Startups Can't Survive On $20,000(ycuniverse.com)
ycuniverse.com
Startups Can't Survive On $20,000
http://ycuniverse.com/startups-cant-survive-on-20000
29 comments
Correct me if I'm wrong, PG, but
1. YC invests $11,000 + $3,000 per founder. So $17,000 for two founders; that should get them through the summer or winter, depending on which batch they're in. This money was never intended to last a year.
2. Each startup has the option of a $80k? (the amount has changed over time, I believe it's higher now) convertible note from Ron Conway/SV Angel. Some will take the note, some won't.
No one in Silicon Valley raises $20,000 and expects it to last one year.
1. YC invests $11,000 + $3,000 per founder. So $17,000 for two founders; that should get them through the summer or winter, depending on which batch they're in. This money was never intended to last a year.
2. Each startup has the option of a $80k? (the amount has changed over time, I believe it's higher now) convertible note from Ron Conway/SV Angel. Some will take the note, some won't.
No one in Silicon Valley raises $20,000 and expects it to last one year.
I thought the $20K was intended to last approximately three months, not one year. Also, aren't convertible notes never intended to be repaid?
This is way off. All the groups I know of that came from outside the bay area rented in the peninsula not in SF, where it's noticeably cheaper. There are also "YC" houses that are passed down that are affordable. Finally, I never heard anyone worried about having to payback the 80k YCVC note.
The $1500 figure is actually quite low for SF. It is more inline with south bay actually.
The author of this article should do a tiny bit of research next time.
The increasing cost of living certainly is an issue for startups. That's the real story here.
I found the article about creating a startup in Thailand [1] really interesting from a cost-of-living perspective. I'm sure many other entrepreneurs here can weigh in on other inexpensive cities in which to live and create a startup.
But the YC example doesn't quite back up the main story well. For most entrepreneurs, they won't be getting that $20k. Personally, I'd rather get $20k than $0k. Or, heck, the network and investment signal that an accelerator like YC affords.
[1] http://levels.io/bootstrapping-startup-thailand/
I found the article about creating a startup in Thailand [1] really interesting from a cost-of-living perspective. I'm sure many other entrepreneurs here can weigh in on other inexpensive cities in which to live and create a startup.
But the YC example doesn't quite back up the main story well. For most entrepreneurs, they won't be getting that $20k. Personally, I'd rather get $20k than $0k. Or, heck, the network and investment signal that an accelerator like YC affords.
[1] http://levels.io/bootstrapping-startup-thailand/
This article doesn't make sense. Three startup founders wouldn't get three one-bedroom apartments. They would get one three-bedroom apartment, which would be much cheaper.
The math is for one one-bedroom apartment. $18k/yr is pretty standard for that in the bay area.
Also, depending on the living situation of the founders prior to YC, it may be cheaper moving to the Bay Area. For example, 3 founders living in separate apartments consolidating to a single one bedroom may find savings.
And they'll have to deal with moving all their accumulated possessions into that shared space. And their families will not be able to squeeze in with them, if they have families.
Hence the qualification, depending on the current living situation.
And they may find they're miserable with 3 grown adults in a 1 bedroom apartment.
The options are to fail fast and live in South Bay. It's not supposed to be comfortable, it's testing your instincts and letting you know that there is no free lunch.
$20k is a lot of money. If your business is doing well or shows promise, YC will help you raise since they don't want to waste their investment. So just do a decent startup and you'll be fine.
$20k is a lot of money. If your business is doing well or shows promise, YC will help you raise since they don't want to waste their investment. So just do a decent startup and you'll be fine.
20K isn't a 'lot' of money, especially in the Bay Area. Especially if you're cutting that in halves or thirds for more co-founders. Please.
[deleted]
Thanks for calling this out. Its a discussion that I really think needs to happen.
I personally love the concept of yc, and see the value but for a good portion of the entrepreneur community it can't work out because of the economics. I would love to see a accelerator give enough money for a realistic budget for a seasoned team. Including myself I have 4 people on my team and we are 3 seasoned developers and an executive with lots of experience as a CIO and CFO. We have real bills and can't live on peanuts, mortgages, kids, need for real health insurance, etc. We are more expensive, but we can outbuild probably most of the teams out there, and especially the ones that have little experience. I wonder if much of the reason we have so many failed startups is that we are don't bet enough on seasoned individuals unless they have enough cash to carry them through the early stages. I would love to see what would happen if pg did a session of YC looking for seasoned teams what would happen. I'd be willing to bet you'd have a good chance for some amazing results, even if it would be more expensive.
I personally love the concept of yc, and see the value but for a good portion of the entrepreneur community it can't work out because of the economics. I would love to see a accelerator give enough money for a realistic budget for a seasoned team. Including myself I have 4 people on my team and we are 3 seasoned developers and an executive with lots of experience as a CIO and CFO. We have real bills and can't live on peanuts, mortgages, kids, need for real health insurance, etc. We are more expensive, but we can outbuild probably most of the teams out there, and especially the ones that have little experience. I wonder if much of the reason we have so many failed startups is that we are don't bet enough on seasoned individuals unless they have enough cash to carry them through the early stages. I would love to see what would happen if pg did a session of YC looking for seasoned teams what would happen. I'd be willing to bet you'd have a good chance for some amazing results, even if it would be more expensive.
There were plenty of seasoned folks [1] in our YC batch, our group included. 3 of 4 of our founders had families and real responsibilities. One major advantage to YC is it opens doors and connections. Many (most?) YC companies have more funding within 4 months than the ~$100k they get at the beginning.
[1] http://www.forbes.com/sites/parmyolson/2013/08/20/latest-bat...
[1] http://www.forbes.com/sites/parmyolson/2013/08/20/latest-bat...
[deleted]
How is an acqui-hire not job creation? How do big companies not innovate or create jobs? I work for a Fortune 500 and have engaged in both innovation and job creation.
Even if what everyone else commented weren't true:
$20,000 Is An Impossible Budget
And yet many many YC-backed companies have made it possible.
$20,000 Is An Impossible Budget
And yet many many YC-backed companies have made it possible.
Add visas if you're not from US
The $20,000 is absolutely not meant to last a year. It's meant to last a summer, only enough time until the startup can raise their first round which should ideally be the end of the summer. Maybe a bit after if they're having difficulty.
Any startup trying to survive for a year on $20k has already failed.
Also, from a linked article, this gem: [1]
> The terms originally made sense because YC was unproven and only funding eight companies at a time. Almost ten years later, Y Combinator has turned into a semi-annual factory of 50 companies...
That's precisely why terms can stay this way. Funds with less of a reputation and track record have to kick in more money, not less, because they bring less to the table without it.
A VC like YC could effectively give $0 and probably still be worth the 7% for the connections/track record alone.
1: http://ycuniverse.com/y-combinator-companies-potentially-wor...