September 14, 2018

Is Y Combinator a good fit for Indie Hackers?

Is Y Combinator a good fit for indie hackers?

For example, Instapainting Founder Chris Chen was a solo YC founder who is an indie hacker now ( Workflowy founders also did YC and are sort of indie now.

  1. 13

    I would say no. YC wants teams of more than one founder, generally people with very specific backgrounds, who want to raise money and shoot for the moon. Someone with a 95% chance of failure and a 5% chance of creating a 10 billion dollar company is better for them than someone with a 80% chance of building a 10 million dollar company, even though most indies would rather take the 2nd set of odds.

    YC founders are probably so crazily over-represented in Courtland's interviews because that's his background and the easiest network for him to pull from. Also none of the founders he's interviewed (so far) would really be a "win" from the point of view of a venture capitalist, even though they've all had huge wins in terms of their personal lives.

    A relevant PG essay on this topic is Black Swan Farming.

    1. 5

      YC wants teams of more than one founder

      I did YC and I'm a solo founder. Not once did anyone at YC ask me to find a cofounder. There were actually a lot of solo founders in my batch.

      generally people with very specific backgrounds

      Can you be more specific... about these specific backgrounds? I was surprised by how varied my batchmates' backgrounds were. There were non-technical solo founders and at least a handful of founders who were teenagers and had dropped out of whatever school they might have been attending. There are probably some patterns, but there are also a lot of outliers and exceptions.

      who want to raise money and shoot for the moon

      This is definitely true. After all, YC is a business. However, YC also funds a number of non-profits. My impression is that YC wants to fund big ideas and people who they think might be able to shape the world we live in, even if they won't necessarily "pay out."

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        Can you be more specific... about these specific backgrounds?

        Well, you went to MIT, didn't you?

        AFAIK, YC has demographic goals (such as funding more women, US racial minorities, etc), but the over-representation of young-ish people with elite schooling backgrounds is likely its most extreme historical background preference.

        There definitely are exceptions and some founders who haven't finished a degree, but there are a huge number of people from prestigious schools in YC.

        To elaborate, I've met and know of many YC founders who look like you on paper. The one big exception is that you're a single founder. That, from what I understand, the vast majority of applicants are solo founders and they're accepted at much lower rates. Did you have traction at the time you applied? PG mentioned in some talks that traction was the way to get in as a single founder.

        I did apply several times to both the regular program and the fellowship without success and have actually never even heard of anyone admitted who looks like me on paper (late 30s at time of applications, guy not from a targeted demographic, not from an elite area or school). There must be some with this background who got admitted, but certainly not nearly the same proportion as coastal 20-something Stanford/Harvard/Waterloo/MIT grads.

        Though I've long-since decided that it's probably not a good use of time or emotional resources to apply again, I'm not faulting YC for the rejections. I failed in raising money and crashed pretty hard in 2016-2017, with severe RSI-related wrist problems that probably wouldn't have stopped 25 year-old me. That's why I'm here now indiehacking, which is much less demanding in terms of keyboard time. I'm managing to cover my rent (which is ~$250 USD) without too much ongoing damage to my body, and as the project grows I can hopefully get the physical issues treated and self-fund the ambitious start-up I couldn't raise money for before.

        Somehow, I have the sense that there are a good number of indiehackers with a background like this.

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          I have this impression about elite schooling too, but I'm not sure about the "young-ish". Last batch stats ( shows a ~30 years old of average, I am not sure indie hackers starting startups are much older.

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            30 is young-ish. From what I've read, the average age of entrepreneurs in the US is somewhere in the 40s and older entrepreneurs are more likely to be successful. However, the huge startup successes tend to come from younger people, often even people right out of school. Given the VC model's need for huge wins, this is probably a factor in YC's younger average founder age.

            1. 0

              I would guess that indie hackers average is closer to 30 too, closer to YC-style startup founders than to entrepreneurs in general

  2. 7

    Some definitions :

    • What is an Indie Hacker ?

    "What makes someone an indie hacker?

    You're an indie hacker if you've set out to make money independently. That means you're generating revenue directly from your customers, not indirectly through an employer. Other than that, there are no requirements !

    Indie hackers are often solo founders, software engineers, and bootstrapped, but it's totally okay if you have cofounders, can't code, and have raised money. " - Courtland Allen, founder of IH (source)

    • What is Y Combinator ?

    "Y Combinator provides seed funding for startups [...] At Y Combinator, our goal is to get you through the first phase. This usually means: get you to the point where you’ve built something impressive enough to raise money on a larger scale. Then we can introduce you to later stage investors—or occasionally even acquirers." (source)

    So, it's obvious that YC philosophy goes against the general IH's philosophy, but like anything in real life, nothing is black or white, or gray, everything is colorful ;)

    Also, Courtland is a YC alumnus, so it depends on how you want to build things.

    1. 2

      This is a great separation. Indie hacker mentality does share a lot with startups that join an accelerator, but the means are somewhat different.

