To get accepted to these programs you have to apply.
I was introduced to David Cohen of techstars through a close friend and was able to engage David in a conversation which led to him suggesting we apply to techstars, and why wouldn’t we. Techstars has a great reputation and seems to be a solid-gold hit machine for churning out hot and ‘successful’ tech startups. Ycom shares this reputation as well.
Why didn’t we apply to what seems like a necessary program to launch a startup these days?
I replied to David that I felt we were a little too far along for the program. We are post revenue, re-investing with monthly cashflow w/ comfortable margins, just hired a 6 figure DevOps guy from revenue, and growing 60-70% by quarter. This does not seem to be in line with the ‘typical’ early-stage startup applying to these programs.
Moving to Boulder,CO for 13 weeks to couch surf or live in a studio apartment while I ‘work on my idea’ in trade of advisement and mentorship, seed funds per founder less then a weeks current earnings and signing over 6% of my company just didn’t sound like a good idea. I’m 33 not 22, married not single, an extroverted tinkerer not a red bull fueled ruby hacker.
When I shared this POV with David he mentioned it was a common objection he hears and pointed me in the direction of 2 blog posts of others in a similar (no longer a startup with a MVP, but not a 10 person funded company either). Here they are.
After reading those it seems that the value of the ‘connections’ you make at these programs is worth it the price of admission. That is a fair argument.
Is it really necessary for a startup to go through a program like these to be successful?
In our case and those of further along startups it seems the primary benefit of programs like this becomes less about the seed capital, or time to flesh out your business and becomes primarily about Access and Valuation.
Access is something hard to quantify. Washington politics it is ALL about access.. the revolving door between lobbyists and political staffers is a well known flaw in our system but that is how it is done. So in this context, does access to investors and the who’s who of the tech industry carry the same benefit? Tech investors are typically tech users and are in order of magnitude easier to communicate with over twitter, facebook, email, their own blog, than it is to say get a 10 minute meeting with a Senator. Tech investors talk about deal flow, and having access to the best deal flow, Startup accelerators like Techstars and Ycom could be seen as an instrument of vetting deals and ensuring quality deal flow to those on the other end. Access to tech writers who gush over hot YC/TS companies as well is valuable unto itself.
People are lazy, if YC and Techstars are vetting deals, investors don’t have to think about/perform their own due diligence investing in them, they just do. Why would an investor take the time to learn about your no name company if they have vetted and certified “graduates” deal flow at the ready. So to this point, startup programs seem to certainly gain you access to these pools of investment funds, making introductions and meetings easier.
Some investor recently wrote that a college education is overvalued. From outside looking in it seems the accelerator programs are essentially doing the same thing. Startup X is a YC09 graduate. Letters after a name is a mark of expertise in some field. How is that any different from being Yale MBA class of 08, or University of Arizona CIS PHD class of 09? So in essence it appears that on one hand they say a college education is not worth what it used to be, but they use a diploma from startup accelerator (YC10) as a way of judging a startup. This is perpetuating the same cycle.. that you have to go to the best ‘school’ to get the best job.
Valuation of a company seeking funding seems to be affected by this phenomena as well and David mentioned it as a selling point of Techstars.
…both [recent graduates] will raise significant series A on much higher valuations than they might have otherwise been able to achieve, due to TechStars.
If you goal is to raise an A, and future B & C money, a higher valuation is likely a good thing. What if your goal though is not to raise after a seed round? David told me that another raise is not always the best outcome and they don’t push companies in that direction should it not make sense. Can startups now expect a 5% 10% even 20% on valuation for adding YC10 to their about page? Is this a good thing overall? Personally it does not sit well with me as it seems to discount the hard work and effort of startups not in the program.
Could you get meetings through other means? Yes. Could you still get a good founder-friendly valuation, Yes. Could you still build a network of smart influential people, Yes. Will it be harder and more difficult, probably. Are Techstars and YC acting as gatekeepers? No. From all apparent sources they have seemed be similarly aligned with founders after the same things, successful companies. If this trend continues of more accelerators, and more startups applying to them, and the primary benefit becomes out of reach of non participating companies, then it would likely have the opposite effect.
It appears though that it is becoming more and more necessary to participate in these programs and pay the price of admission to gain entrance to the club. The cycle is starting to feed off itself with more accelerator programs popping up, and more startups adding Class09 to their about page as a marketing angle. The tech press is enabling as well washing these new graduates in press, and last I checked they were not expanding coverage of their “bootstrapped and not based in SF, Boston, or NYC tech startup” news beat.
After further conversation with David, I agree with him that the network effect of these programs is real and I am likely underestimating the value of it. I have over time built my own network and value all the connections within it. Certainly adding to it would be a good thing. It is evident by our conversation that he is still accessible and approachable irregardless of whether or not we apply. Kudos.
So we were not accepted to any of these programs because we did not apply. I fully get though it has worked and is working for others and wish them all the greatest amount of success.
Feeling like we have to ‘move to SF’ or ‘apply to YCom’ to be successful by the current measure of the industry just goes against my non-conformist nature. These programs can help, but hopefully remain an option and not become ‘the way’.
Oh wait, we will be in SF this summer.