

Thanks PG, applying to Y Combinator cost me a shot at my local startupfund - grkballer44

After being turned down by a local startup fund in Canton, OH (which is being ran by a statewide accelerator program) I enjoyed the spirited 45 minute conversation I was having with the investment analyst  who was in charge of turning down my application, and listening to his reasoning on why I was not even eligible to EVEN PITCH my concept to the local commission who decides who receives funding . 
Let me set the table for the story, I applied to the fund  September 30, and was contacted by the analyst (who shall remain nameless),  after having a brief talk about my idea, he told me to send in an executive statement. During this conversation I also told him I was applying to Ycombinator (which turned out to be a mistake lol).  I had never made an executive statement b4, and after just finishing up my ycombinator application, I couldnt help but feel an executive statement for an early stage tech start up is a  huge waste of time. But I still spent much more time then I could afford (law school full time/ as well as developing a company), because the $25,000 the fund was offering would be a welcome addition to our start ups financial situation (besides being funded solely by a poor graduate student). 3 weeks after sending the executive statement in as well as a follow up email trying to verify he had received my message, I had yet to receive any sort of reply. So I contacted the accelerators offices, and eventually was able to get in touch with the financial analyst over the phone.
After not initially remembering who I was, and having to check to make sure he had recieved my emails (he did), and after briefly visiting my beta for the first time, he told me that my website was not at a point where it was elible to recieve funding. My idea failed for several reasons, which I would like to discuss more fully below.<p>1. I applied to Ycombinator- part of the start up funds conditioning on recieving investment is that the company must stay in Canton, OH for the next 10 years. My application to Ycombinator 3 month program showed that I wasn't dedicated to staying in the area, and was a major part of his reasoning on passing on  my application to pitching to the start up commission.  I found this entertaining on several levels, and apparently my points listed below couldn't convince him. 
        1. There aren't a lot of people who would question my dedication to my hometown. I have lived here my entire life, including while finishing my under grad degree at Mount Union University,  and while pursuing my Law degree at The University of Akron, not to mention locating my start up here.
        2.  The odds of getting accepted to Ycombinator are between 1-3%, horrible odds no matter how you look at it, I'd consider anyone applying who places their start ups future on getting accepted a pipe dream. So I didn't, after my application I continued building my company and working on my product, business as usual. So I find it funny that a potential investor would take my APPLICATION to a program he knows to be a long shot,  as a definitive signs that I would leave the area.  If accepted to Ycombinator it would be a tough decision for me to make on whether or not I should relocate to the Valley full time, but this is a road I haven't crossed yet, and I'd appreciate if someone who understand the ycombinator process (he knew about the program, the analyst is originally from The Valley) would be able to understand this, and at the very least not throw my application to his program out the window just because I applied to another potential fund.<p>2. Uniqueness- according to him my idea wasnt unique enough. After outlining several ways in which my product was unique from the competition, and outlining areas where I believed our start up had a significant advantage. His reply was, whats to prevent one of you major competitors  in the social media field from adopting your idea, and at this point I knew he had no idea what he was talking about. If my idea is unique enough to where major competitors in the field would try to adopt it, then I suppose its at the very least unique, and potentially a market that my competitors would be interested in acquiring us or by competing with us.<p>3. lack of market validation- according to him my company wasnt suitable for the start up fund because it lacked validation, after all when he visited my beta for the first time I only had 4 members  who have joined the site. I explained to him that currently my start up is in stealth mode, and the "members" accounts are there simply for testing. He couldnt understand the concept on why a start up would want to remain in stealth mode(or at least how his fund couldnt invest in a company still in stealth mode), and without market validation they couldnt tell if the idea whether the market would accept it.  He couldnt distinguish between a startup that had launched, and one that was simply an idea, prefering to place my site in the latter merely because of a lack of market validation.   At this point I began to get slightly agitated. If you work for a start up fund, and are unable to invest in ideas that have yet to been released, or had significant market validation, good luck. Good investors/entrepreneurs  are able to make a living because they don't need market validation everytime they evaluate concept,  if they did they would have much more difficult time making money, because by the time the market has been validated its either to late or much more difficult to enter it, the competition being more formidable.<p>There's a reason the valley has had a stranglehold on the tech innovation that has been changing the world. Its because outside of the valley, this is the shit the future entrepreneurs deal with on an every day basis.
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mzbridget
You were turned down by one program? You sound really bitter and I can see why
they turned you down - you're not ready to be an entrepreneur. As a person
running a start up, you're going to get turned down A LOT. So what if YC or TS
or any incubator/fund is accepting 1%? You try. You try again. You keep
trying. As a woman founder, I face much tougher numbers. I don't stop because
the numbers are stacked against me! I keep trying. I figure out ways to
monetize without funding. I get feedback on how to be better. When someone
tells me an aspect of my product is crap I consider it and improve. I don't
write out rants about how someone else was to blame. And yes - YOU NEED MARKET
VALIDATION. If you can't prove that people will use your product, why would
someone invest in you. This isn't 1998.

