VCs didn't want Dropbox or Airbnb or Stripe without YCs stamp of approval.
YC could very plausible fund as many startups as there are ambitious and determined founders.
Let anyone participate in the programs and then let the startups filter themselves out by failing to keep up the progressively more challenging levels of effort.
Each class is like 130 startups now, right? I keep seeing startups that duplicate other existing YC startups. I just imagine as an investor you have to be thinking "Ok, now there are 2 or 3 or 4 times as many startups as 3 years ago being pitched to me that are going to fail."
Patrick from Stripe said something like "Everybody still thought we were crazy, but Peter Thiel was also crazy so he invested within two hours of meeting... after that it became much easier." There was also an email exchange with an investor about Airbnb that PG shared where the VCs just weren't interested and the valuation was amazingly low in retrospect. There's a deep level of conservatism in nearly all tech investors and a lot of herd-like behavior. There's a huge premium for being on their social graph and for going to the same school they did (or one many of their friends did).
Fundraising is one of the least meritocratic aspects of startups.
Perhaps the most extreme example of this I've seen is looking at Vectr vs Figma. Vectr is about a year younger but both companies have been around for a few years and are being developed at roughly the same rate. Figma is in SF, run by a Thiel Fellow and has raised nearly 18MM, whereas Vectr is run in Asia by a Canadian guy with few connections and has struggled to raise anything.
This is insane considering there's such a clear comparison between the two companies, and the one that has raised a tiny fraction of the other has somehow managed to recruit a top-notch team, keep parity on the product and even started pulling ahead in some areas. It's also completely normal. Companies run by founders out of Stanford/Harvard/YC regularly raise boatloads of money while their competitors who sometimes eventually prevail can't raise any. Fundraising often tips the balance.
There just aren't enough investors who truly believe in black swan farming.
 Related Stripe interview: https://www.startupgrind.com/blog/from-the-vault-patrick-col...
 Sigma https://www.crunchbase.com/organization/figma#/entity
 Vectr https://www.crunchbase.com/organization/vectr-4#/entity
Beyond the specifics of this one matchup, the trend is pretty undeniable. Pedigree is a huge advantage in fundraising and being outside of the US is a huge minus, even if the company is incorporated in the US.
Doesn't this happen anyway simply by exposure to the real world? :)
YC tries to make it as simple as possible to make the life of ENTREPRENEURS survivable(Not just VC-fundable businesses). If that wasn't the case, Startup School would include an investment that gets you into the feedback loop of having to produce returns for someone. Not asking for equity is a great feature, because it encourages experimentation and provides railings to keep as many of these experiments on the lane that gives them room to validate and less risk of predictable failures. School may even be the wrong term here, I would call it an Apprenticeship, because you are practicing and mastering your craft with mentors and peers in practice.
This Apprenticeship for Entrepreneurs, crafted by YC, needs to spread with as much quality mentors and talent, as is available, and it needs to have proper funnels doubling down on people who strike gold by meeting a high-demand unmet need. Startups at advanced stages should more qualified support and more funding for equity. (Right now that step is YC Core)
Do that across any country and market segment and you won't need to worry about Jobs automation. Humanity will have an efficient method to create as many entrepreneurs out of Job bleeds as it needs and to lead them into fixing problems that actually need fixing.
Disclaimer: Been once in that orange place in Palo Alto, and I am not a fan-boy. However, I do remember the dark ages around 2005, when there was nothing in Europe that was even worth to compare to this accelerator program. YC has greatly helped to change the landscape.
However, at the core they are pushing you to grow and build a company.
So within my group there are alot of fulltime founders.
Im a fulltime founder myself and have found the experience to be great. Its helped me to ask the correct questions and to move alot faster.
Its also great to have a solid network of other founders to chat with.
In saying this, there are members within our group whom have full-time jobs and simply work alot after hours on their products.
Granted the online courses are supposedly very valuable, but the lack of face to face with YC's network and lack of available funding makes it hard to see how they can get away with the claim that they are "backing" 10k startups.
Edit: 200 people related to YC have volunteered to "mentor" the 10k companies. Let's assume 2 founders per company, that's 1 mentor for every 100 founders. And the course is 10 weeks long, so assuming the volunteers spend 40 hours a week for 10 weeks mentoring the founders (which they likely wont), that works out to be 4 hours per founder over the entire course.
