The Fellowship + Stripe Atlas

Great startups can come from anywhere in the world. One of the Fellowship's goals is to make it as easy as possible for founders to start companies with strong foundations, no matter where they're located. It’s one of the reasons why we’re designing a program that founders can participate in without having to move to Silicon Valley.

Unfortunately, international founders who join YC usually have to navigate fairly complicated processes just to get access to the same tools as their US counterparts. There are two reasons why we set up YC companies as U.S. entities with U.S. bank accounts:

1) Access to the largest pot of seed capital in the world. U.S. investors tend to avoid investing in foreign entities.

2) It’s easier to collect revenue with a U.S. bank account in the U.S. market, which for most of our companies is still the largest market for them to go after.

Today, Stripe announced the launch of Atlas, a beta program designed to streamline the process of getting the basic building blocks of starting a company assembled without hassle. In partnership with Stripe, we’ll be offering Atlas to future Fellowship companies located overseas.

Atlas allows international founders to get everything they need to create a business in the U.S. simply by filling out a web form. Stripe handles the rest, providing each business with:

1) An incorporated U.S. business entity
2) A U.S. bank account
3) A live Stripe account to receive payments from anywhere in the world
4) Access to services they'll need to get started; including tax advice from PwC, legal guidance from leading international law firm Orrick, and $15,000 credit to Amazon Web Services to help scale their newly global business

Stripe initially joined YC to rethink how payments on the internet should work. Now they’ve rethought what borders mean for business. We’re delighted to be working with Stripe to make it easier for our international founders to spend more time working on their startup and less time on paperwork.

YC at Yale, Princeton, UChicago and Northwestern

The second leg of YC's Winter 2016 College Tour kicks off today in Atlanta. We'll be visiting these schools in the next week:

2/26 Yale
> 4pm, Sheffield-Sterling-Strathcona Auditorium (SSS Rm 114) - 1 Prospect Street New Haven, CT 06511
More info

2/29 Princeton
> 7:30pm, Robertson Hall, Princeton, NJ 08540
More info

3/2 University of Chicago
> 6:30pm, Chicago Innovation Exchange - Theater, 1452 E 53rd St Chicago, IL 60615
More info
Sign up for office hours by end of day this Thursday (4pm-6pm)

3/3 Northwestern University
> 6pm, The Garage, 2311 Campus Drive, Suite 2300, Evanston, IL 60208
More info 
Sign up for office hours by end of day this Thursday  (2pm-6pm)

See you there! 

Fundraising Advice for YC Companies

We've modified our fundraising strategy advice to YC founders.  In the interest of everyone having the same information, here is the email I sent to the current batch this morning.


Founders--

As Y Combinator's prominence has grown in recent years, we've seen a flood of new investors who are very focused on investing in YC companies in the current batch.  Some of these investors are very aggressive and offer attractive terms with no diligence.  There are obvious good things about this, but there are really bad ones too.  We're now about a month away from Demo Day, which is when the investor outreach usually starts in earnest (as we've said before, we recommend politely deferring these requests to meet until closer to Demo Day).

So we're modifying our advice about how to raise money at the end of YC.

Before we get to that, here's a very important point: some good companies will struggle to raise money.  Fashionable companies, good or bad, have a much easier time raising money than unfashionable companies.  This is a bug in the market that some of the best investors learn to exploit, but it still doesn't help you much if you need to raise and can't.  Try not to get demoralized if you don't get the response from investors you were hoping for--be relentlessly resourceful and figure out a way to make it work with what you have.

Also, the environment seems to be changing.  It will very likely be somewhat harder to raise money now than it's been in past years, but it's too early to say for sure (so far we haven't seen nearly as much of an effect on early-stage fundraising as the level of press coverage would seem to indicate).

Ok, on to our advice.

1) You should care more about good investors than good valuations.  Use the YC investor database, talk to us, talk to alumni, and talk to the founders of the companies that investor has funded (especially in cases when the companies haven't worked out).  However, you should insist on clean terms (in practice, offering messy terms is a sign of being a bad investor).

2) You should aim to sell only about 20% of the company in your seed round (though 25% is ok if you're raising a 'large'--say more than $2.5 million--seed round).

3) You should raise enough money to get to your next significant milestone.

4) You should try to get the process over with reasonably quickly so you can get back to work.  The founders that fall in love with fundraising rarely go on to be the most successful. 

So here's what I would do if I were a YC founder in the current climate.

