Fellowship V2

Last fall, YC ran an 8 week experiment called The Fellowship to fund and work with startups at the idea or prototype stage. The goal was to see if we could create a program that could help more early-stage startups at scale. The experiment went well and I have a few annoucements about its future.

  • We’re going to do it again. In fact, we’ve already picked the companies for the second batch and we’re opening up applications for the third batch starting today.
  • We’re going to make it possible to apply to both the Fellowship and YC core program via one application.
  • We’re iterating quickly on the format and so the second and third batches will have a very different experience from the first.
  • We’re going to be taking equity.

I’m going to address these in reverse order.

Equity

From this point forward, we’re going to provide more money per team and take some equity in exchange. However, we’re going to try something we’ve never done before.

The new terms for the Fellowship are as follows: We’re going to provide $20K for 1.5%. Instead of taking our equity up front, we’re going to be issuing a convertible security that only converts into shares when the company 1) has an IPO or 2) has a funding event or acquisition that values the company at $100M or higher. 

Basically, YC only wins if you win big. I’m pretty excited about this because it’s both founder friendly and pushes us to build a program for the long term—not just one that is a lightweight version of our traditional model.

New format

Like any good startup, we’re doing our best to iterate quickly and will continue to evolve the program as we go. We’re going to be updating the Fellowship website in the next few days with more information, but here are the highlights:

  1. It will be primarily experienced remotely. This is so teams can spend as much time on product and customer development as possible. Office hours will be done over Skype or phone. We will bring all the teams together once, but only at the beginning of the cycle for an all day Kickoff Conference that will combine many of the workshops we provide our startups in the core batch into a single day.
  2. Fellowship teams will have a dedicated YC partner following their progress throughout the program. We'll also be visiting areas where multiple teams are located. For example, I'll be meeting teams in the Bay Area, Philadelphia, New York and Austin for the second batch.
  3. We’re going to host weekly talks with speakers that we stream live to companies online. This will allow us to invite speakers that can't come to YC in person.
  4. At the end of the program, the startups will be able to present their progress at a Virtual Demo Day to investors.
  5. If a Fellowship team decides to apply to the YC Core program, we'll provide early decision information about their interview status.

Single application

We were surprised at how popular the program would be. We gave very little notice up front for the first iteration and only opened up applications for a single week, but we got nearly the same number of applications for YC Core—over 6K! 

Once we realized we were going to do the Fellowship program again, we decided it would not be efficient for us to have separate application cycles and reading periods for the YC Core and for the Fellowship. 

Since that test went well, we’re going to make it possible to apply to both or either program through a single application. When you apply, you'll see a question on the application that'll let you apply to both or either program. If you're at a stage that is prior to product market fit, we recommend just applying to both.

Doing it again

After our experiment finished in the fall, 22 of the 32 startups that participated in the first Fellowship batch elected to apply to YC Core program and 6 of those companies are now part of the current Winter 2016 batch.

To test out our single application idea, we used the last application cycle to identify and invite teams that would be a good fit for the Fellowship to join the second batch. We ended up accepting 31 companies and they’ll be going through the new format starting February 1st. If all goes well, we hope to scale it up quickly on the next iteration.

Speaking of which, applications are now open today for both the third Fellowship batch and the YC Summer 2016 batch. If you’re interested, apply here.

MagicBus (W16) Makes the City-to-City Commute Easy and Productive

Americans waste more than 400 million hours every week driving alone to work and back. For employers, this means billions of dollars of wasted productivity, and for commuters, it means a lower quality of life. In the Bay Area, many smaller companies struggle to compete for talent with firms like Google and Facebook, who offer their own shuttle services as a perk.

MagicBus is a company launching out of our Winter 2016 class that levels the playing field by providing a shuttle ride available to any communter at the price of public transportation with the convenience of a private ride.

TechCrunch's Sarah Buhr wrote about MagicBus in a story this week:

"MagicBus hopes to end many Bay Area commuter’s slow, soul-crushing daily drive down the 101 with a scheduled, WiFi-enabled, private bus system to transport them anywhere from San Francisco all the way down to Sunnyvale.

