YC Reject - We've been offered an investment to fund our Summer 2011 class

http://www.ycreject.com/2011/04/yc-reject-has-been-approached-with.html

by allanscu • 15 years ago

101 71 15 years ago

adora• 15 years ago

From who? That seems pretty important.

allanscu6• 15 years ago

For purposes of full disclosure, I was approached by an individual angel and I sat down with the investor for a meet and great. The selection process needs to be sorted out and the term sheets need to be agreed upon by all parties before it's finalized and a check is written.

The reason I posted this blog, is because I want to get candidate feedback. The money involved in YC is just a small (but helpful part) of what they do. Will teams that participate in this grassroots project want to give up 6% of their company? What are your thoughts?

corin_3• 15 years ago

I assume you will ask YC to help you out by confirming who actually applied, otherwise it could be seen as an easy way to get funding for people who know they wouldn't have a chance in hell of being accepted by YC. Or am I being overly imaginative?

kovar3• 15 years ago

The money was a very small part of YC's appeal for me. Access to the mentors and other human capital was the real draw. I can't see giving up 6% of my company if the program doesn't offer human capital similar to YC's.

freshfunk2• 15 years ago

I think a YC-Reject co-op is a great idea.

If you're trying to monetize the idea and are asking for 6% of people's company then, sorry, you've got to be joking.

What do you offer for this 6%? Money, connections, knowledge?

If you're simply a coordinator bringing people together, I think asking for 6% is ridiculous and it makes me question your motivation for doing this.

adsahay2• 15 years ago

This is one of the crazy things I've come across - one moment there's a call for YC rejects to hang out together, next day there's cash for equity! Since this is an experiment maybe it would help to keep it simple in the original form and leave investment out of it till the end of summer?

allanscu6• 15 years ago

What about the quality of the applicants? Will the better candidates not bother with this project since no money is involved?

adsahay2• 15 years ago

It would be interesting to diff the original applications and those after the money announcement to gauge the interest and quality. I think quality startups will want to reach a certain level (prototype, proof of concept) and then money will find them. The blanket offer for investment without knowing the startups or prior relationships is a bit too good to be true?

nikcub2• 15 years ago

in ten years time when the social software era zeitgeist is written it will definitely mention 'and even a YC reject group was funded'

danohuiginn• 15 years ago

Bar Camps began as an alternative to O'Reilly's Foo Camp, for those who weren't invited. Now there are barcamps almost every weekend, in a dozen or more countries.

If nothing else, the rejects (always) have force of numbers on their side.

nikcub2• 15 years ago

I don't have a problem with it at all, it is interesting and unusual

He put so much effort and determination into this 'not-YC' that he probably would have been funded anyway

Being rejected from YC will probably end up being the best thing that has ever happen to him

aaronrc• 15 years ago

I know it's been said over and over but why don't all these YC and now YC rejects just get on with it. Build their products, start their businesses and make some money. Why the obsession with being a YC'er and now a not-a-YC'er. Can't they see the whole thing is just a distraction from their already difficult task?! nikcub hit the nail on the head with his comment, it's just a shame YC doesn't lend itself to a plithy title such as "Boo Hoo" (en.wikipedia.org/wiki/Boo.com).

robryan• 15 years ago

Well having a support group and something structured like weekly meetups to drive the startup forward week to week seems like a good thing to me. I don't think it's so much a YC obsession but an obsession with giving a startup the best possible chance to succeed.

ascendant2• 15 years ago

Y Combinator has shown that it adds significant value to the process. Seed funding, access to like-minded entrepreneurs as well as heavy-hitters in both the tech and VC world. Obviously Y Combinator has a brand name associated with it now but the whole incubator concept has proven it is worth it for at least some of the population interested in starting their own companies.

entangld2• 15 years ago

I have a name for it (I love naming things):

ReCombinated

nodesocket• 15 years ago

We can dig it.

lazerwalker• 15 years ago

My name suggestion: ZCombinator (one more than Y)

zyfo• 15 years ago

This is insane and hilarious, as well as a great initiative.

marcamillion2• 15 years ago

WoW.....I don't want to say bubble....but this sure seems like some sort of frenzy.

Kudos to you for taking the initiative and doing what you need to do...and for siezing what could potentially be an amazing opportunity.

I hope it doesn't turn out to be a fad, and something sustainable can be built here.

JCB_K• 15 years ago

The thing is, with YC you get except the 20 grand or whatever it is, the advice from pg and others, and the alumni network, which is both worth something.

allanscu6• 15 years ago

With 40-50 groups now your time spent with him as a YC'er is significantly less. He's added staff, but scaling out his time is a big problem. Plus with the 40-50 groups - I can only imagine that the demo days are a complete circus. Will angels continue to invest their money in what essentially has become a meat market? If I were to invest my money on a high-risk venture I'd like to get a little T.L.C.

SwellJoe4• 15 years ago

The last YC batch was the smallest in a while (I believe it was well under 20). I don't believe they've continued to grow the size of the batches. I'd be shocked if they ever grow to 40-50 groups. That many wouldn't fit in the YC office for the dinners. Where are you getting this "40-50 groups" number from?

