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It's harder to get into YC if you’ve been through another accelerator (ycombinator.com)
228 points by wasd on Jan 20, 2016 | hide | past | web | favorite | 151 comments



This still confuses me.

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?


I think the idea is that as a company founder & CEO, you are responsible for everything that goes on with the company. That includes the decision to join 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.


> At least in the early days, YC had a very strong bias towards selecting companies that would succeed without them.

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.


>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 am sure this is a reflection of the companies they get to look at.

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.


When you have a 100 times the interest and limited bandwidth then you only get a short time to look at each company and you end up choosing on the basis of appearance not substance as this is a faster heuristic.


In general, the more money that a company has raised and the longer it's been around, the higher our expectations are. There are of course important exceptions to this, but we do look for evidence that founders can get things done.


What about companies that went through a specific type of accelerator (ex. hardware, or life science focused) and now wants to accelerate there business growth. How are these types of accelerators viewed by YC?


It's always weird when people ask this kind of question. Isn't the answer obvious?


The startup I work for went through a niche IoT accelerator late in our lifecycle (post Series A.).

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 [1]; there are too many good applicants with significant product and/or traction already.

1: https://www.ycombinator.com/whynot/


No?

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.


>(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.)

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.


My guess is the companies that have been through other accelerators have improved polish that makes it harder for YC to pick the truely better companies.

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.


I don't think that is cynical. :)

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.


Maybe you are just more cynical than me :)

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.


> 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.

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.


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?

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 A with resources M accomplish X.

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.


Except YC does not expect to be criticised when YC companies tank, which many eventually do.


And why should they be criticized? That's table stakes for investing: if you want upside you take risk. Does that obligate them to take on losing bets just to appear fair?


Because it means YC itself has a falsifiability problem.


Business (as life) is not science. If you want to find proof of anything go be a scientist, because everything you find elsewhere will just be anecdotal.


A big problem is the timing in regard to the value that YC offers your for your equity.

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.


"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"

Not all accelerators are equal. Going to college may or may not change your life. Going to Harvard, Stanford or MIT probably will


But if you've got a degree from a lesser colleges, then Harvard, Stanford or MIT will judge you for (i) choosing to go to that less prestigious institution[1] (ii) not obviously being a class above your peers in that cohort (iii) wanting to improve yourself with another bachelors degree in a different discipline rather than something more academically or professionally stretching...

[1]even if you had really good financial or location-based reasons for it...


The simplest explanation often suffices: YC believes strongly in it's process; further, it believes that it's process is most productive when offered to "fresh" prospects...

Occam's razor...


> The expectation that a company should be "accelerated" reflects more on the accelerator than the company.

Or that the idea was less than successful and the executives could not execute even given resources.


in the business world this simply isn't true. you don't assume that company will succeed because you give them money or mentorship, you assume that primarily good businesses will take money and mentorship and translate those things into growth.

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


Joining a bad accelerator reflects poorly on the company (unless it was basically free money).

Either they couldn't get into a "good" accelerator or they didn't do their research.


I do love YC and what they've done to the startup world, but at the risk of sounding like a YC hater, the initial part of the post seems like bad advice (boiled down to: if you want to be in YC don't join another accelerator before hand). The second portion in which to evaluate an accelerator is great advice.

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.


We're all for companies doing what they need to do to survive.

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.


Well, essentially they're doing to YC what accelerators have been doing to venture capital. This is not 100% comparable but it is kind of logical that with a successful program like YC that there would spring up an industry trying to make bank on becoming a pipeline into that successful program.

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 100% agree with that message, but I didn't feel your post conveyed that. My impressions of the post was a broad painting that all other accelerators are bad, even though I know that's not your intent.

I think a lesser emphasis on getting into YC and making the post more of "how to judge an accelerator" would have been better.


Fair point; I updated the post.


Exactly..


YC only helps ~3% of the startups that request help and now they're discouraging people from seeking help elsewhere.

There's gotta be a better way of handling this.