      I'd say it depends on how you want to start up. If you want to leave your day job and you want to go full force on starting your own company, then some investor money can help you to focus and to get your business started (remember that besides the money, accelerators usually can provide you with a good network of companies to work with too). In the trade you'll be giving out a chunk of your company and profits.

      However you may want to start up smaller, building your customer base more organically and independently. Some indie hackers build their businesses while doing another job on the side, while some take their savings to have a small runaway to accelerate their businesses while focusing on it 100%.

      Both certainly have their pros and cons, and there's a lot of gray area in between the two if you want to combine both worlds (e.g. using individual investors without an accelerator or taking a bank loan to start up).

  3. 6

    Depends on what you want.

    It's tough to get accepted if you prioritize your outcomes as a founder (e.g. financial freedom) rather than having your objectives that align with those of the investors (building something world-changing worth $1B+). And if you do somehow get in, there will be a lot of pressure and advice to go the latter route, although it's not like you'll be forced at gunpoint.

    I know many people who've gone through YC, then decided against additional fundraising to hit risky goals, and are instead focused on growing steadily and being profitable. The support, advice, attention, and funding they get from YC really help with that. Lots of indie hacker businesses, probably most, die due to lack of resources, motivation, good mentorship, and other things YC provides.

    (I also know people who've gone the opposite route: started a business with modest goals and disdain for venture capital, but who were convinced to do otherwise when shown that it would be good for them and their business. Austen Allred talked about this in my podcast episode with him.)

    It's not black and white.

    There is the commonly-cited "1% chance at a $1B vs 10% chance at $1M" scenario, which I think is a bit of an oversimplification. It's rarely that simple or that obvious, as it's not that simple to assign risk to either choice. A lot really depends on your business' market, product, timing, what you'd do with the funding, the attitudes of your particular investors, etc. There are tons of variables involved.

    (It's also not true that an investor automatically becomes your boss.)

    I'd say YC is good for you if you're clear about what your situation is, what your objectives are, what investors' objectives are, and you feel confident about parsing incoming advice so that you can filter it and modify it to work best for you. Otherwise you may get confused and get steered off track.

    Most people posting in the IH forum are well aware that the VC path isn't the only way to go, however, and will be considering alternatives instead of being brainwashed by the tech press. So if you're even asking this question, you'll be fine. You won't come away with regrets, because whatever decisions you make will have been informed decisions.

  4. 5

    This is such a great question, and definitely not a simple one to answer. (+1 to many of the responses already here!)

    I wouldn't have started Key Values unless it was for IH and all of the stories I read/heard on IH. Having worked at a growth-at-all-costs VC-funded startup before, I never wanted to start/run a company that way.

    But then I got into YC.

    I decided that I should stay open to the idea of "changing paths" (from wanting to be totally bootstrapped to potentially raising money). However, a few weeks in, I realized that I wanted to build a lifestyle business and not raise money from investors.

    My experience at YC (something that I've been meaning to write about since March) was really stressful. Real talk: I cried. A lot.

    I felt an enormous amount of pressure from YC to raise money and grow my company in a way that I didn't feel comfortable with. I spent a lot energy trying to stay true to myself, and it was an emotional roller coaster. Looking back though, I think that my experience may have been different had I (a) talked to different partners, and/or (b) been more definitive about not wanting to do Demo Day or raise money, earlier.

    There are lots of YC companies that are now lifestyle businesses (though I don't know how intentional it was). There aren't any "hard set rules" on this though. IH and YC are probably not super overlapping, but there exists some union between the two.

    Long story short: when it comes to starting, building, and running a business, there is no one-size-fits-all advice or playbook. There are exceptions everywhere.

    Two non-YC examples:

    • Grammarly was self-funded and bootstrapped for 9 years until they decided to raise $110M just last year (more)

    • Buffer raised money, but then decided to buy out their investors! (more)

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      Would your preference to not raise/demo have been respected without pressure if you held firm earlier? Do you think you would've been accepted if this was established from the beginning? Did you apply or were you invited after getting noticed on HN?

      Appreciate your having been forthright with info. Hope your business is doing well.

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        In short: (1) I think yes, (2) hard to know, and (3) I applied.

        I feel like I received "mixed messages" from YC partners (ie. it depends on who you talk to), which is what made me thrash so much.

        To take a step back, the reason I decided to go through YC in the first place was because I wanted to help cool startups that no one has ever heard of get visibility in front of software engineers who are looking for cool startups to join. Given that YC is a network of cool startups that no one has ever heard of struggling to get in front of and hire software engineers... it seemed like an obvious partnership to me.

        I thought that YC accepted me based on our shared goals, but took a few weeks to realize that might not be the case (perhaps naively so). I don't know why exactly they chose to accept me though. If I had said outright that I had zero intention of raising money or becoming the next $1B+ company in my application, my guess is that they wouldn't have accepted me, but who knows. To be fair, I don't know if being that close-minded to potential paths/options is all that attractive in any applicant, especially w/o prior experience.

    2. 1

      My experience at YC (something that I've been meaning to write about since March) was really stressful. Real talk: I cried. A lot.

