I was amazed by how motivated I became by being involved in the "November Startup Sprint" back in the fall so I think a more formal program could potentially be pretty cool. I'd move away from being a "YC Reject" program to a "Hacker News Startup Co-op".
I would open it up after interviews so that those who got interviews but don't get accepted can participate.
Accomodate all groups who want to participate and don't mess with the financing at this point. The financing talk gives me kind of a "no" feeling.
Have your weekly dinners and get speakers.
Have a web site where YCR startups can promote their projects.
Schedule and hold a Demo Day. I bet you'd be able to get a few investors to drop by or else watch the videos that will go up on the YCR web site.
By banding together, I think everyone will have a really productive 3 months, get to know alot of like-minded individuals, and have a decent shot at attracting some investor interest.
I live in Ireland and wouldn't be able to participate but I think it's a great idea.
Even YC has always said that there were promising groups from those that did not make the cut. They've admitted that they aren't the best at picking winners. So you can't say that the A groups were better than the B groups. Many of the B groups (and even single co-founders) were just a victim of YC's rules and capacity.
A group of "B" talent or "C" talent startups get funded - so what?
The only people who lose out are the investors, who have plenty of chance to evaluate their investment before making a decision (I imagine), so they can only blame themselves for making a bad investment.
Seconded. The economics probably make sense even if 90% are "Cs." One or two winners per batch is enough given the relatively small investment for the relatively large stake. Keep in mind that these investments typically result in an initial valuation of somewhere around $300 - $500k. 6% of something that size for relatively low cost makes room for quite a few losers. My only advice is to make sure that there's a lot of focus on getting great advisors and mentors for the program. That piece is easily as important as the funding.
This. The OP makes the assumption that all grade "A" startups that apply for a class will get into that class. It seems to me that it's starting to reach a point where it won't scale to keep including more and more people into a class. I'm sure some will be because the ideas or founders aren't the best but in the case of ones that make it to the interview, that's already stating they're ahead of the pack in that sense.
I applied for Summer 2011. I'm a single founder - point against. I'm not working on a social networking project or something with mass consumer appeal - point against. It's a fairly trivial product (though a great demand exists) - point against. I'm also older (29) which might not be favorable to YC.
Admittedly I was a little intimidated by a few questions on the application and my video sucked. I've been in real estate for the last few years and am now getting back into software development. Being in real estate though is what gives me tremendous insight into the niche market I'm targeting with my startup. It's impossible to know for sure why I wasn't invited for an interview considering they don't give any feedback. I'd assume they were just more interested in other founders/projects. That doesn't make me a "B" grade startup, I just don't fit the YC criteria (at least right now).
Point being that it benefits YC to bet on projects with huge upside potential. Fewer big hits compensates for massive misses. Isn't that the same strategy that nearly all VC's use?
All in all I'm learning as I go and moving forward regardlessly.
Theoretically, this makes complete sense. But in practice, math matters. If you believe that the number of promising startups is within the range of those that are accepted by top accelerators, then you are right. But if you believe that current accelerators serve a minor percentage of promising startups, then it means a large part of the market (ie. promising startups) is not being served.
I'm actually inclined to believe it's the latter considering the supply and demand. The demand for accelerators is extremely high and the supply of open spots is very low. I think current accelerators are just scratching the surface with respect to promising startups which is why we're seeing many more sprout up.
Crazy stuff. Can you imagine the analog in other professions?
"I got rejected from Harvard Law School. So I got a couple of my fellow applicants together and decided to study law together for 3 years, sans professors. We all just got 6 figure offers from the big firms on Wall Street."
I've never been accepted into YC so this may be totally wrong, but ...
Don't lose sight of the real value in this for a group trying to create their own startup - the mentorship, fraternity, alumni network, initial amount of funding and then finally the demo day presentations which will result in a lot of visibility. Not to mention, at this point in time, the YC brand stamp. I know you have to start somewhere, but I don't think starting with investors is the right move. It won't be difficult to find people willing to invest, as you've already experienced (they came to you). You need to start by trying to provide the startups with the things they can't get on their own - mentorship, fraternity, etc. I have gone through my own adventures of pitching my ideas to VCs, while being completely uneducated about it and green, and I can say it's not difficult to get money from them - so you will be able to get it when its required. At least for me, the money is not really the appeal of YC.