There are a number of startups focused on carpooling in the Bay Area – Chariot, Shuddle and even Uber and Lyft among them, but co-founder Chris Upjohn believes MagicBus offers something uniquely different. Rather than focusing on transportation within a city, his startup supports the ride between cities... Magic Bus is pretty new, but Upjohn told me it already has 'thousands' of people signed up to use it already and Upjohn sees the platform as part of a bigger movement around smart cities.

'When we think about how we’d like to contribute to smarter cities of the future we’d like to reduce the congestion that we see,' Upjohn said. 'We’d like to eliminate the need for people to own cars and use MagicBusses for commuting and services like Uber and Lyft for in the city.'"

Read the full article here.

Getting Into Y Combinator

A new trend in Y Combinator applications is that an increasing number of applicants have already been through some sort of accelerator or “pre-accelerator” program.  As we’ve dug into this trend, we’ve found that many of the applicants did these programs not because they needed the money or advice but because they thought it might help them get into YC (and specifically that some programs market themselves as a "way to get into Y Combinator).

Actually, it's much harder to get in to YC if you’ve already been through another accelerator.  We assume that a group that has already been through an accelerator should have been accelerated, and that if they don't have impressive progress something must be wrong. (A smaller issue is the extra dilution on the cap table.)  We now have enough data to know that the track record of companies that go through multiple accelerators is much worse than companies that just do YC. 

We fear that there may be cases where groups are hurting themselves by participating in bad accelerator programs that don't accelerate them and yet also raise the threshold they'd have to get over to get into YC.  It’s certainly not a deal-breaker—and we are extremely sympathetic to the need to raise money in any way possible—but it does increase our expectations quite a bit.

So we want to remind everyone explicitly: if you want to get into Y Combinator, just apply to Y Combinator or the YC Fellowship.  In both cases, we like funding very early-stage companies.  You don’t need to “prepare” to apply to YC in any way.  You should only do an accelerator if you need the money to survive or think that the resources of the accelerator will help you be more successful; you should never do one as a way to get into YC.



Speaking of that, since we can’t yet fund every good company in the world, here is some general advice about evaluating accelerators:

*Talk to the alumni and ask how strongly they recommend it.  This is the best possible data you can get.

*Look at the accelerator’s track record (it’s important to distinguish between companies that went through the accelerator and cases where the investment firm made a small late-stage investment in the company).  This will give you a feeling for how good the accelerator actually is, and also a sense of how much external validation you’ll get by participating.

*Look at the strength of the alumni network.  You want to join an accelerator that has (1) eminent alumni who (2) really care about helping other companies in the family.  You’re joining a network, and more than anything else except perhaps the advice, this is where you’re going to get value. 

*Pay attention to how an accelerator treats you before you join, when they should be on their best behavior—it’s likely to be an indicator of how they’ll behave later.  Doing founder-unfriendly things like presenting exploding offers does not correlate with good behavior down the road.

Monthly HN Office Hours

Last year, we tried our hand at some new experiments to provide 1-on-1 advice out in the open. We've done this a few times on stage at Startup School, but we figured Hacker News might be a better way to do it at scale. 

I spent a day reviewing Show HN projects and Sam and I did online office office hours for an afternoon. You can see the results of those experiments here:

Aggregated Show HN Feedback
https://news.ycombinator.com/item?id=9748308

Online Office Hours with Sam and Kevin
https://news.ycombinator.com/item?id=9785533

We had such a good experience that we've decided to now do them every month. 

Each month, a different pair of YC partners will host office hours on HN. They'll either be feedback on Show HN projects or answering questions voted by the community. We'll be starting with Michael Seibel and Aaron Harris on Jan 22 at 11am PT. Michael and Aaron will be doing the office hour format on the 22nd. If you'd like help with your startup, on the day of the online office hours, post a top-level comment with a one or two sentence description of what you do and the first thing you'd like to talk about. The community will vote, and Aaron and Michael will answer the top questions.

We'll announce the time/day/format of the HN office hours the week before they happen through a Tell HN and then the day of put up a new thread (if it's a office hour format) for people to post their questions. If it's a Show HN format, the partners will just add their feedback to the individual Show HN posts and we'll put up an aggregated set of links when we're done.


Winter 2016 College Tour

Join YC partners and alumni at colleges around the country. Hear their stories and find out what it's really like to start a startup.