I agree. This is part of the reason that we are making more of our advice freely available online (e.g. http://startupclass.samaltman.com/ and http://playbook.samaltman.com/).

The problem with a bad accelerator is that they can actually harm your company with bad advice and unnecessary distractions.


Paul when you are building a startup are there any necessary distractions (HN excluded).

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.


There are hundreds of accelerators with more appearing all of the time (plus significant management turnover in many of the programs). Evaluating them all would be a full-time job for several people. I'd rather put that effort into finding more ways to help more startups.


I would hope the fact that a problem is hard is not a reason to not do 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.


Wouldn't it be super weird for the leading accelerator to start formally rating its competitors? There's a difference between having good data and being in a position to help people by publishing it.


It certainly would be weird given SV has never worked like this, but it would be incredibly powerful in effecting change.

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.


Wouldn't it be super weird for the leading experts in <professional field> to start formally rating their competitors, i.e. other more-junior professionals in that field?

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.


What's an example of a profession where the leading firm publishes ratings of all its competitors?


I cannot think of an example exactly like that. But in many professions, senior members are the ones who certify junior members. Law, medicine, all the reputable parts of finance.

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.


I think you can't just give an accelerator the binary label of good/bad.

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.


That doesn't help with the networking aspect though; which is probably the most important part.


I don't think they're discouraging people from seeking help elsewhere so much as saying that if you get help elsewhere, don't also expect help from YC unless your numbers are really, really good.

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.


They're not discouraging people from seeking help elsewhere, they're just saying that going through any accelerator starts the clock on your company.


What happens if you apply to YC and another accelerator and need to respond to the other accelerator while you are waiting to hear back from YC?


Good accelerators don't make exploding offers.

People who make exploding offers are not just bad, they're also acutely aware of that fact, thus the manufactured scarcity.


I don't know. I think a reasonable person could construe the YC statement [1] as manufactured scarcity too, even if YC makes the statement for sound reasons. It could be construed as a pre-exploding offer (or threat).

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.

[1] "If you apply to other accelerators, then we'll be more critical of you."


I think it's clear that's not the intention here. The message is basically "the clock starts ticking with funding, so expect to meet a higher bar".

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.


> What happens if ...

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.


We don't want to do that; however, I think sometimes when people think they're getting help they're actually getting hurt.

One of our goals is to release as much advice as we can for free for anyone.


one of the key reasons why people join accelerators is for network and connections though, not just advice.

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.


Yes stop worrying about YC and get on with building your business.


I think this sounds great in a hand wavy way but most folks don't have unlimited time and funds to do this and need to raise money in order to build their business So worrying about YC / other accelerator /angel funding is not mutually exclusive of "building your business"


Well as someone who has built a (moderately) successful startup without any outside funding or acceleration I have a different perspective on this.

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.


Look I run a (moderately) successful services firm that's been completely bootstrapped as well ;-)

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.


I think the key here is don’t try and build a Snapchat or Facebook unless you are an insider. Build a business that works first and once you have the experience, skill, and most importantly contacts, then build a VC-only business if you really want to.


It makes sense to become profitable more quickly then. Github was profitable nearly from the get go. So was Atlassian. There's also that guy who lived in japan and made flash cards for teachers. There's also the guy who made You Need A Budget with just an excel spreadsheet and some charisma.

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.


This is actually the conventional wisdom despite nearly all of the evidence being against it.

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.


Sure the startups that make the most noise are typical VC backed businesses. The ones you don’t hear about are the ones where the founders control 100% of the business, are in highly profitable niches, and where they make a few million a year in profit which they get to keep.

These type of businesses get very little press, but they are very good to own and run - I of course know nothing about them :)


PlentyOfFish is a good example of this. http://www.businessinsider.com/how-markus-frind-bootstrapped...

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).


Sort of reminds me of the late night talk shows in America. They frequently said, "if you're going to do Leno, you can't go on Letterman, if you do you're never invited back" and vice-versa*

* = Unless you are an A-list celebrity (or Unicorn) in which case we'll take you no matter what.


