Starting a business gives you a broad enough diversity of things to do that you can sustain 90 hours per week dedicated to the effort for a long, long time.
Coding burnout? Refine your pitch deck and cold call materials. Designing burnout? Pick up the phone and sell. Isolation burnout? Go pitch at a local pitch event or find advisors at a business plan competition.
When you switch focus like this, you free up exhausted parts of your brain and body to give them a chance to recover without disconnecting from your startup, and you get a cross-pollination effect, where each of these activities informs one another very nicely.
I thought YC main thing was growth not revenue. Why did they get rejected for revenue? Also making someone fly overseas for a 10 minute interview to get rejected really sucks.
I hate the all day interview, but if you are coming from overseas then maybe give them more than 10 mins.
It's great that YC provides feedback on why they don't accept (some) companies. However, it's a bit disappointing to see that not having MRR is a reason to reject a company. It seems like a lot of the successful YC companies were accepted way before they were anywhere to close to revenue -- and some were even working on a completely different product when accepted.
My hope is that MRR is sufficient, but not necessary for acceptance!
I think they do continue to accept companies without MRR. I suspect they simply value it more in cases where they are unsure if the product is something that can eventually be monetized (i.e. they don't know if people are willing to pay for it).
Maybe I just don't get the Silicon Valley culture, or perhaps I'm missing something fundamental, but let me just get this straight:
1. Startup has no revenue whatsoever, but ostensibly have good product. They go pitch to investors and get rejected, likely because they have no revenue.
2. They hack around for 1 (!) weekend and get their MRR to $500. Five hundred bucks. They now go back to investors and say: hey look, we now have revenue (peanuts really), can we get funding please?
In what world would those $500 be expected to make a difference? How is that a proof of anything? I expect even really inept startups can somehow pull together $500 revenue from friends and family.
I suppose I just don't get how $500 in revenue could be seriously considered the tipping point between rejection to acceptance for investment?
To my layman reasoning, this is incredibly naive, but I'd like to be proven wrong.
It’s proof they can actually make money on the thing, which matters because it sounds it’s soemthing people like enough to pay for so as they grow the user base, they’ll grow revenue. However, keep in mind they still didn’t get in to YC after changing it, so it may not have chances things that much.
The $500 isn't about cutting the burn rate in a significant way. It's just the first domino to fall.
It's very hard to make the first dollar. Customers want to see other people pay you first. That's why many startups fill their websites with logos of big-brand clients, even if they're making very little from each.
That's the thing. In my mind $500 proves nothing. Well, it proves that you can get $500 a month. I think it says zero about the actual ability of this business to become a success.
Put differently, if I believe in the idea behind a startup, I'm willing to overlook the fact that they have no rapid growth yet. If the idea is not enough to convince me, a miserable $500 is sure as hell not going to make a difference. It's too little in too short a time. It says zero about customer retention or satisfaction, etc. It's akin to taking two data points, zero revenue and $500 MRR and then extrapolating the growth. Nobody but a fool would believe such a metric.
If they went away, hustled hard for 2-3 months and got to say 50-100 paying customers (with that number consistently growing), good reviews or some feedback that customers actually like the product, I'd be more inclined to think of it more than just a fluke.
And honestly, seeing something like this would make me less confident in a startup, because as I said in another comment, the impetus for charging seems to be completely tied to getting accepted by YC, rather than trying to build revenue for the business. "Let's just hack our way to $500 then we can show we have revenue and the objection they listed will be moot and we'll get accepted."
The better move would be to have a solid plan for a pro product, start charging, be able to show growth in paying users, and then reapply for the winter YC class showing those data points.
$500 and then some churn and poof...
You really need to do a stable couple of thousands for a couple of month to “know” you’re paid plans actually provide long term value. Or sell yearly plans.
I sort of agree, but $500 monthly is quite a bit - it's way more than I'd expect most people who don't already have a significant public following to be able to reach on e.g. Patreon in one weekend. I could probably expect to find $500 from friends and family, but I doubt I could get a monthly commitment of $500 from them.
Except it's not $500 monthly. They claim £250 MRR but they got rejected 2.5 weeks ago so we don't actually know how many of those users will continue to pay next month. I'm not arguing this isn't still impressive for a weekend hack, but it is categorically misleading to claim £250 MRR when you haven't even had a billing cycle yet.
>In what world would those $500 be expected to make a difference? How is that a proof of anything? I expect even really inept startups can somehow pull together $500 revenue from friends and family.
In practice, this is actually much harder than you'd expect.
Also, competent VCs will probe to understand who made the purchase, and whether they're likely to do it again.