Yeah, not the same as "backing" a company.
What's more helpful, is that you're placed in a group of say 20 other companies all trying to produce something, some are making money, some have literally nothing. You can learn from one another, share ideas, test out each others products, etc.
One thing most people trying to start a company don't have is a support network of highly motivated people doing the same thing. I know I personally do, but many of my fellow startup school colleagues do not. That's what's helpful: The startup school group office hours (or therapy sessions).
The second most valuable portion of startup school, is that they force you to be accountable. If I say I'm doing X, they want to see it. They expect results, and they push you to share.
The finally, and perhaps most valuable portion of startup school, is the fact you can network. I'd argue this is different than group office hours. There are many companies that have synergies, for example my project: https://projectpiglet.com/ can help identify trends, or "experts", which other teams could use.
There are other examples, but it's definitely been useful.
That being said, it is not YC proper. You don't get funds, many of the founders don't actually have an LLC or C-Corps. Many are in school, or (like myself) have full-time jobs working 50 hours a week.
Although not being able to work on the project full-time sucks, I've definitely made progress through startup school. We would have had less without it, the ideas from the team have bubbled up and the support pushes us to do better. I would recommend it, and definitely don't think it's "backing 10k startups", however it is helping in a significant way.
In any case, as long as it's not asking for an ownership stake, I don't see the problem with it.
If half the companies drop out each week, that's 200 mentors towards 625 companies, which isn't that great, but not too bad.
> The course will begin on April 5th, 2017
But the title implies they're going to add 10,000 new applicants.
> Now, Startup School will accept about 10,000 companies in early 2018, says Altman, and potentially more after that.
My question is, can this mentoring be as effective as having a 'real' mentor? I have no doubt that YC mentors are highly qualified individuals, but with 10k startups, I can't help but feel that these sessions would be as rapid-fire as one of the live office hour videos in Startup School. Nothing wrong with that, but for me, I look for relationships the most from mentors.
This also makes me think that this may just be a Round One to perhaps a lengthier process to sift for startups with the best potential..
1) the number of applicants is increasing (which is what the graph was evidently made for)
2) the percentage of successful applicants is declining steadily actually halving from (roughly) around 3-4% until 2012 to (still roughly) 1,50-2,00 later
This may be IMHO due to two factors (or a combination of both):
1) Too many startups lately apply without having a sound enough project or not original enough ideas
2) Y Combinator has become more picky when choosing who to accept
Surely it is not as easy to be accepted (in the actual YC financing program) as it may sound, I thought that the success rate was higher than that.
Neither YC nor a university are in the business of particularly providing such a thing. They provide a stamp of approval, aka vetting, which is what gets you the job. That you survive it, learn very minimalist skills, graduate and get that piece of paper in theory increases the odds that you possess such and such personal qualities. From there, the overwhelming majority of what you will need for your career, will be learned post-university. The university isn't doing much more than vouching that you represent at least a baseline, ideally according to / in-line with the university reputation.
In the case of YC, their stamp of approval is what gets you the big money. They vet you. They do not make you a great hacker or leader, or give you those skills, you have to do almost all of that yourself. The best they can do is sometimes point you in the right direction and offer occasional help.
I believe universities traditionally aspired to loftier goals. See:
great piece of yc history! What a great photo.
The heart of YC’s philosophy is that world has too few people solving fixable problems, a “bottleneck in society,” says Garg. “If you fundamentally believe that, then [Startup School] is exactly the right thing to do. You are empowering a bunch of people to just try and it’ll turn out it’s going to be way easier than they thought it was going to be. And there’ll be more progress.”
Is this still true of YC today?
It could be said that YC and other startup incubators have done a stellar marketing job in taking ~6% equity off organisations by turning the tables on funding and making companies "apply" to give their equity away. From YC's perspective they have nothing to lose and everything to gain from this arrangement, versus the founders who are in pretty much the opposite position.
There is even cases of YC alums going through again. The reason is likely quality, structured mentoring and not just marketing.
YC used to only give a tiny amount of equity that any vaguely successful person could match ($16k?). It filled the gap between starting and series A.
Bootstrapping means avoiding getting a series A.
