Taking part in Y Combinator from Europe: is it worth it?

https://sifted.eu/articles/yc-combinator-alum-tips/

by adrian_mrd • 5 years ago

162 85 5 years ago

devops0002• 5 years ago

I don't think is worth it to give up 7% if your business has some revenue, and it's growing.

If you haven't reached market-fit yet, then a mentorship could be useful if you don't have such skills in your networks.

melomal3• 5 years ago

If it has revenue and is growing then I would look to get a loan to double down on what is working.

Pay back the loan whilst increasing revenue and keep the entire company to yourself/team. The additional revenue can offset the expenses which were taken care of by the loan.

0xfaded• 5 years ago

By which time an American company will have copied your business model and plow 10x anything you could ever dream of raising in Europe into dominating your market.

edf13• 5 years ago

Investors and Y Comb bring a lot more than just cash though

tarr11• 5 years ago

Getting a loan is very difficult unless you are profitable.

andy_ppp7• 5 years ago

I always just think about the investors you get access to if you do YC, and the network of people. I think if you are on an exponential growth curve but want the YC experience I think it would be worth discussing that 7%, I believe it's not set in stone and exceptions can be made. Why wouldn't YC want a smaller percentage of something that was clearly already going to be huge...

And as for the 7% I'd say you might get that back with more funding for less equity if you're already one of the larger companies by demo day, lots of investors will throw money at you.

rjzzleep• 5 years ago

I think it's worth looking at the leaked emails from when Google acquired YT.

They didn't acquire it because they thought their tech was great or that they had a great product. They acquired it because a) the team was local and b) because sequoia invested in it.

https://twitter.com/TechEmails/status/1433837480449613839

dang5• 5 years ago

FWIW I'm pretty sure YC just offers a standard deal and doesn't make exceptions. For one thing it's way too hard to manage negotiations when working with so many startups (they fund close to 800 a year these days, and consider many more). Maybe there are exceptions (I don't know) but they'd be extremely rare.

dominik-2020• 5 years ago

I think it's more complex than that. I would recommend everyone to join YC. It helps with customers and investors. Most likely your company valuation will go up more than you'd need to compensate for the 7%.

jsonne• 5 years ago

Giving up that 7% functionally doubles the valuation you can justify at a seed stage and saves you months in fundraising efforts. That time is valuable and if you plan to raise a lot having a low dilution matters quite a bit.

robocat• 5 years ago

If the effects of joining YCombinator increases your final valuation by more than 7%, then on a purely financial basis you should join YC because even though you have given them 7%, you end up more wealthy than you would have. Ignoring dilution.

Obviously there are a variety of caveats, such as voting issues and time investment.

Personally, I suspect most founders are at a negotiating disadvantage (knowledge, power and bargaining asymmetries), and think it would be easy to get an extra 7% by having YC on your side of the table.

Also see https://www.ycombinator.com/deal/ for details.

ironmagma5• 5 years ago

Bookface is YC’s knowledge base, and it answers 80% of the questions a founder can have about building and selling a product, be it to clients, candidates or investors. It’s the most valuable content I’ve ever read.

Something tells me this information isn’t so scientifically based and cited as it could be. I wonder just how much of this contributes to the business monoculture we see today.

polote• 5 years ago

When you are accepted at YC you are already a team which is autonomous and capable. With or without Bookface information things will not change much. Maybe you can save an afternoon because the information is easier to access and already curated. But nothing life changing for sure.

What really is important is connection to other people, when you are starting a B2B saas companies for example the people you are talking with on BookFace, are all potential customers, and can make your first customers easier to find.

edouard-harris2• 5 years ago

The advice on Bookface certainly isn't scientifically based in the strict sense of having been compiled through double-blinded, controlled studies. But the writer and publisher of this content (the YC team) has both 1) intimate access to the largest single dataset of startups that has ever existed; and 2) an extraordinarily strong financial incentive to give consistently excellent advice to its portfolio companies.

That doesn't mean their advice is always right, but it does mean they have both the capability to quickly discover when they're wrong, and a powerful motivation to quickly correct their mistakes. So at any given time, we should expect the advice YC gives its portfolio companies to be pretty good.

Given that, it's worth considering whether what's perceived as "business monoculture" might actually be better described as "set of business practices that have been shown to actually work pretty well in the real world".

sfink2• 5 years ago

From what I've seen, YC will always advise going for a high-growth, high-risk strategy, and their advice and knowledge base will always push in that direction because that's what is best for YC.

