I think there are some key details missing in this post which make it hard to tell why you were in fact rejected. In addition to the accelerator, you've also been going at it for 3+ years, and are only now hitting 1M For B2B, that is unfortunately on the really slow end of things for growth (read Jason Lemkins quora posts for whay to expect for typical bootstrapped busineeses). The fact that you're a leader already in this market, and growth is that slow, is maybe an indicator the market doesn't have much potential. On the other hand it might also just be that you're in a market that is new, so the potential is there and others just don't see it.
https://mega.nz/#!ip0WXAZR!ynjFWvnvojT0bmG7maTszjFybuG_Yr1De...
Paypal offers a necessary service to a company (payment). They charge a service fee.
I'm not going to say YC isn't useful or worth the equity for some people. However, you've got think that a $120K loan is pretty damn cheap these days. Also, I pay my accountant a few thousand a year and he gives me incredible business advice. Possibly I'm just lucky, but I suspect that young founders do not really understand the options they have open to them for growing a business.
I view my accountant as a necessary business expense. I even get to write off the money I pay him from my income. That's more like Paypal. Similarly, on a loan, I have to pay interest. That's a cost (and possibly necessary expense). If I need to pay a consultant to help me improve my image or make contacts, that's a cost.
Giving away part of your company for a service? Not at all like Paypal :-) Personally, I'd rather pay an expense than give up part of my company. Obviously depends on the situation, though.
YC has always valued persistence - so I'm sad that he applied and wrote that, since he might have been able to get in the next time, and I think YC likely would have helped his ability to recruit and valuation, especially given the changing markets. But regardless, I always have respect for startup founders (esp after 3 years of hard work) - so we should all wish his team luck.
Yes, one can argue, times have changed a lot since then as the applicants pool have significantly increased. One other the thing, founders were extremely impressive; so, Airbnb may be an outlier.
I'm sorry you had a bad experience in LA. I agree a lot of the stuff you wrote about that accelerator sounds like unconscionable bullshit. The amazing thing is it is far from the worst I've read about. I'm glad you realize it was crappy.
Yes, there are ways to bootstrap a B2B business: early sales/revenue. The risk is becoming a consultancy, or losing your market to someone who is better funded. I wouldn't say you have to raise (even for consumer), but I also wouldn't say you shouldn't, and in the current market, raising is probably the best choice for someone who fits the scale/size/winner-take-all model, even in B2B.
2.9%? Why does a specific percentage matter? If someone takes 10% and tanks your business, that's bad. If I could get YC level value-add (network, advice, reputation) as a developer tool company focused on startups for 25% of common from a huge value-add investor, I'd seriously consider it. But of course I'd rather take YC for 7% and all the other YC benefits.
Quora got in YC after already raising many rounds and through other accelator..but that was 2 years ago when YC wasn't 100% crazy tech only yet: http://techcrunch.com/2014/05/11/quora-y-combinator/
Karthik, disclosure, I was a YC founder.
It doesn’t seem very thoughtful to say never pay more than 3%, full stop. If you get more than 3% value out of the incubator, it’s often a good idea to pay more than 3%. You should make the decision after talking to many people who’ve chosen the incubator, and there are many companies that will say they got much more than 7% benefit out of YC – and also companies that didn’t.
It’d be great if every incubator charges much less than they do today, but I’m doubtful it’s a perfectly competitive market, with stickiness in things like alumni networks and reputation (it does seem like it has some similarities to the education market). Entrepreneurs would obviously benefit from more competition amongst incubators – and maybe you’re right that change is at hand.
I’m sorry that you didn’t get in to YC specifically (and maybe it wasn’t the right idea to apply, if you felt so strongly about how incubators provided so little value) – but I hope you won’t let your disappointment and anger get in the way of thoughtful business decisions, including in cases like future customer rejections.
Anyway, back to building our businesses – good luck with your own!