Excluding cheating - asking friends and family, or business to partner to boost your MRR -, a few hundred dollars prove a lot of things. Getting the marketing, billing system, and actual product right for this few hundreds is way harder than it seems.
It's the kind of situation that an auto mechanic in Pennsylvania would give a confused look of "kids these days" toward.
Focusing on growth is great but what has happened here feels to me like an inversion of accepted business logic. It seems like there wasn't a thought given to revenue before receiving this feedback.
The funny part about that is how this little bit of $500 MRR would have definitely helped this small team pay their grocery bills, and they could have been benefitting from that months ago if they just...thought about how businesses exist to make money.
The desperation to get into YC feels like an episode of American Idol, where the contestant may not remember what the benefits of being on American Idol are in the first place.
Looking at their site, it's got a few misspellings, a dead link, and some really strange ways of communicating that they used to have no watermarks, but now they have watermarks.
The product seems slick but incredibly limited as well. I'm not sure the idea of a video editor being web based is actually incredibly useful over an installed app.
Finally, they're charging $50 a year for a product that does less than iMovie (pre-installed on 50% of smartphones sold in the USA) or Adobe Premiere Clip (free).
If you stayed subscribed to this product for 6 years you'd have broken even by just buying Final Cut Pro, assuming they don't ever raise the price.
I'm not really surprised that YC had revenue concerns.
You might have missed it in the article, but their explanation is really apt.
"Therefore, we thought that if we can get first paying users and MRR over the weekend and get back to YC next Monday morning, they would see that we had achieved MRR in only a few days. Additionally, we would look like a team who could move fast, listen to feedback and get stuff done."
The reason they were rejected is because they had no MRR. They were also told they need to move fast.
They proved over 1 weekend that they can get $500 in revenue and move fast.
It's the notion that they got feedback, moved fast to implement feedback, and showed that users were willing to pay on day 1 with a half-baked MRR plan.
I found the feedback contradictory. They said: (1) you need to charge for this, and (2) it's a market that no one owns yet so you need to grow fast to capture it.
The surest way to grow fast is to have a free product. I realize that not a lot of time can go into this feedback, but this struck me as pretty contradictory on its face.
It seems that they only added the watermark when they started charging. Pre watermark it is hard to know if the business is potentially viable at all. Free signups might fall off now that they aren’t getting everything for free.
Assuming that is the case the business model would have to change to pro features or add. Maybe VC would be more comfortable on some data on all this.
missiveapp.com and conferenceBadge.com, my two startups, have both been rejected at the interview phase. Our yearly revenue for both now stands in the 7 digits. We are still just a team of 3 + 1 employee, 100% bootstrapped. Life is good. My advice, keep pushing!
so, it took anna 10 hours, and lets assume anna gets paid 25 dollars an hour, so a cost of 250 dollars. Shelley, used the conference badge, and at 1.79 for the fully shipped version of the badge, it will cost 582 dollars. So, essentially, Shelley paid 332 dollars for QR codes and convenience.
Blank lanyards and card holders are really cheap if bought separately, and one really only needs to make sure that their printer prints 4x6" or A6, instead of buying such an expensive kit.
Hmmm, I hear you but I’m really skeptical of valuing any full time employee’s time at $25/hour.
The true cost of a full time office worker employee once all taxes and benefits are factored in are usually going to be a lot higher than that. This would make the service a lot more worth it.
OTOH if that employee is underutilized, their time is effectively free, so the only thing you would be paying for is (hopefully) quality and consistency.
It's not just her pay for 10 hours, there is the lost opportunity cost of other work she could have done that day(s) and the supply cost for 325 badges/holders/lanyards/etc...
I think this depends on one-off vs long term. If this group is going to be doing 2~3 conferences a year, learning how to print labels yourself or is valuable skill. You might even have a designer on your team that could work with a local print shop (allowing a personal relationship and even last minute badges so you're not handwriting last minute speakers).
There's a one time cost of learning all that stuff, and then each year you just reuse those same templates and skills with a new logo/graphics from your design guy.
If this is something your team/volunteer group/etc. rarely does, then it's probably worth just paying conference badges. It's a trade-off.
If it's a non-profit thing, consider open souring the process and CC licensing the designs to help others doing the same thing.
I organise conferences as a hobby, and I've been manually doing mail merge on badges for the past few years.
It takes me anywhere between 5–15 minutes to set things up, and my biggest annoyance throughout the process is dealing with CSV character encodings.
I think the main value the service provides is that it provides "guaranteed" next-day delivery. My print shop gives me a fair amount of crap for not sending my badges to print a few days in advance.
On the other hand, it's so much less work for organisers to print blank white boxes, and let attendees fill in their own preferred names at check-in.
