Every batch there are some groups that fall apart between when we agree to fund them and when YC starts. Sometimes we tell them not to worry about it and do YC anyway, and sometimes we tell them they should take some time to repair the damage and reapply for the next cycle. It depends on how bad the breakage is. If a team of 3 loses 1 person, that's no problem. Whereas if a team of 3 loses 2 people, that's bad.
In this case, the breakage was not only on the bad end of the spectrum, but we weren't told about it till the last moment. IIRC Jon told us an hour before he got on the plane here. That affected our decision more than the breakage itself. At the scale we operate on, we can't afford to have people around who aren't upfront with us.
I'm glad Jon got funded though. As he says, I was quite enthusiastic about what they were working on.
The problem is assessing who the critical members of the partnership are at that moment. I've met companies where the quiet, reserved hacker in the background was the real brains for the technical and business side of things. The other partner(s), while critical for adding that je ne sais quoi which the hacker required to be effective, were easily replaceable.
Some hackers just want to be Karl Rove. The problem with that is unless somebody tells you about Karl Rove, you'll think all the pawns he puts into place are the ones who are irreplaceable. They aren't, though you might mistake them as such because they are the public face of operations.
It's not common, but also not rare for teams to have the invisible Wizard of Oz who is really pulling the strings behind the scenes. Neither Ferrari nor Michael Schumacher have won much since Ross Brawn parted ways with them as technical director. Yet he managed to take Brawn GP (formerly Honda F1), which was a joke of a team, to both the Drivers and Constructors championships in its second year with him at the helm (first as Brawn GP). While even more variables are at play, take a look at the LA Lakers with and without Jackson as head coach. Then tell me how many people attribute Kobe to their success and don't really ever mention Jackson's name. Would Apple have been the same company (wait for it) had it not had Jonathan Ive?
I'm not quite sure how YCombinator would accept this business based on one co-founder and then dismiss them when he was the only one left. Not being upfront about things would definitely be a warning sign. But again, in his mind, you accepted the business based only on him. Why would it be such a big deal if the two other co-workers left? I've read some other comments about it being a vote of non-confidence in the business. Talk to 95% of employees in companies and probably 2/3s of partners. Secretly, they think the company is going to hell in a hand basket and will be dead or in serious trouble in 2 years time. It's human nature to be skeptical to the point of fearing a business' prospects; Maslow's Hierarchy and all that jazz. A startup doesn't satisfy very many of those levels... people get antsy.
You're right about Phil Jackson. He's a basketball genius. LA has always been able to attract top talent, but raw talent alone doesn't equal multiple championships at NBA level.
Yeah, like the OP says it's good to network on and offline so I include a location and contact email in my profile.
But I used to watch the Lakers religiously. In fact I've got a signed jersey from Eddie Jones hanging up right now. One fan appreciation day starters were meeting briefly with fans, who could line up to meet Shaq, Kobe, Eddie and others. My friend and I chose Eddie Jones who was our favorite Laker at the time.
Paul, thank you for adding your point of view, and I understand that it was a bad surprise to hear the bad news to late.
But if I understood correctly:
1. he was not planning on applying to YC, you asked him to
2. he had a good living situation and local contacts, and you asked him to move to SV
3. he had a functioning company wit income and co-founders, and you asked him to do something (move to SV) that blew up the company
As he makes all these sacrifices, in a very short schedule, you decided that you no longer wanted to fund him, as he turned up, suitcase in hand.
It is fine that you did not want to fund him into your group, and that you have well-tested criteria about co-founders.
But the guy made sacrifices for you and YC, and from what I understand, you / YC dumped him in the last minute.
To me, relationships are built on moments of truth. (Not my phrase, I heard it from the CEO of a health insurance company.) What do you do when things are going badly, rather things are going well.
Perhaps you are being modest, but I cannot see any mention of anything you did to help him, now that he was in a foreign city with no connections and no co-founders, trying to follow your instructions. "Apply for the next YC" does not count as help, and the ability to mention that you had accepted him previously does not count as help either (although I am sure he used it in his self-introductions).
Good on him for finding funding, and of course he is a good entrepreneur for picking himself up and continuing, and you are a good spotter of entrepreneurs for selecting him in the first place. But to me, this story does not reflect well on YC.