You’ll also have the chance to apply for one-on-one office hours at each stop. Get feedback on what you’re building, or ask us questions about YC. Hope to see you there!

1/22-23: University of Toronto
> 5:30pm, University of Toronto, Leslie Dan Pharmacy Building, Room PB B150, Toronto, ON
> More info 
> Sign up for office hours (1/23)

1/22-24 University of Pennsylvania
> 1/23, 5pm - Hardware Review with Luke Iseman at PennApps - Towne 100, Penn Engineering Quad
> 1/23, 7pm - Live UX Review with Kevin Hale at PennApps - Towne 100, Penn Engineering Quad
> Sign up for office hours (1/22-1/23)

1/25 North Carolina State University
> 1:30pm, Talley Student Union, 2610 Cates Avenue (Room 3285)
> More info
> Sign up for office hours (10am-1pm)

1/25 Duke
> 6pm, The Duke I&E Bullpen, 215 Morris St., 3rd Floor, Durham, NC 27701
> More info
> Please contact Sidney McLaurin (sidney.mclaurin@duke.edu) if you are interested in signing up for office hours (4pm-6pm).

1/26 University of North Carolina at Chapel Hill
> 6pm, 1789 Venture Lab, 173 East Franklin Street, Chapel Hill, NC
> More info
> Sign up for office hours (2-5:30pm)

2/4 University of Maryland
> 6:30pm, Computer Science Instructional Center (CSIC), 4146 Paint Branch Dr, Room 1115, College Park, MD 20740
> More info (University of Maryland student portal)
> Sign up for office hours (2pm-6pm)

2/5 Johns Hopkins
> 5:30pm, Hodson Hall, 110 Auditorium, Johns Hopkins Homewood Campus, Baltimore, MD
> More info
> Sign up for office hours (2pm-5pm)

2/11 Washington University in St. Louis
> 5:30pm, Whitaker Hall Auditorium
> More info
> Please contact toker@wustl.edu if you're interested in signing up for office hours. 

2/24 Morehouse College
> Sign up for office hours (2pm-5pm)

2/25 Georgia Tech with Startup Exchange
> 6pm, The Garage, Basement of Sq5, 848 Spring Street NW, Atlanta, GA
> More info
> Sign up for office hours (2pm-5:30pm)

2/26 Yale
> 4pm, campus location TBD
> More info
> Sign up for office hours (12pm-2pm)

2/29 Princeton
> 7:30pm, Robertson Hall, Princeton, NJ 08540
> More info
> Sign up for office hours (3pm-7pm)

3/2 University of Chicago
> 6:00pm, Chicago Innovation Exchange - Theater, 1452 E 53rd St Chicago, IL 60615
> More info
> Sign up for office hours (4pm-6pm)

3/3 Northwestern University
> 6:30pm, The Garage, 2311 Campus Drive, Suite 2300, Evanston, IL 60208
> More info
> Sign up for office hours (2pm-6pm)

YC Updates and Additions

Y Combinator now has 5 major groups—YC Fellowship, YC Core, YC Continuity, YC Research, and Hacker News—and we’re putting one person in charge of each group.

Paul Buchheit is taking over for me as managing partner of the core YC program.

We’re going to continue doing YC Fellowship (!), and Kevin Hale is going to be the managing partner of that.

As we’ve already announced, Ali Rowghani is the managing partner of YC Continuity, and Dan Gackle runs Hacker News.

As YC's President I will spend my time across the three investment programs (YC Fellowship, YC Core, and YC Continuity), and will also run YC Research until we find someone to run it full-time.

Additionally, Kirsty Nathoo is going to be the CFO across the entire YC group, and Carolynn and Jon Levy are going to be the General Counsels across the YC group too.

While we’re on the topic of who does what, I wanted to share two other roles that people outside of YC ask about a lot.  Each partner at YC is responsible for specific areas, but these are the ones that interface with external people most often.

Dalton Caldwell is going to be responsible for admissions to the core program and also for our efforts to stay engaged with alumni companies.

Kat Mañalac is responsible for the outreach efforts we do to meet potential new founders, and she'll also be working closely with Kevin on the Fellowship. 

Finally, we have a few new additions to the team to announce.

