

Start-ups Rejected By Y Combinator (And Investors) Flock To YC Reject - rrhoover
http://blogs.forbes.com/tomiogeron/2011/04/11/start-ups-rejected-by-y-combinator-and-investors-flock-to-yc-rejects/
Edit: title
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shawnee_
_But is this another sign of a bubble, particularly on the investing side? Why
would angels invest in companies that are not vetted by Y Combinator?_

There's a very valid reason to invest in companies that aren't YC companies.
The $150K burden that most of the YC W11 companies took is one reason. If a
company has $150K to play with out the door, it's not exactly bootstrapping
it. If a company isn't bootstrapping things, it can have deluded visions of
grandeur and won't always build an efficient or sustainable product. Money can
buy hype in the short-term but hype doesn't build value in the long term.

In other words, YC isn't about scrappy underdogs any more. And if there is one
thing the valley can always make room for, it's the scrappy underdog.

~~~
marcomonteiro
I thought the article was fairly straight forward until I got to the point you
quoted. It's as if the attitude is that YC picks _all_ the great startups and
non-YC companies are second-rate throw aways that are destined to fail.

While I personally think YC is a great program with a lot to offer, which is
why I applied, they don't have the resources to take on every group that
applies. It also wouldn't be in their best interest. I was skeptical about YC
Reject at first and wasn't sure about applying or looking for work and working
on my startup part-time but I'm considering it more and more now.

~~~
jpk
Indeed, the YC rejection letter says basically this. (For the benefit of other
readers: <http://news.ycombinator.com/item?id=2422032>)

The problem here is that everyone is looking at acceptance/rejection as bi-
implication when it's not. Getting in implies you're probably good, but
getting rejected doesn't imply you're probably bad.

~~~
ScottBurson
Getting rejected doesn't in itself imply you're probably bad, but it doesn't
imply you're good either. And if all an investor knows is that you're a
founder or team that wants to do a startup, the odds are that you're no good.
The problem is that the prior probability that you're good is already very
low, not that the conditional probability that you're good given that you're
rejected by YC is any lower.

So the real question here is, can these people learn to first evaluate their
applicants, and then support the ones they fund, anywhere near as well as YC
does? I think the YC formula is not going to be anywhere near as easy to
duplicate as they seem to think.

~~~
marcomonteiro
_And if all an investor knows is that you're a founder or team that wants to
do a startup, the odds are that you're no good._

So the investor's knowledge about your project determines the founder or teams
quality? YC applicants disclose more than that they want to do a startup, does
that the automatically improve the odds that they're good? What specifically
makes them "good" anyhow? YC Rejects would be disclosing more than they want
to do a startup and in fact it's been noted that the angel would review
applicants and determine who gets in.

 _The problem is that the prior probability that you're good is already low,
not that the conditional probability that you're good given that you're
rejected by YC is any lower._

Based on what exactly? Why is it more likely that your not good to begin with?

 _So the real question here is, can these people learn to first evaluate their
applicants, and then support the ones they fund, anywhere near as well as YC
does? I think the YC formula is nit going to be anywhere near as easy to
duplicate as they seem to think._

It doesn't have to _duplicate_ the YC formula in order to be successful as
even YC proves that their formula doesn't automatically lead to successful
startups. I do think that the YC staff and alumni network is a huge asset but
that doesn't preclude others from providing valuable resources. The rest
remains to be seen.

~~~
ScottBurson
_So the investor's knowledge about your project determines the founder or
teams quality?_

Sorry, I guess I was a little too cryptic. No, the investor's state of
knowledge doesn't determine the team's quality; it determines _the investor's
estimate_ of the team's quality, and thus the likelihood that the investor
will invest.

 _Why is it more likely that you're not good to begin with?_

Simple: most startups fail. The vast majority, in fact.

 _It doesn't have to duplicate the YC formula in order to be successful_

Perhaps not, but note that YC has been considerably more successful than most
angel groups. There must be something out of the ordinary they're doing.

~~~
marcomonteiro
Most startups do fail. Most new businesses fail though unfortunately. That
doesn't mean the team wasn't any good. There are so many dynamics involved.
One of course is the quality of the product being developed by the team.
Another being the marketing strategy, including pricing. And another being
market acceptance.

I'm curious how you're defining YC's success compared to other angel groups.
YC is a pretty amazing group, no doubt, but being great at publicizing and
helping storm up investor interest in a startup can't be the only measure. Not
that I'm trying to insinuate that's all YC is good at because I'm not.

------
geuis
What concerns me about this YCReject project is that is for people who didn't
even make the interview process (apologies if this isn't true, this is to the
best of my knowledge).

I consider the YC interview process to be a useful filter. Anyone can apply to
YC and anyone can be rejected. I applied 2-3 years ago and was rejected. Last
year, my cofounder and I got the interview but didn't get into the program. To
me, getting the interview means that the YC folks thought there was something
interesting in the proposal, but decided not to fund the company because of
limited space for the round or the personalities of the founders.