No, you have the story wrong. We didn't push him to apply to YC. And he definitely didn't split up the company for us. He hadn't yet done it when he arrived in SF, and when we learned he was planning to, we advised him not to.
I am sure I do have the story wrong, if only because I was not there. I just went on what was posted so, could the original author of the story either correct the story, or correct PG?
For "We didn't push to apply to YC", the original posting had said "I hadn't really considered an incubator like YC because we already had a product, customers, and whatnot and I thought I really just needed cash to hire a bunch of people. But one of the guys at breakfast really liked what we were doing and wrote an intro email to Harj, one of the partners at YC. It was mid-May so the application deadline for the Summer 2010 session had already passed. But Harj and I had coffee the next day, and he liked what he saw so he invited me to come interview for late acceptance."
And for "he definitely didn't split up the company for us", I was going on "So the day before YC started, I sent Paul and the gang an email letting them know that my team was changing. I didn't think it would be a huge problem. I (naively) thought that they'd just give me advice on how to navigate the new situation. But alas, Paul was not happy with the changes and told me it might put us in jeopardy of getting funded by them." In other words he did not say that you had told him the company should stay put, you had told him you would not fund him, now that the company had split up in trying to fulfil YC's requirement for SV location.
By the way, I am entirely aware of a third possibility, i.e. that you are both right, and that two different people can have correct but different memories of the same situation. But the story as it was written did not make YC look good, even though the author is promoting it with cheeriness as coming through adversity.
Times were crazy, and missteps and miscommunications may or may not have happened. But I've got nothing but love for these people. Going forward, I'm way more interested in being "a guy with $1.5m looking for top people to build an amazing company with" than "the guy that got kicked out of YC".
"In other words he did not say that you had told him the company should stay put, you had told him you would not fund him, now that the company had split up in trying to fulfil YC's requirement for SV location."
You have misinterpreted what he wrote. Specifically the phrase "now that the company had split up" is false. The company had not yet split up. He had (at most) a verbal agreement with his cofounders that they would split up the company in the future, but they had not acted on it yet. Our advice was not to.
To be fair, the guy had to manage an unscheduled move from kansas to sf, including family in one week. At the same time he had to figure things out with the cofounders. In such a short timeframe, isnt it understandable that YC werent notified earlier?
If I were managing an incubator with 1000 applicants twice a year, and 2/3s of a founding team decided they didn't want to join the program, I would take that as a vote of no-confidence from those two members.
In a lot of situations in life, you have imperfect information and you have make the best judgment call based on what you have. Maybe those 2 guys didn't go to YC because of family obligations although they'd really love to, but maybe they just thought the startup team didn't really have legs and was just a side project.
At that early in the game, the 2 cofounders knew the author better than PG did. I'd make the same call.
FYI, we were all full-time, the business was already profitable and we were all living off of the income it was generating. The startup clearly had legs then and still does.
I can see the other side. YC's requirements are not a surprise (and are quickly Googleable). If Jon's cofounders weren't on board with YC's requirements (namely, moving to San Francisco), that's something he should have been aware of before pitching and getting accepted, and probably should have come up during his pitch -- to YC, it could have been a sign that he didn't know his cofounders well.
My knowledge of this is limited to reading the comments here and Jon's blog post, but it's fair to see YC's side as well on feeling a bit blindsided. That's what I read between Paul's lines, anyway, specifically since he used the phrase "up front with us".
Not pointing fingers or anything, just understanding both sides and responding to you specifically.
I wasn't pointing fingers at you in this, as I said - I was responding to the question directed at Paul. Now, I'll respond to you. I thought this privately, but your comment kind of pushed me over:
I'm not sure if it's intentional, so I apologize if it isn't and I'm completely off-base. I mean no disrespect, and I'm just trying to understand what I'm reading.
I'm reading a bit of exasperation from you that you weren't provided enough time to make life-changing decisions by YC. It almost sounds like blame, even though your blog post leans the other way. Whether you overtly admit it or not, it sounds like you hold a bit of a grudge that you lost out on that YC round because you weren't provided enough time to uproot your (and your cofounders') lives.