"Will angels continue to invest their money in what essentially has become a meat market?"

The evidence seems to indicate that the answer is "yes".

"If I were to invest my money on a high-risk venture I'd like to get a little T.L.C."

Personally, if I were an investor, I'd rather get a little R.O.I.

wheels• 15 years ago

That's not actually true. I was in the valley a couple months back and was able to book office hours with Paul as much as was useful (and more frequently than I had when we were doing YC in S09). Office hours with Paul and the other YC folks are in 15 minute blocks and have been since YC was much smaller. Most YC teams don't meet with Paul privately every week and even as such the upper bound on the number of those meetings that'd be possible per week is around 200. Also, now, in contrast to when we did YC you can also book hours with Paul Buchheit, Harj and Gary.

marcomonteiro4• 15 years ago

Yes and that's what makes the equity trade worth it. The money is too small to justify giving up 5-10% if it wasn't for the quality of advisors (and their reputation) that you'd be adding to your company.

phamilton3• 15 years ago

There was an article a month or two ago about the problems with tech accelerators gaining popularity.

I can't find the link but it basically said the accelerator bubble is going to happen when the secondary groups get the 'B' talent startups, and then the next groups get the 'C' talent...

While I have no idea about the quality of YC Reject groups, this does kinda have that same feel to it.

allanscu6• 15 years ago

Even YC has always said that there were promising groups from those that did not make the cut. They've admitted that they aren't the best at picking winners. So you can't say that the A groups were better than the B groups. Many of the B groups (and even single co-founders) were just a victim of YC's rules and capacity.

entangld2• 15 years ago

I'd still settle for meeting up with a group of intelligent and determined entrepreneurs who I can bounce ideas off of and perhaps get a little advice.

marcomonteiro4• 15 years ago

YC doesn't have the time and resources to help every startup.

ascendant2• 15 years ago

This. The OP makes the assumption that all grade "A" startups that apply for a class will get into that class. It seems to me that it's starting to reach a point where it won't scale to keep including more and more people into a class. I'm sure some will be because the ideas or founders aren't the best but in the case of ones that make it to the interview, that's already stating they're ahead of the pack in that sense.

bad_user• 15 years ago

Talent and potential are very subjective metrics -- I'm not sure YC gets the best candidates. They only get the best as judged by the pool accessible to them, and by their selection criteria.

That said, yc reject groups probably will suffer from a smaller talent pool (since they are indeed option B), and from a lack of experienced people to make a reasonably good selection.

brown9-2• 15 years ago

A group of "B" talent or "C" talent startups get funded - so what?

The only people who lose out are the investors, who have plenty of chance to evaluate their investment before making a decision (I imagine), so they can only blame themselves for making a bad investment.

cliftonmckinney• 15 years ago

Seconded. The economics probably make sense even if 90% are "Cs." One or two winners per batch is enough given the relatively small investment for the relatively large stake. Keep in mind that these investments typically result in an initial valuation of somewhere around $300 - $500k. 6% of something that size for relatively low cost makes room for quite a few losers. My only advice is to make sure that there's a lot of focus on getting great advisors and mentors for the program. That piece is easily as important as the funding.

freshfunk2• 15 years ago

Theoretically, this makes complete sense. But in practice, math matters. If you believe that the number of promising startups is within the range of those that are accepted by top accelerators, then you are right. But if you believe that current accelerators serve a minor percentage of promising startups, then it means a large part of the market (ie. promising startups) is not being served.

I'm actually inclined to believe it's the latter considering the supply and demand. The demand for accelerators is extremely high and the supply of open spots is very low. I think current accelerators are just scratching the surface with respect to promising startups which is why we're seeing many more sprout up.

rrhoover• 15 years ago

My initial thought is to leave investment/equity out of the program and stick to the original vision. There are dozens of established incubator programs that have a reputation and history of performance.

phamilton3• 15 years ago

Crazy stuff. Can you imagine the analog in other professions?

"I got rejected from Harvard Law School. So I got a couple of my fellow applicants together and decided to study law together for 3 years, sans professors. We all just got 6 figure offers from the big firms on Wall Street."

davidw3• 15 years ago

Here is a list of companies that didn't go through YCombinator and did pretty well: Microsoft, Google, Facebook, Cisco, Amazon.

So I think the 'sans professors' thing is a bit unfair.

phamilton3• 15 years ago

And Abraham Lincoln went 'sans professors'.

I didn't mean to bash. I merely meant to accentuate how unique the situation/industry is.

bhousel• 15 years ago

Maybe a better analogy: The Boston marathon fills up so quickly that a local running club director decided to just start his own marathon nearby for runners who didn't get into Boston.

http://www.runnersworld.com/article/0,7120,s6-243-297--13469...

jasonlbaptiste• 15 years ago

The original idea had something special and different. Now this is really just another accelerator.

allanscu6• 15 years ago

The money is only a small part of it. It's really there to make sure you can focus on your project and not worry about putting food on your plate or making rent. The money was put on the table, but I'd like to get feedback to know if it's something that interested teams would want in exchange for equity.

marcomonteiro4• 15 years ago

The money to me was important as well as everything else YC offered. I wouldn't have applied otherwise. I can't afford to build my business without the seed money at this point. So it's either find a job, go back to school and/or look for funding elsewhere.

hotpockets• 15 years ago

I was going to try something similar a while back. Perhaps a different persons perspective on a similar idea will stimulate your mind: http://news.ycombinator.com/item?id=925134

kevinburke• 15 years ago

At this point though, if we're taking PG & co's rankings of applications, the top 10% of YC applicants are still in the interview phase - if I were the OP I would want to wait until after the class gets announced, right?

davidw3• 15 years ago

"We're like YC but better!" has "sour grapes" written all over it. If it's that much better, why did you bother applying to YC in the first place?

