Was Y Combinator Worth It?

I think you are mixing up a correlation vs causation effect.<p>The first thing is there is an extremely important causation effect, the more investors you have, the easier it is to get more people to invest (social proof).<p>So, inbound vs outbound:<p>If you have a lot more investors already committed, you have a lot more social proof. Naturally if you have more investors, you will have a lot investors talking about your deal to other investors. Thus, the people who contact you inbound want to invest. However, it has nothing to do with the fact that they are inbound, it is just that by the time they are contacting you, your fundraising already was dripping with social proof.<p>Conversely, at the beginning when you have no investors, you likely are going to have to contact some of them. This is obviously going to have a much lower conversion rate, because you have no social proof!<p>Taken to the logical extreme, if inbound investors are so much more valuable than outbound, when you start fundraising you should just sit next to your telephone and wait for investors to call you. But of course that won&#x27;t work, because it isn&#x27;t inbound investors that actually matter. It is all about building social proof, and then once you have that, a lot of good things are going to happen. For example, YC is very powerful indication of social proof, and look how much easier fundraising became!<p>Basically, people who read this TC article: if you are interested in fundraising, PG wrote the canonical piece about it, <a href="http://paulgraham.com/fr.html" rel="nofollow">http:&#x2F;&#x2F;paulgraham.com&#x2F;fr.html</a><p>This post is fun, and I congratulate you on raising your round, but this data isn&#x27;t predictive or useful.

I always think that speculation about YC&#x27;s fundraising value obscures the correct causal link. YC doesn&#x27;t make fundraising easier, per se, it makes you build a more valuable company. That makes fundraising easier.<p>I get some variation of this question a lot. I assume that all recent YC alumni do. I always talk about (a) the intense focus that YC gives it&#x27;s founders, (b) the positive pressure that the partners, the dinners, and the batch provides, and (c) the incredibly supportive guild of alumni.<p>YC helps founders build companies that are valuable. VCs and angels know that.

&gt; One last point on this, almost any VC will take a meeting with almost any entrepreneur.<p>As someone who was trying desperately to raise money in 2008 (from the Midwest, no less), just wanted to note that this is false. I contacted several dozen VCs and literally zero were interested in hearing a pitch.<p>This was for a company that had thousands of users and won a $50k business plan competition, so it&#x27;s not like we were a joke company on the &quot;almost any entrepreneur&quot; spectrum.<p>Sure, it was 2008, and sure, we were nowhere near Sand Hill Road, but I wouldn&#x27;t want people getting the impression that it&#x27;s trivial for non-YC companies to get in the room with VCs anytime they please. It&#x27;s not.

<i>In total we took 121 calls&#x2F;meetings with potential investors, and received a check from 43 of them.</i><p>To me this is the most important sentence in the article. Just under 2&#x2F;3 of their meetings, 65% resulted in no deal. That is 78 well placed, well funded, fully informed NO&#x27;s. In the end though none of those Nos matter.<p>I think people overlook that aspect and just see the yes&#x27;. Congrats to EasyPost for all their success.<p><i>edit</i> Since my point appears to be unclear to some: &quot;Don&#x27;t be discouraged by rejection&quot;

Let&#x27;s simplify this even more - risk.<p>Getting into YC reduces perceived investor risk. Full stop. It doesn&#x27;t reduce the actual risk that the investment won&#x27;t fail, but it&#x27;s much easier on our brains to say &quot;Well these guys are a YC company and YC companies tend to do well. If they don&#x27;t do well, there is at least a support network of partners&#x2F;alumni to ease the pain&quot;.<p>There is nothing worse for an investor to speak to someone they don&#x27;t know, or don&#x27;t have any connection to.<p>There are two simple ways to increase your chances of funding: (1) get so much traction without funding that any investor would be dumb to pass you up or (2) be massively connected. Both aren&#x27;t easy but they are by far the strongest signals right now to investors.<p>So is any incubator &quot;worth it&quot;? For many early stage startups, the answer is categorically - &quot;yes&quot;. If you break down the cost-to-benefit ratio, the cost of doing an incubator is usually very low, while the benefit can be and normally is very high.<p>Last note - people often neglect the notion of high profile investor&#x27;s ability to &quot;cast a wider net&quot;. This is one of the huge benefits to YC. Getting a good investor on board isn&#x27;t <i>always</i> just about capital. They can prove to be a huge part of your marketing plan.