Based on Paul's response, it sounds like they had wished they'd have known in that garden meeting that perhaps your cofounders weren't on board. I don't think it's an unfair assumption that you knew, when you pitched YC, that your cofounders had families and were rooted. I think Paul is expressing disappointment that he was blindsided by you hours before YC started with something hitherto unmentioned. Is it unfair to say that perhaps you should have expressed at the initial meeting that the next round might have been better?
I can't imagine YC would have pulled funding from you had you said, at the initial meeting, "can we please shoot for Winter? this is a big deal, and I know your round starts soon, and I want to be respectful of my cofounders and give myself time to get things together". I'd have considered that a sign of wisdom, personally, and gained a lot of respect for you.
My take, anyway. It worked out in the end, so bravo.
Yeah it wasn't really like that. The guys were willing to move if they had to. They were willing to make the move and I had no idea they were going to be out until they were. But after getting swept up in everything for a few days preparing to move, it just became clear it wasn't going to work. There was no intentional omission of facts. When I accepted, I expected us all to be there.
And to clarify, I don't blame YC at all. I love those guys. I really admire Paul and sometimes even quote the few interactions we've had. I think he's a genius and seriously hope we can work together on something one day. (Hi, Paul!)
In my comment above, I was actually just trying to explain that everything happened very fast. I tried to update people as best as I could. It was just a very crazy week.
To me, Jon seems to have demonstrated exactly like the type of resourcefulness YC asks for in its applications [1].
Unfortunately there was no way for YC to predict the Jon had these chops at the time. The fact that YC can make such predictions with high-accuracy, from simply an application and a 10-minute conversation, is very impressive. There are bound to be borderline calls now and then.
If you have de-identified application data, it would be interesting to know what early patterns in applications predict future success.
[1] Jon hustled his way into YC, found a way to make the move when his co-founders weren't willing to, kept the company running and profitable meantime, and closed a large seed round with top-notch investors, in perhaps roughly the same timeframe that he would have with YC.
I think YC here demonstrated that type of resourcefulness is not what they ask for. Looks to me they are more on the side of reliable, steady, old-school business with team values vs resourceful ingenious type of people that stop at nothing. Makes sense business-wise to rely on steady signals vs riding the wave, but in any case YC is just a business.
In 2010, I got accepted and kicked out of Y Combinator, lost my cofounders, and raised $1.5M from A-list investors
Sounds like it was more "our team was accepted even though they had no idea what I was up to, I subsequently lost my cofounders, and Y Combinator revised their decision based on that."
I'm surprised that YC accepted "them" after meeting just one of the co-founders. Also, what is not very clear is why he went by himself to get money and how he continued the company by himself without his cofounders. Meaning that it sounds like it's just that they didn't want to move to SF with a week-notice, not that they gave up completely on the startup...
I came to SF the first time by myself because I was the hustler in the group. I talked to my team members every day. They knew I was in SF talking to investors and they knew I was interviewing for YC. They just hadn't heard of it until I was already doing the interview.
As to how I was able to continue, as I explain in the article, they spun off a t-shirt printing business that we had been running. It was a more predictable business. Less risky for them. More of a 9-5 thing with a steady income.
To be fair, they still believed in the business. They just didn't want to tattoo it across their face and sell their first born son like I want to.
That's what I'm wondering, I bet there's good money in child-flipping. You know buy a 3 month old, get them to the walking+talking phase and boot them off to someone willing to drop top dollar.
(FYI for the downmodders: that's what's called a sick joke)
Not at all - ideas are worth nothing, but if you can prove the execution you're good to go. So own the idea, go forth, and execute some kids better than anyone else.
Ah, but she only seems to deal with kids beyond the walking-talking phase, so there's potential for a partnership supplying her with kids for her to mentally whip into later life therapy.
I'm surprised that YC accepted "them" after meeting just one of the co-founders
This was the first time we had a late application process and I made the mistake of not insisting that Jon submit an application form. That would have surfaced the issues much earlier. We've since established that we won't fund anyone without them filling out an application form and meeting all co-founders in person.
Congrats to Jon, that's a fantastic list of investors to have.
I went through TechStars Seattle 2010. In watching the 9 other companies, it is obvious that the best predictor of success for my peers has been the strength of the relationships between co-founders. I'm measuring success (at this early stage) as some fuzzy function of how easy the team made it look to build a product, gain traction, raise money, and keep smiling.
