We could easily have slammed together off the shelf components and potentially grown at a similar rate. Also potentially not, sales is hard!
Seeing founders with less care for detail and more for the sheer growth of their user base was impressive and deflating.
It felt like everyone I compared myself to, they were devoting 90% of their time to selling and 10% to building.
I share the feeling. There's success stories of companies doing the same (e.g. Notion, Replit), so I know it's not completely off-book, but I constantly wonder whether there is downside to that approach of focusing on sales in the beginning. I can guess things like less likely to be innovative, but is that true? Maybe since they average being alive longer than the ones that focused on product in the beginning, any potential downsides are negated in the long term (e.g. just innovate later with the infinite runway they now have). Would love to see some study/survey on this.
I think one downside is that because you are optimizing for sales in the short-term, it can lead to product design/architecture decisions which unknowingly constrain the direction or limits of future development/innovation (or at least make it very expensive to retrofit). I think Notion is potentially suffering from this now as users try to push its limits into more complex applications.
> it can lead to product design/architecture decisions which unknowingly constrain the direction or limits of future development/innovation (or at least make it very expensive to retrofit)
As my beard starts to grey, I've come to the conclusion that needing to drop a lot of money to retrofit is an infinitely better problem than not having captured a large segment of the market.
As someone who did Perl commercially from 2001-2019, most of my career was spent working at companies who'd done a large Perl build-out some time between 1995 and 2005, made a lot of money and captured a large amount of market share, and were now expensively retrofitting a lot of very, very nasty code that inexperienced programmers had smashed together in a rush.
Much better to be in that position than a company with a beautiful codebase who didn't capture the market
> Much better to be in that position than a company with a beautiful codebase who didn't capture the market
For sure. But I wonder how many are prevented from capturing a larger segment of the market because of poor design decisions re more fundamental primitives of the product. I suppose the worst case scenario here is a complete rebuild and migration.
Did Notion focus on selling before they had the any semblance of a product? I thought the founders holed up in a Japan for months to get an early version implemented before things started taking off.
Sorry for the ambiguity, I meant I shared the feeling with OP that it felt like people around me were selling while I was building, but it can't be so wrong since there's success stories of companies like Notion that similarly focused on building.
i think where people are more borderline is if they can raise at a decent seed valuation elsewhere already (eg based on existing revenue or prior reputation/technology being far more established).
It's well understood that YC has some value add. So the fun question is - what is the valuation you can raise at which it does NOT make sense to enter YC?
YC values you at ~2m when they invest (120k divided by 7%, 380k MFN SAFE aside). Lets say you come out of it worth $10-20m on average. Maybe the connections and other stuff gives you value worth $5-10m. so if your business is valued above 15-30m you should consider NOT going into YC.
Is that a good way to think about it? any of these numbers you would change?
I think it's really hard to put a purely monetary value on YC, but I think it definitely does a disservice to say that the program only adds $5-10M worth of value.
If you speak to YC alumni, you'll hear from many of them that YC made them dream bigger. There's a founder in the comments here who said YC was an "ambition multiplier" for him[1]. How do you value that?
right, sure, that is a huge value. but it's not, for example, $1B worth of value. should John Carmack do YC? no. etc.
the goal of rational decisionmaking is to try to convert all factors into some kind of comparable numbers, and $ is just one utility function on which to project all these nonmonetary qualities. call it "utils" if you like (https://en.wikipedia.org/wiki/Utility#Cardinal).
so fair point if you disagree with 5-10m of nonmonetary value equivalent. Is it more like 50m? 100m? what is the lowest you can make the upper bound?
a fun academic question for most, but for me personally, i have been offered a $2-3m seed pre product so that suddenly became a lot more real.
The problem with these monetary estimates is that they involve current valuations, which are probabilistically based on future outcomes, not enterprise value.