Basically, YC didn't invent startups, it invented a new, more accessible route to starting one.
The future is wandering towards Fast Times at Fairmont High, it seems.
YC started with this idea that you take a couple of college student hackers, give them like $20k and let them build something "ramen profitable." The basic idea was that tech had lowered the barriers to entry for business.
An awful lot of these big companies (Uber, Home Hero -- which is shutting down -- etc) seem to hire 1099 contractors instead of employees and they often don't pay all that well. The goal for YC seems to have become grow the next unicorn.
So, I find myself wondering (having already forwarded this stuff to various people): Is there anything of use in these lectures if you aren't looking to become a billionaire and have no desire to grow some gargantuan company that probably is making the founders rich on the backs of the 99 percent who are so often underpaid?
Is there any basic business wisdom here for people not looking for some J curve growth and then cashing out? (Serious question and I know it sounds like snark. I just don't know how to say this more diplomatically because this is not how YC started and I have trouble with the direction it seems to have taken.)
On the point of not growing big, though, there was one area where YC did something fundamentally new: they supported whatever the founders wanted to do. If the founders decided not to try to grow big or to take an early exit, YC was always supportive. But this wasn't because they regarded such outcomes as successful from an investment point of view (they're not). It was because they were decent people. And pg used to say that pushing founders to do something they didn't want to wouldn't work anyway.
It's a shame there's not a Startup School-like resource for creating a lifestyle business (YC-like in that it'd have a unified theory of lifestyle business creation, as YC has for startups, that'd been honed through assisting in the creation of hundreds of such businesses).
HN's expertise falls short when it comes to adjudicating unicorns as they don't usually look promising at the beginning. But, in case of a small product, I think community's feedback and advice can be invaluable.
I forward stuff from HN that I think is pertinent to the group I run called Business Bootstrappers:
So far, that is the vast majority of what has been posted there. As yet, conversation has not broken out and I don't post very much else there.
30x500 (Amy Hoy)
Founder Cafe (Rob Walling)
Dynamite Circle (community by Dan Andrews and Ian Schoen of Tropical MBA)
That's also what we're working on at http://nugget.one and I also think https://www.indiehackers.com is a great resource for inspiration.
Your question might be better rephrased to something like:
Is there value in Startup School for those aiming for modest growth or to create a lifestyle business?
modest growth business
<-- one or two more company sizes in here?
multi billion dollar company
You don't want to say the word "lifestyle business" in any sentence or the VC's will ignore everything else you asked and focus on that. When they hear that word it triggers some sort of "fight or flight" response in the primitive amygdala of the VC, leading them to run away. Pretend you've never even heard of the concept of "lifestyle business", it keeps them happy.
Product/market fit is important even in a lifestyle business. The issue you will have is making your business work at a minimum scale.
I can go on and on.
I think getting into debt is dumb, but statistics show that founders risk a lot more than employees. And many people do not want to be founders. Please don't call them slaves.
Additionally, early engineers and biz folks are usually brought on specifically because the founders don't know what the fuck they're doing in either technology or business.
There's this big myth that being a founder is some magical hardship and a massive fucking gamble, but the realities don't make that so--instead, it's used to justify fleecing employees out of market rates.
CB Insights also concurred with the principle in their May 8th email.
In regards to the Startup School lecture, one of the points Dustin Moskovitz makes in his talk is that you have a better shot at doing well financially if you join a startup at Series B+ than you do trying to start your own startup. You'll have less stress and if you join the next mega-successful company, you'll most likely make more money. There's also a huge amount of learning that takes place working at a rocket ship for a few years and the brand creditability is worth something too. The hard part is picking a startup that is actually the next Google, Facebook, Uber, etc and sticking around until it goes public to exercise your options (especially since companies are taking longer to go public and lock up early employees with golden handcuffs - https://en.wikipedia.org/wiki/Golden_handcuffs).
That being said, if your goal is to get rich, your best bet is probably to start an actual business, raise as little money as possible, and "sell early" - e.g. acquired for < $30M. If you look at most acquisitions, most of them are under the $30M mark (https://www.cbinsights.com/blog/tech-companies-exit-early-st...).
