Ask HN: Why aren't you applying to Y Combinator?
There are far too many one-sided "here's why you should apply to YC" articles on HN. I'd be interested in hearing why other startups (particularly bootstrapped ones) have chosen not to apply to Y-Combinator.
As for me, angel investing (call YC what you will) just has a creepy "bank strategy" feel to it - to make the most amount of money off those who have the least.
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[ 3.1 ms ] story [ 128 ms ] threadBut if you can overcome these obstacles using proper time management, project scheduling and keeping fixed costs to a minimum, you'll end up with significantly greater equity and fewer fingers in your proverbial pie, in contrast to giving up equity and answering to your investors, however useful their input may be.
Bootstrapping a startup requires you have a real-world business model which actually generates revenue, which is more than many investor-backed companies can say. However, a profitable model is not necessarily a sustainable one. You could fill your schedule with client-contracted work and pay the monthly overhead and maybe yourselves too, but it's not the most sustainable long-term business strategy (unless you really want to be doing this forever.)
So you contract/consult to pay the bills, at the same time devoting a reasonable portion of your time to building your own products and looking for your "homerun."
This is pretty much what I did, I saved money and now don't have to worry about contracts or client work, I can focus solely on the company and keep costs down as if I had taken outside investment.
YC never really entered the conversation for us, I view YC as a place for people that fall into a "I have this idea I want to try, but if I quit my job I can't pay rent" type category, which wasn't me or the people I'm working with.
(edit to say that I'm not knocking the stated category, I'm really happy that YC exists)
I gave more thinking to this last year, and asked myself what I could do to change this.
So we moved to a cheap place with the whole family, here we're able to buy a house without mortage (before the move it would have required 25/30 years mortgage + 2 high-paying jobs, to get something that wasn't even close in term of quality/space).
Here goes the rent :)
Plus, there is a wide range of probable outcomes where I feel on top of the world at age thirty and YC would count me in the fail column. (Say, a few hundred thousand in revenue, organic growth, a schedule close to mine today, and minimal desire to sell.)
If my plans change, I would probably apply.
Say, $300,000 in revenue, and a %80 operating margin, would mean you're operating profit is $240,000. IF you're growing at %50 a year, and the company sells for 50 times earnings, then you've got a business worth $12M.
That's a success in my book!
Adjusting for the reasonable valuations, selling does not move the needle for YC, and all time spent on me would be time wasted relative to mentoring one marginal try to build the next Zynga, GroupOn, Mint, etc.
That is neither regrettable or joyous. We merely have goals not in alignment at present.
50 is out of the question: get your money back in 50 years? No way.
If I could build a business to $20K in revenue and flip it for a million I, and many, many others making a living online, would be a millionaire many times over.
A 'lifestyle business' - but fairly "web2 buzzword compatible". And yet, according to the fairly believable numbers they made than $100K in profit in their first year (and about that much LTM also) and sold for only $90K after 18 months.
That's a 'multiple' of only 0.9 ;-(
In that case, any smart buyer will instantly see that there is a sharp downward trend in revenue. Maybe the site is falling in the SERPS, new competitors have entered the market, or, worse, the target market is becoming saturated.
This explains the low sale amount.
Dan was smart to sell before revenue declined too much.
That being said, you probably could still flip a web company for $1M with the 50x multiplier (given $20k in revenue). If you're serving an SaaS to 167 customers (paying $10/mo), your EBIT to Sales ratio --> 1.00 with negligible variable costs. God bless the interwebs.
To some extent, I like to think about us as some kind of tiny, minuscule Y Combinator: multiple projects that have interconnections between them as time goes, interesting encounters.
Like grandma would say: I would not put all my eggs in the same basket either :)
2) There simply is not much need for outside capital, as we have a large angel round worth of our own capital in the bank.
3) Strong impression that there is no chance that YC would take us. My co-founder has zero interest
4) YC is predicated on a certain set of assumptions about the type of business, and the priorities of that business. We don't share some key premises there. Namely, it appears that YC believes in betting it all on a short term, big reward, while we believe that a very quickly growing, profitable business will produce a better return for us, at lower risk.
5) As I mentioned we don't really have a need for outside capital, and the contacts YC would get us would primarily serve the purpose of doing additional rounds. Thus, in my opinion the increased risk of having to adopt a specific outside investors timetable, and operational style, along with the risk of having to follow bad advice, does not seem to be worth it, for money we don't need. While YC doesn't subject us to that risk directly, joining the YC program would be getting on that track....
4) Not true, many counterexamples, most notably Wufoo.
Sounds like you're doing just fine on your own, though.
As a result of my experience with VCs, I structured our business so as not to need them, and ended up not needing Angels or YC either. No question the market for tech investment has shifted and YC lead the way, and I would say that I like a lot of what I've seen about the way it is going.
The lean startup is the way to go for web/software startups these days, and YC is a contributor to that trend.
Wufoo is a good PR case for YC in that it has contributed to the startup ecosystem a sustainable, profitable company that creates value. It's good to see.
However, YC cannot survive on happy thoughts. The fund and LPs need to see big returns for the wheel to keep turning, and growing happy sustainable businesses doesn't move the needle enough.
Realistically, YC probably needs to push out a mix of sustainable companies for good ecosystem PR, and a handful of home-runs that keep the LPs happy and the fund financially viable. To say that Wufoo is an "example" of YC's backing of neat sustainable businesses is to see half the picture.
