In a blog post published yesterday (here) Y Combinator’s Sam Altman talks about an increasing trend ofYC applicants havingalready gone through an accelerator or a “pre-accelerator”.We applied to YC for the Winter 2016 batch and we areone of those startups that had gone through an accelerator before. I wanted to give ourperspective on the real reasons we applied to YC despite having gone through an accelerator before.
Before we get into the reasons, its important to give a littlebackground on our company and ourexperience with the first accelerator. This is the story of how WeLink got started and goes back to 2012. I had a prototype for an idea and wanted to start a company. I saw an article about a new accelerator in LA called StartEngine that claimed to do a reality show (which later turned about to be agimmick) for its first startup batch. They had a very simple form unlike the typical YC app. I filled it in a minute and forgot all about it till I got a call for an interview. I didn’t have a co-founder and thoughtmy chances were better with a co-founder. I went to a networking event in San Francisco, convinced a person to join hands and went to LA for the interview. StartEngine was founded by Howard Marks who was one of the co-founders of Activision and he interviewed us. 2 minutes after the interview got over, we were in the break room; Howard came in and said he would like us to be a part of the first batch of companies. It was an exploding offer with a 24 hour timeframe (nice catch there on a red flag Sam Altman). We accepted the offer and thus began our journey as part of a startup accelerator.
We had 10 startups as part of our first batch. Here’s a brief summary of our experience in StartEngine. Some of these observations were in realtime and some are in hindsight.
1. The overarching theme of our experience was to get funded somehow and not building a viable high growth business. We did not have any advisors who were serious about vetting the ideas or offering business advice/connections. What is now published as YC playbook is something we learnt on our own after we got out of the accelerator in the 3 years henceforth.
2. It was sickening to note that some advisors in LA would only offer their time if you guaranteed them a percentage of your company. I found this the most offensive thing about the LA startup ecosystem and we never had such people on board. To this date, our cap table is very clean and the founders havea 92+% stake.
3. Being the first batch of StartEngine made things more difficult as there was no alumni network we could use to check if they would recommend us doing it. Turns out StartEngine was also figuring out how everything worked and were as clueless as the startups themselves. It was a bummer that during our demo day StartEngine was pitching the investors to invest in their fund as against keeping the focus on the startups that presented.
Acouple of days after the demo day, I parted ways with the person who had tagged along as co-founder . Thanks to an intro made by another person from our batch I met Nathan, who is my Co-Founder, and we’ve been grinding it outfor the last 3 years. Even though my experience with StartEngine was less than ideal, we are still grateful for the chance they took on us and helping us ‘start our engines’. No acceleration but at least we got a beginning in that 1. Our formal company structure came into existence. 2. I met my ideal Co-Founder Nathan Chandra from the networking.
Key takeaways for me from our first acceleratorexperience and the years following are: 1. If you are a B2B startup, you don’t need Seed/Angel funding to build a typical high growth startup. We made a deliberate decision not to raise any seed money soon after demo day and set out to build a viable business. I’ll delve more into how to build a B2B business with no angel/seed money in subsequent blog posts. 2. If you are a consumer startup, go get that Seed/Angel funding. Your chances offailure are high and theadditional hands might help you get to a better shape. 3. Never ever do a startup accelerator. EVER.
We never broke rule #1. But why did we break rule #3 and apply to YC?
The main reason comes down to the benefit the YC network can provide a B2B startup like ours in accelerating our business. No entrepreneur can resist a 6 month acceleration to a B2B sales cycle. We believed YC can give us that acceleration.
Contrary to Sam’s data, we did not get into an startup accelerator just because we thought it would increase our chances of getting into YC. There is also nothingwrong with our business just because we did not get funded (which irritatingly has been a delusional metric for startup success) or have high growth right after our first accelerator. Building a business takes time and we have laid an ultra strongfoundation for our success. What matters is that we did not give up even after we got no acceleration and kept going on and on. Failure is/was never an option for us and we werenothing short of cockroaches when it comes to surviving startup nuclear winters.
When we applied to YC in Dec 2015 we had 6 figure revenues. We did not get in. Now we know why from Sam Altman’s post. We are already on track to hit 7 figure revenues within the first quarter of 2016. I don’t know what high barYC has set for startups that have already gone through an acceleratorbut if you are part of our industry, you know that we are the market leaders and the hottest product in our space. Will we apply to YC again? We’ve now amended our rule 3 to this:
3. Never ever do a startup accelerator. EVER. Including YC, unless they take not more than 3% equity.
Wait, What? We believe the role YC plays is to act as a facilitator of an essential function. Similar to Paypal. You can do what Paypal does by mailing physical checks or handling cash. But Paypal offers you the convenience, guaranteeing a certain level of security. YC does exactly the same role to startups and there should be no reason to pay anything above 3%. Alchemist Accelerator which is the top B2B accelerator takes only about 4% in equity from what I heard. Anything above 3% for a startup accelerator is really a disserviceto entrepreneurs in this time and age.I firmly believe the day when this is the new norm is not far away.