That might be what's best for a given founder or company, but it may very well might not be. You will have to be proactive and assertive in what works for you to avoid being bullied into the standard YC/Silicon Valley gamblers' playground point of view.

ironmagma5• 5 years ago

If it works, it's science. If it doesn't work, it's not science. That's not the part I'm concerned about -- it seems much less important whether a given practice will net you money, than whether said practice is actually a good thing to do. The business types have difficulty distinguishing "good advice" and "advice that makes you rich right now" as it is.

aerosmile5• 5 years ago

If the advice at YC was the same as what you get at HBS, we would have plenty of people who know how to scale but not how to start. And no, the art of starting something is neither well researched nor well understood, beyond of what you'll learn at YC. They really have formulated that field better than anyone else, however scientifically (or not) that knowledge was created.

bpodgursky• 5 years ago

You might be shocked how much true information is not peer-reviewed.

ironmagma5• 5 years ago

Probably not. Having citations is simply (a la Wikipedia) a reasonable-enough proxy for being "actually researched" as opposed to arbitrary fluff.

lbriner2• 5 years ago

The ultimate skill of the CEO is looking at what is and isn't working and adapting. If you read an article A about how Air BnB worked out by visiting every customer and taking photos, you have to decide whether that translates to your business as a way to fix your troubles or not.

I think the use-case is more based on company X struggling with a particular problem (e.g. how do you please the mass market) and finding someone who has faced the same problem and learned some stuff along the way.

DoreenMichele• 5 years ago

Social things are inherently hard to study "scientifically."

Business is an inherently social phenomenon. Going to people who know something about business because they have firsthand experience with business seems to be an industry gold standard for how you pass on useful knowledge.

tluyben2• 5 years ago

I did Antler in the EU recently: going in pretty much thinking it would not be beneficial, but it was. So going to say yes: for the mentoring and contacts it will be, even if you already have a bunch of startups under your belt.

the-dude• 5 years ago

Did you get funded? Can I contact you? ( you are Dutch right? )

ro-_-b• 5 years ago

What I don't understand is why they complain about the high costs of setting up a business in the US (tens of thousands of dollars). Shouldn't this be pretty cheap with Stripe Atlas?

sfe22• 5 years ago

And they actually recommend using atlas in their youtube video.

nottorp• 5 years ago

Well do you know the pricing for non US citizens? It's probably more complicated than for locals.

nkotov2• 5 years ago

Love this article. I had a chance to go through YC S20 and it's been life changing for me. As someone who lives in a non-target city (Charlotte, NC) and with no connections to SV and not having a fancy degree, getting into YC opened so many doors for me. As a first-time founder, the 7% that YC takes seems like almost nothing when in return you get access to very valuable information and network. If I was to start a new company again, I'd still apply for YC again.

aerosmile5• 5 years ago

The challenge of a random company posting about their experience at YC is the same as what you'll hear about HBS - it's always anecdotal and tied to the personal outcome of the writer. Are there people who spend a shit ton on HBS and don't return that investment soon enough? Sure. Would it make sense to go to HBS? Depending on where you net out, it can be the best or the worst investment you've ever made.

The nice thing about YC is that you're not investing your cash, but equity. If you have the right business/team/timing/execution, then the cost of equity will be high, but you'll do better than you ever expected so it's all good. And if you don't do well, then your equity wasn't worth much to start with, and you essentially got the HBS experience for free without any of the debt.

samb1729• 5 years ago

By HBS do you mean Harvard Business School?

Apofis• 5 years ago

I don't think you can lose with HBS. If you want to talk scaling and on speak eye to eye with VC's and don't think entrepreneurship is a lottery, then a business school always makes sense. This comes with a but... BUT only if you plan to lead or scale your enterprise. It's only what I see from the outside so far, since I'm just getting ready to dip my toes. Ideas are ideas, everyone has one, like a netherhole. The ability to execute is the determining factor.

poorjohnmacafee• 5 years ago

Definitely understand the appeal for first time founders, and founders who are early in their careers so don't have contacts in the industry they are building products for, but having gone through an accelerator myself, I can't really imagine going through an accelerator a second time. Maybe for second time it still makes it easier to get introductions for b2b customers? But the accelerator I went through also taught a ton of strategies/tools for getting early customers without depending on just other companies in the network using each others products.

lbriner2• 5 years ago

I think it is fair to say that YC are not just "an accelerator", they have a massive pool of investors and advisors. I too was in an accelerator but although famous, was nowhere near as potent as YC.

