The expectation that a company should be "accelerated" reflects more on the accelerator than the company.
(A cynical person would say that this philosophy is merely to incentivize companies to apply to only YC. I don't think that's the case and take Sam at his word.)
But if the company is indeed the independent variable, then e.g. AirBnb and Dropbox succeeded because they were great companies, not because they went through YC.
How do you claim on one hand that YC can materially improve your company, and on the other judge the company for not being improved after going through another accelerator?
This blog post could be interpreted as a way of providing more information to founders, so that they can't then say "But I didn't know that accepting another accelerator would lower my chance of getting into YC." Now you do.
Also, it's a true statement that AirBnB and Dropbox succeeded because they were great companies, not because they went through YC. At least in the early days, YC had a very strong bias towards selecting companies that would succeed without them. You'd have to ask someone affiliated with YC if that is still true, but given comments from YC partners here, I suspect it is.
That statement is not mutually exclusive with YC being able to help companies that would've succeeded without them, and indeed, both Brian Chesky and Drew Houston have said that some of YC's advice was very helpful to them in critical early stages.
Interesting, my perception is that it's gone the other way; that not only is YC now primarily accepting companies at a later stage when they've already been substantially derisked, but it's also investing in less risky companies to begin with. Several YC partners have said this as well, e.g. Jared Friedman:
"Companies are joining YC at a much later stage. When I started YC, most companies wrote their first line of code in the first week in the program. Today, many of the companies have been working on their business for a long time and some even have substantial customers and revenue before applying. If the companies in my batch applied to YC today, I doubt that many of them would get in." http://blog.jaredfriedman.com/2015/08/18/nine-years-of-demo-...
While I'd like to believe that YC is still willing to fund companies like JustinTV or Loopt, where there is substantial risk in terms of both the technology and the sociology, the reality is that if you go down the most recent batches of demo day companies most of them look like Dollar-Shave-for-X or Uber-for-Y. Maybe that's a slight exaggeration, but perhaps the most striking thing about the most recent batches is how few of the companies are obviously terrible ideas. Unlike back in 2006 and 2007, where probably a third of the companies failed to even launch, and another third probably never got more than 100 users or whatever.
Obviously YC is now also funding energy and biotech companies that are at least as risky as anything from 2005, but if you look at the verticals where they've been active the longest it certainly seems like the trend in those areas is toward later stage and lower risk.
I am sure this is a reflection of the companies they get to look at. If we use a dating analogy they seem to be getting more interest from supermodels, but this doesn’t mean they are getting more interest from potential life partners.
I think it's the opposite actually; there are an effectively infinite amount of startups, but the bandwidth of YC is (currently) finite. What we're seeing now is exactly what you'd predict just from the math, even without any data.
No, not necessarily.
Every startup in the batch had a unique end goal, but they're not necessarily traction in the way YC appears to view it. Sometimes the end goal is a pre-traction milestone, like shipping our first set of physical chips. In this sense, it's a blurred line between pre-accelerators and early-stage accelerators
Personally, I'd contend that YC today does not really like funding "very early-stage companies". Or at least, the definition of very early stage has been inflated from 2005 to now. The bar has been raised too high ; there are too many good applicants with significant product and/or traction already.
I mean I would have thought that the answer to the question "Does YC consciously avoid founders with foreign sounding accents" was obvious ("of course not"). But it turns out it wasn't.
I wish more people would apply this type of skepticism to tech investment in general. I think there's a lot of shady stuff going on that doesn't really get discussed -- imo, there are significant problems with the conventional startup investment model.
That said, in this case, I think it makes sense to say "Why wasn't that help sufficient? Were they really bad accelerators or are you just wasting money?" I also think it's important to recognize that a lot of small local accelerators are just bad accelerators. Since the most competent people are often the most keenly aware of their inadequacies, it makes sense that some really good companies would go through a local "starter" accelerator program, feeling unworthy for YC out of the gate.
The more cynical view would be founders going through multiple accelerators are more focused on appearance and "playing the startup game" than actually building a real business.
Cargo culting seems very prevalent in the current startup culture -- especially in those that are "playing startup".
These founders see all of these external things that startups do and assume they must be necessary for success -- or that they will at least will help cover up any problems they have.
Unfortunately this is just like carving wood into the shape of a radio and expecting it to work. It might look the same but it has none of the things that make it a radio. You can even attach a real antenna to it, but it is still just a block of wood.