PG once formalized YC value prop as average outcome multiplier [1]. Whatever the current valuation, would YC improve your expected outcome over lifetime of the company on 7.5%? If yes, then you should do it.
interesting framing. (and awfully convenient for yc/pg, haha, but fine)
this feels like a second order analogue to the "ideas vs execution" debate - we know that idea is worth ~0, execution worth ~100 - but the harder question is - what is YC-fueled 3 months (where lets say you spend max 24 hours with YC partners/peers/events) + say 1-2 years worth of residual relevant connections worth vs a ~10 year hard grind on your own?
not gonna get the answer here but was fun to contemplate :)
very kind. the silicon valleyite answer is annie duke's thinking in bets. get the book or crank up any of the 3000 podcast interviews she's done.
the realer answer is have about ~16 years of being in love with/thinking about microeconomics. maybe do some math/linear algebra (where you get very used to projecting spaces onto different dimensions), and then make a few high stakes decisions with regards to job negotiations optimizing for cash, salary, learning value, career path, etc.
but dont think for a second i have any of this figured out haha. i just write well.
S16 here. I think the greatest value add was actually being able to work heads-down for 3 months knowing that you would almost certainly get investment on Demo Day. Almost all companies got investment, since YC was extremely selective back then (batch sizes were much smaller) and investors generally trusted YC's judgement. Prior to S16, this was probably even more true.
If it weren't for YC one would have to spend 50% of their working hours having coffee chats and preparing demos, since investors generally had their own contorted idea of what a good demo is before they would invest, and it was usually not what the customer wanted. Being able to get twice as much work done in return for 7% was a good deal.
I don't think that applies anymore, sadly, with the large batch sizes they accept now. Nowadays you'll have to waste half your summer having coffee, not have guaranteed investment, and still give away 7%. Not a good deal.
Also, if you live in the bay area, it's fairly easy to come across most YC advice and get investor intros just by going to enough house parties with seasoned founder attendees.
Nowadays you start with $500K though, which puts you in a much better position when speaking with investors as your initial runway isn’t as close to nil.
Yeah. It's better, though $500K is still low for a couple founders plus company expenses, given how much rents and cost of living has gone up in the past 6 years.
Especially if your startup isn't purely software, and involves some operational or hardware expenses, $500K is a no-go.
It's also the ballpark of what 2 technical founders could easily make by working for ~6 months in the bay area, and not have to give away any equity at all.
So if you're doing it for $500K, I'd say there are better ways to get $500K than giving up 7% of your company.
Now if YC handed out $2M and cut their batch size by a factor of 4 (being more selective in their applications), I think it'd be a really good play for them.
Isn't running a business and especially a startup is supposed to be risky?
"We have an idea that's not materialized yet, give us money so we can live comfortably and reap all benefits it it works out and not lose anything if it doesn't." - sounds like a wishful thinking.
> Isn't running a business and especially a startup is supposed to be risky?
No, it is risky, and you want to actively eliminate as many of the risks as possible. Having a decent sized pile of cash is one way out of several of the risks. Supply chain shortages, founder medical expenses, mishaps and accidents, rising costs of living, personal emergencies happening to founders or employees requiring leave, there are a million things that will bite you if you don't have cash and runway.
"Supposed to be risky" isn't a good way to think about it, IMO. A lot of the time you'll hear people romanticize a couple of fresh graduates living on couches in a garage, living on ramen, and building a unicorn, but the reality is that most billion-dollar companies weren't actually built that way, and it isn't the best way to optimize your chances of success.
If something is risky, you should treat it as such. What I see people caught up in the startup/hustle/entrepreneur porn is the belief that they are different. No, statistics still show 95% of startups fail. You shouldn't be telling people to spend your youth on something that has 5% of less of success.
It depends a lot on personal circumstances, and this is what I wish was mentioned more.
For example, if you graduate with an engineering degree, can code, and don't have any grave medical conditions or loans to repay, I'd wholeheartedly encourage trying to start a company if you want to. It's risky in that the company would have a 95% chance of failing, but in that case you still learn a lot and it's fairly easy to land a job if you keep up your technical skills.
If you're stably married, your partner earns a high income in a stable job, and is supportive, that's another case where I'd say go for it, take the calculated risk.