Matt Krisiloff is working with Kevin on YC Fellowship (he’ll also be doing some work on YC Research).  Matt previously co-founded a mental health directory that helped people find good therapists, and before that he studied at University of Chicago.

Denis Mars is working with Dalton on admissions for YC Core. Denis is a YC alumni (he was the founder of Meetings.io) and the founder of several other successful companies.  He was also the Chief Engineer of a Formula 3 championship-winning team.

Verena Prescher is working with Kirsty as the Controller of YC Continuity. Prior to joining Y Combinator, Verena was the Controller at Felicis Ventures.  Previously, Verena was a tax manager in PwC’s Asset Management practice, providing tax compliance and consulting services to investment partnerships with a primary focus on the venture capital and real estate industries.

Holiday Gift Ideas from Y Combinator

We've just launched YCGiftIdeas.com-- a collection of clever and unique gift ideas from 60 Y Combinator startups.

Yesterday I was doing some last-minute online Christmas shopping for my dad (I got him an Airbnb gift card), and it occurred to me how many of the YC startups were making things that would make really neat gifts. But they needed to be centralized, so I began pinning them to a Pinterest board. It was so cool how varied and "one-of-a-kind" these products were. Smart watches and jewelry, DIY iPhone repair kits, handcrafted shoes, beauty products and fragrances, Watsi donations-- there was something for most everyone there.

I wanted to share this collection with everyone, so I put together a web site. It's a real v1-- not perfect or complete by any means. But there are only 8 more days until Christmas, so I've scrambled to launch it and will continue to make updates/changes!

To YC alumni: if I've overlooked your product or you'd like a change, email me.

Thanks to Colleen Taylor for her wonderful writing and Strikingly for the quick and easy site building.

Happy holidays!

YC Digest: December 5-11

Top Stories from the YC World -- December 5th to 11th, 2015


YC News


Announcing new Open Office Hours

Introducing Open AI, the first initiative from YC Research

YC partners Qasar Younis and Kevin Hale's AMA on Tech in Asia


Launches

Function of Beauty (W16) Creates Personalized and Precise Haircare Formulas


Alumni news

Gigster (S15) raises $10 million for its software development platform

Paribus (S15) featured on Good Morning America for its online shopping savings app

Greentoe (S14) brings its "name your own price" shopping app to Android

Panorama Education (S13) featured in NPR

How Lugg (S15) got its on-demand moving app off the ground

Noora Health (W14) helps ease strain on doctors in developing countries

Level (W15) launches Level Vinyl for finding and custom framing records

Function of Beauty (W16) Creates Personalized and Precise Haircare Formulas

If you walk into any drugstore, you'll find an aisle full of shampoos and conditioners. But ultimately, these are all still one-size-fits all solutions. The actual amount of variation among each product and brand is quite small, and many consumers shop around for years trying out different haircare products without finding one that really works for them.

Function of Beauty is a startup launching out of our Winter 2016 class that creates truly customized haircare products. Founded by two MIT grads, computer scientist Zahir Dossa and engineer Joshua Maciejewski, along with cosmetic chemist Hien Nguyen, Function of Beauty has built a software platform that allows customers to create a personalized profile from 36 different features, encompassing options regarding hair type, style goals, fragrance preferences, and more. Ultimately, the company says that its platform can be used to create more than 450 million unique end products.

TechCrunch's Jordan Crook wrote about Function of Beauty in a story published this week:

"For now, the team is hand-filling each bottle and using a software algorithm to determine ultra-precise formulas for both the shampoo and conditioner. Eventually, however, Function of Beauty will use an advanced robotics machine to automate the creation of each formula and fill the bottles.

'Once we build the machine, we’ll be able to handle 100 different ingredient blends, leading to 900,000,000,000,000,000,000,000 combinations,' said Dossa. 'That number dwarfs the number of people on the planet, much less the relatively small number of shampoo and conditioner options on the market.'

Beyond formula customization, the company also offers the ability to name your specific formula, with that custom name printed right on the bottle.

...Function of Beauty keeps prices relatively low by selling directly to consumers online. An 8oz set will go for $26 and a 16oz set goes for $38. Comparatively, low-end products like Suave will cost you around $10 to $15, whereas high-end products like Fekkai shampoo and conditioner can cost up to $50/set."
Read the full story here.