Sure, there are things that you get frustrated at (like some 20 year old telling you, at 40, how to do finance, when you would rather be building) but it sounds like the biggest thing is the culture and being prepared to delegate a lot of what you think you know to the way YC tell you to do it. I think a lot of Entrepreneur types don't like being told that their way is not correct!

corry• 5 years ago

There are many reasons - (1) the halo effect for future rounds of funding, not to mention Demo Day itself; (2) access to absolute god-tier advisors in areas that even though you're not a first-timer, you may not have experience with (e.g. you founded a B2B SaaS company before but now are trying a B2C thing); (3) help with hiring (YMMV on this). Also the nature of a highly focused sprint for 90 days to see if something is ready to take-off can be a great forcing function too (maybe on its own that's not compelling enough, but across these various items it seems reasonable to do it again).

fairity2• 5 years ago

If I was to start a new company again, I'd still apply for YC again.

Once you go through YC once, you have access to all the information and alumni community in perpetuity (via Bookface). I think it's natural to want to go through YC again as a form of reciprocation (for all the value you received the first time), but you might find that the value-maximizing route is to take capital from other sources if you go to bat again.

nkotov2• 5 years ago

I'd apply not just for that but the access to group partners who know your business in and out is worth a lot to me. There were several instances where I needed advice from people who had experience my group partners helped.

probably_wrong• 5 years ago

Hundreds of pages of paperwork to register the company in the US

This called my attention, as I imagine that a US-registered company with European founders would be a headache. Is this a requirement for YC companies? If so, could someone explain why? I can imagine several plausible reasons, but I'd like to know what the official one is.

motives2• 5 years ago

Its so investors can leverage the massive tax breaks available when investing in US based startups. Hence why YC also lets you found in tax havens like the Cayman Islands. Note this is probably not the official reason, as it's generally frowned upon internationally to encourage tax avoidance.

sgrove2• 5 years ago

The simpler, less cynical answer is that it's not just a US-based company, it has to be a Delaware-based company.

This is because all of the laws around founding, investing, selling, etc. a company are extremely well-trodden in Delaware, and there are very few question marks as to how some strange eventuality or disagreement might be handled.

Since startups are already incredibly difficult, this is a way of normalizing away some of the weird situations that could cause a startup to fail (and likely would never cause them to succeed), so that everyone is putting energy into the real unknown unknowns around the startup.

dustingetz• 5 years ago

Here's a hot take, not sure if it's right:

YC's 7% is the difference between founders vs VCs having control after two rounds assuming good growth. The issue is that the best startups like early stage MS Amazon Google Facebook don't need help attracting access and information. The 90% failed startups get the merit badge which will help you in your future career as a non-founder. And then there's good startups like Roam, which YC is not smart enough to detect. What's left is controversials like Airbnb, which never exists without YC. Are you Airbnb? And is YC smart enough to see that?

aerosmile5• 5 years ago

I would group this together with two other statements I heard that seem logical on the surface but ignore the reality of the market:

"Why raise a seed round of more than $1.3M? If I can't build a business with 1.3M, then it's not a business worth building!"

"What's the problem with [name of a top tier VC fund] being in my seed round? If they actually choose not to do our A round, then it's not a good business to start with!"

The problem with all these statements is that you're looking at this from an overly idealized perspective where things always happen for a reason and there are no oh-shit moments. But the real world is messy and sometimes not rational. Perhaps your VC won't take your A simply because they already did two As that same year, and they are stretched beyond their limits. And perhaps your bigger competitor will sue you and suddenly your $1.3M will no longer be enough (at that point it's too late to raise again).

So going back to your original statement "best startups don't need help attracting access and information" - so you're saying best startups always go from bootstrapped to a high valuation A without any seed checks in between? I mean, even Google took a bunch of seed checks, and it doesn't get more disruptive than two Stanford PhDs building a better search engine with patented IP. By the time all those seed checks, lower-than-otherwise valuation, and various not-super-clean deal terms (was Eric Schmidt really necessary and how much did he cost in cash and equity?) are factored in, the YC route turns out to be net positive even for the best startups with first-time founders. The only exception might be a serial founder with a prior exit and strong VC connections, eg Max Levchin.

officialchicken• 5 years ago

Everything is becoming more remote friendly, YC isn't fighting against that trend. And their track record and prestige speaks for itself. "It's not what you know but who you know". But why ask that question on this site? Do you honestly believe someone will say 'No', give credible information, and not be down-voted or shouted over to oblivion?

black_13• 5 years ago

Taking part in y combinator is it worth it.

Taking part in Y Combinator from Europe: is it worth it?

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