With 40-50 groups now your time spent with him as a YC'er is significantly less. He's added staff, but scaling out his time is a big problem. Plus with the 40-50 groups - I can only imagine that the demo days are a complete circus. Will angels continue to invest their money in what essentially has become a meat market? If I were to invest my money on a high-risk venture I'd like to get a little T.L.C.
That's not actually true. I was in the valley a couple months back and was able to book office hours with Paul as much as was useful (and more frequently than I had when we were doing YC in S09). Office hours with Paul and the other YC folks are in 15 minute blocks and have been since YC was much smaller. Most YC teams don't meet with Paul privately every week and even as such the upper bound on the number of those meetings that'd be possible per week is around 200. Also, now, in contrast to when we did YC you can also book hours with Paul Buchheit, Harj and Gary.
The last YC batch was the smallest in a while (I believe it was well under 20). I don't believe they've continued to grow the size of the batches. I'd be shocked if they ever grow to 40-50 groups. That many wouldn't fit in the YC office for the dinners. Where are you getting this "40-50 groups" number from?
"Will angels continue to invest their money in what essentially has become a meat market?"
The evidence seems to indicate that the answer is "yes".
"If I were to invest my money on a high-risk venture I'd like to get a little T.L.C."
Personally, if I were an investor, I'd rather get a little R.O.I.
Yes and that's what makes the equity trade worth it. The money is too small to justify giving up 5-10% if it wasn't for the quality of advisors (and their reputation) that you'd be adding to your company.
For purposes of full disclosure, I was approached by an individual angel and I sat down with the investor for a meet and great. The selection process needs to be sorted out and the term sheets need to be agreed upon by all parties before it's finalized and a check is written.
The reason I posted this blog, is because I want to get candidate feedback. The money involved in YC is just a small (but helpful part) of what they do. Will teams that participate in this grassroots project want to give up 6% of their company? What are your thoughts?
The money was a very small part of YC's appeal for me. Access to the mentors and other human capital was the real draw. I can't see giving up 6% of my company if the program doesn't offer human capital similar to YC's.
I assume you will ask YC to help you out by confirming who actually applied, otherwise it could be seen as an easy way to get funding for people who know they wouldn't have a chance in hell of being accepted by YC. Or am I being overly imaginative?
There is no bar to apply to YC. You fill out a form on the YC home page; costs nothing but an hour or two of your time. It would be pointless to find out if a team applied or not. There are hundreds or, more likely, thousands of applications each batch (I don't know the exact number, as it hasn't been public in a few years, but I know what the curve looked like back then); there's plenty of rejects for YC Reject to reject. And then they can found YC Reject Reject, and create more exciting investment opportunities for angel investors.
Maybe I'm wrong about this, but I would imagine that the the average quality of startups that applied to YC and didn't get accepted is higher than the average quality of startups that didn't apply to YC, but do apply to a YC rejects group now there is a possibility of funding.
Obviously, depending on how well the YC Reject guys filter the applicants, it may not matter who applies, if they select the best, and are proven to be good at the selection process.
Why would someone apply for a funding source that only offers to give a few thousand bucks for 6% but not apply for a funding source that offers to give a few thousand bucks, the best advisors for early stage software startups in the world, the best odds of being funded in the angel and series A stages and with remarkably good terms, the best odds of being covered in TechCrunch (100%, I believe, if you demo on demo day) and several other major tech media, and participation in the next "mafia" in Silicon Valley?
Obviously of the hundreds or thousands of companies that don't get accepted to YC, all of them can't be accepted to YC Reject either. No matter how much money they've lined up (the word "angel" was used, I believe to describe the funding source, so it is in the thousands or single digit millions), there's simply not enough money for it to be a money spigot that anyone can turn on, at will.
Basically, what I'm saying is, if the odds are slim in either case, the cost of applying to each is simply filling out an application, and the payout for YC is so much higher than for YC Reject, why would someone lie about applying to YC rather than actually applying (even if they don't have high expectations of getting in)? I just can't figure out a situation where that would ever make sense.
Firstly, YC Reject is, by its very nature, aiming lower than YC. Secondly, no offense to people behind YC Reject, but I would expect YC to be significantly better at spotting the best applicants.