In a lot of other cases, such as if you're knee deep in student debt, or (live in the US + have a medical condition + not a lot of savings), I'd advise building up a modest amount of savings first.
> Do you think this is realistic getting access to these just by living in the Bay?
Yes, if (a) you're nice and approachable (b) you're working on something interesting (c) are reasonably good at socializing, it's pretty easy to ask around and get looped in on such events. People here are pretty open about having interesting friends-of-friends show up to house parties.
If all you see is the numbers, then yes. But there is more to YC than just the numbers, I think they do not only increase your chances of raising money (and likely more than if you did it yourself) but they are also very experienced in mentoring start-ups to the point where they become viable businesses and that is quite difficult.
The bit that stood out to me was "a Figma file so big it sometimes crashed". I don't know YC but it sounds like this is the kind of thing one of their Mentors would tell them to throw in the bin and take out a paper notebook instead.
In larger companies, it is just accepted to invest the enormous amount of design time into these things but in a startup, anything that hogs your time over selling should be an alarm bell.
It would be different if you were producing a massive UI-dependent product but this sounds like fairly basic sass that doesn't need a Figma design, certainly not initially.
Great read Chris! I was in the S21 batch and definitely relate to a lot of the things you posted. Especially re: batchmate quality.
One big thing that YC did for me is it was an ambition multiplier. Pre-YC I thought it'd be cool to make software that could just pay my bills. A year post-batch and I find my default state is much more ambitious than before.
It's a crazy feeling seeing so many people start from 0 and the progress they can make in just 3 months. YC helped me and my company tremendously.
>One big thing that YC did for me is it was an ambition multiplier. Pre-YC I thought it'd be cool to make software that could just pay my bills. A year post-batch and I find my default state is much more ambitious than before.
When you talk about an "ambition multiplier", do you mean personal wealth? YC is great for receiving favorable terms in the future. But you can't really take that money out of the firm, or pay yourself some stupid salary. It's just paper wealth. And a bigger valuation and more ambitious growth usually means scaling up a lot faster (fail fast), rely more on future rounds and maximize your valuation.
For a fund they'd prefer a 10% chance for $100 million valuation to 90% chance for an $11 million valuation, but personally I would prefer a 90% change for a million opposed to 10% chance of 10 million, because I can't diversify and run 10 startups simultaneously like a VC can. So I guess that's the downside of the "ambition multiplier"
I’m at my third YC company and it seems like each time what I thought my career was completely changed. I’m leading a whole company engineering team where at my last job I was a principal engineer who spent Covid working (sadly) alone.
My first I thought I’d be lucky to land a entry level gig and did so well I become the lead engineer over a couple of guys within a month (as soon as we found them.)
I would never have gotten that experience that fast. Sure looking bad I was a senior at entry level because I had practiced so much: but at a traditional corp I would have had to wait years to get to that level of experience where YC basically throws you at it and hopes you don’t fail
Thanks! Yeah, sounds like we shared a similar experience. YC definitely starts to make anything feel possible. They give you the tools, it’s up to you to take it from there.
This was a great read, but after reading it and how the group got funded with just an idea and a mock-up that took 15 minutes to make would make me less likely to apply for YC in the future. Imagine you're building a business and put a lot of thought into the the product and start building it out. And you're basically getting the same deal as someone who just came up with an idea and wung the whole process?
Sure, you're investing in the person, but you either have the right experience or not. If you had the right experience and a product, you should probably look to bootstrap or other funding options.
A stat I read before is that 29% of the batch has just an idea while 10% had more than $50k of monthly revenue when accepted. Imagine being that guy that grinded to create a business that's generating a million a year and getting the same terms as some dude with just an idea and "the right experience"?
I understand the sentiment. The reason the mock-up was quick to create was because the entire thing was already done in my head. There were plenty of folks with very little experience and some with quite a bit of experience. I can’t say that I have any real idea what goes on in the minds of the folks making the decisions, but they do seem to pick an outsized number of winners. Whether we’re in that bucket or not remains to be seen.
Yeah I get it, I don't mean to disparage what you did and it looks like it worked out great for you. But how many hours would you say you've spent sketching it out, in your head at least?