Also, on a lighter note, will there now be a ycrejectrejects project/site?

abbasmehdi4• 15 years ago

YC came out of an unmet need as well, VCs not finding at the seed stage.

davidw3• 15 years ago

What's that got to do with anything? My point was that by defining themselves in terms of "not ycombinator" it doesn't look good.

I'd much rather read about an "independent, peer-based company building support group" or something like that.

phlux2• 15 years ago

Actually, I would like to get into the YCReject as a PRE-YC -- where I can get to a much better position with my plan, then apply to YC with the same plan, next session.

abbasmehdi4• 15 years ago

Could this be a scheme to look at everybody's applications? Why would the angel not directly go to YC demo day or ask them for the reject list? When desperate it is easy to lose sight of what is plausible.

Please don't get me wrong, I am not calling you a liar, but this is just healthy skepticism. If I were to ever go along with this I would need to see some written proof.

If you have actually done this you're doing a great service to a lot of people.

allanscu6• 15 years ago

That's a fair question. Without knowing me, it's hard to gauge my integrity. If you have any questions, I'll be happy to speak with you.

abbasmehdi4• 15 years ago

Thanks for keeping an open mind! :)

marcamillion2• 15 years ago

YC Reject could turn out to be an interesting development just based on the way YC does self-selects for a 50/50 success ratio.

See more here: http://news.ycombinator.com/item?id=2431712

russ• 15 years ago

Someone should get started on the 'YC Reject Reject' fund.

adrianwaj• 15 years ago

Where's the accompanying news.arc?

dclaysmith• 15 years ago

I was amazed by how motivated I became by being involved in the "November Startup Sprint" back in the fall so I think a more formal program could potentially be pretty cool. I'd move away from being a "YC Reject" program to a "Hacker News Startup Co-op".

I would open it up after interviews so that those who got interviews but don't get accepted can participate.

Accomodate all groups who want to participate and don't mess with the financing at this point. The financing talk gives me kind of a "no" feeling.

Have your weekly dinners and get speakers.

Have a web site where YCR startups can promote their projects.

Schedule and hold a Demo Day. I bet you'd be able to get a few investors to drop by or else watch the videos that will go up on the YCR web site.

By banding together, I think everyone will have a really productive 3 months, get to know alot of like-minded individuals, and have a decent shot at attracting some investor interest.

I live in Ireland and wouldn't be able to participate but I think it's a great idea.

ph0rque• 15 years ago

I'd move away from being a "YC Reject" program to a "Hacker News Startup Co-op".

How about "Peer-to-peer Startups"?

selvan• 15 years ago

Accepted applicants articulated their idea & company better than non-accepted applicatns as per YC scale. If you aren't accepted by YC, shouldn't it be same as getting rejected from a VC?. In most cases VCs are investing in companies that are rejected by other VCs. How one perceives opportunities for an idea/investment, is very subjective. YC and YC Reject will not be same even though offer is similar ($12,000-20,000 for about 6% of the company).

Skywing• 15 years ago

I've never been accepted into YC so this may be totally wrong, but ...

Don't lose sight of the real value in this for a group trying to create their own startup - the mentorship, fraternity, alumni network, initial amount of funding and then finally the demo day presentations which will result in a lot of visibility. Not to mention, at this point in time, the YC brand stamp. I know you have to start somewhere, but I don't think starting with investors is the right move. It won't be difficult to find people willing to invest, as you've already experienced (they came to you). You need to start by trying to provide the startups with the things they can't get on their own - mentorship, fraternity, etc. I have gone through my own adventures of pitching my ideas to VCs, while being completely uneducated about it and green, and I can say it's not difficult to get money from them - so you will be able to get it when its required. At least for me, the money is not really the appeal of YC.

I think dclaysmith says it well here: http://news.ycombinator.com/item?id=2432040

falsestprophet• 15 years ago

This is an invitation for a trademark infringement lawsuit.

mwhite• 15 years ago

If YC Reject groups get similar funding, this might be a good way to empirically test whether either Y-Combinator succeeds at choosing more capable groups or Y-Combinator offers advantages over other accelerators.

kovar3• 15 years ago

I wish I could agree, but I do not. There are way too many variables. To even get close to making a valid test you'd need to run the same startups through different accelerators at exactly the same time.

phlux2• 15 years ago

I guess it is more a test of how the money affects the startup vs. the mentorship/network.

YC Reject - We've been offered an investment to fund our Summer 2011 class

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