It doesn't work without the leading slash. They probably all have cached redirects from working locally so they never noticed. 30 second fix on basically any webserver.
I have a suggestion: add support for dual-clip lanyards[1]. I've always found the single-clip lanyards annoying: they flop around and get twisted. I went to a conference this spring that had lanyards that clipped to both top corners of the badge, and it was significantly less annoying.
In the last few conferences with single-clip lanyards, I started noticing the badges' orientation. I would expect them to be roughly 50% front, 50% back, but significantly more badges were oriented so that the back was showing, which surprised me.
I guess it's the same kind of magic that makes the USB port always be the wrong orientation, then you flip it and it's wrong again, and it's only right after you flip it twice.
I usually keep my badge facing in (so you can't glance at my info) on purpose if the badge has a lead-gen attendee type - e.g. founder, investor, media - printed on it. I find that having it the right way 'round makes it harder to have interesting or productive discussions because by the end of the first day everyone is pre-judging the people they meet based on their badge.
If I'm there on a founder badge, for example, it's difficult to chat up investors because they're wary of hearing the 400th pitch from a random startup guy when I really just want to talk and make a connection.
This may be more annoying for me than most because I'm often at conferences as someone's guest, so the badge type rarely matches with my goals for attending.
I actually prefer the double clip style because I find it more comfortable, too! Just offering an anecdote that might help explain your observations - I can't be the only person who does this.
Those both look like amazing companies and I love the website design. but I could kinda see how YC might reject you... they're always looking for the unicorn and neither one of those looks like it's gonna 100x, they look like great businesses that will make tons of money, but possibly not at a scale or within a timeline that would make investors excited.
I tried out your app on my iPhone X. There are buttons on the bottom that you can't tap (like 'privacy' in the signup screen or 'I prefer to stay alone' in the hamburger menu.) because they are in the swipe up zone. Might want to add a general safety margin to the bottom of of your app for bezeless devices.
OK, I'm stealing this idea. Just returned from an exhibition where this whole badge idea was implemented pretty poorly-clearly still a lot of space for improvements.
With funding, you might be in the situation of having not a single cent more in revenue (possibly less, trying to buy growth) and failing hard because of having 30 employees more than you have now, and not the tiniest idea of how you could get by with less.
The intersection between the set of business opportunities that can work bootstrapped and set of business opportunities that work when strongly funded might be much smaller than one would naively assume.
I kinda wonder, if you believe what's missing in your platform is a single feature that can be implemented in 2 days, do you really think YC wouldnt realize that too?
So this is likely not the reason for the rejection.
I would have even more worries about these founders after this stunt because it shows a lack of self awareness and strategic insight.
I'm in no way affiliated but Id guess YC is looking for foundational advantages and paradigm changing ideas in their companies. You can't pivot to those in 2 days.
I think it's not about the technical implementation of the payment feature (as you say, that's not that hard), it's about if anyone would use it (i.e. if anyone would pay).
Before they implemented the feature it was unclear if anyone would pay, after they implemented the feature it was clear that at least some people would pay.
I feel like you're assuming way too much when the only evidence we have to base YC's rejection is by their rejection email. They clearly wanted MRR and company that moves fast, and the OP clearly showed that both are possible in a measly 48 hours.
Also YC even asked to meet them before the next round, so it might have intrigued them.
YC is just the gatekeeper to a network of wealth and expertise in scaling. I guess no one really needs it, in the sense that you can look up how to scale.
But if you’re a VC-style company, and you’re trying to grow fast (and if you’re not you do not want to go through YC) then your business model is by definition “EAT ALL THE MARKET”.
If you’re an early stage company, even if you can bite off a big chunk of market, it’s fairly certain the YC old boys network can help you bite off another big, non-overlapping chunk.
Anywhere in the sub-$100M valuation range, that’s probably worth 6% just in terms of getting out in front of other growing competitors (or competitors-to-be). It doesn’t change your path, but it changes the dates on the graph.
That’s assuming you are a VC-mindset company (centralize revenue streams around a few owners, grow fast, get liquid).
There are other kinds of companies who “will not need YC soon” but mostly those companies shouldn’t want YC in the first place.
YC is an accelerator, and as such, needs to accelerate /something/. If you join too early, then it's almost a distraction to getting the product out and talking to users. However, hit the sweet spot and YC is an invaluable resource to help you grow.
On the other hand, YC opens the door to so many opportunities and great people, that even if you're too early, the net result is still a pure positive for your career and startup.
I don't think of YC as an accelerator, but maybe that's where things are headed since we (InfluxDB) went through in W13?