It's just odd to me that someone can compare a million dollar ARR business with a cocktail napkin business sketch and give the company's equal terms.
Selection bias is a tricky question when evaluating "they do seem to pick an outsized number of winners." Does that mean that the people they pick off personal traits and a 15 minute demo are intrinsically winners, or is it just possible for YC to turn almost anyone with the right skills into a winner?
Note : Chris is selling himself short by a large margin -- he has a shit-ton of expertise on the growth hacking side of things. (We were also in W22 batch and he was great for getting advice from on various things)
Who cares what someone else received vs what value they give? What I care about is what I receive vs what value I sell makes sense at my stage. This is about making your startup succeed not beating other companies in the program on terms.
If an investment of 7% for 750,000 makes sense go for it. Who cares if someone else gets 8% or 6%.. it's not your money.
If you think having a product/revenue is valuable and you have a product/revenue and someone offers you some terms and they don't care about your product or revenue, then you're probably not getting the best deal you could get. It could be the best deal, sure, but that's the floor, because that's the deal you could get without a product or revenue. So that's a big indicator that you're getting a worse deal than you could from someone who cares about product/revenue.
It's not even consistent with YC philosophy about the idea doesn't matter, MVC, get to revenue fast, etc
This is a fallacy.
The deal other people get has no bearing on your company.
Yes. If you compare what you did vs what they did. But really it's like winning the lottery and complaining that some other winner bought less tickets.
Imagine actually getting into YC and turning it down because someone you think is less worthy also got in.
Tbh it sounds quite entitled.
At worst those other companies are unrelated. At best they are inspiring.
I think its entitled to think that your idea is worth a multi-million dollar valuation without a single thing to show for it.
If you get into YC and you actually have a product or revenue, it's almost certain that someone else would give you better terms because they care about product or revenue. It's like getting a 1600 on your SATs and going to a school that doesn't check your SATs. Is it the best school for you? Maybe, but prob not.
Just a signal that quality of the investments appears low these days.
Obviously a big win can erase a lot of misplaced bets, but I wonder how many of the pure idea, low effort startups ended up reaching major success.
To me it speaks of a non serious/committed entrepreneur, because the amount of cash that Y combinator supplies makes no material difference in the ability to actually bootstrap the project.
I don’t agree with this. What I do think is there are lots of “firms” that suck up all the money and efficiency from a project. They have no real desire, or skill a lot of times, to build a successful app but instead to game jira and enjoy a steady stream of suckers.
I’ve been through multiple YC companies now (arriving right after they were funded) and they all pretty much throw money to these code monkey shops that target YC and work with them.
Not just that but I’ve met “scrum masters” who’s entire schtick was consulting YC firms (or other early stage startups) and brought to the table senior engineers of below or equal to mid level quality.
I’d really hate to see how many founders with good ideas saw there time and effort wasted due to a trusting of firms like these.
startup valuation milestones are based on how well you can communicate why/how you will win to the next set of investors, what your next set of risks are and how a few more data points remove them and extrapolate to an inevitable future business. present cash flows don’t matter, only future cash flows do. we can only invest in what we understand, so more clarity = more prospective investors = more competition for your round. traction numbers are super helpful to communicate that certain risks are cleared but are not necessary early if your story of how/why you will win quickly is crystal clear without them. this applies from concept stage all the way to public cos like Tesla.
It’s a trade off. YC is second to none for someone who is just an engineer (or even entry level) to be able to get very real funding and a couple of years to give their dream a shot.
If that doesn’t fit where you’re at in your career that’s understandable but all systems of decent scale will have horror stories.
I remember a company I worked for went through a YC interview.
We were rejected with "we are not sure you can deliver".
At that point, we had built 2 mobile apps, a big customer wesbite, rich portals for partners, contractors and admins, had thousands of customers, were almost profitable. Our CEO had a history of delivering in that he sold his previous startup.
I must sound bitter, but it's pretty gut-wrenching when someone gets throgh by making UI mockups during a zoom call.