Actually I think cargo cult thinking is more of a problem at the accelerator/angel/VC level than at the startup level. We have all these funders copying the YC model and relatively few trying to do things differently. We need much more diversity in funding and acceleration models. All roads might lead to rome, but we don’t all need to travel there on the same bus.
Yes, these people could exist, and there are legitimate reasons for doing multiple accelerators as well.
The end goal for a very early stage startup accelerator or incubator can be a lot different than a later stage accelerator.
Different accelerators for different specific purposes at different stages in the lifecycle of the company.
Because they're not claiming credit for the success for their alumni, and they are also giving other accelerators the benefit of the doubt that they are good too, and acknowledging that the primary factor is the founders themselves. If they don't thrive after going through another accelerator than why would YC be any different? I don't see the conflict here at all.
Founder team B with resources (M+other accelerator) accomplish Y.
If not (Y >> X) => Founder team B did something wrong or squandered the extra resources. That's a bad signal.
This holds unless you make the assumption that the other accelerator provided zero value. And if it did, then that reflects poorly on the founder team that chose that accelerator, baring something exceptional happening.
Pretty straightforward to expect more from teams who have had access to more resources.
We found out that having left an accelerator program, it is difficult take a potential deal with YC, as the cost of further dilution has to go with potential higher valuations in SF.
In fact, apply for YC first. If you don't get in, but have a respectable accelerator program and network, consider moving on and push it. Many roads lead to Rome.
Not all accelerators are equal. Going to college may or may not change your life. Going to Harvard, Stanford or MIT probably will
even if you had really good financial or location-based reasons for it...
Or that the idea was less than successful and the executives could not execute even given resources.
that being said, I'm sure there are outlier scenarios where a company can plausibly say "we signed up for accelerator X and they sent us down the wrong path for x, y, and z reasons. we'd like to do it right this time around." and YC would take that into account.
edit: words r hrd
Either they couldn't get into a "good" accelerator or they didn't do their research.
But some startup founders may want to get into YC, as it is the best. Yet, they may hesitate to join a strong accelerator that can give them a few more months of runway and advice they desperately need, because of this post. Startup founders may take years to figure out the right direction for the co., as the market size or solution may not be obvious at first. And I feel as though this post, and YCs thinking discourages that and discourages competition.
But from what I've seen externally, some startups that go through (a bad) accelerator, don't accelerate, can come out multi-million dollar cos. Based solely on founders persistence on solving the problem.
However, we've seen an increasing number of accelerators getting startups to join them by saying "we can help you get into YC", and then subsequently hurting the company with bad advice or onerous terms.
Companies should never do an accelerator to help them get into YC. Companies should do an accelerator if they need the money to survive or think that they resources of the accelerator will help them be more successful.
The better way to deal with that would be to say that you want to emphasize simply that your chances are decreased if the previous investors / accelerator / your mom made your company less interesting and / or term wise unpalatable.
You might even go into detail about the kinds of terms and the kinds of advice that you feel are particular reasons to not be accepted, this might save a lot of founders a lot of grief, even the ones that did not decide to apply to YC because it comes from a respected voice in the industry rather than from some cornered cash strapped founder during the negotiations with a party much more savvy and powerful.
I think a lesser emphasis on getting into YC and making the post more of "how to judge an accelerator" would have been better.
There's gotta be a better way of handling this.
The problem with a bad accelerator is that they can actually harm your company with bad advice and unnecessary distractions.
You really should name and shame the bad accelerators. I know no one likes to be negative, but if there are accelerators out there messing up companies and leading founders astray then it would be best to make this information public. You will take some heat for doing this, but you guys should be able to handle it.
More seriously, it depends on how serious the bad accelerator problem is and you guys are one of the few that have the data on this. If it is a minor problem then I agree there are better ways to help, but if it is a major problem then it needs to be addressed.
Actually just an acknowledgement of the level of the problem with no names attached would be highly useful to the community. Very few people have access to this data and YC is one. The fact that Sam wrote about this makes me suspect that it is a major problem.
Y'know, the way it's done by all professions worthy of the name?
No, it would not be weird at all, and more importantly, it'd be good for consumers of that industry.
I mean, to make my actual argument, instead of just alluding to it, it seems to me that:
1) it's good for consumers of an industry to have ratings of the providers in that industry
2) I can think of three sources for such ratings: crowd-sourced ex-customer ratings, ratings by a purported expert-at-rating, ratings by peers. I think these each have their merits.
3) If ratings-by-peers is indeed useful, then in a given industry, it has to start somewhere.
