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The move to SFBA is a real issue, and an obstacle for anyone with family commitments. I'm not sure what they can realistically do about it, since part of the premise of the program is that you're benefiting from being physically proximate to them. The rest of this, I think you're wrong about. I'm at a YC company right now (Fly.io) --- technically, I'm a YC founder at Fly.io --- and I've spent the last several years working directly with YC companies, and I haven't perceived any distinctive "80 hour work week, subsist on ramen" lifestyle out of those companies. I know why people believe this about YC companies, and I think it's a convenient fiction YC itself sort of deliberately doesn't knock back, but I don't think there's much truth to it. I used to think 7% was ludicrous for what YC was bringing to the table, but YC brings a lot more to the table now than it did when I thought that. There are cynical ways to look at the YC benefit and there are generous ways to look at it, but either way: if you're going to go on to raise more money, you're getting something significantly more than $125k for the share you give up. I'd be more concerned about the "$125k for a founding team is ludicrous" thing but for the fact that for me, and for most of the people I talk to about this stuff, the alternative to YC is bootstrapping and consulting. If you're looking at the money YC gives you for the session as the entire financial permission structure for your company, you weren't going to succeed no matter who invested in your company. |
The primary value I saw in trying to enter YC was about driving the inflection point through a larger investment after self-funding everything up to and including getting product in front of prospective customers, booking some sales and demonstrating traction. At that point, I wanted to have both the financial horsepower and network available to push hard on the accelerator.
My prior experience taught me that being starved of cash is the single most difficult hurdle to jump over. I put over $300K of my own money into my last serious startup. That money went a long way because I was able to wear so many hats (and I was working from my garage).
The problem surfaced when I had to grow. I was starved for cash. It was as twice as painful as anyone could possibly imagined. The slope of your growth curve, at some point, becomes a function of financial horsepower. I mortgaged my home and pulled out another $250K. That helped, but it wasn't enough. Hardware is hard for a reason. You need cash, lots of it.
The inflection point started to appear in 2008, it took an indescribably effort and unimaginable personal sacrifice to get there from starting in my garage in 2001. At the peak I closed a five million dollar sale that was going to provide enough money to truly put the business on the map and displace multi-billion dollar market-leader companies from the segment we were in.
And then the economic implosion happened. Our five million dollar client defaulted on the contract. The company went from having an acquisition offer to the tune of tens of millions dollars on the table to being as close to bankruptcy as you can get by mid 2009. I almost closed another multi-million dollar sale that would have saved the business in 2010. In the end, the tail end of the financial crisis ended-up imploding that potential sale, and that was the end of it.
Life can be an interesting ride for entrepreneurs.