HARC

We’re excited to announce YC Research’s newest project: the Human Advancement Research Community (HARC).

This came out of a conversation that started between Alan Kay and me more than a year ago about how to invent future computing technologies; I’m delighted to finally be officially working with him and his group.  He is one of the smartest people I’ve ever met.

HARC’s mission is to ensure human wisdom exceeds human power, by inventing and freely sharing ideas and technology that allow all humans to see further and understand more deeply.

The PIs at HARC wrote the following:

In our increasingly interconnected world, every individual’s actions can affect billions of others in complex and invisible ways. We believe every individual must have access to technologies that allow them to build their own understanding of the world and its systems in order to act conscientiously, responsibly, and effectively, both as individuals and in collaboration with others.

HARC researches technology in its broadest context, which includes: technology for communication (from the invention of spoken language to modern data graphics), intellectual tools (such as the scientific method and computer simulation), media (from cave painting to video games), and social systems (including democracy and public education). We are focusing on areas where we believe the structures created today will have the most impact on the future, and that can most benefit from having dedicated resources outside the for-profit world. At the moment, these areas include programming languages, interfaces, education, and virtual reality.

Our shared vision of technology combines an expansive long-term view with a strong moral sense. We look to the distant past as well as the far future. We reject the artificial boundaries created between the humanities, arts, and sciences. We don’t always agree on what is good or evil, right or wrong, but we use these words seriously and are driven by them. We seek to guide human technologies in thoughtful and ethical directions, with a deep sensitivity to the relationship between technology and the human condition, and the difference between what a piece of technology is intended to be and how it impacts humanity in reality.

In partnership with Infosys and SAP, HARC is starting with 20 of the top researchers in fields related to human learning and understanding, many of whom previously worked in SAP’s Communications Design Group. They include Principal Investigators (in alphabetical order): Vi Hart, Dan Ingalls, John Maloney, Yoshiki Ohshima, Bret Victor, and Alex Warth.  

We will share more detail about each PI’s current projects once we settle into our new roles and establish a web presence.

HARC will be chaired by Patrick Scaglia, who has spent his career leading similar long-term research initiatives. Alan Kay and Patrick will jointly contribute to the group’s strategic vision. Chris Clark will run the group operationally (along with YCR’s other groups).

The Advisory Board includes Patrick Collison, Adele Goldberg, Alan Kay, Vishal Sikka, and Tanja Rueckert.

Special thanks to Infosys, SAP, Sam, Alan, and Patrick for their generous support and hard work creating HARC, and we look forward to sharing more about our research in a few weeks.

Y Sequoia Combination

Today, Y Combinator announced its intent to acquire Sequoia Capital. This deal is still pending regulatory review and a successful pitch by Sequoia managing partner Doug Leone on YC Summer 2016 Demo Day. We’re not disclosing the financial terms, but Sequoia's ownership of YC-backed companies will pass to us, so I’ll just say we're once again the largest outside shareholders in Airbnb, Dropbox, and Stripe.

Sequoia Capital has had an Incredible Journey being the leader in venture capital investing in Silicon Valley for most of the last 40 years.  They have partnered with iconic companies like Apple, Google, Yahoo, PayPal, YouTube, LinkedIn, and WhatsApp.

The acquisition will enable our firms to realize a number of operational synergies. We have a blog and Sequoia doesn’t. Sequoia’s day-long Monday partner meetings will be replaced with Tuesday night dinners. And now YC companies will automatically receive a Sequoia term sheet to negotiate better terms from other firms. Sequoia will become the new YCVC group*, where they will take a hands-on role of turning YC’s best companies into enduring franchises, which they have been doing anyway.

The combined entity will officially be called “Sequoia Combinator”, but will do business as “YC”, as brevity is very important to both organizations. The new YC logo will be changed from orange to green as it is the color of sequoia leaves and money. Sir Michael Moritz will become chairman and also return to his journalistic roots as editor of Hacker News. Sequoia will help launch YC China, YC India, and YC Israel, and YC Forestry, which will be focused on preservation of sequoia trees worldwide.

