Get things done. More building, less talking: A simple rule of thumb for raising money.
We're impressed by teams that get things done, and unimpressed by teams haven't even started to build something. I've often found myself thinking, "If you think this is so great an idea, why haven't you spent some weekends building a version 0 prototype?"
Seriously, whether you're raising pre-seed from YC, seed from angels, or Series A from VC's, you've got to get moving.
This is not college admissions -- nobody is here to pat you on the head. If you want to get ahead, you've got to build, build, build. A great idea on its own is worthless without a team that can make it real.
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Young Entrepreneur: I've spent 500 hours building a product
Wisened, shrewed Investor: Great, I'll take 6% of that value you've created, plus the 600 hours I expect you to spend over the next 3 months, and pay you twice San Francisco's minimum wage for that privilege.
Young Entrepreneur: oooooooh!
Perhaps it's a popular criticism because it's a valid one. I understand that a straight dollar conversion is not fair, but what would be fair? As a consultant, I value my time at $150/hour, so how about we put a very simplistic scenario together based on that?
Imagine I've already spent a realistic 400 hours of straight work on an application, and YCombinator accepts me. I've already invested $60k in opportunity cost betting on my start-up. Now I spend another 170 hours per month for 3 months, that comes out to roughly another $77k in opportunity cost. I've traded $140k in opportunity cost. for $14k in funding, and given YC 5% of my company.
For $14k they've purchased 5% of what they believe is a $280k company. Where does that $280k of value come from? Maybe from the $126k in free labor I've given the company?
The truth is we gave up ~6% but got an absolutely staggering ROI on it. Network, connections, peer group, advice, you name it.
You ask any YC company whether it was worth it and almost all will say yes. Us included.
Because life happens? Not every startup idea is a simple web application. Perhaps Ycombinator only invests in easy, one-trick pony ideas, but that doesn't represent the reality of all business.
I'm realizing that clearly YC's sweet spot is "web app that can be built by two guys in a very short period of time". For more complex businesses, say services that have real capex requirements, it's just not a fit.
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