Sometimes different alumni have very different experiences. Sometimes an accelerator's niche is very relevant to one company's problem but not another's. As Sam's advice said -- it's more useful to qualitatively talk to someone you know (and also trust, or at least consider credible) to evaluate their opinions on the accelerator. There are too many unique factors.
Obviously, this is hard for a new-ish (pre-) accelerator, so one heuristic I've used instead is to review the experience of the accelerators' founders and mentor network. It's a start.
In other words, if you're going to go with another accelerator, commit to that program and decide that you're going to build a real business off it. It worked for both SendGrid and Digital Ocean. Don't expect that you'll be able to bounce between programs and accept help from everyone, because if you need that much help, it starts looking like you really don't have your shit together as a founder.
People who make exploding offers are not just bad, they're also acutely aware of that fact, thus the manufactured scarcity.
Not that I agree with that interpretation; I think YC's viewpoint makes a lot of sense -- especially if it is a proven negative indicator of success.
 "If you apply to other accelerators, then we'll be more critical of you."
This is similar to the notion that a startup can "sell the dream" up until the point where they have revenue, after which they're no longer selling dreams, they're selling the trend.
Make a decision, and then make the most of that decision. Sam is not saying it's bad to do other accelerators. However, for very natural reasons, graduates of other accelerators have more expected of them. Likewise, I doubt YC would accept their own graduates for another round.
One of our goals is to release as much advice as we can for free for anyone.
Without that conversations, that sounding board, all that written advice just makes another investopedia/venturehacks guidebook. Most startup founders already do the google legwork and required readings. It's great, but not the main reason why people would apply for YC.
While I do think YC provides a lot of value to their alumni, people can get fixated on the process of raising funds and not building their business. Build a great business making real money and you won’t need funding.
I totally get it, but for every github and Atlassian there's also a Facebook and Snapchat or a hardware startup (wish I could think of one now...) where outside funding is essential.
If your business idea is too big to make without large (seed investment size) amounts of funds then you should pick something else or get a job and slowly build it with your own income.
Suck it up.
You can name the few startups that have done what you're recommending, but every other (high growth) startup did it the way you're knocking.
A great many people try to create startups while maintaining day jobs. You don't hear about those ones, ever.
These type of businesses get very little press, but they are very good to own and run - I of course know nothing about them :)
Though by the traditional silicon valley definition of startup, the ones like you describe can be labeled something like lifestyle businesses, solopreneur ventures, etc. I think people like Chris Guillebeau (The $100 Startup), Jason Fried / DHH (blogs and books), and Marco Ament are successful people to read that are also good examples of starting businesses this way. Maybe even Tim Ferriss (4HWW).
* = Unless you are an A-list celebrity (or Unicorn) in which case we'll take you no matter what.
* You already got advice
* You already built a minimum viable product
* You already got feedback on that product
* You already networked with people who would lead to the next round, growth, etc
* You already spent money on marketing
Unless you've pivoted, what is Y-Combinator (or any second accelerator) going to be able do to help you other than introducing you to another set of investors (that if you chose your first accelerator wisely you might be somewhat connected to
Other than that, there's the cap table that they explicitly mention, 3-8% of a seed stage company is less attractive if there is another 3-8% player involved. Similarly, an A round (that they help you get) is less attractive if 12-16% of the company is already in un-dilutable preferred shares.
* Great advice, solid mvp, good feedback, solid networking but the money you spend on marketing was too little, and done horribly. All this product needs it a good marketing plan and it abruptly begins to hockey stick and gain velocity?
I think the real reason is dilution and/or wanting an 'industry first dibs' on any potentially valuable start up. At least if they see any promise in the product.
I wonder what you feel companies should do in the event of a strong pivot: reincorporate or retain their cap table?
Based solely on this post, it seems beneficial to reincorporate in order to retain an undiluted cap table.
However, that seems contradictory to YC's thesis of investing in teams instead of ideas. If a team's first idea isn't successful, I imagine YC would want to retain its stake in whatever their new venture is.
Also - is there any chance you've previously used pre-accelerators as a positive indication? "Letting up" on your standard assessment of a team simply because they had gone through a pre-accelerator could also explain this trend.
I've seen that sentiment around more of late, possibly as a result of the glut of seed-stage startups who are pivoting after failing to raise an A.
One of the common problems with many accelerator programs is that they are run by people who are not themselves experienced founders. Not surprisingly, their advice is often counterproductive.
Advice IMO is the least valuable benefit of an accelerator. There's no shortage of advice out there, and founders who take bad advice only have themselves to blame (poor judgement).