I am very interested in hearing about those strings, whether in private or public. Impressive karma rate you've got there!
I've got a couple high-growth startup worthy projects I might pursue but even then, I don't think I would apply to something like YC. Honestly, I think I'm at a later stage in terms of growth than YC requires.
I'm already more than ramen profitable, and if I step it up and invest aggressively in growth for a webapp, I could probably raise an angel round fairly easily.
YC is good if you only have an idea/prototype. If you have a product with paying customers, a proven business model, and established customer acquisition channels, the value of YC is significantly less compared to the growing value of the share you would be giving up.
I would rather take the amount of equity YC asks for and divide it among my founding team/first employees.
YCombinator gets 6%? That is peanuts compared the benefits you already know about, hardly exploitative.
I'm applying because the "bank strategy" seems to be on the other side of the table.
Also, I think a lot of people overestimate the value of their current network, and underestimate the value of the YC network.
Secondly, people make all kinds of assumptions about "I don't fit their model." The best way to determine if you fit their model is to apply.
If you have an inkling to apply, do it.
Finally, saying there are far too many one sided arguments in favor of YC is like saying "There are far too many people who are happy with their lives."
I don't belong in the army. I don't need to apply to determine if that is true.
I don't think taking drugs would be good for me. I don't need to try it to see if that is true.
etc
Give people the room to be able to make an informed decision based on prior knowledge without having to actually go test it out in reality to confirm it is correct.
However, you are making an apples and oranges comparison here. You don't apply to the military. You volunteer for service, and it is compulsory from there on out. You can't apply to take drugs, the act is self contained.
I am speaking to those people who have a desire or interest in applying to YC, but don't because they assume they don't fit the model. If you have an interest, apply, and find out definitively. If you don't have an interest, don't (much like your military example)
Simply put, while YC seems great, it's just too expensive for me and my co-founders. There is three of us, and if only two of us engage actively in the process we would have to spend over $1200 just for getting to the interview (based on a quick Expedia search, and not including any car rentals, visa fees and the like); and if we get accepted, just getting us over there would spend at least 10% of the supposed YC investment.
It would be great if YC would open a European counterpart, but that don't seem likely as they have closed off even the East Coast one.
As another European, I would also love a European counterpart. But to me, applying to YC is not really about the money, it's about the advices, the networking and the press coverage that is hard to get when bootstrapping.
Would have been nice to be more enlightened earlier in my life but now that hindsight just fuels my motivation.
a) I don't need the $20k (and certainly not for the %age YC want to take - 6% for $20k = valuation of $333,000). In fact I don't even want to price a deal so early in the company lifetime.
b) I find myself introducing so many fellow entrepreneurs to contacts in my network that after 4 years in SF I probably have a large overlap of contacts (which seems to be a big draw).
c) YC seems designed to let a bunch of smart young guys(/girls) hack around in cheap accommodation eating ramen until they come up with something cool. I guess cos I'm almost 30, live with my partner and business minded I'd rather be clear with the problem I'm trying to solve and the business model to achieve success before I write much code. Pivoting is to be expected but it should be a 'get out of jail' card, not a standard MO.
d) I think it's hard to break out of the mould of being "a YC company" and stand on your own feet. A few have managed it but not many.
tl;dr: Perhaps ultimately I don't fit the mould of recent college grad with little money, low personal burn, probably not living in SF yet and little-to-no startup experience -- which seems to be the type of founder YC likes.
Myself and my cofounder have families, kids and enjoy healthy life/work balances.
Finally, I have no plans of living in SV. I love Cali but I hated living in the Valley.
* We don't make the kind of software YC is interested in
* We don't need the money
* We're not in the US
Reasons we should anyway: a) Connections. b) Exposure. c) Connections.
Last night I had a dream where I spontaneously got on a plane to SF bay and loitered outside the YC offices where I social engineered my way in and pretended to be a founder.
PG was there just kind of hanging around and giving advice to whoever approached. I sat and listened for a long time and now I can't remember a thing he said. I'm sure my subconscious stored it all since that's probably where it came from anyway. Then I was suddenly in a gondola near the YC offices, over-looking the ocean and some mountains with a really majestic blue sky. My wife and a female YC founder were there with me and we were talking about how beautiful it is in California.
When I woke up, I had the feeling like maybe I should apply again and the first thing I see when I log on this morning is this post. I had firmly decided not to apply and told myself to just focus on the business.
Ignore the synchronicity or give it a shot...
Fortunately unscatter.com is something I can bootstrap and build slowly. Also, by not being a part of an incubator I can work at my own pace, which means I have that time to spend with my girls, one of whom is only 3 months old.
Different strokes for different folks.
I have a full time job that pays my bills (which are MORE than what YN would give me as an investment AND I'd be giving up equity for it).
Plus, I have a 2-year old who still nurses (not open for debate, sorry). Basically he'd HAVE to come with me and assuming they'd even allow that, I'd also have to move my childcare with me (my dad) and he'd have to be away from his family too.
Plus, I have no immediate desire to find a co-founder and no plans to exit. All of these things may change and I'm open to that, but that's how it is right now.
#1) Startups that don't apply 'cause they just don't want to
#2) Startups that don't think YC would accept them
#1 is fine - if you don't want to do something, don't do it
#2 is silly - let YC reject you; don't reject yourself (regardless of location, stage you're at, one co-founder can't make it, idea, etc.)
There are other simpler reasons I wouldn't apply now--wife, 2 kids, and the Boston sessions are gone.