I can only guess that Y Combinator really values co-founders because the patterns I've seen in 10 companies must be painfully obvious with 100 companies. That's not to say that there won't be outliners/exceptions, but when you're placing bets...
Who downvoted this? That's not cool. Asking for an explanation is always ok.
Anyways, Yuri Milner (with Ron Conway) recently announced a blanket offer to all YC companies: $150k in no cap convertible debt. The title could have been to a story where a YC company dropped, presumably forfeiting the offer, only to be tracked down specifically and offered much more.
I'm curious in how things would have turned out had he not been kicked out of YC. My guesses are he probably wouldn't have been that much better off. My analogy for this would be the situation of a Harvard drop out. You've already accomplished the toughest task - getting ACCEPTED. Whether you graduate or not seems pretty insignificant since it's so much more unlikely for an average high school student to be accepted into Harvard, compared to an average Harvard student finishing the program he was accepted in. Ultimately he was able to demonstrate his ability to network and raise fund despite not completing YC. What I don't know is how much did having that YC stamp of approval (despite being taken away later) helped in those endeavors.
Edit: rephrased my question a bit, still seems awkward...
YC accepts single founders, the bar is just higher.
Applying with co-founders and having them disappear is probably worse than applying as a single founder, because co-founders jumping ship is one of the things that often happens shortly before a startup dies. I'm sure YC was acutely aware of this pattern, and that makes the Storenvy story all the more impressive.
The article makes it sound that PG and co allowed this guy to pick up and move to SF only to tell him to suck it the next day.
If that is what happened, they deserve some scorn for playing with a person's life like that. That's just not on. If, however, they were clear about their reservations and just wanted to meet the guy again to discuss, it was really stupid of him to transport himself from his home to a hotel.
Such a cavalier attitude to risk actually might be a very good reason that this guy should not be running anything, and YC made a sound choice.
Either way, don't know any of the actors in the story and wish them all the best. Thanks for sharing this rather strange story.
"Such a cavalier attitude to risk actually might be a very good reason that this guy should not be running anything"
I read this story very differently. Jon was fearless, took a calculated risk, and, when the initial outcome didn't role in his favor, just kept plugging in the face of obstacles - to his success.
If you think that "Flying out to Silicon Valley on a reasonable chance that Y Combinator was going to fund his startup that already had a community, but with several months of cash regardless of that funding" is a cavalier attitude to risk, I would love to think what your thoughts about what some of the _really_ hair brained things that startups do to become successful.
The sheer _act_ of deciding to create a startup is easily one of the most risk prone acts one can take - so, ironically, per your logic, anyone who does so should not be running anything. :-)
I loved the story, loved how he rolled with the punches, and loved his positive attitude at the end towards everyone. I have almost no doubt that he's going to deliver great things.
It was risky. But, I also believe that there are two key points from the story that made it easier.
1. He married a woman who is extremely supportive and dialed in.
2. He had a savings that he could fall back on. So, getting kicked out of Y Combinator was heartbreaking but not soul crushing.
Basically, he had some good protective factors which made it possible for him to take risks.
It was more an issue of timing. The conversations started with my cofounders about 72 hours before the first YC dinner. I was already scheduled to move out of my apartment and had airfare booked. It wasn't until I was literally heading to the airport the night before the first dinner that I found out that things might be in trouble. I'd already spent the last couple days moving all of my stuff into a storage unit.
I talked to Paul on the phone as I was boarding the plane and he told me, "I don't know if I'd come out here just yet." But I didn't want to miss the first dinner (still naïvely thinking things will work out). He definitely gave me fair warning and I knew the risks, but it seemed silly to turn around at that point. I knew I could always fly back home in a few days, if I needed to. It was worth the risk. And in hindsight, I'm insanely thankful I got on that plane.
IMHO - one of the very best HN posts ever. no way for YC to be right about founders every time but the rejection feels devastating (we got interviewed then rejected for Winter 2010). But truth is that the vast majority of startups don't do YC or other incubator programs. Hustle, more than anything stands out as the factor that turned a rough situation into a success. good stuff Jon!
YCombinator has a very narrow niche for the kind of companies they fund. They reject many companies, not because they aren't good companies, but because they don't fit the YCombinator style. This isn't a bad thing for YC. Everybody needs to specialize. And it means there are plenty of good startups out there that aren't getting funded by PG/Yuri Milner.
