
Advice to Summer YC Applicants - pg
http://ycombinator.com/exploding.html
======
spolsky
Exploding offers are a sign of desperation, but they also serve to filter out
young entrepreneurs who have a modicum of business sense.

The VC firm that extends an exploding offer and won't negotiate it is
guaranteeing that they'll only fund companies that aren't very good at
business.

A few years ago I wrote:

 _It seems to me that a company that accepts an exploding offer is
demonstrating a remarkable lack of basic business aptitude. Every building
contractor in New York knows you request bids from five or ten plumbers before
you award the contract. If a plumber said, "I'll do it for $x, but if you shop
around, deal's off," the contractor would laugh his head off and throw the
plumber out on the street. Nothing sends a stronger message that an offer is
uncompetitive than refusing to expose it to competition. And that's for a
$6000 kitchen installation. Getting $10 million in funding for a business is
the biggest and most important deal in the life of a company._

(<http://www.joelonsoftware.com/articles/VC.html>)

~~~
vaksel
I don't think YC really fits here, since you know ahead of time what their
offer will be.

~~~
webwright
Sure it does. You know what the offer will be but you might not know what
OTHER offers will be. Yes, I know TechStars and others are before YC, but
there can be other offers on the table (other funding, acquisition offers,
etc)

Thankfully, YC seems to be friendly if there are circumstances like this (Paul
gives an example below).

This works because YC has a flexible # of slots. TechStars has a rough way to
go here because, with 10 slots, they can't let a deal linger for a month
without a firm answer. I don't think it's malicious on their part.

------
tokenadult
"Using this tactic in a stage where funding happens synchronously is not very
ethical. It would be like colleges doing it."

I'm sure pg is aware of how colleges do this, so for readers for whom this
cultural reference is not clear, I'll mention that in the United States the
most competitive colleges to get into have a joint agreement (through their
membership in the National Association for College Admission Counseling) to
announce their decisions about whom they will admit by April 1st, allowing
admitted applicants who are admitted to more than one college to wait until
May 1st to decide at which college to enroll. It's not a perfect system by any
means, and I am endlessly fascinated by the peculiarities of college admission
in the United States, but it does give all students a month to compare offers.

"What can you do if you find yourself being pressured to decide before you're
ready? We advise approaching the situation with confidence. If your startup is
going to succeed, you're going to have to learn how to push back against
people who try to take advantage of you. So try negotiating."

This is excellent advice. Most of business is negotiation. It's never too soon
to practice negotiating.

------
gojomo
_(YC asks people to decide that day whether or not to accept an offer from us,
but we do this because at that point they already know all they need to, not
to pre-empt other offers. There is no other seed firm that decides after us.)_

If another seed firm did set its decision date a few days or weeks after,
would you then give teams more time to decide?

That would be incredibly gracious of YC -- indeed beyond what I would expect
of the category leader. But that seems to be the implication of your
parenthetical.

~~~
pg
Sure. Whenever a group has a specific reason they need more time to decide,
we've always given it to them. We once interviewed a startup that got an
acquisition offer right in the middle of YC interview weekend. Not only did we
give them a couple weeks to see how things played out, we advised them on
negotiating with the acquirer.

~~~
froo
_Not only did we give them a couple weeks to see how things played out, we
advised them on negotiating with the acquirer._

For the uninitiated, this is the very definition of integrity.

~~~
pg
Honestly, it was more powerlessness. How could we compete with an acquisition
offer? Integrity depends more on how you behave when you have power.

~~~
froo
I agree to some extent, but I still like to think integrity is a function of
how you behave at all times, not just when it is advantageous.

For example in the situation above - I perceive you as the kind of person who
really believes what he writes and wants to help people get up and running. I
mean, your essays date back before YC.

So in my mind, advising this group during the acquisition offer, even if there
was a chance you would miss out, is showing a true adherence to some kind of
ethical/moral code.

That's true integrity, in my opinion.

