Salaries aren't paid in lump sum. You expect more funding or revenue by that point. YC investing also creates buzz for other investors so it's easier to get more people on board. "We are a YC backed company, asking for 400k series A"
If you're raising such a little amount, your team isn't going to be that big. Salaries are usually paid monthly, so that amount can technically sustain a small team of developers and a designer for a few months. When a startup raises money, it's a sign of confidence and generally means they won't have an issue raising more money. Seasoned investors will sometimes wait until someone else makes the first move before diving in.
> Salaries are usually paid monthly, so that amount can technically sustain a small team of developers and a designer for a few months.
Obviously everyone has different interests, personal circumstances and risk tolerance but I'm amazed by the people who get involved in companies with little runway.
Very early startup employees, what's motivating you?
It's not for salaries, more for living costs for the founders. Most founding teams are expected to be able to build a prototype and get some sales on their own. Once they have product-market fit, they raise money to scale, which is where salaries come in. The deals are low for good reason. If they have too much too early, they'll start scaling before they have the right thing to scale.
The truth is YC at 125k is a ridiculous deal. They're essentially banking on the brand name being valuable enough for you to give up significant equity for what is, in reality, very little money. This is getting more and more true each day as YC accepts more and more companies, from anywhere, in more and more batches and you get even less access to contacts and mentorship.
Even if you're eating ramen, that's like 3-6 months of expenses at best. For anyone that isn't like fresh out of college, you'd think they'd have access to that kind of capital through savings, family/friends, or even credit cards.
I guess it rather strengthens your point about it being all about the brand name rather than the capital.
You budget for a tiny team, getting paid minimum wage and hoping that you can stretch it to a further injection of funds. Most startups who get to YC or HAX already have a demonstrable MVP and the 125k should get you to customers, a further investment or some kind of industry or government grant. Occasionally you can talk the incubator into a couple more convertible notes if you need to get over an obvious hump.
Getting to YC or similar is a bit of a ticking time bomb and deliberately so. You aren't funding a cool lifestyle, you are building a sustainable businesd that repays the investment.
Paying minimum wage is counterproductive unless you're a founder or have founder-sized equity. You should pay at least a living wage, even to equity-holders, and would still need to find talented people willing to take a pay cut in return for significant equity.
Most companies have such a low burn that 125k covers the three months to demo day
Some companies are already funded prior to doing YC
Some companies raise a seed round before demo day
If you walk away from YC demo day with only the YC money in the bank you've done something horribly wrong. It's the quickest way to high quality seed investment in the world.
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[ 4.2 ms ] story [ 29.9 ms ] threadObviously everyone has different interests, personal circumstances and risk tolerance but I'm amazed by the people who get involved in companies with little runway.
Very early startup employees, what's motivating you?
https://blog.ycombinator.com/a-new-standard-deal/
Even if you're eating ramen, that's like 3-6 months of expenses at best. For anyone that isn't like fresh out of college, you'd think they'd have access to that kind of capital through savings, family/friends, or even credit cards.
I guess it rather strengthens your point about it being all about the brand name rather than the capital.
Getting to YC or similar is a bit of a ticking time bomb and deliberately so. You aren't funding a cool lifestyle, you are building a sustainable businesd that repays the investment.
I'd bet that 99% of YC companies do not generate the free cash flow to repay the investment during their three months in YC.
YC does not want you want repay the investment. YC wants you to raise a highest valuation you can as quickly as you can.