"... Still, a couple hours later, I boarded a plane with my wife, dog, and all the necessities for the summer stuffed into a suitcase and flew to SFO and hoped for the best. Seven days isn't nearly enough time to find a proper housing setup in SF, so we checked into an extended stay hotel where we would end up living for an entire month.
The next morning, Paul emailed and arranged a meeting with the entire YC team for us to discuss the future of Storenvy in YC. Since we didn't have a car, and I didn't have enough time to figure out something better, Janette and I took a $100 cab ride down to Mountain View. ..."
Amazing storry. I just wished I was one of his co-founders, I would never say no to that. But I guess this just goes to proof that not everyone has a startup goal in their minds.
I wish you the best of luck on your project, it is a true inspiring story. Congrats
Its important to note that YC isnt "at fault," or "did something wrong." They did what they thought was best, and that decision drove Jon down a different path. The end result (at least at this point) is net-net positive for both. Being in YC as a single founder would have been really hard on Jon, and would have probably netted a different short-term result, given the learning and potential shift in direction an accelerator can bring (YC, TS, etc.)
This is awesome. One thing about storenvy though, if I were to trust my business with you guys, I would want to know that there is a future and you aren't just figuring it out as you go along.
I would say figure out a way to monetize it in the short-term (perhaps transaction fee on all the sales), that way, your sellers can be confident that you are a going concern.
Great story! And guys, I personally think the discussion should focus more on "...and Then Raised $1.5m for My Startup". He clearly has no hard feelings for YC and even said "they did the right thing".
To me the story speaks of the rewards of true hustle. That and making sure you're family is 100% involved in your start up too, as his wife sure helped too!
This is about the future! We could sit around and dissect events from the past all day long, but I'm way more interested in building a team and destroying the e-commerce space together. If you're a UI designer or Ruby hacker, please get in touch! :) http://www.storenvy.com/jobs
An enthusiastic +1 for you. Not only do you possess the open mind to see all these business decisions as rational as humanly possible (I envy that in a startup founder ;-)), you also turn that experience towards strengthening your business in multiple ways. Class act @NewMonarch.
The way I see it, Paul was willing to take a huge gamble on this company from the outset because of a strong gut feeling. Y Combinator didn't have to let them in and was being incredibly generous, going as far as setting aside their own rules for this one special case. They went above and beyond the call of duty. And then, to hear word that they'd have to yet again do things differently than they are accustomed to for this one company probably just didn't feel right anymore. I am happy for the writer and I bet he'll be very successful, but where he went wrong (if my facts are correct) is expecting YC to allow him to stay in the program because of "protocol." They made the first decision based on a gut reaction, and they reserved the right to make a second decision "on gut" as well. Also, to be clear, they didn't kick him out, they respectfully asked the founder to apply again next quarter. My purpose isn't to declare a winner. I have a lot of respect for the author and his perseverance. But I hope he sees just how much he was asking from YC, what an incredible achievement that was to convince Paul to take the first leap of faith, and why he probably should have just swallowed his pride and accepted YC's decision with genuine gratitude.
Sorry for the bad sarcasm community. I love Jon and Janette. I met Jon way back in 2009 and he was hustling with just an idea then. As a fellow Midwest entrepreneur it's awesome to see him "graduate" from our area and succeed in the valley.
Why did you have to move to San Francisco? I understand the benefits, but I thought YC funds companies based outside CA, so was that a condition of the funding that they made?
A startup batch has to all be physically present for the YC period. That is because they meet in person frequently. So for 3 months you have to live where they are holding it.
Originally YC alternated between Boston and Silicon Valley. However they have now changed to always operating out of Silicon Valley. So you have to live there for that period.
This does not stop companies from moving there for 3 months and then moving back. As a notable example, Wufoo is based in Florida.
In this case, the breakage was not only on the bad end of the spectrum, but we weren't told about it till the last moment. IIRC Jon told us an hour before he got on the plane here. That affected our decision more than the breakage itself. At the scale we operate on, we can't afford to have people around who aren't upfront with us.
I'm glad Jon got funded though. As he says, I was quite enthusiastic about what they were working on.