Originally it was enough to have a few people, an idea, and a prototype. I think that was the model for the most successful YC companies currently out there (Dropbox, Airbnb, Stripe, PagerDuty). Some didn't land on their actual idea on product until after the batch (Twitch).
There are certainly companies that come in with a baked product and the start of some real users/customers who then use their time in YC to juice their numbers and raise big rounds at crazy valuations right at the close of the batch. However, I think what YC offers that is unique (and a real strength) is that they back completely unknown founders very early in their process of building a product and a company and give them the connections and advice to help build something big.
The YC series A program strikes me as more of an accelerator.
Hey Dom, we worked together directly when you were in YC, and I deeply disagree with your assessment that having progress helps a startup succeed in YC.
The worst case scenario is a newly accepted YC startup with a little bit of traction... just enough traction that they aren't willing to change ideas/markets and not enough traction for them to actually know they have product market fit. It's the uncanny valley of product-market fit. These companies with a little bit of progress can spend months or years of their life chasing what they later realize was a mirage.
When a new YC company enters the batch with very little or no traction (and can move incredibly fast) they will longterm outperform companies accepted with small traction most of the time. Based on the hundreds of companies I have personally funded at YC, speed is the single most predictive variable of if a startup will succeed - not traction at time of accept.
imagine we are talking about CPU clock rate - the rate at which founders are able to make progress - which means everything from how many customers they can talk to in a day, how fast they learn from running a test, how fast they can build a prototype, how quickly they internalize feedback from customers, etc.
Ok, got it thanks! And, from your experience: what are biggest underlying drivers for speed? Founders’ chemistry? Founders’ willingness to work long hours? Market they’re operating in (some markets are faster than others I suppose)?
Hey Dalton, thanks for the answer, that's fair. I totally agree that in the long-term, moving and failing fast is a net positive for both founders and YC. I wonder how different the YC three-months experience is between founders who have product-market fit vs the ones who don't? It seems like there's a "cadence" to the program highly focused on growth culminating to demo day?
Hi Dalton OP here, appreciate your input here, Thank you.
Moving fast is something we are working at hard at. From a technical and creative perspective.
Correct me if I am wrong. When you say moving fast, do you mean being nimble and quick at pretty much everything, with the goal to find product-market fit?
These founders haphazardly threw a new paid feature into their app just to try to impress the YC team? They should have taken the time to do market research and do it right rather than risk alienating their user base. I wonder if getting rejected was a big enough blow to their ego that they couldn’t see clearly, just like college applicants will go to top ranked colleges with no concern for the price or the risk/reward profile of that decision, but instead so that they can brag about being the best. YC is “the best”, but that doesn’t make it right for every startup.
They took the feedback to heart, built fast, and got paying users! Where's the big mistake there?
I think one of the good things about YC, is if you try to optimize for getting into YC, you're actually building your startup in a constructive manner.
They did get advice from some of the most experience startup investors in the world. Who's biggest question was why they hadn't started charging users. Taking advice from highly experienced people is probably better then trying to do your own research.
How would you even research such a decision if not ask very experience startup founders and investors?
Maybe true of startup accelerators in general, but getting into YC is like going to Harvard. Even if you’re in a shit major, just being affiliated will open doors for you that would otherwise remain closed. People will take your phone calls far more often if “Harvard” shows up in your LinkedIn profile.
It’s not a guarantee of success, but it definitely helps you build the relationships you need to participate in the “global domination” game (which is the game you’re playing, because that’s the game investors are playing).
The article doesn't indicate the amount of planning or research they already completed prior to this phase. It's pretty reasonable to assume that they knew what they wanted to charge for, but that it just hadn't been prioritized yet. If they were able to quickly get existing users to pay then they clearly had some idea what their users wanted.
I wonder if the results thus far actually validate the concerns raised by YC ("hard to know whether people are willing to pay")? $250 MRR strikes me as rather low for 35K MAU - assuming that's 50 users it's just over a 0.1% conversion rate, and a little over 2 weeks in I'd expect most of those monthly users to have come across the option to pay at some point by now. Nonetheless, wish you guys the best of luck in figuring out the monetization!
Sort of an aside but it’s really impressive to see the level of care the YC team puts into the feedback provided in the email. It would be easy to just have a generic rejection. Considering the number of teams they are interviewing, it’s even more impressive. Kudos.
Hmm. Some rapid development. I wonder if they wrote test cases for the subscription functionality. When they had that test-payment gateway go to production, did they add safeguards to prevent that from happening again?
I mean, it seems like an impressive story, but when I read it, all I see is potential technical debt.
I don't think I'd like to be back in startup culture. I really like solid testing, and I hate moving so fast that we don't create that safety net.