Now, I don't have a startup looking for funding, and if I did I wouldn't expect to get into either. But I'd expect to have a much better chance at getting into YCR than YC. As such, were I looking for a small amount of funding, I might look at YC and think "why bother, not a chance" and then see YCR and think "let's pretend I applied to YC, then I actually have a chance at this one!"
And sure, the cost of applying to each is just filling out an application, and so in future I (the hypothetical me that is in a startup) might apply to YC, knowing that the worst case scenario is I become eligible for YCR. But right now, even the time spent filling out an application is a waste of time if you don't think you can get accepted - but perhaps less likely to be a waste of time applying for YCR.
As to why people would want to lie to apply to YCR - a part of the reason for YCR, and for possible funding, is the PG quotes saying "we are always going to miss some of the best..." etc, and the idea that teams applying to YC, given they thought they might be good enough, they are more likely to be good than teams who thought they definitely wouldn't be good enough for YC. Without the link to YC, there would never be a funding offering based on a blog post saying "let's get a group of startups together to form a network of contacts etc.", after all.
At this point though, if we're taking PG & co's rankings of applications, the top 10% of YC applicants are still in the interview phase - if I were the OP I would want to wait until after the class gets announced, right?
I know it's been said over and over but why don't all these YC and now YC rejects just get on with it. Build their products, start their businesses and make some money. Why the obsession with being a YC'er and now a not-a-YC'er. Can't they see the whole thing is just a distraction from their already difficult task?! nikcub hit the nail on the head with his comment, it's just a shame YC doesn't lend itself to a plithy title such as "Boo Hoo" (en.wikipedia.org/wiki/Boo.com).
Well having a support group and something structured like weekly meetups to drive the startup forward week to week seems like a good thing to me. I don't think it's so much a YC obsession but an obsession with giving a startup the best possible chance to succeed.
Y Combinator has shown that it adds significant value to the process. Seed funding, access to like-minded entrepreneurs as well as heavy-hitters in both the tech and VC world. Obviously Y Combinator has a brand name associated with it now but the whole incubator concept has proven it is worth it for at least some of the population interested in starting their own companies.
This is one of the crazy things I've come across - one moment there's a call for YC rejects to hang out together, next day there's cash for equity! Since this is an experiment maybe it would help to keep it simple in the original form and leave investment out of it till the end of summer?
It would be interesting to diff the original applications and those after the money announcement to gauge the interest and quality. I think quality startups will want to reach a certain level (prototype, proof of concept) and then money will find them. The blanket offer for investment without knowing the startups or prior relationships is a bit too good to be true?
They haven't defined anything yet, this is just the first few days, everything is up for adjustment, not getting in YC is driving them, if this works it will have to change to work as you're suggesting.
The money is only a small part of it. It's really there to make sure you can focus on your project and not worry about putting food on your plate or making rent. The money was put on the table, but I'd like to get feedback to know if it's something that interested teams would want in exchange for equity.
The money to me was important as well as everything else YC offered. I wouldn't have applied otherwise. I can't afford to build my business without the seed money at this point. So it's either find a job, go back to school and/or look for funding elsewhere.
If YC Reject groups get similar funding, this might be a good way to empirically test whether either Y-Combinator succeeds at choosing more capable groups or Y-Combinator offers advantages over other accelerators.
I wish I could agree, but I do not. There are way too many variables. To even get close to making a valid test you'd need to run the same startups through different accelerators at exactly the same time.
My initial thought is to leave investment/equity out of the program and stick to the original vision. There are dozens of established incubator programs that have a reputation and history of performance.
Accepted applicants articulated their idea & company better than non-accepted applicatns as per YC scale.
If you aren't accepted by YC, shouldn't it be same as getting rejected from a VC?. In most cases VCs are investing in companies that are rejected by other VCs. How one perceives opportunities for an idea/investment, is very subjective. YC and YC Reject will not be same even though offer is similar ($12,000-20,000 for about 6% of the company).
Could this be a scheme to look at everybody's applications? Why would the angel not directly go to YC demo day or ask them for the reject list? When desperate it is easy to lose sight of what is plausible.
Please don't get me wrong, I am not calling you a liar, but this is just healthy skepticism. If I were to ever go along with this I would need to see some written proof.
If you have actually done this you're doing a great service to a lot of people.