I went back to look at the application. It fell immediately below the threshold for invitation to interviews. I.e. if even one of us had given them a grade one step better, they would have made it to interviews.
When we make mistakes, it's usually in this phase. Most of the time when we screw up it's by not inviting a group to interviews, rather than by interviewing them and turning them down. So this startup is exactly where a mistake would be most likely to occur: in the applications that fell just short of the cutoff for interviews.
The good news is, we'd already decided to fix this problem. We're going to do 3 interview tracks for s2012, which will let us interview 270 groups instead of the 180 we did last time.
If we'd done that last time, we would have interviewed these guys. But last batch was the first time we did parallel interview tracks at all, and we needed to test whether it worked for 2 before we went to 3.
YC "bugs" are
- startups that are accepted and fail
- startups that are rejected and fail, but would have thrived had they been accepted
(Of course this last kind of bug is extremely difficult to track down.)
But if a startup makes a killing after being rejected by YC it means they didn't need you.
If you consider this a bug, there's some kind of moral problem because it means YC is trying to siphon every promising team in order to maximize YC's success, independently of who YC is likely to help more.
You're not just betting on horses, you're also training them: it seems what you should want to maximize is YC's impact...?
YC is trying to rewrite a lot of the rules of venture investing, and has had quite some success there, but at its very core it's important to remember that they are investors. At the end of the day, the measuring stick of an investor is their returns, not how many (proto-) companies they pulled from the brink of implosion. As such, your second measuring stick rings false.
I suspect that AirBnb, Dropbox and Heroku are simultaneously among the investments that YC is the most proud of and the companies that would have been most likely to succeed had they not been a part of YC.
PG has specifically stated that this is not a bug (it's a feature). The goal of YC is not to take mediocre or bad startup teams and turn them into wins, but to take the winners and turn them into Super-Winners(Dropbox).
As far as maximizing YC's impact, I think Dropbox maximizes it more than small wins from teams that would have lost had they not been in YC.
I think that's how it is, yes, and PG seems to have stated as much; in essence, you either die or don't die; if you don't die, the scale of your success depends on a lot of things that are beyond your control.
(Actual quote from PG: "The formula for the success of a startup includes a random multiplier of roughly zero to a thousand." — http://news.ycombinator.com/item?id=3050280 )
If one subscribes to this point of view then the purpose of YC is to help startups not die, and the purpose of the YC admission process is to
1. select all startups that have a chance of not dying if admitted (eg, refuse startups that don't stand a chance in hell of not dying)
2. if the sample from #1 is too large, reduce it at the low end first (startups that are not very likely to not die) but maybe also at the high end (startups that seem certain to not die no matter what)
Maybe reducing the selection from the high end is just plain stupid / counter productive, but if you don't do that, it's not very clear why one would be in this business in the first place (as opposed to other lucrative businesses).
These guys got 10k users in a month. But maybe they'd get 100k in 3 if they had YC. Even if you understand that either way it would be a success anyway. It's still reasonable to assume that it would be a worthwhile deal for them. If YC missed the opportunity to help them get even better, even faster. It's reasonable for both sides to treat that as a bug.
The mission of a prep school is to help good students become brilliant; if it becomes stuffed by already brilliant candidates (for example because the admission process is more selective than the admission process of the college it preps for), so much so that there's no place left for second-tier students who would make the most of its teaching, then there's a problem.
I'm just wondering if this is something YC worries about or should worry about.
Also, elite prep schools do try to fill their classes with nothing but brilliant students, for a variety of reasons, including money and prestige. There are some negative consequences, to be sure, but it happens. At least Y Combinator increases the size of its classes every year, unlike prep schools.
Prep schools are businesses too, BTW. And yes, businesses have a responsibility to their shareholders to maximize profits. But if that was the only purpose of any business, everyone would be selling luxury watches.
YC is not a pension fund putting money in a VC; YC "makes it happen". They invest in very early stage companies because they believe that they can help them succeed (and they do).
In 2004-2005, PG famously predicted the second coming of Apple; if he had put all of his money in Apple stock then, he would be 17 times richer today. And yet that's not what he did. At the same time he was making this prediction, he founded YC.
- - -
I can't seem to explain myself clearly, but I'll give it another try.
The total return of an investment fund is really the return on a very few top investments, which tend to dwarf all others.
Now, if you had a magic prediction device that let you identify for certain the next Google, it wouldn't make sense from a profit-maximizing point of view to invest money in any other company: just put all your money in the next Google and you're done.