I could be wrong here, but it sounds like you would have been further along than anyone I met in the batch. The majority of folks I spent time with were starting from scratch.
Why feel bad? Watch other growing companies pitch and crash. I suspect it is harder to sell when you have a little traction. . . Easier to sell vapour than solids ;)
I mean just the fact that there is overwhelming presentation from one group not speaking to your founder here. Sounds like if he's that far in the game, they won't be able to steer him
Probably not skin color, but maybe founder was born in an authoritarian place (like Russia)? Far more likely that he used Windows, Word, or preferred Java, though.
Thanks for sharing. It seems like everyone was mostly focused on sales and some were doing quite well. Were there any strategies that stood out to you that were working? Was there some leg up provided to companies in their sales efforts who were in YC?
Everyone in YC sells to each other. It's quite encouraged to buy from other YC startups and test out their tech as alpha customers because it increases the valuation of the YC network (including your own company). It's a very interesting model because as a SaaS getting the first enterprises to sign up is extremely hard, yet those add enormous equity value and provide the proof and case studies for growth at scale.
YC can be thought of as a tech startup affinity network. The"shocked-pikachu face" attitude of the author, from being surprised a napkin worked for funding to being amazed that YC-affiliated startups gave him revenue before a product is live, is a testament to the YC model. Either the author is unaware of this obvious inside-network effect or they are pretending it doesn't exist. In the real world no random enterprise cuts you a check for untested, pre-live, alpha software. It is the SaaS cross-selling YC scheme that enables this.
I'm not even saying this is necessarily a bad thing. It's just a very unique model that is a warped inversion of real-world economics, and it decreases the risk for investors provided the whole network can continue selling into each other.
That's an interesting way to think about it. In some respects it could be viewed as a way to funnel to total YC investment into the "more-functional" startups in the network. Companies that provide more value (to other startups in the affinity network) end up with more of the net investment.
Did you have any initial investment before YC? or what was the value? I don't get it.
You started to make the service and pivoted multiple times... how big was your team of programmers/designers once you were accepted ?
Did you get money instantly ?
ps. I'm looking for a one angel investor about 70k for my next app and don't know where to start looking. Already have few national apps making revenue and multiple made for customers, but nothing like this international one..
> Heck, you can even choose to skip Demo Day entirely and take that initial $500K (yes, it’s $500,000 now), and just bootstrap it from there. I wouldn’t recommend it, but hey, it’s not against the rules.
Interesting, I didn't know YC allows this. Are there any well-known (atleast within technical circles) YC companies that have done this?
I had a similar experience (S20) and one of things I wished I did more of during the batch was to connect with more people, not for the sake of selling something but to just meet people from all over the globe. I'm working on a new idea now and most likely will apply for YC again as well.
Genuine question — what is work-life balance like in YC? Is it possible to maintain a decent work schedule or are you essentially sacrificing that to be in YC (or start the company in general)?
That's entirely up to you. It's your company. Startup life in general is probably going to be busier than working a corporate job, but the answer is: whatever the company needs. Sometimes that will be 80 hour weeks, and sometimes you can do 40 or take a vacation (which you should do from time-to-time anyways).
In my opinion, you should do everything you can to maximize your valuable time during the YC batch, so it'd make sense to work harder then. But even a startup is not everything in your life. If you have a family and kids, those need time also.
From what I hear the biggest value is the network, both from a customer and investor perspective. Especially if you are selling to startups there are huge benefits in applying.
Seeing founders with less care for detail and more for the sheer growth of their user base was impressive and deflating.
It felt like everyone I compared myself to, they were devoting 90% of their time to selling and 10% to building.
I share the feeling. There's success stories of companies doing the same (e.g. Notion, Replit), so I know it's not completely off-book, but I constantly wonder whether there is downside to that approach of focusing on sales in the beginning. I can guess things like less likely to be innovative, but is that true? Maybe since they average being alive longer than the ones that focused on product in the beginning, any potential downsides are negated in the long term (e.g. just innovate later with the infinite runway they now have). Would love to see some study/survey on this.