You can't assume they didn't. More importantly, I work very closely with subscription providers can tell you that many of them fail to create these basic safety nets with large teams, slow release schedules, and lots of funding.
This sounds a bit like "Taking out a loan to pay your medical bills is imprudent financial advice".
On the surface it might be true but it doesn't matter if the alternative is you (or your startup) dying. Ultimately only the authors know their circumstances and the trade offs they have to consider.
At first I was with them, but when they summarized at the end I think they missed the underlying point of the feedback.
The feedback was “why have you waited so long” not “this was too early for you to apply”
The fact that the founders bent that around in their heads after changing their actions, to me, indicates they aren’t quite getting what the email implied.
But what do I know, I’ve never gotten in to YCombinator or launched a successful startup.
This is obviously speculative, I’m not in anyone else’s head.
I interpreted that they were concerned about the thinking that went in to making the decision not to begin charging people sooner.
I felt supported in that interpretation when the founders ended the article by saying perhaps their company was at too early a point for the program.
The feedback seemed to imply they were too far along to have not started charging, so interpreting that to mean they were not far along enough could mean the feedback was responded to with direct action but the underlying thinking remains unchanged.
Like I said, I have no idea if I’m right, but if I am then the last conclusion paragraph validates the YC interviewer’s concern that there’s a deeper problem about how the company is being approached.
(same boat as OP, just hazarding a guess) -- What is the plan? Why were they waiting? Wanting to capture a larger segment of the market to out compete a rival company before monetizing could be an answer. There's others, sure. I think the point was there should be a strategy. The entire post felt like a couple kids waiting to turn in their next assignment, and wanting to know what to do for extra credit. Which is likely unfair, its just the vibe I got. It sounds like they have a product people like, which is great. My next question might be -- what do they want to do next, and how will YC help them? Probably things they've covered, but maybe not.
I think they understood the feedback and tried to react to it in the best way they could. A situation like "The best time to plant a tree is 20 years ago; the second best time is today". They can't change the past, they can try to catch up.
I don't think they did, and I don't think you did (please read my tone with generosity; that's not meant to be an attack.)
I don't believe the feedback they got was that they should be charging, and they aren't yet, therefore "the best time to plant a tree..."
The question they got was "Why aren't you charging yet?", because by product and market, it seemed they ought to be. The correct answer is "This is our market, this is our business plan, this is why it makes sense for us to not be charging yet." The question is one of rationale, which could be judged as being good or bad, but still the question is "why?"
Their actions revealed that they didn't have a solid rationale. So without any more reasoning than "because it seems like YC is criticizing us for not charging," they quickly started charging. Did YC's criticism actually change their business strategy? Their knowledge of the market? Anything that should have plugged into the question of whether they should be charging? If the answer is "no," then they launched a significant change to their product without any good reason and, in my opinion, validated YC's opinion.
Yes, I believe the feedback they got was that they should be charging. Maybe because it confirms my personal perspective that I think they should be charging already indeed.
This kind of feedback is not to be taken at face value. YC says very clearly that the point of the interview is to judge the quality of the founder(s). Whatever excuse they invent to write in the rejection email is really nothing more than that: a polite excuse.
They don't feel that they can be frank and just say: "We think you're probably bad founders based on the fact you have been very slow to charge customers."
Just remember that they're attempting to judge the potential of a team of human beings in 10 minutes. Realize how fundamentally flawed (and demeaning) that concept is. It's quite possible, and even likely, that their interview selection process is worse than random chance.
Of course, they think they're good at picking. But this belief is based on the theory that the companies that they don't pick will succeed even without YC's help i.e. that there would be an embarrassing anti-portfolio.
Since many of YC's most successful founders acknowledge that they wouldn't have succeeded without YC, that theory is obviously bunk.
IMHO the YC application and selection process is reasonably good. It's something approaching a crowdsourced process. The interview is them injecting their egos into the process, to the detriment of themselves and founders.
The problem is perpetuated because the people that do luck their way in are then immediately convinced that the system works. After all, it did select them, it must be pretty darn good. This is the destructive power of ego.
Someone could beat YC at selection simply by copying them and removing the interview part of the process (i.e. just accept the top N applications). Crowdsourcing is going to most closely approximate the customer point of view, and that's what ultimately matters for startups.
It's okay that YC is kind of bad at their core function. They're still good enough to stay in business and it's their prerogative. It's just a shame that they're not improving and that there isn't anything better, yet.
> In March, we submitted our application, and kinda forgot about it.
> Two months later we got an email saying that a partner would like to speak to us.
This is a tangent, but I want to share something about my YC interview experience for anybody ever in this position.
