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Ask YC: Partial/No Funding Arrangements?

5 points by NewWorldOrder ↗ HN
Maybe YC already does this, but has YC ever considered accepting some applicants w/o giving them funding (or some type of partial funding)?

These accepted applicants would still be invited to all the YC stuff, but they would just be at different funding levels. This type of arrangement could increase the number of YC startups per round and subsequently increase the odds of finding a “home run.”

This, of course, assumes that the YC can handle more founders per round.

20 comments

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maxwell
Seems like it would dilute the pool of companies and create enmity between founders. As far as I know, funding levels already vary between accepted startups, but the whole point of investing is the hope of return -- if YC invested nothing, what would they even get out of a "home run"?
NewWorldOrder
What's implied in the question is that the YC would still get some percentage of the company. I'm assuming that people aren't applying to the YC just get money to live for a few months. If this assumption is the case, then, theoretically, people would come, give up some part of their company, take no money, and be perfectly happy.
SwellJoe
Many YC companies didn't need the money. We (Virtualmin) didn't (though it helped to offset the cost of my move from Austin where I had property to deal with and a car to sell--and the significant disparity in cost of living between there and here...I certainly didn't have any desire to turn down the money, but we signed on for the experience not the cash). pg has said about a third of companies don't need the money. The limiting factor is time for pg, tlb, and Jessica, not whether you need a measly 15 grand to survive long enough to launch.

But, frankly, nobody applies because of the money. There are cheaper sources of money.

astrec
In my case I have money from a previous successful startup, will be moving to the US, and put a premium on local knowledge and the right introductions - for me and others in the same position there is little value in taking small amounts of cash, but the value of everything else YC offers could be quite significant. Surrendering a percentage of your company for a higher value return is quite reasonable.
pg
Money is not the limiting factor.
astrec
Does this mean YC would make a no-cash investment if the right circumstances arose?

If so, is it safe to assume that YC's target equity position would not differ significantly given to the relatively low value of the cash component vs. mentoring/networking?

emmett
He means they fund every qualified startup that applies; they have plenty of money. If 100 promising startup teams applied, they'd fund all 100 of them.
startupcrazy
Oh please, what nonsense. Your statement doesn't even match up with what pg writes.
pg
Emmett's right.

http://news.ycombinator.com/item?id=120949

startupcrazy
No, Emmett is not right because there is no definition of qualified. It is a meaningless statement. The problem with the statement is that it implies that you are not funded you are somehow not qualified. What does that mean?
astrec
Indeed, but in certain circumstances where there is no scarcity of cash on either side its relative value declines, hence my question.
pg
We'd always offer money. I suppose a startup could refuse to take it. But that would probably mean we'd picked wrong.
skmurphy
What are the factors that act as tighter limits than money?
SwellJoe
Time, obviously. There's just four people in YC. pg has written about this on numerous occasions. Space is also a concern...the Anybots office holds about 20 companies, and then begins to get cramped and stuffy. Regardless, if they feel good about your prospects they will accept you, regardless of how many others have been accepted (though there is an upper bound, I suspect the pressure is applied during the written application phase rather than the interview phase...and there is an upper bound to the number of interviews they can reasonably handle in one weekend).
skmurphy
Most other Angel, VC, and incubator programs run a "rolling admissions" process. That would seem to take some of the time pressure out of the equation, but "time" as a limiting factor sounds more like the residue of inadequate productivity or know-how, or a function of the processes and structures the YC founders have put in place.

In other businesses, for example, if the number of startups that could take part in the program and offer a possibility of profit/upside or what have you for the investment of time and $ the business would find a way to address at least a majority of the demand (or unmet need). If YC had been funded by YC I would suspect they would be encouraging themselves to expand in a way that continued to create a compelling experience and a reasonable expectation of profit. Perhaps they are, since they talk about taking on more startups each time. I was struck by this article by George Gedron on the critical need for entrepreneurial education in the real world in Inc. http://www.inc.com/magazine/20071001/guest-speaker-the-real-...

It seems that YC is one solution (and if they make a nickel while doing so, more power to them). But Gedron isn't limited by time (any more than any of us are) because he is building a scalable repeatable model targeted at undergraduate education. I am not trying to play devil's advocate, I see a need for a factor of 100 to 1,000 scale up in what YC is doing (defined more broadly as entrepreneurial education, not just aimed at web applications).

pg
Batching "admissions" is net more efficient. Plus the whole structure of YC requires it.

We do keep expanding. Every batch has had more startups than the one before. And we're always looking for ways to scale. Just this fall I wrote a bunch of software to keep track of and communicate with all the startups. We'd be lost otherwise, now that the total is up to 80.

SwellJoe
I think there are many aspects of the model that can't be scaled via technology. I'm pretty certain that face to face time is really important, and I'm absolutely certain that the casual friendliness of the dinners is vital. Somewhere between the size of a dinner and the size of a Demo Day or party crowd the interactions break down into mingling rather than having actual conversations. I don't know where that size is, but there is definitely a cutoff. The dinner I attended in WFP08 seemed a wee bit too crowded. The noise level was a bit uncomfortable...only towards the end of the evening did I find I was able to carry on a normal conversation at normal levels. I think that makes a very real difference.

Of course, given that I consider the other founders and that intimate dinner experience every week the most valuable part of the program (with pg and Co. being merely the enabler of those gatherings)...one could theoretically split it into two weekly dinner groups (or three, or four, as YC patience and stamina allows), but then you run into the problem of getting good speakers in such abundance. pg would then be running a restaurant rather than a startup starter, though. If a few more good success stories come out of YC, the speaker pool could be bolstered by former YC founder appearances. I enjoyed Sam's talk as much as most (Joe Kraus is still my favorite of the lot).

pg
So far the limiting constraint has been the number of good applicants. But time is a close second, and may become the first constraint unless we can think of clever ways to make ourselves more efficient.
sosueme
I surely would love if YC did this. I have a design for a database/social net/marketing product for a niche of 100,000 executives just like myself. I will be late for this round of application submissions. I do not need the money, but would love to have the mentoring and interaction with other founders as I am not a software developer. I know exactly 2 programmers that worked in good startups and while they gave good advice they have their own life. One of them wants nothing better than to walk around in South East Asia and the other has his own product he spends 110% of his time on. While friend suggestions are helpful I would be delighted to get get some pointers. One of which I need most is how to find a developer co-founder