Alfred Lin from Sequoia adds “YC is a perfect match for Sequoia because YC has been such a great source of deal flow for us. We don’t have to beg to invest in them anymore.”

Justin Kan from YC adds “Sequoia has so many partners on the Midas List and we’re really looking forward to learning from real investors.”

We are so excited for the future!

 

*Sequoia LPs will have 30 days to export their data.

Justin Time

Justin Kan is going to be the new spokesman for YC and handle the PR requests we get.

You should probably follow him on Snapchat (username: justinkan).

On a more serious note, I'm always impressed with how well-spoken Justin is, and how well he is able to connect with both reporters and founders.

Welcome x 11

We have a lot of new additions to the team to announce.

Tim Brady is joining YC as a Partner.  Previously, he was a Partner at ImagineK12.  Tim was Yahoo’s first employee and spent 8 years as the company’s Chief Product Officer.  Tim was also the CEO of QuestBridge, an educational startup that helps bright low-income high school students gain admissions and aid to many of the nation’s best colleges.  Tim has an MBA from Harvard and a BS in electrical engineering from Stanford.

Chris Clark is joining YC Research as head of operations.  Chris previously ran operations at Loopt, which was funded by Y Combinator in 2005 and acquired by Green Dot in 2012.  More recently, he was Mayor of Mountain View and still serves on the city council.  Chris has a BA in Political Science from Stanford University.

Bill Clerico is joining YC as a Part-time Partner.  Bill is the co-founder and CEO of WePay (YC S09), a payment company for two-sided marketplaces and software platforms that helps them manage risk.  Previously, Bill was a technology investment banker and studied CS at Boston College.

Cadran Cowansage is joining the YC software team.  Cadran most recently worked for MongoDB, Inc. in NYC.  She has a Master's in Biomedical Informatics and previously worked in several industries, including healthcare, intermodal transportation and finance. 

Jason Kwon is joining YC as a lawyer.  Before joining Y Combinator, Jason was the Assistant General Counsel at Khosla Ventures, and prior to that, an attorney at Goodwin Procter.  In his past life he was also a coder and product manager at several startups.

Karen Lien is joining YC as Edtech Principal.  Karen was previously at Imagine K12, which she joined in 2011 to help launch its first cohort of edtech startups. Before Imagine K12, Karen was the Director of College Relations at QuestBridge.  Prior to QuestBridge, she briefly taught high school chemistry, getting a first-hand taste of the challenges and rewards of working as an educator.  Karen has a B.S. in astronomy and physics from Yale University and an M.S. in astronomy from UCLA.

Brad Lightcap is joining YC Continuity.  Brad brings experience in both finance and operations.  He joined Dropbox in 2013 where he worked on projects ranging from product/partnership analytics to corporate finance and M&A.  Prior to Dropbox, Brad was an analyst with J.P. Morgan's Healthcare Investment Banking group in New York.

Sharon Pope is joining YC as a Part-time Partner.  Sharon is currently the Chief Marketing Officer at Green Dot Corporation (a pro-consumer financial technology innovator), where she has worked to conceptualize and launch products for Americans who seek alternatives to big banks. Prior to Green Dot, Sharon was the head of marketing and communications at Loopt (acquired by Green Dot, 2012).

Tom Sparks is joining the YC software team.  He is a systems and network engineer with over 20 years of experience in the field. He's worked for Microsoft, realtor.com, some of the Fortune 100, an early groundbreaking music startup and was one of the founders of one of San Francisco's largest ISPs. He cofounded Cryptoseal (YCS11), which was later acquired by Cloudflare.

Finbarr Taylor is also joining the YC software team.  Finbarr previously co-founded Shogun and worked for Pebble, Exec and Groupon. Before that, he studied CS at Strathclyde University in Scotland. 

Catherine Uong is joining YC as an Associate.  Catherine was previously at ImagineK12, and is passionate about learning and the power of creativity to help unlock students’ potential.  Catherine has a B.S. in Business Administration and a B.A. in East Asian Languages and Cultures from University of Southern California. 

Welcome, everyone!

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

Basic Income

We’re going to try something new—our first Request For Research. 