The really interesting thing here is how essentially worthless &quot;please introduce me to your investor; I&#x27;d like to talk to them&quot; is.<p>It pretty much argues for having an inbound-only strategy, and some low-stress easy way to filter those (e.g. &quot;I&#x27;ll pick up the phone for {pg, pmarca, cdixon, fredwilson, ...}, &quot;this set of people go to weekly-batch email response time&quot;, &quot;these people are sent to &#x2F;dev&#x2F;null&quot;). A decent profile on a place like AngelList, but not much else.

&quot; Why? Because that’s their job, to meet with entrepreneurs. It also means that if they schedule it on, say a Friday in SF at 11am, they can: a) avoid driving down to Sand Hill altogether, and b) arrive in Tahoe in time for a few evening runs. Be wary in thinking it’s anything more than that.&quot;<p>Thanks for the gratuitous kick in the nuts.<p>Did you consider that maybe the fact your meetings with VCs didn&#x27;t result in good outcomes might be a signal of something else?<p>Having done both, running a company is definitely more work at the peak, but being a great VC is a ton of work, too.<p>You&#x27;ve got a lot to learn about VCs if you think we meet with you so we can go night skiing. Or that any VC goes night skiing.<p>&lt;edit for tone at expense of humor &gt;

Interesting look into your fundraising process Jarrett.<p>It&#x27;s impossible to distinguish the impact that YC had on your second go around at fundraising versus the impressive progress that EasyPost had made as a company.<p>YC definitely helps with fundraising--it&#x27;s a strong signal of social proof and it can generate a sense of urgency in investors--but growth metrics and traction are usually the most important things.

The result is not totally surprising but it&#x27;s nice to see some numbers to quantify it. The only negative thing I see is the fact that the only comments so far are complaining about identifying investors.

Hundreds of calls and meetings. When does one work on the product? I&#x27;m a bit disillusioned by the apparent focus on funding over product in the valley. I hope it is a misconception of mine.

I&#x27;m not a fan of Paul Graham, but is Y Combinator worth it? Absolutely. It&#x27;d be worth it to give up <i>30</i> percent of your business to get into The Club, much less then 6-10% YC reportedly takes.<p>Y Combinator is a brilliant idea. Paul Graham was something that would be a rarity now, and probably always has been-- a smart, good, straight-shooter who made it big. That made him a really attractive personality, especially to the young, and the fact that he&#x27;s a good writer didn&#x27;t hurt either.<p>YC enabled him to turn that reputation into gold: because the benefit of a startup being YC-approved turned out to be so vast, he can get an early percentage at a low valuation. To be clear about it, his startups benefit as much as he does. He&#x27;s not screwing them over in any way.<p>This is probably why I have to deal with the rankban&#x2F;slowban treatment. I&#x27;m a thread. I&#x27;m a smart, good guy, and not a bad writer either, who did the startup thing (twice) and found it utterly worthless. (I&#x27;m PG&#x27;s Antichrist.) There are hundreds like me, in fact, but most people who fail at something slink away in shame, like it was their fault even if the game was totally rigged. Not me. I have to go back and warn the others, no matter how much I am to be punished for the service.<p>Is Y Combinator worth it? Hell yeah. I&#x27;d argue, at this point, that it&#x27;s <i>not</i> worth it to take on the Valley if you&#x27;re not backed by YC. The pipeline has been established, the game is over, the land has been mapped and the good gold mines are known. Whatever is the mid-21st-century&#x27;s engine of innovation, it will be far the fuck away from SillyCon Valley. In the mean time, VC-funded startups are the new I-banking and if you can get the acceleration that comes from the YC stamp of approval, you should absolutely do it. That&#x27;s not how I would like the world to be; but that&#x27;s how it is.<p>It&#x27;s a shame, though, that this subsociety (Silicon Valley) that claims to be advanced and futuristic is still, in truth, a feudalistic reputation economy in which who you know matters a hundred times more than what you know. (&quot;What you know&quot; only matters in terms of the savoir-faire needed to acquire backers.) It&#x27;s not about technical excellence any more and hasn&#x27;t been for some time.

Quote &quot;To date we’ve raised $3 million from ...&quot; (long list of names of VCs and individual investors.)<p>Bad idea to list these names. Some of the listed parties are individuals, small investors, who will surely want their status as speculative investors to be kept confidential.