I think that you're stretching for that. There are a number reason to suspect that a second accelerator will be less effective that the first:

* 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.


The immediate reason is the possibility that 1 of those 5 was poor advice from the last accelerator. For instance:

* 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.


Better for whom? Sure, YC wants more startups in general, but that's because they want a better pool of candidates to invest in, and secondarily because it legitimizes doing a startup instead of joining a big company or academia or something else. If they're at capacity, it's not particularly relevant to them if startups they can't fund manage to exist or not, as long as the prospect of doing a startup remains attractive (which doesn't seem at risk, and arguably is also at risk from too many failed startups).


This is interesting.

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.


My thinking has changed on this. I think investors shouldn't get a free option on every idea a founder ever has; after a few pivots and rounds I think a clean start is often a good idea.


There's a lotta grumbles about Sam and YC taking this stance at VCs these days. FWIW I think it's about right but SO hard to judge.


That's interesting. I'm guessing the investor complement to this would be the option to get your money back if a company chooses to go in a wildly different direction?

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.


What if the investors were also mentors that helped guide the startup to a particular potentially-successful pivot?


What is the best way for founders to structure their pivots then in your opinion?


A simple way of thinking about this is that acceleration only helps if you are pointed in the right direction!

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.


I'm curious how YC would rate the benefits of the program? My guess (from most to least): 1. Networking 2. Urgency 3. Capital 4. Advice

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 would guess that you have it in reverse. Best guess would be Advice, Urgency, Capital, and Networking so I guess not strictly reverse.


For example...?

(I 100% believe you)


Most common is just wasting their time with low-ROI things such as meeting with a large number of low-value mentors. We try to keep startups focused on talking to customers and building product.

A crazy one I remember was telling a pre-product startup that they needed to focus on defining their brand.


"Hello, pre-product pre-revenue startup. You know what you should be working on right now? Your overseas expansion plan. The $COUNTRY market is too small to sustain the gigantic company which you will inevitably turn into. Here, let's spend two weeks working on PowerPoint decks."

(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.)


yes, it would be really helpful to get some examples of the counterproductive advice.


FWIW if anyone is evaluating doing a Techstars program, I'm more than happy to talk about my experience or help you find someone from the program you're considering - just reach out!

tommy at alloy dot co


Expect an email from me soon. Thanks!


Good guy here ^

Maybe you could write about it?


Plan on it! There are definitely some nuances to TS specifically that it is very appropriate to discuss on an individualized basis. I've had friends go through all the major and a few minor accelerators now, so I think I have a pretty good view on it and am always happy to discuss. It's a huge decision!

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.


Hummm.... we have customers, we have revenue, we are working with some amazing brands (7-Eleven, pizza hut, Chili's) we have access to more than 500k candidates, we applied to YC and we didn't made even the interview...

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.


Those brands are big, and had a very strong upward trajectory at one time, but are they amazing? They remind me of sugar water. Especially 7/11. https://signalvnoise.com/posts/2813-do-you-want-to-sell-suga...


Heh, I feel like this is a direct shot at 500:

(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)


If you want to see the companies that went through the 500startups accelerator, just go here: http://www.seed-db.com/accelerators/view?acceleratorid=2001

(500startups does mix the two on their portfolio page; Seed-DB only shows accelerator companies)


Also a shot at Techstars, who have been known to lump in late-stage fund investments with their accelerator returns. Writing a tiny check into Uber's B-round has nothing to do with their accelerator program, for example, and it's disingenuous when they conflate the two.

I should mention that they have been doing a better job distinguishing this lately.


Actually, David Cohen wrote a check in Uber's angel round - http://davidgcohen.com/2014/07/14/the-ponys-lucky-horseshoe/

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


Ah, thanks for clarifying what round that was, and kudos to David! Like I said, you guys have been doing a better job distinguishing between your accelerator and venture portfolio, although that hasn't always been the case.

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. :)


I personally (speaking for myself) never cared for "the #1 startup accelerator" wording, and now that Techstars has built a small marketing team you'll have noticed that we talk about Techstars a lot differently - http://www.techstars.com/ :)

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...