------
rms
Alphalab in Pittsburgh decides after Y Combinator. They generally seem very
reputable. The main negative is they have a "stay in Pennsylvania" provision
-- if you leave PA, you have to pay back the $25,000 and they keep their 3%
equity. They have this because they are funded by the state of PA and the
ultimate goal of the funding is to create jobs in Pennsylvania.

~~~
skyfaller
Their FAQ at <http://www.alphalab.org/faqs.aspx> suggests you have to stay in
_Pittsburgh_ , which is smaller than Pennsylvania. Even the option to move to
Philadelphia would make this more attractive.

~~~
skyfaller
On the other hand, their About page at <http://www.alphalab.org/about.aspx>
says "As Innovation Works utilizes funds from the Commonwealth of
Pennsylvania, each company receiving funding is expected to maintain a
significant presence in Pennsylvania after the program." I guess you would
have to ask them for a clearer response, but perhaps they would be OK with
anywhere in PA.

------
bluefish
The same "exploding offers" are prevalent in the job-seeking world as well. I
fell victim to one accidentally: I was trying to happily accept a job but the
acceptance deadline detailed on my offer actually expired the day after I
received it in the mail. At the time I thought it odd that the company was in
such a rush to get a response from me that they couldn't give me a week or so
to think about it. Then I got there and found out very quickly why they were
pushing me into taking their offer. Three weeks later I had quit. I'll never
take an exploding offer seriously again and commend YC for being gracious and
flexible in their process.

------
dbrush
This happened to me in early summer of 2007. I was actually at the airport to
join another program when I followed my gut and took a chance with my Y
Combinator application instead. I was subsequently interviewed and accepted,
so it worked quite well for me. I would, however, encourage everyone to weigh
their options before following their guts as in the end you may get no offers
by taking a risk like I did.

Probably part of what prompted my decision was how much integrity this other
program didn't have relative to Y Combinator (offering perks and having
integrity are sometimes inversely proportional).

------
wastedbrains
This happened with us, We applied to 3 groups and were accepted into two and
asked to interview at YC. All the seed groups were pretty cool about it.

The first groups deadline was so early, we wouldn't have known about offers
from the two other seed groups. After giving us an offer extended our decision
period, by over 2 weeks. The second groups deadline was towards the end of
that time and actually told us we were accepted slightly early so we could
make a decision between the two groups.

YC invited us out for and interview, but that was going to be so much later
that we didn't think we could put off the decision that long. PG was great
about giving us his thoughts on the matter and talked on the phone with us
some about the situation.

In the end we made our decision to accept one of the offers and not do the YC
interview. It worked out well for us, but it was a bit stressful and
complicated.

One problem is that the programs start at different times and really out of
timing need to make decisions earlier. One of the programs we applied to
started a week after the YC interviews and obviously by that time they need to
know who is going to be showing up. It would be great if they could all sync
up the timing a bit more like college semesters are roughly at the same times.

------
aneesh
PG made an interesting analogy to the college admissions process. How long
until we see an "Common App" for seed firms, and a common decision timeline?

~~~
pg
That may be the answer eventually. The situation now is getting out of
control. It's not just us people are trying to pre-empt. They're all trying to
pre-empt one another. The result is that they end up setting their deadlines
in roughly inverse order of quality, creating a cascade of stressful decision
points for the best applicants. And the more new YC-like things people start,
the worse it will get.

I don't think there would need to be a common application, but there may have
to be a common deadline.

~~~
jackowayed
This really reminds me of the presidential primaries. Everyone trying to be
earlier than the others.

Unfortunately, there's no central governing body to even try to limit it, so
it's even more able to get ridiculous.

~~~
anamax
Since "campaigning for president" is undefinable, trying to limit it is
absurd.

In some real sense, every US Senator and Governor is campaigning for
president.

~~~
tokenadult
_every US Senator and Governor is campaigning for president_

Those who are not "natural born citizens" of the United States (such as the
current governor of California) cannot become President, by the Constitution,
but, yes, for the most part most politicians of national prominence keep a
future run for the presidency in mind in most of what they do.