If YCReject was oriented at people who got the interviews but not the program,
that would at least be an interesting signal. It might tell investors that
these people garnered YC's interest and might be worth a second look. However,
I don't see how letting everyone who's application was rejected into an
alternate program provides any kind of useful filter at all.

~~~
Retric
I don't think the goal is a filter at the level your thinking about. The real
question is simply is are YC rejects a better pool to consider than the random
ideas they are already receiving.

On the upside, they are looking at a pool of people that got it together
enough to apply to YC with 1 or 2 ideas, got rejected and still want to give
it a go. That means they are a least willing to push back a setback and not
simply spamming ideas looking for money. On the down side, some of the best
people / ideas have been removed. Overall it's probably a better group of
people and ideas than would apply to a less well known funding source.

~~~
jdunck
I applied and didn't get an interview. And I agree that a filter of some sort
is needed for YCReject to be meaningful. I'll persist in my efforts, but that
doesn't imply I will be successful.

More to the point, though, I think much of the value of YC is in the network
of alums and mentors they provide. Unless there is some buyin from those
mentors (or others of their value) then I don't think there's much point to
YCReject except as a team to cheer you through the low points.

------
waterside81
For me, YC & the rest of the seed funds have seemed to light a fire under
would-be entrepreneurs, which is great. It's opened up lots of doors and
spurred on innovation, which is the whole point. PG & co deserve a round of
applause.

But I find it bizarre and a bit upsetting that YC has become the be-all, end-
all (at least on HN). There were great startups before YC and there will be
great ones after YC. I'd like to echo the sentiment of others who have said
the following: If getting into YC (or TechStars or whatever else there is) was
part of your strategy, then you're probably not going to succeed. The value
they add is immense, but they are by no means king makers. Many YC companies
will fail, and some will succeed and those that succeed might just as well
have done so without YC.

------
citizenkeys
I have mixed feelings about this. With YC, it's not just about the money or
the weekly speakers. It's about Paul Graham's experience as a mentor and
Silicon Valley connections.

That said, though, there are many of us with good ideas that are asking
ourselves right after YC application decisions "What now?" Similar programs
that we can immediately start pursuing after being rejected from Y Combinator
at least offers a back-up plan.

~~~
rmobin
One of the important benefits of YC is that meeting every week with a group of
like-minded founders forces you do some kind of work on your startup. Even if
you are demoralized, you would feel pretty stupid if you didn't have anything
new to show after a week.

------
Vivtek
_But is this another sign of a bubble, particularly on the investing side?_

Can it be a bubble if _everybody_ is asking whether it's a bubble? This
metabubble stuff makes my head hurt.

~~~
david927
Everybody asked that question in the late 90's about tech stocks, and in the
00's about Real Estate. I don't know of a time when everyone was asking "is
this a bubble?" when it wasn't in fact exactly that.

------
robryan
If the quality of YC startups is improving every round that means that more
and more companies YC would have previously invested in are missing out.
What's to say you won't find a dropbox or heuroku out of the rejects group
that would have made it into previous rounds?

~~~
allanscu
It's going to come down to determination of the group, and it's hard to gauge
that in an application or interview process. I'm in the process of gathering
more information about groups that applied to YC/TS/500 that were rejected but
eventually became successful. If you know of any, please let me know.
allan@ycreject.com

~~~
citizenkeys
Sent you an email. Also added links to YC Reject and YC Reject Reject to Y
Combinator Universe ( <http://ycuniverse.com> ).

------
power78
Next they'll have news.ycreject.com!

------
shuri
What would be interesting is if a random set of the unaccepted got the same
opportunities as the accepted. But that's not possible...

Instead what yc needs to do is accept a control group and see if there is any
correlation between being chosen and eventual success. Then again...

------
baguasquirrel
Does it bother anyone else that YC has become so important that it's being
covered in Forbes? I appreciate the attention that the startup community has
been getting these days, but I'm sure many of you likewise enjoyed the
underdog status we had.

------
abbasmehdi
If I was pg I'd be closely monitoring these developments, this may make an
even bigger mess of funding and financing as he mentioned in one of his latest
essays.

------
tlrobinson
I thought I was joking when I posted this:
<http://news.ycombinator.com/item?id=2428988>

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ethnomusicolog
What suprises me is why it took so long to happen: hacker community +
validated model + underserved customers yields YC Reject

------
neoveller
A very inspiring story. It gives me a little more faith in the Valley.

------
kimfuh
Someone should do an American Idol Reject show.

------
johnx123
What about crowd sourced YC? (yconline or something?) We have a system ready
with us.

~~~
maxer
there is on that exists <http://www.seedups.com>

~~~
johnx123
It's more of kickstarter. But, ours is more like YC (crowd decides whom to get
funded and funds)

------
dengzhi
it's sorta like how now Yahoo only gets all the Google-rejects