The negative impact of bad advice IMO is far outweighed by the potential impact of an expanded network, the momentum gained from "rising to the challenge" of an accelerator, and the capital infusion.
(I 100% believe you)
A crazy one I remember was telling a pre-product startup that they needed to focus on defining their brand.
(For avoidance of doubt: this wasn't an accelerator I have or had a formal relationship with, and -- thankfully -- won't be on the short list for almost anyone reading HN. For further avoidance of doubt: if you ever have coffee with me in Tokyo and ask for accelerator recommendations I am likely to observe that plane tickets are cheap.)
tommy at alloy dot co
Maybe you could write about it?
TL;DR on TS for us it was a homerun, I don't believe it is for everybody. I believe there are times it a particular TS program is a better situation for a company than YC, but that there are MORE situations where it is better to do YC if you can. That's my 2 cents.
I'm starting to think that it was because we did participate in other accelerator before, and that doesn't make much sense to me.
(Fairly so. They seem to offer a blurry line on what they consider "portfolio" sometimes, not going out of their way to differentiate accelerator vs later stage investments)
>>(it’s important to distinguish between companies that went through the accelerator and cases where the investment firm made a small late-stage investment in the company)
(500startups does mix the two on their portfolio page; Seed-DB only shows accelerator companies)
I should mention that they have been doing a better job distinguishing this lately.
And the list of Techstars companies shows only the stats of companies that went through a Techstars accelerator - http://www.techstars.com/companies/ Non-accelerator company investments (Uber, Twilio, etc) only appear on the Techstars fund page - http://www.techstars.com/venture-capital-fund/
Disclosure - I work for Techstars
In a similar vein, what are your thoughts on Techstars calling themselves "the #1 startup accelerator in the world" and claiming "the best results" for their program? Given that YC's performance is roughly ~12X yours, this does seem to be somewhat of a misstatement. That is, unless you're claiming to be #1 for some arbitrary metric that isn't actually the benchmark for your industry (which to be clear, is the market cap of the companies you fund).
I think Techstars is clearly a great program, but stuff like that just strikes me as disingenuous. :)
BTW, the #1 thing came from the first ranking of accelerators back in 2011 - http://tech.co/top-15-us-startup-accelerators-ranked-2011-05 (I believe they used a mixture of financial results and founder ratings, but I'm not sure.)
Yep, YC companies have raised a lot more money and have a higher total valuation, but YC also has a two-year head start! Based on any reasonable metric, Techstars has better results than any other accelerator - http://www.seed-db.com/accelerators
PS - my favorite story about how Techstars directly helped to change the course of one company is here - http://www.wired.com/2015/12/how-bb-8a-rolling-robot-in-a-ga...
Early Uber investors are sitting on one of the largest ever venture returns.
As Brad writes, that fund is "one of the best performing funds I’ve ever invested in". :)
We've been to one. It was early stage, and within our geography. When we spoke to YC/500startups in 2013, it was all about having traction or earning revenue and breaking even. We didn't have that. We were academia dropouts with some patents and an idea.
Going through the 1st accelerator helped us because we didn't even know how to put together a pitch deck. We've since pivoted because ideas change, become more focused and polished. Our idea, business model and pitch is completely different.
YC would not have accepted us in 2013, someone else did. Now if we want to apply to YC post-pivot, we get penalized? That seems incredibly unfair.
I guess you can call it baggage, but nothing works right out of the box. Youtube was a dating site before it became a video site, but they didn't start fresh/reincorporate. They just grew from what their users wanted.
But then all else equal: if you're a possible YC pick-up at the margins of being accepted, so they have a choice of accepting you or someone with similar prospects but without the baggage, it would be irrational of them to pick you up.
It gets fuzzier the less marginal you are relative to all the other companies that want to be in the next YC batch, of course.
At the same time I wish they were more transparent. Dropping bits and pieces in no particular order like "don't do a previous accelerator" or "get a recommendation from another alum" makes their process seem irrational.
Unfair or not, their job is to choose companies that will benefit YC. If the data shows that companies with property X do worse, asking them to lose money because they want to be "fair" is not a reasonable request.
Of course, individual cases might be an exception. And YC does accept, but with higher expectations/requirements.
I don't think that's what is being said. You say YC would not have accepted you in 2013 - what you would want to do now is be accepted in 2016 as a company years further down the road. Is the bar higher? Sure, but that's natural. Demonstrate that you've made good use of those 2 years and you are in good shape to proceed and you should be fine, is what I read into it.
It's different pitch, but a natural and logical progression. Most of the time ideas need refining, especially with user feedback. It doesn't make sense to start with a new company since the technology that powers is still the same.