I filled out my application in February for the NYC interviews. They passed on me for the early NYC interviews, but ~2 months later I got an email for Mountain View interview.
During my interview, I was asked what my revenue was two months ago, and what it was last month. When I gave my answers it created immediate disarray between the three interviewers.
I walked through my numbers and could tell something was visibly wrong, but time was ticking and I had to steer back to the product, vision and growth.
When I got my rejection email, the lead-in reason was that the revenue wasn't clear (and to clarify, we are doing VERY well with revenue growth).
A bit perplexed, I went back to my application and realized what had happened. The YC application asks for "what was your revenue last month, two months ago, three months ago, etc)"
The partner was trying to get me to talk about what caused a 100% revenue spike (and again, we're not talking about small revenue here) between February and March. But when filling the answers out in February, those questions are anchored to December and January. That spike was just onboarding customers.
As I personally had to live through the hell of onboarding these customers from December to January, it never occurred to me that he was asking about that spike while looking at my "last month" and "two months ago" revenue.
I read my application a lot the week leading up to my interview. It never occurred to me change my answers to realign with the two month gap between when I filled it out and when it was accepted. I'm not sure I would even do that now, knowing what happened.
So the upshot is this: if you fill out your YC application well in advance, be prepared to speak to your financials (and company as a whole) both as are they are today, but also as they appear in your application, because the answer to "what was your revenue last month" is different depending on whether the partner is referring to your application, or the last calendar month.
Why didn't the partners immediately ask you to clarify the discrepancy between the numbers you stated on your app and the numbers you were telling them? Is there not enough time to have a bit of a back and forth?
We did, in a round-about way. I oversimplied the conversation in the OP for the sake of the point I was making.
I wrote a in depth essay about the whole experience shortly afterward while it was fresh in my mind. I'll likely publish it as a blog because I think it addresses quite a few things in a YC interview that I hadn't heard/thought of during my prep (and I've read all the prep blogs that have been written).
Possibly, but the onus is on the applicant to drive through things like this, not the interviewers. Again, nobody in the room had the luxury of understanding what was happening at the time. Hopefully my experience can help others.
It's pragmatic advice for both sides - I would expect the interviewers to be doing lots of these interviews so it's something I would expect them to be familiar with.
Nah, there's definitely an onus on VCs not to miss out on a super hot startup because they mixed up two months because of a bad comparison of two times expressed in relative terms.
It sounds like you're better off without YC at this point. The only thing they can offer you now is to take 7% of your equity off your hands for not providing anything you need.
That's not fair to say, and that wasn't the point of my post. I'm just reminding anybody who fills the application out in advance that the partners are looking at an application from two months ago.
The financials are actually the easy part to reconcile - for most companies, the product growth that happens in two months should be the delta you're trying to close in that conversation (it was, for me).
I'm not sure why you're taking that as a negative--not needing YC's money is a good thing.
If you're growing at the rate described then what exactly are you hoping to get out of YC that you couldn't get from networking without giving up 7% of your equity?
I'm just saying it isn't fair to say that I would have gotten nothing from YC - I'm sure it's an invaluable experience and it was genuinely and amazing opportunity to even have the chance to interview with them.
And I do a agree it's a good thing - the YC program I interviewed with began June 3. From the day of the interview to June 3, we 6Xed our revenue. Trust me, I'm wasn't the least bit discouraged by a rejection.
I don't think this looks very good for them. They suddenly added watermarks over their videos to 'encourage' users to sign-up. A pro plan with added value would have been more considerate, or even a full switch to paid users with a notice period.
They are also displaying company logos under 'Trusted by thousands globally' that obviously are not paying customers since they didn't have subscription plans before.
How many of those paid subscriptions are the result of people stuck in the middle of editing projects that they suddenly could not finish because of the watermarks?
I don't want to be a jerk to kids in their early 20s who are bootstrapping their startup idea, but reading this account would actually confirm for me why this team wasn't ready to be accepted into YC or a similar program.
A big part of the onus of the original product, at least, as it was launched, was that it was "watermark free" and the way it was "sold" to end-users was that it was a free service. Now, I can understand the initial rationale here -- you want to get users, you start with free, and assume you'll pivot to paid options/add-ons at some point or get sponsorship or other revenue streams, or pretend it's still 2009 and that startups with no revenue can obtain ridiculous valuations and then be acquired by Yahoo or whatever.
The problem is, it's no longer 2009 and investing strategies have changed. Revenue has replaced users as the important growth metric for lots of investors. (There are exceptions, I'm aware, but this is a general trend we've seen over the last few years. Don't worry founders, the pendulum is bound to go back in the other direction in another few years.)
