't want to give up 5-10% of my company and the ~$10k would not make a difference, however I would love to be more involved in the community, and am particularly jealous of this paragraph:
"When you’re accepted into Y Combinator you are part of a community of 172 startups, that take every opportunity to help one another. Being part of this community is invaluable. Six months after our session of Y Combinator ended, the founders of S09 regularly meet, and I would consider us a close group of friends."
Is there any way for a non-YC startup to become an honorary member of this group?