It's safe to assume that YC, who have been in business for 7 years (really 14 since they have 2 rounds per year) are getting better at what they do. They should be able to predict who's likely to succeed and who's not, better and better each year.
Therefore in all logic they should be reducing the number of startups they fund: put more money in sure winners and don't fund anybody else.
And yet they're doing the exact opposite: each batch is larger than the previous one.
There can be only two explanations to this: either they're getting worse and worse, and are spreading their bets; or, they're getting better and better and can afford to offer their services to more and more companies.
It seems likely that the second option is the correct one.
>> put more money in sure winners and don't fund anybody else
>> There can be only two explanations to this: either they're getting worse and worse, and are spreading their bets; or, they're getting better and better and can afford to offer their services to more and more companies.
They invest so little per company that they can afford to invest in every company where the expected return on investment exceeds the amount invested.
As they become better known, they get more and more qualified applicants, and thus the number of bets that they make should be expected to increase over time.
Even if a company succeeds without YC that doesn't mean that YC's potential involvement is a no-op. On the one hand that represents a missed opportunity for revenue. It also means a missed opportunity to perhaps accelerate the growth of that company beyond what it has managed to achieve on its own.
Bugs in the application process can only really be rooted out by startups that apply and are successful.
Startups that apply and fail could point to a bug in a number of different areas - not just the application process.
If the purpose of YC is to make money and improve startups, than they are failing at both of those things if they pass on startups that eventually succeed.
A few thoughts:
- It would be interesting to see what made them 181 instead of 179. Would applicants this close to the cutoff get feedback of any kind about how they fared?
- Whoever ranks 271 might be missed out too in the future.
- Has any thought been given to sharing "you're this close" details with the 50 or 100 applicants that were within the proverbial whisker, or giving them a second review to see if any would move up or down relative to their peers in the same range?
That said, interviews and applications are inherently subjective and based on a snapshot in time; they will always have "bugs". It is a tough thing to do, and I fully appreciate the effort going into it.
Best of Luck!
Said another way, the delta between where Codiqa stands today vs. where they would be had they been interviewed does not seem as large an opportunity as probably the opportunities you made for the companies you did select. Therefore, I'd say there's no bug.
Like someone said "Micheal Jordan would NOT want to be selected by YC".
This means people like Mark Zuckerberg, Larry Page, Sergey brin, Bill Gates, Steve Jobs are not likely to come out of YC. Because the very fact that they have to go through layers of interview sessions, and then spend time performing to you, to get your attention like some performance artist performing to the king to get his attention means that is not going to happen.
Because people screw up in interviews. And a interview is generally no measure what the true story actually is. The guide to cracking interviews and performance is learning how to game the system. If your process is known to people outside,and they plan enough to cover all the corners and deal their cards well, they can game your interview process. That's how job hoppers who can do nothing hop around in circles of big successful companies. The situation from evaluating a 'good product' changes to evaluating 'how good the interview went'.
Nerds, Geeks of the best quality hate all this interviewing, playing-to-the-galleries-business. That is why they wish to build their own firm. Now if you subject them though the same bureaucratic process which they had otherwise go through in a traditional large corporate(Applying, interviewing etc) they are just going to go away, take money from somebody else and build some stuff in the same time.
If I would be building a business and need funding from somebody. I would go to them and explain them 'whats in it for them' and take their money.
But if have to go through the same large corporate styles process for this, I will be spending my time for something else. Because the very purpose my starting a business is to avoid that corporate styles processes.
You have to seriously ask what value you bring, or how different you are from anybody else. If you are just evaluating profit prospects(which I agree, is important), funding, taking profits back. Then really you are just another VC. There is nothing wrong with that. But that is what it boils down to.
Now there are lots of pretty damn good sites that YC alumni are making from launch day; but the fact that a good number isn't, suggests that PG might want to improve his filter process a bit.
Do beautiful sites at launch day correlate well with IPOs? I'll supply the answer: no. Many beautiful sites will not IPO. Many tech companies which IPOed had abominable sites at launch day. The long-term salience of this is an amusing historical footnote and nothing more.
I'm not sure how this is related. From what I've observed, PG selects promising founders, not great site-builders. Is it fair to expect all of them to create beautiful sites?
What I'm trying to understand is, if a team of amazing hackers don't understand site design, html and css - should they be rejected at YC?