Now, I don't know what the team's original business plan was for this service, but based on the YC letter, it appears that they said "we'll start charging eventually" and that led to the question about why you aren't already trying that now, when you have 35,000 MAU. A fair question -- and one that really represents more of a question about business plan rather than lack of MRR.
But the team read this as "if we can show MRR, we can prove we're ready" -- except that wasn't and isn't the problem here. Yes, it's impressive that the team was able to hack together a payment gateway and offer a pro product in a weekend and obtain $500 in revenue (should be noted that this isn't recurring and it won't be clear what the actual recurring revenue is for several months), but the fact that it was done so haphazardly, and honestly, for what looks like the wrong reasons (it wasn't about "this is best for the business" it was about "this will get us into YC"), is the biggest red flag.
If you want to change a fundamental part of your product (no watermarks) and make it a pro feature to entice users to pay, you're welcome to do that. It may or may not work for existing users, and it's possible there are better ways to extract revenue/add value. The truth is though, this was an idea done at the last minute to try to secure placement in an accelerator, it doesn't appear to be born out of actual business rationale for the product.
As a heavy app user, I absolutely abhor the bait and switch, on top of annoyances such as in-app subscriptions (I don’t mind one time in-app purchases for keeping permanent feature upgrades).
In this case, it sounds like their users may have been feeling baited and switched, having invested their time into the product only to have to pay to continue using it without watermarking.
If my understanding of the above is accurate, then they may have already destroyed their trust relationship with their current users..
I don't think the users are feeling baited and switched. They got something for free that most people charge for, and in exchange for early testing got watermark-free level service. Eventually, everything free needs to be paid for.
$50 per year is reasonable. By posting about their project and having that carried on ycombinator, they maybe got the biggest audience of sympathetic users they could ask for. It's a great bit of viral marketing, and I expect they'd see a spike in interest from independent investors as well as a spike in paid memberships.
This read like a business school professor. All young businesses are a fluid experiment "out of business rationale" is a hindsight fluff statement. If rationale informed effective product then a lot more people were successful.
Additionally, odds are that the best thing for the business (and founders) would being admitted to YC over any product change they could possible make.
They had non zero odds and I think it was a clever plan all things considered. If YC is looking at founders above everything else and less product, these young dudes seem to be cut from the cloth.
> If rationale informed effective product then a lot more people were successful.
That's not necessarily true, as plenty of businesses fail because they don't have a business plan for their product. The world is littered with great products that failed because there was no business plan or the business plan wasn't sustainable. Obviously, having a business plan doesn't make a successful product (and I never one intimated otherwise), but in this case, the feedback from YC was about the business and not about the product.
>Additionally, odds are that the best thing for the business (and founders) would being admitted to YC over any product change they could possible make.
If by "best thing" you mean "could raise money to fund the product in absence of a business plan" -- you're probably right. Getting into YC or a similar accelerator would make raising money easier for sure. But getting in doesn't guarantee funding or success in any way shape or form.
>They had non zero odds and I think it was a clever plan all things considered. If YC is looking at founders above everything else and less product, these young dudes seem to be cut from the cloth.
I disagree that they had non zero odds. They were rejected and given a reason why. The response to that rejection didn't actually answer the critique by YC (and the founders don't seem to have understood what that critique was). You're right that the product doesn't always matter when it comes to who gets funding, but in this case, being "clever" just further proved that they didn't actually understand that core feedback, which is wholly independent of product.
Look, I hope these guys try again. I also hope they take up the offer for office hours and take that feedback into perfecting their business model and their product strategy so that they are more successful next time.
>That's not necessarily true, as plenty of businesses fail because they don't have a business plan for their product. The world is littered with great products that failed because there was no business plan or the business plan wasn't sustainable.
That observation is a long horizon observation. In the short horizon most businesses tend to stagnate and die because of interest and growth. Unless theyre trying to grow an organic biz overtime (which applying to YC seems to signal otherwise) going and getting in the ecosystem would be by far the largest upside to the biz and more importantly the entrepreneurs.
> Combining the non-zero and best thing for the biz.
These are kids who by being in YC get expert observation and access to a network that they would take a decade to build. The only scenario in which not getting in is better is if they strike some insane gold pocket and they are physically too busy to participate in YC. They had YC as a captive audience and there was precedent for flexibility, thats non zero.
same same. I hope this serves as the intro to a story titled "The time YC almost made another $5b."
I imagine reversing a rejection is different though. Most people, YC or not, have an ego and will stubbornly maintain their rejection even if it makes sense to change mind. This is just psychology. Colleges, dates, hiring managers all do it.