------
dbul
I think it says a lot to get through the first round at more than one
organization. Even if you took the risk and declined the first offers and
ended up with no offer, you gain confidence in your idea(s) and an ice breaker
to angel investors (who you'd have to actively find).

That you ended up with no offer could have just been a matter of chance: there
were 33 strong companies and only 28 spots so decisions had to be made. So if
the other organizations aren't willing to be reasonable, maybe taking the
chance is the better choice.

------
jmtame
Perhaps you could hold early interviews the first weekend in April for people
who meet two conditions:

1) You are already interested in them, and would have interviewed them anyway

2) They have other offers on the table with early deadlines, particularly mid
or late April obligations

~~~
pg
I don't think it would fix anything to change our schedule. If we moved our
interviews earlier, they'd just move theirs even earlier.

~~~
ivankirigin
Have you considered rolling admissions now that you're in Cali all year? Those
that aren't ready for demo day could wait till the next one. You could have 3
or 4 demo days yearly. That would solve scheduling problems.

It might also make the application process easier on you by trickling in the
applications. No cramming to get to them all. You could still do batch
interviews monthly.

------
jwb119
Wonder who the nefarious "other organizations" are..

~~~
iamwil
Just ask around who the other seed firms are, and look at their web pages for
their deadlines. Since no other seed firm decides after YC, the answer is
pretty much: all of them.

------
minalecs
Putting a time limit on offers is not a big deal. I mean who wouldn't say to a
good startup, that multiple parties see potential in, saying.. you're past the
time limit we'll pass. Financially thats not a good idea. But in the end
decisions need to be made and overall its good for all parties for yc to work
with the startups that are put in this position.

~~~
arjunnarayan
At the end of the day if they originally wanted you, chances are they still
want you, despite deadlines. They won't cut their nose to spite their face.
Call their bluff. Chances are they'll want you back.

Not to mention the selection correlation - if you get into some seed
organization, you're already more likely to get into YC. It isn't guaranteed,
but it's already a good sign.

------
rms
Techcrunch comment from a Dreamit guy:
[http://www.techcrunch.com/2009/03/22/the-nasty-exploding-
ter...](http://www.techcrunch.com/2009/03/22/the-nasty-exploding-term-
sheet/#comment-2665424)

------
ivankirigin
How about we make this thread an open forum about this? Name which firms are
behaving poorly, to warn others about them or to let them respond.

~~~
trickjarrett
I don't think this is wise on the YC domain. Even if the words are from users
of the site it can open nasty doors.

~~~
ivankirigin
I don't like this lack of transparency. Why not name companies? It would be
great (like TechCrunch w/ TechStars) to showcase the opinions of others on the
matter.

~~~
trickjarrett
This isn't an issue of transparency. This is an issue of a direct conflict of
interest. I'm all for their names being brought out to the open, but for
slanderous remarks to even be housed on a YC server seems to open a possible
chink in armor should other incubators become hostile. That was my only point.

~~~
ivankirigin
It is indeed a diplomatic approach. Less drama is better for business.

------
sarvesh
How about accepting applications year round but still having the twice a year
3 month program? If someone knows they are going to be a in say the next
summer or winter round it is less likely they would apply elsewhere.

~~~
pg
We couldn't do that. The only way we can operate on such a scale is to batch
the various types of work. E.g. do all the interviews over one weekend.

~~~
arjunnarayan
Option 1: You could do an "early decision" round, and a regular round. If the
early round is very early (february?), and the regular round at the current
schedule, the other seed firms would have to really come out into the open to
pre-empt their decision date before early decision.

Option 2: You could move your schedule early up - to have your interviews and
decisions wrapped up by March 1 - and give the startups a whole month to
decide (Just to signal your integrity). Then if the other seed firms gave just
48 hour exploding notices that would really sit in stark contrast.

You want to force them to signal their bad integrity out and clear in the
open. Right now they're able to be dirty in the closet. If you force them to
come right out, especially if your actions are diametrically opposite, you
win.

