

Is Y Combinator Obsolete (For the funding portion at least)? - modkit

After applying, getting called in, and finally being turned down for an early round of YC funding, I emailed Paul Graham last spring about a new project I was working on..  I already had a prototype and some Alpha testers and was looking to form a company so I asked Paul if I could get YC a la carte..  Hold the cash and the move to the Bay area.. Extra on the top lawyers and maybe sprinkle on some sage advice..  Paul said the project looked interesting and encouraged me to apply to the formal program as the YC system only scaled when done in batches..<p>So I applied, (lonely single founder at the time) and got back a response turning down the project..  At the end of the email was the following:
"We're trying to get better at this, but it's practically certain that groups we rejected will go on to create successful startups. If you do, we'd appreciate it if you'd send us an email telling us about it; we want to learn from our mistakes."<p>Now of course, I plan to send Paul that email one of these days, but the recent Kickstarter phenomenom has me wondering if it is my project that they got wrong, or is the whole idea even necessary any more?<p>A little networking and I got a good firm to defer our legal fees for company formation and I'm not too far removed from some pretty successful entrpreneurs who offer sound advice whenever I ask, so I think that just might happen naturally..  But now with Kickstarter, we were able to raise $6k and counting with no strings or equity lost: http://kck.st/9Kgf6O..  And this is from the only investors that really count.. Users!<p>What do you all think?
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bl4k
One aspect of this is that PG and YC have shown themselves to be very
understanding investors. I would rather sell stock to somebody understanding
in that way than to deal with a multitude of people who I don't know telling
me what I am doing right or wrong.

The first time I raised money I made the mistake of not knowing two of the
investors well enough, but I took their money anyway and they ended up being
complete assholes. I will never live that decision down, because of how much
damage and wasted time it caused (much more than what they themselves
invested).

I have no experience with Kickstarter, but you could see some examples of that
with Diaspora - people putting pressure on the company to go one way or
another because 'hey, we funded this thing! listen to us!'. It sounds like
potentially having hundreds of asshole investors (I know they don't get stock,
but that doesn't effect some persons right to think and behave like they do).

YC is also a shortcut into the SV network, which can be very important
depending on your plans for the company. The experience PG et al bring etc.
doesn't need repeating.

So based on what I know and what I saw with Diaspora (YMMV etc.) I would
definitely choose YC over KS if I was raising money.

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modkit
Very good points..

As far as the hundreds of annoying investors, I never really thought of it..
But I guess that happens anyway whenever you take any customer's money..
Except in the Diaspora case, they took the money in advance of development
with an expectation that what they were building would satisfy each user which
is an impossible scenario from the outset.. Plus the project was open source
which I don't think is exactly the norm for a YC investment..

But I think in the end, Diaspora is a fluke.. Statistically and Culturally..
Statistically, it's outcome was not representative of a typical Kickstarter
Funding process.. Culturally it was the result of some backlash against
Facebook.. That means some of the backers were already pissed off and the open
source focus means the some were likely quite vocal to begin with.. I think
the combination of these factors and the fact that the funders came in before
anything was built leads to the scenario you mention..

Our product was already quite built out before we came to kickstarter and
users were pledging for Alpha access and other near future products..
Interestingly enough, we got a front page post on Sparkfun.com today and there
were a few non-backers who had something to say about how we should build our
project.. The fact that it IS already a project means that they can criticize
without making the mistake of backing us and feeling swindled that we don't
share their vision.. A few times, the complaint was that we should turn our
web based product open source even when they criticized our design.. I think
complainers will complain no matter what, and the question of ownership and
control is very important as in the case of your investor..

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wmf
YC hasn't been about the funding for a while, so saying the funding part of YC
is obsolete doesn't mean much. The "convincing people that it's not that hard
to start a startup" part of YC is also obsolete now that people are shouting
this message from the rooftops, but people are still applying like crazy.

Also, good for you that you got people to donate $6,000 to your for-profit
company, but if that happens too often it's going to create a backlash.

~~~
modkit
Oh and they didn't donate.. They get access now and in some cases also a
presale.. This more than anything proves user demand which is so important to
flush out early.. It's funny you wrote that they donated.. One of the sparkfun
commenters said he would not fund a for profit project.. I hope he has a farm
because he wouldn't be able to buy much ;)