There are tons of video editors, all the way back to Adobe Premiere. OpenShot, which is free and open source, isn't bad. What do these people have that they don't?
I almost can't believe I had to scroll this far to find a sensible comment.
Honest question (as someone very ignorant about the business world), why do people spend money on this stuff? And why do so many people (based on the comments here) act like it's OK to create such products (i.e. products that bring literally nothing innovative or useful to the table)? By OK I mean ethically, considering that there are so many more pressing problems in the world.
> And why do so many people (based on the comments here) act like it's OK to create such products (i.e. products that bring literally nothing innovative or useful to the table)? By OK I mean ethically, considering that there are so many more pressing problems in the world.
Just to be clear, I want to understand that you're asserting:
1) It is morally unethical to create a non-innovative product
and
2) It is morally unethical to work on something other than "a pressing problem" in the world, as you define pressing problems
?
Or are you saying,
1) In a world with "more pressing problems", it is unethical to work on something as low-value as a non-innovative product
?
And for context: what projects do you feel are ethically acceptable ways for people to spend their time on, and what do you do?
There was a time when I thought positive feedback from a VC meant something. 2 startups and $16M in VC funding later I've realized that it doesn't. Having a VC tell you your startup is awesome is like having your mom tell you your startup is awesome. They have no incentive to be honest with you and every incentive to have you walk away with a positive impression of the firm.
Founders REALLY need to stop looking to venture capitalists for validation of their business. Your metrics are all the validation you need, especially if those metrics are profit or revenue. Putting confidence in the feedback of a VC can cause you to ignore warning signs.
Even if they write you a huge check, it doesn't mean you have a good business. All it means is that you are good at fundraising.
This is a really great comment. Positive feedback from any third party, VC or otherwise, is information that can be factored into your own 'model' of whether your business is a good one but it seems to me the overwhelming factors ought to be either the real numbers you mentioned and your own (hopefully) more complete and considered analysis of your market and opportunity, using the information and hypotheses that only you have.
Positive feedback is nice but it should have zero effect on whether or not you pursue a business idea - if you weren't going to pursue the idea without it, there are probably fundamental reasons for that, that should probably override the reasons behind the positive feedback anyway.
Raise from another VC (if you need) and keep moving. Don't raise if you don't need to, obviously. Like dating, if they don't want you, it's their loss. Hounding them will only make you sound needy, and unfortunately people (especially investors) are wired to give to the people who least need it, in general.
Many YC startups don't charge anything. Here is one that seems still to be figuring stuff out (https://www.54gene.com/). One that seems to be figuring out who and how much to charge (https://ultralig.ht/). In fact, I'd like that someone goes through the startups and deduce how many of these are making any money or have strategies to make any money.
Here is what I think is going on: YC is trying to be polite (bullshitting) about the rejection. They won't straightforward tell you: You suck. Or you are not sexy enough to be in bed with. And it's fair enough. When was the last time a potential hookup told you they won't have sex with you because your face is ugly or you have an ugly belly.
YC probably picks up on intuition. You can't judge a dog for 10 minutes. They are using subconscious cues based on their experience. They are looking for founders. The startups with high MRR are probably suckers for scaling that made it at monetizing a product to market. YC takes them (expensive %7 for cheap mentoring) because they can afford that.
You can't change the built-in neural networks inside YC brains. They might be going against their intuition on the diversity front because data has suggested they should or they are trying to look cool.
What this team did is basically show up next morning and have a black t-shirt because they figured out that I don't like guys in white t-shirts. That's not going to make me like them. Probably hate them more. It shows lack of consciousness and maturity. This is not a government position with cold requirements where you need to check the boxes.
The fact that many YC startups don't charge anything doesn't mean that this startup has a good reason not to be charging. I think the assumption that YC gave them a BS reason is absolutely unwarranted.
Personally, I love the hustle. It was absolutely worth a shot, and by the next batch they'll have a lot of data to show. Most great first-time founders have no idea what the hell they're doing, and it's totally forgivable for them to have waited a bit longer than necessary to start charging. They responded to feedback from smart people who know what they're talking about, and are moving ahead.
Yeah, I got the impression that YC didn't see why they weren't charging for what they had since it is a liked and a viable product with a pretty simple way to make revenue.
I hope these guys do well, I like the hustle also!
I would give YC the benefit of the doubt: that they’re actually giving honest feedback.
When YC interviewed and rejected my company, they stated candidly that they didn’t think our team could execute. In retrospect, I agree with their judgment at the time, and appreciate that they were polite and honest with their feedback.
I hope you start making enough money before next YC round that you don't need to sacrifice a percentage of your company to investors - remember vc funding should be a last resort, not a goal.
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