The reality with taking venture capital is even if you take a "small" amount of from seed investors of lets say $2M in exchange for a 20% stake, you're looking at a $50M exit to make back 5x the VC's money (simplifying the math and not accounting for additional liquidation preferences), which in a VCs perspective isn't that great. They're more so looking for a 10x return, so $100M is the minimum for a seed investment.
Probably the ideal scenario for the founder trying to become wealthy is to just be as lean a possible, keep as much equity as possible and ultimately sell to become financially secure. Once you have enough money to keep you set for your life, then maybe it makes more sense to swing for the fences.
In a statistics sense I'd be curious what the expected (average) return on being a founder is
So yes I believe it will be valuable. Ignore the parts that you disagree with.
The reality is that an awful lot of companies today seem to be all about the benjamins in a way that isn't healthy for anyone. There is no nice way to say that and say "I would like to not pursue such a business model."
I am a little burned out on the message I consistently get from people online that I am not allowed to solve my very serious financial problems because I am too poor to afford manners. Meanwhile, everyone seems okay with rich people not caring one whit about my suffering. Me misphrasing something is apparently an offense punishable by potential starvation.
So, yeah, I'm kind of bitter about how rich people treat poor people these days. It is generally pretty monstrous.
The video I enjoyed most is "How to Find Product Market Fit" by Peter Reinhardt.
I'm not aware they actually cost anything.
This problem started before I was homeless when I was being dog piled on HN for being a woman opening my mouth here. There seems to be NO good path forward for me. Trying to figure out how to solve my problems at all appears to be frowned upon. My very existence appears to be frowned upon.
2018 seems like an eternity away. I hope my new company is profitable by then.
Sorry for the delayed reply. I wasn't checking in on this thread.
Unfortunately since this is an anonymous account I can't say :)
I wonder if it's actually bad advice for all those thousands of entrepreneurs to be advising them to go for being mega gigantic.
It's bad advice because those thousands of new entrepreneurs have a much greater chance of long term success by NOT following the "go super big" path.
Indeed it appears that taking a "quite successful" company down the "go super big" path might lead to a variety of adverse outcomes (as I have gleaned from reading the stories of many failed venture backed companies).
I suspect that what is niggling me is that perhaps YC and all the other venture capitalists maybe are really now acting and advising what is in their interests, which is really not in the interests of all these bright eyed new entrepreneurs.
I suppose YC's history and origin make it feel like they are on the side of the entrepreneur, but is that still true?
I'm more concerned about the detail focused questions like which features I should build first, how should I test (with a proper statistical probability) and a low number of users? What leads us astray most as startup founders (apart from investors and running out of money)? How can I simplify this feature so it takes me a day to try rather than 4-5 days? Should I remove it if no-one liked it or persevere with improvements?
I mean even stupid questions like what size should I make my DB server if I'm posting my startup to Show HN on a Friday afternoon? What logging/dashboard/analytics should I set up to start?
The problem is I'm not sure someone who talks to me once per week would be anything other than a sounding board for my own thoughts as I should know my business so much better than they ever could.
The real reason to do YC of course is their unmatched network of people and the brand recognition you get when talking to investors...
A lot of the technical things you mention could be just a wierd inverse cargo cult. Those are things that actually would be effective for running a real company, but you're going through the motions because that's what everyone else "did to get money" even though that's not what they did to get money.
Look at indie.bio -- almost every single one of their companies is a joke chasing some hot topic in biotech with often little or no real market or effective business strategy. The folks running the company make big noise about, open source science and breaking free of the postdocapalypse/community science, and the ruination brought to a generation of academic PhDs. Yet not a single one of their companies licenses operates with free ip licensing and about half of the companies are spinoffs with full time academic professors on the founding team or advisory board.
In general there is a disconnect between the narrative that's sold and what actually happens.
Do you really doubt this, on any level? YC exists in order for the investors to secure a large stake in the next Facebook, no matter who that ends up being. They're not philanthropic, that's just the sales pitch.
Is YC backing 10k international startups with funding, or is this just a MOOC?
I personally love the Startup School lectures and they have been a great help to me.
I don't see the niche drying up anytime soon, so I appreciate this advice. I feel like I am on the right track!
I may not be building a million or billion dollar market, but I figure that if money is the same, I'm glad to be working by my own rules rather than someone else's!
Here's to hoping!!