I hate the thought that getting funded is like winning the lottery. Yes, it is absolutely necessary for some startups, but far too many seem to treat it as an end in itself (presumably there are bragging points associated with being able to say you've been funded to the tune of X million)
Bootstrapping encourages you to keep your costs tight, focus on profit and revenue, ship early, quickly and often, and build something people want.
My use of the term startup lottery was meant to describe the communual celebration and veneration of quite often earning some runway.
The businesses that need it are ones that have to find a product-market fit and a repeatable business model. I just think you're better equipped to find validated scalable business models once you've done it without money.
There's nothing quite like having to find and build what people are willing to pay for out of the gate instead of putting it off. From where I see it, I don't see enough technologically complex startups that need a runway, and in hindsight could have been built without funding.
The startups that would, tremendously benefit from the coaching, introductions, and business model development are rare, and special, and maybe that reflects in the small number of startups accepted to Y!. The rest shouldn't consider themselves a failure either... this startup certainly fit the mantra build something people want (and will pay for)
Need a marketing person? Give me a call.
Edit: I also think that YC should not be what decides whether you create your startup or not. It is great to see you guys kept going. The people that decide to change ideas or abandon their startup because of not getting into YC tell me that they are pretty good at picking people that aren't serious about creating a successful business.
1) Strongly, strongly consider capturing CCs at signup. Yes, this takes a bit more work. Yes, this will decrease your conversion rate. However, you're going to get more people successfully charged than you do currently.
2) There exist things you can do to increase user engagement with the app which will increase conversion rate from "user" to "signup", even if you don't take advice #1. I have a video coming out in a little while about this. Short version: go take the free trial of Balsamiq Mockups and take copious notes about what they do. In particular, note how Balsamiq doesn't start you out with a blank screen and note the timing and frequency of prompts for you to signup. Implement both of those things. Your conversion rate will increase.
3) You captured my email address for a "paid" signup. Good! I got no email from you. Bad! You should, bare minimum, hit my inbox with "Thanks for signing up for Codiqa. Your free trial lasts until XX/YY." followed by the best three bullet point sales copy you can come up with, linking back to your site extensively. Why? Because I already forgot your domain name (literally true) and statistically speaking I already forgot I signed up for Codiqa. Hitting my inbox is a free chance at recapturing my attention tomorrow when I do my morning email pass.
4) But wait, if one email is good, isn't five emails better? YES! Put a wee little checkbox on your signup form saying "Can we email you a free course about JQuery mobile? Five emails, absolutely no spam, opt out any time." You'll get 40%+ signups. If they sign up, you hit them on day 0, day 6, day 15, day 20, and day 28 with emails of approximately the following format.
Thanks for signing up for a free month-long course on JQuery Mobile by Codiqa, the jQuery mobile design app you used recently. (You asked for this when you signed up. Don't want it? No problem, click here.) This is your 2nd email out of 5. Today's topic is how jQuery mobile cuts app development costs while increasing revenue.
(h2) jQuery Mobile Cuts Development Costs by 50% (/h2)
Paragraph of copy. (~300 words) Link to codiqa docs or blog in here somewhere.
(h2) Another bullet point (/h2)
Conclusion paragraph goes here. Early in the email sequence the conclusion paragraph just mentions your service, establishes expectations for the next email, and invites them to email you at any time. Later in the sequence you get salesy as heck.
What does salesy as heck mean? By the fifth email you should, if you're good at writing and jQuery Mobile, have your most engaged customers eating out of your virtual hands. The fifth email is less about education and more about one focused case delivered by their favorite jQuery Mobile expert on why buying the $30 a month plan, specifically, today, is the best possible thing they can do to improve their life today.
Execute correctly on this and you will print money. How much money? Just a comparable: for BCC, which is far less sophisticated on the email than this trick is and which has terrible unit economics, I make about twenty cents per email I send. If I tell you how many orders of magnitude that number can be improved by, four different consulting clients are going to demand my spleen sauteed with a glass of chianti.
5) Charge more! Or at least give an option for charging more. $30 a month is rat droppings to a business doing mobile development. (You will not get that feedback from some HNers. That's OK. Five hundred HNers refusing to buy your product plus one business charged $500 a month = $6,000 of revenue a year.) Put a $250 a month plan in there. You will sell it, to someone who a) does not need to pay $250 of his own money to buy it and b) receives well in excess of that much value from your service.