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grkballer44
Sorry If I may have came off as an ass with the post. The point I was trying
to make is that I truly didnt get any feedback on my product, besides the
point of lack of market validation. IN my executive statement I sent a link to
my beta, which he didnt visit until I was on the phone with him. Market
validation is important, but I feel that id you have a functional beta as well
as a concept or plan the least you can so is go through it b4 saying lack of
market validation is the end all be all.

~~~
mzbridget
I rarely see a VC or incubator read the entire statement or much less click
through to a beta. They care about numbers. You could have the next Google or
FB but if you can't show that people will (or are) using it then what's the
point? For me, I had to do an alpha test w/75 users and I have hundreds in my
private beta and have tons of articles and market research to show traction
and I still get questions about "enough traction". Just think about it from
the VC perspective: "How much am I going to get back on my return" That's ALL
they care about. That's all they should care about. Plus, its not up to them
to give you feedback. You need to get people on your product and ask them for
feedback, iterate based on their feedback and then start shopping it around to
people in your space and get their feedback. After that, you go to investors.

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spitfire
You didn't apply to a startup incubator. You applied to a local vanity
project.

Local/city governments all over the world are trying the "incubator" fairy
dust in an attempt to seem hip and with the times. The "analyst" you spoke to
is really a gatekeeper trying to filter out any project with a bit of risk (or
any possibility of outsized success). What they're looking for is zero risk,
guaranteed small-time success which officials can point to and say "see, we're
entrepreneurial and digital!!".

On the other hand, if being rejected by third tier "analysts" gets you this
down perhaps business isn't for you.

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cd34

      His request: he told me to send in an executive statement
      Your response: an executive statement for an early stage tech start up is a huge 
      waste of time
    
      Fund's requirement: the company must stay in Canton, OH for the next 10 years
      Your response: apply for funding outside Canton, OH
    
      His response: according to him my idea wasnt unique enough
      You need to refine your pitch
    
      His response: lack of market validation
      four people isn't validation. Even in stealth, you need to get a number of people 
      using your product. You need a revenue model, you need people using the service 
      to tell you what needs to be improved. Your idea may not be easily marketable and 
      clients are going to give feedback on what works better for them.
    
      His question: why a start up would want to remain in stealth mode
      Your response: I began to get slightly agitated
    

Regardless of your opinion of what he knows, he's the one with the money that
you're trying to get. Telling the guy with the money that he doesn't know what
he's doing isn't going to get him to write that check.

Refine your pitch, adjust your attitude, get some market validation and paying
customers and approach other funds or bootstrap until someone notices you.

~~~
frankwong
Is the norm to build and test until you have a live system where users have
been using it over many iterations of feedbacks and alterations before
approaching investors? At earlier stages than that is generally a bad idea to
approach them? Thanks.

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bartonfink
What part of this is PG's fault?

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grkballer44
None of this is PG's fault. I only made that the title of the post, because
the financial analyst I talked to said the local fund I applied to said one of
the reasons I wasnt eligible is that I applied to YCOMBINATOR. I meant this as
a post to show whats wrong with the start up scene in most of the country. I
feel that PG and ycombinator are part of the solution not the problem

~~~
rbanffy
Please revise the title to something like "having applied to YC was one of the
reasons another fund turned me down".

It'd be fair to say it wasn't the only reason.

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jaequery
Unless you get _accepted_ by YC or any funds, there's no reason to mention
them in the first place.

It's like trying to hit on a girl and saying, "I also met this other chic I
liked ..."

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jaequery
I don't really feel bad for you. Try again.

