[rachellaw]

It seems to unfairly penalize startups who've pivoted since after the accelerator.

We've been to one. It was early stage, and within our geography. When we spoke to YC/500startups in 2013, it was all about having traction or earning revenue and breaking even. We didn't have that. We were academia dropouts with some patents and an idea.

Going through the 1st accelerator helped us because we didn't even know how to put together a pitch deck. We've since pivoted because ideas change, become more focused and polished. Our idea, business model and pitch is completely different.

YC would not have accepted us in 2013, someone else did. Now if we want to apply to YC post-pivot, we get penalized? That seems incredibly unfair.

[tptacek]

Why did you "pivot" to an entirely new company, rather than starting fresh? Each "pivot", especially when funded, is baggage.

[rachellaw]

It's more of a natural evolution. We had one idea on how to use the technology, but the user feedback preferred a smaller aspect that we overlooked. So we narrowed down and turned that one small aspect into the company focus instead. The technology that powers it all, is still the same

I guess you can call it baggage, but nothing works right out of the box. Youtube was a dating site before it became a video site, but they didn't start fresh/reincorporate. They just grew from what their users wanted.

[tptacek]

That makes sense.

But then all else equal: if you're a possible YC pick-up at the margins of being accepted, so they have a choice of accepting you or someone with similar prospects but without the baggage, it would be irrational of them to pick you up.

It gets fuzzier the less marginal you are relative to all the other companies that want to be in the next YC batch, of course.

[rachellaw]

Yes, that's what we thought as well when we got rejected. With such a large group of applicants, the core reason is probably "you're on the wrong side of bell curve"

At the same time I wish they were more transparent. Dropping bits and pieces in no particular order like "don't do a previous accelerator" or "get a recommendation from another alum" makes their process seem irrational.

[ikeboy]

>We now have enough data to know that the track record of companies that go through multiple accelerators is much worse than companies that just do YC.

Unfair or not, their job is to choose companies that will benefit YC. If the data shows that companies with property X do worse, asking them to lose money because they want to be "fair" is not a reasonable request.

Of course, individual cases might be an exception. And YC does accept, but with higher expectations/requirements.

[ska]

"Now if we want to apply to YC post-pivot, we get penalized? That seems incredibly unfair."

I don't think that's what is being said. You say YC would not have accepted you in 2013 - what you would want to do now is be accepted in 2016 as a company years further down the road. Is the bar higher? Sure, but that's natural. Demonstrate that you've made good use of those 2 years and you are in good shape to proceed and you should be fine, is what I read into it.

[nostrademons]

Why not shutter the pre-pivot startup and apply as a fresh startup to YC? If the idea, business model, and pitch are completely different, is it actually the same company?

[rachellaw]

We've already taken investment pre-pivot from angels, screwing investors over to be a 'fresh startup' seems to be a type of fraud.

It's different pitch, but a natural and logical progression. Most of the time ideas need refining, especially with user feedback. It doesn't make sense to start with a new company since the technology that powers is still the same.

[nostrademons]

If the IP is the same, it makes sense to continue with the existing company. The IP belongs to the company, which belongs to the shareholders.

If you're changing everything, then it makes sense to just start a new company.

[ScottBurson]

Sam's relevant comment upthread: https://news.ycombinator.com/item?id=10941276

So I guess it can be a judgment call. In your case it sounds like you're doing the right thing, though.

[rachellaw]

one of the things that really struck me when fundraising:

"...that 25k he just gave you, could've gone to his kids' college fund or investing in blue chip stocks instead. It's amazing that you can raise money at all."

Angels give less money than VCs, some angels give low amounts (15-25k) especially in an early seed round. They're doing it for you. Screwing them over for more equity or YC makes you a shitty irresponsible human being and imho, should be considered a type of fraud.

Honestly I'm surprised at Sam's stance. Unless it's really justifiable, this seems like bad advice.

[biot]

On the flip side, an investor puts money into funding an idea which they (ought to) know has a 90% chance of not working out. I don't see anything morally or ethically wrong with saying "I/we gave it our best, but the idea didn't pan out" and returning any leftover funds, if any, before completely flushing that idea (discarding all assets associated with it), putting your thinking cap on, and looking for the next opportunity. I generally don't see a problem with starting over if you're going from an "Uber for Drones" idea to a "Custom CNC Furniture" idea, for example.

Of course, that's a completely different scenario from simply evolving the idea in a different direction but still keeping the core; in that case, I agree with your point of view. For example, I do see a problem if you're going from a "Custom CNC Furniture" idea to a "Custom CNC Cycling Parts" idea. It would be pretty shady to screw over your initial investors in that scenario. It also might be actionable by the original investors if you reuse any assets you developed using their funds.

[ScottBurson]

I think there are cases where the company spends pretty much all the money trying several pivots and never comes up with a viable product; but the founders still want to try again. At that point, if the company really isn't worth anything (in particular, has no IP) then I can see that it might be acceptable to scratch it and start over.

Your point is well taken, though. I wonder if there might not be a middle ground, where a new company is formed with the old company owning some of its stock. This gives the new venture a cleaner cap table while not completely screwing the original investors.

[meric]

It sounds like you are doing the right thing.

[jeffwass]

So you're advocating screwing over the investors from the first accelerator? Especially after they guided the startup to a potentially successful pivot?

[tptacek]

It depends on the situation.

If your new business plan is encumbered by associations with the previous "pivot" (usually: because you share code with it), then starting fresh is problematic.

But if it's not, if the only thing that's the same with the previous pivot is the team, and iff you haven't worked on the new business plan using resources from the previous investors, then "pivoting" gives your previous investors equity in a business they had nothing to do with starting.

If you were (a) about to run out of money anyways after giving it an honest shot or (b) returning money back to the investors, there's nothing wrong with dissolving old-co and starting new-co with a clean cap table.