

Startups Can't Survive On $20,000 - citizenkeys
http://ycuniverse.com/startups-cant-survive-on-20000

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morgante
You'd think a site called YC Universe would actually know about YC.

The $20,000 is absolutely not meant to last a year. It's meant to last a
summer, only enough time until the startup can raise their first round which
should ideally be the end of the summer. Maybe a bit after if they're having
difficulty.

Any startup trying to survive for a year on $20k has already failed.

Also, from a linked article, this gem: [1]

> The terms originally made sense because YC was unproven and only funding
> eight companies at a time. Almost ten years later, Y Combinator has turned
> into a semi-annual factory of 50 companies...

That's precisely why terms can stay this way. Funds with less of a reputation
and track record have to kick in _more_ money, not less, because they bring
less to the table without it.

A VC like YC could effectively give $0 and probably still be worth the 7% for
the connections/track record alone.

1: [http://ycuniverse.com/y-combinator-companies-potentially-
wor...](http://ycuniverse.com/y-combinator-companies-potentially-
worth-13-7-billion-new-investments-still-get-same-low-offers-since-2005)

~~~
dkersten
_A VC like YC could effectively give $0 and probably still be worth the 7% for
the connections /track record alone._

Its been said many times that a lot of YC startups don't need the money and do
it for everything else, so yeah, absolutely.

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austenallred
Correct me if I'm wrong, PG, but

1\. YC invests $11,000 + $3,000 per founder. So $17,000 for two founders; that
should get them through the summer or winter, depending on which batch they're
in. This money was never intended to last a year.

2\. Each startup has the option of a $80k? (the amount has changed over time,
I believe it's higher now) convertible note from Ron Conway/SV Angel. Some
will take the note, some won't.

No one in Silicon Valley raises $20,000 and expects it to last one year.

~~~
sbashyal
This article is incorrect in lot many ways. For example, after the
introduction of SAFE, the VC funding is no more a debt

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wmf
I thought the $20K was intended to last approximately three months, not one
year. Also, aren't convertible notes never intended to be repaid?

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Asseta
This is way off. All the groups I know of that came from outside the bay area
rented in the peninsula not in SF, where it's noticeably cheaper. There are
also "YC" houses that are passed down that are affordable. Finally, I never
heard anyone worried about having to payback the 80k YCVC note.

~~~
rpedela
The $1500 figure is actually quite low for SF. It is more inline with south
bay actually.

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meritt
The author of this article should do a tiny bit of research next time.

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mikeleeorg
The increasing cost of living certainly is an issue for startups. That's the
real story here.

I found the article about creating a startup in Thailand [1] really
interesting from a cost-of-living perspective. I'm sure many other
entrepreneurs here can weigh in on other inexpensive cities in which to live
and create a startup.

But the YC example doesn't quite back up the main story well. For most
entrepreneurs, they won't be getting that $20k. Personally, I'd rather get
$20k than $0k. Or, heck, the network and investment signal that an accelerator
like YC affords.

[1] [http://levels.io/bootstrapping-startup-
thailand/](http://levels.io/bootstrapping-startup-thailand/)

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carsongross
Watch me.

Step 1: don't live in Bay Area.

~~~
jawerty
Watch you what?

~~~
cwp
Survive on $20,000

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ab123c
This article doesn't make sense. Three startup founders wouldn't get three
one-bedroom apartments. They would get one three-bedroom apartment, which
would be much cheaper.

~~~
aray
The math is for _one_ one-bedroom apartment. $18k/yr is pretty standard for
that in the bay area.

~~~
byoung2
Also, depending on the living situation of the founders prior to YC, it may be
cheaper moving to the Bay Area. For example, 3 founders living in separate
apartments consolidating to a single one bedroom may find savings.

~~~
epicureanideal
And they'll have to deal with moving all their accumulated possessions into
that shared space. And their families will not be able to squeeze in with
them, if they have families.

~~~
byoung2
Hence the qualification, depending on the current living situation.

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benguild
The options are to fail fast and live in South Bay. It's not supposed to be
comfortable, it's testing your instincts and letting you know that there is no
free lunch.

$20k is a lot of money. If your business is doing well or shows promise, YC
will help you raise since they don't want to waste their investment. So just
do a decent startup and you'll be fine.

~~~
ulfw
20K isn't a 'lot' of money, especially in the Bay Area. Especially if you're
cutting that in halves or thirds for more co-founders. Please.

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jhartmann
Thanks for calling this out. Its a discussion that I really think needs to
happen.

I personally love the concept of yc, and see the value but for a good portion
of the entrepreneur community it can't work out because of the economics. I
would love to see a accelerator give enough money for a realistic budget for a
seasoned team. Including myself I have 4 people on my team and we are 3
seasoned developers and an executive with lots of experience as a CIO and CFO.
We have real bills and can't live on peanuts, mortgages, kids, need for real
health insurance, etc. We are more expensive, but we can outbuild probably
most of the teams out there, and especially the ones that have little
experience. I wonder if much of the reason we have so many failed startups is
that we are don't bet enough on seasoned individuals unless they have enough
cash to carry them through the early stages. I would love to see what would
happen if pg did a session of YC looking for seasoned teams what would happen.
I'd be willing to bet you'd have a good chance for some amazing results, even
if it would be more expensive.

~~~
jconley
There were plenty of seasoned folks [1] in our YC batch, our group included. 3
of 4 of our founders had families and real responsibilities. One major
advantage to YC is it opens doors and connections. Many (most?) YC companies
have more funding within 4 months than the ~$100k they get at the beginning.

[1] [http://www.forbes.com/sites/parmyolson/2013/08/20/latest-
bat...](http://www.forbes.com/sites/parmyolson/2013/08/20/latest-batch-of-y-
combinator-startups-established-entrepreneurs-solving-real-world-problems/)

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analog31
How is an acqui-hire not job creation? How do big companies not innovate or
create jobs? I work for a Fortune 500 and have engaged in both innovation and
job creation.

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dkersten
Even if what everyone else commented weren't true:

 _$20,000 Is An Impossible Budget_

And yet many many YC-backed companies have made it possible.

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ecesena
Add visas if you're not from US