We’d like to fund a study on basic income—i.e., giving people enough money to live on with no strings attached.  I’ve been intrigued by the idea for a while, and although there’s been a lot of discussion, there’s fairly little data about how it would work.
 
It’s true that we have systems in place to give people resources, but the bureaucracy and qualification requirements make it a very imperfect approximation of what most people mean when talking about a basic income.  We have some examples of something close to a basic income in other countries, but we’d like to see how it would work in the US.
 
I think it’s good to start studying this early.  I’m fairly confident that at some point in the future, as technology continues to eliminate traditional jobs and massive new wealth gets created, we’re going to see some version of this at a national scale.
 
So it would be good to answer some of the theoretical questions now.  Do people sit around and play video games, or do they create new things?  Are people happy and fulfilled?  Do people, without the fear of not being able to eat, accomplish far more and benefit society far more?  And do recipients, on the whole, create more economic value than they receive?  (Questions about how a program like this would affect overall cost of living are beyond our scope, but obviously important.)
 
50 years from now, I think it will seem ridiculous that we used fear of not being able to eat as a way to motivate people.  I also think that it’s impossible to truly have equality of opportunity without some version of guaranteed income.  And I think that, combined with innovation driving down the cost of having a great life, by doing something like this we could eventually make real progress towards eliminating poverty.
 
We’re looking for one researcher who wants to work full-time on this project for 5 years as part of YC Research.  We’d like someone with some experience doing this kind of research, but as always we’re more interested in someone’s potential than his or her past.  Our idea is to give a basic income to a group of people in the US for a 5 year period, though we’re flexible on that and all aspects of the project—we are far from experts on this kind of research.  We’d be especially interested in a combination of selecting people at random, and selecting people who are driven and talented but come from poor backgrounds.  We're open to doing this in either one geographic area, or nationally distributed.

If you’re interested in running this project, please apply by February 15th.

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.

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.

YC Continuity

YC will fund its 1,000th company this year, and many of these companies are now scaling their organizations, revenue, and operations.  Though years removed from our program, these founders continue to come to YC for advice and support, and we would like to do more to help them.

To that end, I'm delighted to share that Ali Rowghani has joined YC as a full-time partner.  Ali has quickly become a trusted advisor to many of our growth-stage companies, and is helping a great deal with our vision of continued support for our alumni companies after they finish our program.

Also, in response to requests from a number of YC founders, we've raised a new fund called the YC Continuity Fund, which Ali will be running.  This fund will allow us to support YC companies well after Demo Day in two primary ways.

First, we're going to do our pro rata investment for every YC company in every round with a valuation below $300 million.  We believe we generally pick good companies for YC, and we want to be able to continue to support them in future financings.

Second, we will consider leading or participating in later stage growth financing rounds of YC companies.  We are open to taking Board seats where it makes sense for founders, but do not expect to do so in every investment.  We hope to be a founder-friendly partner for maturing companies in the same way we have been a founder-friendly early-stage investor.  Also, there are some companies we think are very good and important to support with growth-stage capital that traditional investors are less excited about, and we're looking forward to being able to do that.  Finally, we look forward to being a very long-term focused investor in a sector where most players are not.

We also want to be very clear on what we're not doing. We are not pursuing investments outside of the YC portfolio.  We are also not leading seed or traditional Series A rounds or trying to otherwise disrupt early-stage VCs, whose participation in the ecosystem is very valuable.  It'd be the wrong thing for our companies, as it would both create massive signaling issues for companies we didn’t fund and deprive companies of valuable additional advisors.  By doing pro rata in every company, we should avoid any signaling issues.

Our mission at YC is to be the organization that enables the most innovation in the world.  Capital especially long-term capital willing to invest outside of the current trends is an important ingredient in that mission, and I'm excited we are now able to better support some of our companies.  In doing so, I hope that joining YC is an even better deal for companies just starting out.

Welcome Jared!

I'm delighted to share that Jared Friedman is joining YC as a full-time partner.  Jared co-founded Scribd, the world's online library, which was funded by Y Combinator in 2006.  He was the CTO there.  Jared has also been an investor in more than 30 YC companies.  Before Scribd, he studied computer science at Harvard.

There are now 16 full-time partners at YC.