      Really looking forward to this.

      We've been talking a lot at PostPerk about whether we'd ever take external funding (including applying to YC, although that would be less about the money).

      I've taken funding before and had pretty much exclusively bad experiences, so I'm wary of doing it again.

      One scenario I would consider however is bootstrapping in the early days through product/market fit, and then turning the money tap on when we want to grow faster (similar to what happened at Grammarly).

  5. 4

    Here are a few major differences between YC type projects (startups) and Indie hackers (IH):

    • Startups focus on an exit strategy (reach high valuation and get acquired or go public), IH focus on profitability

    • Startups raise external funding in order to iterate and grow as fast as possible; IH focus on slower self-funded growth and money out of their own pocket

    • Startup founders exchange majority of their equity for funding (and advice, mentorship, employees); IH keep full ownership of their company

    • Startups hire, build and manage large teams; IH are either solo founders or small teams

    • One of the startup struggles is managing the constant change due to growth; one of the IH struggles is staying productive, motivated and competitive when working alone

    • Startup CEO spends a significant amount of time on fundraising, investor relations, shareholders expectations; IH has to focus on staying profitable (and everything else)

    • Startups are a full-time commitment; IH are often side projects

    • Startups aim to conquer huge markets; IH focus on a small niche and a solution tailored to that segment

    All that being said, this is very generalized (especially on the IH side). Different founders decide for different paths. And different projects require a different approach.

    Also, there's nothing wrong with starting as an indie founder and eventually deciding to transition your project into a YC type startup. But as long as you aim to stay small, YC will not accept you into their program.

    This is why I recently started working on Providing the knowledge and support focused on indie founders, profitability and sustainable growth. Without taking equity and expecting (extraordinarily improbable) billion dollar valuations.

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      I just wanted to say you put equal sign between startup and VC funded like startup=VC funded. It is very often not the case. It is a well known industry advice to avoid premature funding. Your "comparison" promotes ineffective attitudes and positions startuppers as exit-hunters.

      1. 1

        The term "startup" is very vague and is being used in many different contexts to describe a variety of different early stage businesses. I should have made more clear that I was referring to a startup as in type of a business that YC (or any other traditional accelerator) would accept into the program. In this case exit-hunting (and VC funding) is almost inevitable, since that is YC's business model.

  6. 2

    Let's ask more pointed questions instead, in order to pick our labels more carefully.

    Keep in mind that YC is venture capital and they have a single mode of operating: invest money in innovative and disruptive ideas with relatively low odds of success in the hopes of a gigantic payout on the one or two successes in the portfolio.

    1. Is YC a good fit for a self-funded company?

    How the company got to the present point is irrelevant.

    From their side, they want people + big ideas > disruption > payout. Nothing else matters. They'll qualify you based on that. From your side, you want to go the investment route because you consider it a better choice for your future goals from where you stand in the present. Do you have something a VC would consider interesting as a concept? In that case, you need a VC because once your idea is public, a VC will outspend you by funding and/or creating your competitor. Disruption lends itself to winner-take-all, which lends itself to short-term financial sacrifice in exchange for market dominance long term.

    1. Is YC a good fit for an entrepreneur interested in the freedom/lifestyle aspect of running a business (aka not having a boss)?

    Probably not. That famous investor you just took money from is now your boss. It's all fun and games (and no rest!) until you're not aligned with that person anymore.

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      Investors don't automatically become your boss. Especially not after the first funding round.

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        Don't most investors demand a vested equity schedule for founders?

        Sign that, and you've just committed the next 3/4 years of your life, with your equity dependent on you still being in the company that long.

        With multiple investors and vested equity, it's quite possible for a founder to get booted out of a company they founded at an early stage, without owning substantial equity: lots of people this has happened to.

        Compare this to the balance of control, where you own everything or share equity upfront with one or two partners.

        1. 0

          Don't most investors demand a vested equity schedule for founders?

          Well, yes they probably do (at least the competent ones). But any and every founder should demand a vested equity schedule of 3+ years. No way in hell I'd work with or for a founding team that didn't have one in place.

          Sign that, and you've just committed the next 3/4 years of your life, with your equity dependent on you still being in the company that long.

          They normally backdate from when you start working on your project. To be clear, you should have vesting set up before even thinking about approaching investors (unless you're a solo founder with no employees).

          With multiple investors and vested equity, it's quite possible for a founder to get booted out of a company they founded at an early stage, without owning substantial equity: lots of people this has happened to.

          I think you might be a bit confused about how vesting works. You have full control of all of your equity (and the voting rights that entails) until you no longer work for the company. So whether you have vesting or not makes absolutely no difference to the decision making structure at your company. It isn't easier to fire someone who has yet to vest fully.

          As a founder it's really, really unlikely you'll be kicked out by your investors unless they own >51% of the voting rights (and or board voting seats, the details can vary depending on country and shareholder agreement). Pretty much impossible unless you do something illegal. Also, there's no way you get to 51% investor ownership after 1-2 rounds of funding.

          And that doesn't change with vesting.