Also, I agree, our pricing is too low. Our focus right now is on developers who can use Codiqa for work purposes. That has a higher value than $10/mo.
We are going to experiment with some of these ideas and blog about them. Thanks again.
Does anyone else have any other opinion on this? I am currently trying to decide whether CC should be a mandatory field or not for my app (which will have a 30-day free trial). What kind of impact on conversion are we talking about?
I understand that have data on this and the customers who converge outnumber the ones that you loose, but it might diver per demographic. Paying with credit cards is less common in Europe than in America, so that might play into it. What might help is get a seal of approval from some organization that you are safe. If you have social proof it's even better.
EDIT: I might also be worth considering if non-paying customers are really just a liability to you. I understand the bottom line is what counts at the end of day, but free customers might recommend your service to someone else or they might come back later when they really need your service.
I for one, subscribe to a lot of SaaS but would never put in my CC number just for a trial.
And what about corporate customers? I think many subscribers can come from corporations where someone somewhere tried the product and liked it, and then made sure his company paid for it. If he had to enter his CC# before he could even try he would probably not do it.
Data points of HN readers who would never do X or would be annoyed by Y in the process of evaluating your software.
I think the target population matters. If you're selling to teachers or dentists, then you should speak to teachers or dentists to learn what they will do or not do.
If you're offering a jQuery framework, then HN seems pretty relevant as far as the people susceptible to subscribe to your services.
I get a notification when anyone unsubscribes and, if it looks sort of borderline (e.g. sent one test phone call on the first day, never used the service again, and then canceled on day 33) I offer to refund their money. I get about 50% uptake on that. This makes me sort of anomalous in the industry (take a look at e.g. 37Signals policy on refunds -- "We. Don't. Refund." -- which is much more common) but it works at my scales because AR doesn't have so many accounts at the moment that sending an email or two a week is a big tax on my time. (And, of course, I don't lose sleep at night over $9 or $29 or $79 in revenue. It is literally rounding error for me -- if the yen hiccups that is much more painful.)
At the risk of stating the obvious: the business model is not hoping that people will forget about their subscription to Appointment Reminder. The business model is in convincing them to log into the site every day, run their business off AR, and call my cell phone at 3 AM in the morning to scream at me if anything goes wrong because that way I can get them to pay me thousands of dollars.
A note, in our case we used PayPal for subscriptions.
However, as a way to weed out non-serious users, I can understand the rationale (but then again you would let go of publicity effect).
You're not trying to get people to forget about the service and pay for one month then cancel. That's not a long-term success for the business. You're trying to extract a commitment to pay money because extracting a commitment to pay money automatically increases their perceived value of your service, their engagement with it, and their likelihood of paying for it.
Forcing the decision-point until when the trial is over will cause them to discount the value of their software because a) they've already consumed it or b) they haven't had time to look at it yet but have had time to totally forget your sales copy about it. You want the big decision point to come at their moment of maximum perceived desire for the software: when they've just come to your website with a headache and you've just told them you're selling aspirin, the magic cure for headaches. At that moment they burn with desire for aspirin, so get agreement in principle that if the aspirin cures their headache you get paid, rather than saying "Take this aspirin and then let's talk about how much you value not having headaches four weeks from now."
After you get people to make the decision, all of their future actions will tend to reinforce that they previously made the correct decision. (People hacking 101.)
These companies ranged from 2 people to 400+ people. Most SaaS offerings are under $50, which seems to be something that most business people won't hesitate about spending money on and certainly wouldn't require someone to go to someone else to approve.
If this is the case in your company you're wasting a lot of time!
I still think it's a missing piece of the news world, but we lacked experience and did not dig in and focus.
If so, congratulations! =)
However, we just pushed an update last night that has dramatically increased our conversion rate from free to paid trials. Only time will tell by how much!
You could just put "Plans", which because you're selling something implies it has a price.
"Pricing" sounds like you're raising the issue of cost too quickly (on the landing page). Give them the value proposition of the plans, then tell them how much it will cost.
For other options, there's always "Products" but that makes me think you have multiple products (Product Suite, Standalone 1, Standalone 2...)
I always happen to look for "Plans & Pricing" these days; it's one of the things I scan for.
No point wasting my team reading anything on that site if the price is out of my league.
Edit: Apparently just like you.
I was blown away by the builder interface design.
Well done, guys.
Any help would get a huge hug from me. And thanks, in advance.
BTW nice work with Codiqa, I am in. [Edited for grammar]