For those following along at home, that $50k is likely worth around $250M today.

Early Uber investors are sitting on one of the largest ever venture returns.


And the first Techstars Ventures fund was a $5million fund that invested in angel rounds of Uber, Twilio, SendGrid, GroupMe, and more - http://www.feld.com/archives/2015/01/raise-150-million-vc-fu...

As Brad writes, that fund is "one of the best performing funds I’ve ever invested in". :)


It seems to unfairly penalize startups who've pivoted since after the accelerator.

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.


Why did you "pivot" to an entirely new company, rather than starting fresh? Each "pivot", especially when funded, is baggage.


It's more of a natural evolution. We had one idea on how to use the technology, but the user feedback preferred a smaller aspect that we overlooked. So we narrowed down and turned that one small aspect into the company focus instead. The technology that powers it all, is still the same

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.


That makes sense.

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.


Yes, that's what we thought as well when we got rejected. With such a large group of applicants, the core reason is probably "you're on the wrong side of bell curve"

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.


>We now have enough data to know that the track record of companies that go through multiple accelerators is much worse than companies that just do YC.

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.


"Now if we want to apply to YC post-pivot, we get penalized? That seems incredibly unfair."

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.


Why not shutter the pre-pivot startup and apply as a fresh startup to YC? If the idea, business model, and pitch are completely different, is it actually the same company?


We've already taken investment pre-pivot from angels, screwing investors over to be a 'fresh startup' seems to be a type of fraud.

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 the IP is the same, it makes sense to continue with the existing company. The IP belongs to the company, which belongs to the shareholders.

If you're changing everything, then it makes sense to just start a new company.


Sam's relevant comment upthread: https://news.ycombinator.com/item?id=10941276

So I guess it can be a judgment call. In your case it sounds like you're doing the right thing, though.


one of the things that really struck me when fundraising:

"...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.


On the flip side, an investor puts money into funding an idea which they (ought to) know has a 90% chance of not working out. I don't see anything morally or ethically wrong with saying "I/we gave it our best, but the idea didn't pan out" and returning any leftover funds, if any, before completely flushing that idea (discarding all assets associated with it), putting your thinking cap on, and looking for the next opportunity. I generally don't see a problem with starting over if you're going from an "Uber for Drones" idea to a "Custom CNC Furniture" idea, for example.

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.


I think there are cases where the company spends pretty much all the money trying several pivots and never comes up with a viable product; but the founders still want to try again. At that point, if the company really isn't worth anything (in particular, has no IP) then I can see that it might be acceptable to scratch it and start over.

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.


It sounds like you are doing the right thing.


So you're advocating screwing over the investors from the first accelerator? Especially after they guided the startup to a potentially successful pivot?


It depends on the situation.

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.


> we like funding very early-stage companies

Is this still true? Aren't you supposed to show good traction in order to have a good chance to get into YC?


I wonder if there is any kind of selection effect in this. YC attracts a lot of attention and helps steer opinions about what are attractive investment opportunities. If YC (for whatever reason) tends not to like companies that pass through multiple accelerators, maybe that has a side effect of making other people also not like them (just because YC doesn't) and eventually to build up some biases or (potentially unjustified) extra skepticism about them, and over time it means a more difficult funding landscape once you've attended multiple accelerators, regardless of the quality of the company.

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 just turned down a program yesterday because of this concern. They were surprised to hear it, but good to have this post out there to back me up on it.


Given that YC has less than a 3% acceptance rate is it wise to turn down a program because it might affect your chance of getting into YC?


It depends on how "even" you think that 3% is distributed. If you believe that 90% of teams that apply have a 0.0001% chance, 10% have a 30-ish% chance, and you have good reason to think you're in the 10% case, probably.

I don't know if that's the exact math, but it's probably a lot closer to that than to evenly distributed.


This is true, but unfortunately few founders know what pool they are in.

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.


Sam is there a common theme underlying the poorer track record of companies that have been through other accelerators (brakes in this case)?