If you're changing everything, then it makes sense to just start a new company.
So I guess it can be a judgment call. In your case it sounds like you're doing the right thing, though.
"...that 25k he just gave you, could've gone to his kids' college fund or investing in blue chip stocks instead. It's amazing that you can raise money at all."
Angels give less money than VCs, some angels give low amounts (15-25k) especially in an early seed round. They're doing it for you. Screwing them over for more equity or YC makes you a shitty irresponsible human being and imho, should be considered a type of fraud.
Honestly I'm surprised at Sam's stance. Unless it's really justifiable, this seems like bad advice.
Of course, that's a completely different scenario from simply evolving the idea in a different direction but still keeping the core; in that case, I agree with your point of view. For example, I do see a problem if you're going from a "Custom CNC Furniture" idea to a "Custom CNC Cycling Parts" idea. It would be pretty shady to screw over your initial investors in that scenario. It also might be actionable by the original investors if you reuse any assets you developed using their funds.
Your point is well taken, though. I wonder if there might not be a middle ground, where a new company is formed with the old company owning some of its stock. This gives the new venture a cleaner cap table while not completely screwing the original investors.
If your new business plan is encumbered by associations with the previous "pivot" (usually: because you share code with it), then starting fresh is problematic.
But if it's not, if the only thing that's the same with the previous pivot is the team, and iff you haven't worked on the new business plan using resources from the previous investors, then "pivoting" gives your previous investors equity in a business they had nothing to do with starting.
If you were (a) about to run out of money anyways after giving it an honest shot or (b) returning money back to the investors, there's nothing wrong with dissolving old-co and starting new-co with a clean cap table.
Is this still true? Aren't you supposed to show good traction in order to have a good chance to get into YC?
The post says that YC's reasoning is that conditioned on knowledge that the company attended multiple accelerators, YC expects to see more significant progress. I think this eliminates any usefulness of doing a randomized experiment on YC applications, where the property of previous accelerator attendance is hidden and we just observe whether YC would accept them or not (meaning, their fundamentals are good enough to be accepted). Instead, YC is saying that fundamentals that look good enough to be accepted are actually not good enough if you've been through an accelerator.
On one hand I understand what they are saying, but on the other hand I also think that however an application comes to be sitting in front of your eyeballs shouldn't necessarily matter. It seems odd to me that the criteria for entry would be path dependent and the goalposts could move back or forth depending not on what the current state of your company is, but on how it arrived at that current state.
Please note this is not a criticism. I am not a successful start-up accelerator. Just observations about this seeming counter-intuitive to me.
I don't know if that's the exact math, but it's probably a lot closer to that than to evenly distributed.
My guess is it is like VC funding where all the VCs want to fund companies that don’t need the funds - the companies that don’t need to be in YC are the ones they want to choose.
The core of a great company is the same: work your ass off building something your users love. No accelerator can give you that.
Why there is great value in a program like YC, it appears easy as a founder to fall into the trap of thinking getting into YC is an end in itself. This can’t be good for business success.
Let's be honest here. This is the primary issue not the "smaller issue"?
Let's call a spade a spade. Or have I missed the joke?
Hence, dilution is very bad. That would be my primary issue.I just don't understand why it was stated as a minor side point to the whole discussion. Surely it is absolutely important?
If you are going to go through accelerator, why not go with the one that carries the most social capital.
The purpose of a sales broker is get your company in front of perspective buyers, who would have interest in an acquisition of your company and help with the sale.
While you don't need to, I would think the chances of being accepted are considerably better if you are prepared. Especially if you have factors working against you that YC doesn't like.
Obviously joining an accelerator prior to YC doesn't count as preparation (more like making your startup radioactive), but it does seem prudent to have a solid YC application while being ready to nail the interviews if it gets that far.
1. Access to people who will introduce you to people with piles of money that is burning a hole in their pockets.
2. Advice from people who have seen companies go from small to big from the "inside".
Even more interesting would be companies that were rejected by YC but went through a different accelerator, either before or after applying to YC.
What's an exploding offer?
 http://www.ycombinator.com/about/ sorry couldn't resist :-)
> a job offer that is retracted if not accepted within a very short period of time. "they can’t get first-rate students unless they use pressure tactics like exploding offers"
See also https://blog.ycombinator.com/exploding-offers-suck :
"As the world of accelerators gets more and more competitive, we’re seeing more and more exploding offers where an accelerator tries to force a company to make a decision about a funding offer before the company has a chance to finish talking to other accelerators."