I'd close the first, say, $200k from the first reasonably good investors that offer it on reasonable terms--say a $5 million pre-money valuation or higher.  This removes some uncertainty and pressure, gives you capital to execute with while raising the rest of your round, puts you in a stronger position, etc.  It's worth a discount for all of this.

Beyond that, I'd then collect interest from investors.  Get to know them and let them get to know you.  This doesn't have to take a long time; a few weeks and 3 meetings per investor for a seed round is enough, and in some cases both sides will feel ready to make a decision after one meeting.  But don't feel the need to take offers in the order they come in; you have a limited amount of space in the round, investors are on your cap table for a very long time, and you want to pick the best people you can get.  Every batch, some of the best companies regret selling a lot of stock early on and then getting interest from great investors later.

Then, after a set number of weeks you decide to spend fundraising, make the allocation decisions at the same time.  It's cleanest to offer everyone the same terms that invests at the same time--everyone claims they add extra value and needs advisor shares, but no one else thinks anyone should get them.  If you deviate from this, you should be transparent and let everyone in the round know about advisor shares or different terms.  (If you fill up your initial raise and then have more interest but are sensitive to the dilution, it's fine to ask new investors if they want to raise more at a higher price.  They can always say no.)

Use the Handshake Deal Protocol when you're ready to make allocation decisions.  (Though it's worth noting we only recommend the HDP for seed rounds.  If you're raising a Series A, i.e. millions of dollars from one investor, use the tried and true term sheet to indicate an agreement.)

Other reminders for fundraising:
*The best investors know that the most important thing to figure out at this stage is how much your users love you.  Great engagement and word of mouth growth are magic for fundraising.
*Growth is obviously still really helpful.
*It's important to articulate why the company will eventually be in a strategically valuable position (i.e. a monopoly).
*It's important to articulate your mission.
*Don't be arrogant--this is a tactic that somehow does manage to work for fundraising some of the time for some founders, but most of the time it doesn't.

As always, reach out to us along the way with questions.

Sam

VINEBOX (YC W16) Lets You Try New Premium Wines, by the Glass

Traditional wine clubs deliver by the bottle or the case. That means that often, members end up with large amounts of wines that are unexceptional, or not suited to their tastes.

VINEBOX is a company launching out of our Winter 2016 class that is a new take on wine clubs, sending top quality wines by the glass instead of by the bottle. The VINEBOX model makes it easy and cost-efficient to explore the world of premium wine one glass at a time. As a member, you only commit to full-sized bottles when you're sure you've found something you love.

VentureBeat's Ken Yeung wrote about VINEBOX and interviewed its founders in a story this week:

“If you’re like me and enjoy wine occasionally, but find it difficult to select a good bottle, then joining a wine club won’t necessarily be a great investment for you. After all, why would you risk getting an entire bottle when you’re not sure if it’s something you want? Instead, you might want to check out Vinebox, a monthly delivery service that will ship wine by the glass to you from Europe to improve your palate.

...'Right now we live in a society where we’re all about testing things out. It’s about immediate gratification. You can listen to a sample of music or watch an episode for free,' said Vinebox chief executive Matt Dukes. 'We’re extending the example to wine because picking it can be an intimidating thing.'

Operating as a wholesaler, importer, and retailer, Vinebox is licensed to ship wine to 39 out of the 50 states (sorry, Utah). Its three largest markets are New York, Texas, and California. Customers can select from one of three tiered offerings: They can pay $35 per month, $33 for three months, or $30 per year. Each option comes with three glasses of wine each month from bottles costing between $25 and $55."

Read the full story in VentureBeat here.

Gravitational (S15) Helps Companies Run and Maintain Cloud Apps on Their Private Infrastructure

Most software vendors put their software on a virtual machine and send it to their customers. That means that the customers are on the hook to hire system integrators and other IT personnel to keep that software running -- making the entire process of installing and maintaining enterprise software difficult and often expensive.

Gravitational, a company that was part of our Summer 2015 class, launched to the public this week with an answer to this problem: Gravitational helps software companies remotely manage their applications on private infrastructure, making it unnecessary to hire additional people to run complex software on premise. Essentially, Gravitational turns every on-premise installation into a remotely managed service.

TechCrunch's Ron Miller wrote a story about Gravitational this week:

"Without a solution like the one from Gravitational, companies would have to maintain two sets of code, which is simply too costly for most companies to pull off. That meant these companies were sometimes leaving deals on the table from customers who wanted a delivery model they couldn’t offer.