The obvious explanation is that companies that truly accelerated raised VC, removing the need for added acceleration.


I can think of half a dozen plausible reasons for this effect, but only YC has the data.


We don't fully understand it.


My guess is that companies doing multiple accelerators tend to be those playing startup or placing too much faith in external factors making them successful. Networks and alumni and advisors are important, but if you're optimizing on that front, you're distracted from the real work of building a company.

The core of a great company is the same: work your ass off building something your users love. No accelerator can give you that.


This is my best guess too. As a founder of a moderately successful startup that has never been through an accelerator or taken outside investments I have had to be 100% focused on the business and its success by necessity.

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.


> A smaller issue is the extra dilution on the cap table

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?


I don't see any reason not to take what was said at face value. There's no reason to automatically pass on what seems to be a great opportunity just because you're not first in line. The reason to pass is that the data supports a lower success rate.


It just seems backward to me. I understand that YC are in the business of jump-starting startups with potential. A handful of those startups might succeed. Their entire business model seems to focus on the returns from that small handful of successes. If I were them, my primary reason for taking these companies onboard and helping them to succeed, is purely to see a profit at the end of the line.

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?


The dilution isn't normally that severe. A 900x return at a 7% success rate would be better than a 1000x return at a 5% success rate.


IMHO, accelerators early on in your startup life are to give you marketing boost to get customers when nobody gives a shit about you. More than anything. These days you can get a product ready with little or no money. As for advice, there is so much written out there if you just spend some time reading, thinking and doing things you can accelerate your startup growth.

If you are going to go through accelerator, why not go with the one that carries the most social capital.


I hope the taint attains to the company, not to the founders. (I think that's how it works).


[deleted]


YC likely frowns on people like "sales brokers". If you're profitable, consider getting a loan to increase your growth rate.


The purpose of a sales broker is not to get more money. We have plenty of cashflow.

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.


Curious if there are other signals you can talk about? Working on the business part-time only because of job? having a young family? Age? Most of SV seems to feel if your over 40 and aren't at least VP of something your mediocre. ambitiousness of the idea versus being able to show progress? How about paying a contractor to do some sales versus finding a co-founder? in this case I'm technical but have a full-time job so don't have the time to talk to customers.


>You don’t need to “prepare” to apply to YC in any way.

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.


what is the purpose of ycombinator in layman's terms? Serious answers please.


It's a record label for startups.


An ousider Layman's answer (meaning my guess is probably as good as yours):

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".


It's a rare entry point into the world of venture capital, a world that, for decades, was completely dominated by the old-boy network.


"was"?


A badge of being "in".


I'd be curious to see counter examples to this. Is anyone aware of YC companies that previously went through a different accelerator?

Even more interesting would be companies that were rejected by YC but went through a different accelerator, either before or after applying to YC.


Interesting that they have enough data, since I doubt even 1000 companies have gone through YC and counting the few hundred that have, probably only a small fraction of them have exited or died.


From TFA: "exploding offer"

What's an exploding offer?


Exploding offers are an exploitation tactic intended to pressure you to commit to doing what the offering party wants ASAP, or else what you want will go away. It's OK for something like a firesale at your favorite retailer, but definitely not good on a more intimate scale, like a job or investment. If they actually want you, they'll let you take your time regardless of what their offer says, and an exploding offer is a big signal that you probably don't really want to work with them.


"we make funding decisions immediately afterward"[0] is the polite way to say that you have 24 hours to decide if you join that accelerator or the offer is rescinded.

[0] http://www.ycombinator.com/about/ sorry couldn't resist :-)


It's usually used with reference to job offers, but the same concept applies to accelerator acceptances. From Google's magical definition thing:

> 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."


"Some investors will try to prevent others from having time to decide by giving you an "exploding" offer, meaning one that's only valid for a few days." -- http://paulgraham.com/fr.html


As an unrelated question - what are some of the other well known accelerators, that are at par (or better) than YC?


Why is this a bad thing even if it were the case?


Looks like YC is sending a signal of dominance to other accelerators.

Classy.




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