“Is Y Combinator worth it?” This is a question we get from a lot of super early-stage companies that we’re talking to or working with. Many of whom are just applying or going through the startup accelerator program.
First, here’s a little bit of background, YC was started in 2005. I worked in venture capital at the time, I didn’t know about it when it was first started, but I did read Jessica Livingston’s book, “Founders at Work.” And that was my first intro to Y Combinator.
Back then, and even now, Y Combinator is a group of really amazing mentors, who help early-stage startups, get off the ground. And so you go through a batch, you’re in there with a bunch of other founders. Even nowadays, it’s up to a couple of hundred companies. But you go through an accreditation program.
It’s like an MBA for the real world or an MBA for starting an actual growth business. It’s an amazing program. And you learn a ton about how to get an early-stage company going, how to raise money, how to build a product, how to recruit people. There are so many amazing skills that they teach you in YC.
The compensation for Y Combinator is approximately 7% of the company, but you do get to get capital for that, too. So you’re paying for both the experience, but also the capital.
And just to make it helpful, I isolated some core benefits that we can talk through because I do think YC is a great program. I do think it’s worth it.
Y Combinator Benefits
There are a number of professional and personal benefits of going through the YC accelerator program. Here are just a few:
Support from Other Founders - So the first benefit is just support from other founders. I think doing a startup is probably one of the loneliest things you can do. It’s hard, there are not a lot of other people who are helping you in the early days. And so, just being able to rely on other people who are in the same situation that you are in is really helpful. You can benefit from their energy, their experience, and their encouragement.
Joint Problem Solving - The second benefit is the joint problem-solving. And this is, the fact that you have (a) all these other founders going through similar situations, helps with joint problem-solving. But more importantly, you have all of the mentors at YC, who have seen the pattern over and over and over again. And frankly, at Kruze, we see the same thing. We have 300 clients now, and that doesn’t include all the companies that have outgrown us or been bought. So mentors can be helpful. And Y Combinator is the hotbed for professional mentorship for startups. So that is helpful as well.
Alumni Network - There is also a huge alumni network. There are probably a thousand companies now, probably more that have gone through YC, probably two or three thousand.
And so, you’re able to draw on the alumni group, whether you’re trying to sell alumni, the new service that you’ve built, or you’re just trying to get advice, or you’re trying to recruit executives into your growth business, that alumni network can be powerful. And it’s just something that it’s hard to replicate unless you do something like an MBA. So the alumni work is probably one of the most valuable things about the Y Combinator experience.
Potential Customers - I touched on this in the alumni section, but there are a lot of potential customers for your startup in YC, especially if you’re a B2B service. It’s a nice little head start to be able to sell whatever you’re doing to your batch mates or people who just have gone through the program. So that’s nice and helps a lot of startups get off the ground. The reverse of this is that I’ve heard from some clients in Y Combinator is that they feel pressure to buy services from other YC companies, which may not be ideal if some of those are not actually the best at providing that particular service.
Money - The next one is just pure money. You do get some capital for going through the YC program, but more importantly, you get this halo or blessing, and they also help teach you how to raise money and speak venture capitalists’ language. What we see consistently, is companies that have gone through Y Combinator, typically raise more capital, and they also raise capital at higher valuations, than they would have as a normal seed company, without that halo.
It does work, and so I know you’re giving up a few percentage points, of your company to go through the program, but almost always, you’re going to make that up, on the other side, because you’re just going to raise money at a higher valuation, and you’re going to raise more money. It’s a nice benefit.
Talent - Now, talent is another key benefit of YC, because you have that halo, and recruiting your earliest team members is one of the hardest things. And so in the same way that a venture capital firm gives recruits a lot of confidence, and maybe it’s the thing that pushes them over the edge, to sign on a dotted line and start working with you, that Y Combinator halo can work well. Can help get the first few recruits in the door.
And another underrated aspect of this is, sometimes, some of the companies in YC, in the batch, don’t make it, that’s just life in early-stage companies. You know, Paul Graham always says, “Make something that people want.” And sometimes companies enter the program, not making something that people want. And so those founders are a great source of talent, too. You can add them to your team, they’re going to be looking for a job most likely, and you already have the shared values of going through Y Combinator. So that is a nice benefit as well.
Press - And then, like venture capitalists, reporters, or the press, really believe in the YC halo effect. They know that there are a lot of great companies coming through there. They know they’re getting a lot of great coaching, and so they’re more likely to cover your company, And press in the early days, ideally, positive press, can be helpful. It can help make your investors feel more confident. It can help your early employees feel more confident. And help get your name out there with customers. So the press that comes along with Y Combinator, is great.
Relationships with Service Providers - The next benefit is that other people in the YC program can help you find good service providers. Finding a reliable service provider that will do all that they promise, is sometimes difficult. However, being able to count on the referrals and recommendations from others in the YC program is helpful. It will save you both time and money.
We know again, they have that certain level of coaching. We know they’re serious, we know they’ve raised some capital. And so they’re a really good opportunity for us, and the founders that are reaching out to Kruze, and considering working with Kruze, they have the benefit of the rest of the YC network, to ask and say, “Hey, is Kruze a good partner to work with here?” And so you have this nice, referral network or recommendation network, to lean on with service providers. It’s helpful.
So those are all the benefits.
To sum it up, YES, I think Y Combinator is a great program to go through.
I wish that I had gone through it at some point in my life. Kruze is a bootstrap company, so we never raised money. So it wasn’t something we were looking at, as we built the company, but I really, I’ve had so many friends go through it. I’ve had so many clients go through it, and pretty much everyone is positive, about the Y Combinator experience.
So just remember there are a ton of benefits to YC. You can raise money easier, you get great coaching and mentorship, you have an alumni network. It’s easier to find customers, it’s easier to work with service providers.
So I encourage early stage companies to apply to Y Combinator, go through the program.
I know it will help your company, and give you a much better shot as a startup. It’s hard to do a startup. I know because Kruze is a startup, and you always want to take every ounce of help you can get. And Y Combinator is just a great program that’s going to help you immensely, and just give you a better shot at being a successful company.