This wasn’t the founders’ first go with Y Combinator, Ev Kontsevoy, Gravitational’s founder told TechCrunch. His first company, Mailgun was a member of the YC Winter 2011 class. It raised $1.2 million, before it was acquired by Rackspace in 2012.

It was through his experience working at Rackspace for several years after the acquisition that Kontsevoy began to see some difficult problems facing companies hosting SaaS programs in the cloud, which would eventually come together and lead him to launch Gravitational."

Read the whole story here.

Why YC?

People often ask us what happens at YC and what benefits you get as a YC founder. Here is a list of the resources available to YC founders.

You can also read a longer version of what happens at YC here.

Applications for Summer 2016 are open! Apply here.


YC in Atlanta - 2/24-2/26

YC is visiting Atlanta next week, and we hope to see you there! 

Wed, Feb 24: Coffee with YC at Tech Square Labs
> 11am-12pm, 859 Spring Street Northwest Atlanta, GA 30308
> More info

Wed, Feb 24: Morehouse College Entrepreneurship Center
Sign up for office hours (2pm-5pm)

Thu, Feb 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)

Questions? Shoot us an email at openofficehours@ycombinator.com.

Yardbook (YC W16) Brings Software to the $30 Billion Landscaping Industry


Landscaping is one of the last industries that has yet to be ‘‘software enabled’, with most companies running their businesses on pencil and paper.

Yardbook is a company launching out of our Winter 2016 class that's bringing cloud-based software tools to this vast yet under-served industry.

TechCrunch's Jon Shieber wrote a story about Yardbook this week:
"With the penetration of mobile phones, and simply the falling costs of hosting and managing and online business, new verticals are opening up to young companies at prices and scales that would have been unheard of even a few years ago.

In YardBook’s case, it’s the lawncare industry.

And the customer adoption of YardBook shows that, at least in this instance, the thesis might be proven correct.

In just over a year, the company has managed to snag 11,000 customers and processed $65 million in payments across the platform. Today, the company is launching a tipping feature for payments so that even more money can be captured by lawncare service providers without the need to resort to grubby cash payments (filthy lucre!)"

Read the full story here.

Acre Designs (YC W16) Makes It Simple to Build a Zero-Energy Smarthome

The typical American home built today is fundamentally very similar to homes that were built in the mid-20th century. In aggregate, this adds up to a lot of inefficiency: American homes consume a quarter of the nation’s energy and 14 billion gallons of water annually.

Acre Designs is a company launching out of our current Winter 2016 class that makes it incredibly easy to build a zero-energy smarthome -- one that's functional, beautiful, and reasonably priced. Acre homes are 100 percent solar powered, and use 70 percent less water than your average home.

TechCrunch reporter Frederic Lardinois wrote about Acre in a story published this week:

"As Acre co-founders Jennifer and Andrew Dickson told me, they started the company out of their own frustration in finding a sustainable home that was built to modern standards. Specifically, they were looking for a zero-energy home that could use solar to power the entire house.

'We realized existing homes were very difficult to get to any standard of efficiency without a lot of work,' Jennifer told me. 'But we are still building new homes with the same standards as 60 years ago.'

Andrew (an industrial designer with experience in working on everything from furniture to jet boats) and Jennifer (an architect) co-founded the company with builder Don Newman (now Acre’s VP of Construction) and got accepted into Y Combinator. ...Given how outdated the construction process and many of the designs and features of today’s new construction homes often are, it’s a bit of a surprise that nobody has really tackled this market yet."

Read the full story, and see more photos and a video of an Acre home, here.

Sendbird (YC W16) Adds Real-Time Messaging to Any App in Minutes


User engagement and retention is one of the biggest pain points for app developers: Research shows that the average app loses 77 percent of its users in the first three days. One of the best ways to keep users around is to add messaging and chat features -- but doing so can be time and labor intensive for a developer team.

Sendbird is a company launching out of our Winter 2016 class that lets you add messaging to any app quickly and easily. Its messaging-as-a-service platform lets developers to add real-time chat capabilities to their app in just five minutes.

TechCrunch's Matthew Lynley wrote about Sendbird in an article published today:

When John Kim and his team were working on a community-based application called Smile Mom — which was designed to connect nearby moms — they ran into a problem: They wanted to integrate messaging, but couldn’t find an off-the-shelf solution they liked.

They ended up building one themselves, and that led a bunch of friends to ask to use the service. So Kim and his team decided to pivot the company toward building just that. The result was Sendbird, a software development kit that enables developers to quickly build chat tools for their services. The company comes out of Y Combinator’s most recent class, and is launching today.


Read the full story here.