I thought the article was fairly straight forward until I got to the point you quoted. It's as if the attitude is that YC picks all the great startups and non-YC companies are second-rate throw aways that are destined to fail.
While I personally think YC is a great program with a lot to offer, which is why I applied, they don't have the resources to take on every group that applies. It also wouldn't be in their best interest. I was skeptical about YC Reject at first and wasn't sure about applying or looking for work and working on my startup part-time but I'm considering it more and more now.
The problem here is that everyone is looking at acceptance/rejection as bi-implication when it's not. Getting in implies you're probably good, but getting rejected doesn't imply you're probably bad.
Getting rejected doesn't in itself imply you're probably bad, but it doesn't imply you're good either. And if all an investor knows is that you're a founder or team that wants to do a startup, the odds are that you're no good. The problem is that the prior probability that you're good is already very low, not that the conditional probability that you're good given that you're rejected by YC is any lower.
So the real question here is, can these people learn to first evaluate their applicants, and then support the ones they fund, anywhere near as well as YC does? I think the YC formula is not going to be anywhere near as easy to duplicate as they seem to think.
Sure, I think it's fair to say YC skims good teams off the top and the average goodness of the remaining pool is decreased. I'm not disputing that. I'm disputing the idea that the negative signaling for a team that doesn't make it in is as strong as the positive signaling for a team that does.
And if all an investor knows is that you're a founder or team that wants to do a startup, the odds are that you're no good.
So the investor's knowledge about your project determines the founder or teams quality? YC applicants disclose more than that they want to do a startup, does that the automatically improve the odds that they're good? What specifically makes them "good" anyhow? YC Rejects would be disclosing more than they want to do a startup and in fact it's been noted that the angel would review applicants and determine who gets in.
The problem is that the prior probability that you're good is already low, not that the conditional probability that you're good given that you're rejected by YC is any lower.
Based on what exactly? Why is it more likely that your not good to begin with?
So the real question here is, can these people learn to first evaluate their applicants, and then support the ones they fund, anywhere near as well as YC does? I think the YC formula is nit going to be anywhere near as easy to duplicate as they seem to think.
It doesn't have to duplicate the YC formula in order to be successful as even YC proves that their formula doesn't automatically lead to successful startups. I do think that the YC staff and alumni network is a huge asset but that doesn't preclude others from providing valuable resources. The rest remains to be seen.
So the investor's knowledge about your project determines the founder or teams quality?
Sorry, I guess I was a little too cryptic. No, the investor's state of knowledge doesn't determine the team's quality; it determines the investor's estimate of the team's quality, and thus the likelihood that the investor will invest.
Why is it more likely that you're not good to begin with?
Simple: most startups fail. The vast majority, in fact.
It doesn't have to duplicate the YC formula in order to be successful
Perhaps not, but note that YC has been considerably more successful than most angel groups. There must be something out of the ordinary they're doing.
Most startups do fail. Most new businesses fail though unfortunately. That doesn't mean the team wasn't any good. There are so many dynamics involved. One of course is the quality of the product being developed by the team. Another being the marketing strategy, including pricing. And another being market acceptance.
I'm curious how you're defining YC's success compared to other angel groups. YC is a pretty amazing group, no doubt, but being great at publicizing and helping storm up investor interest in a startup can't be the only measure. Not that I'm trying to insinuate that's all YC is good at because I'm not.
"I thought the article was fairly straight forward until I got to the point you quoted. It's as if the attitude is that YC picks all the great startups and non-YC companies are second-rate throw aways that are destined to fail."
Huh?! That's putting a lot of words into the author's mouth. These companies may or may not be great, but it's true that they are not vetted in any way other than they've heard of YC and took some time to fill out an app. I hope they all succeed, but it doesn't seem out of line to suggest that companies NOT accepted/interviewed by YC aren't inherently fundworthy when compared to those that are.
I disagree, I didn't put words in the author's mouth. I didn't chose the questions or the framing. I also disagree, it is out of line to suggest that. Startups existed before YC. YC does not hold a monopoly on determining or ensuring success. Their "rejection" letter alludes to this fact.
YC has a tremendous amount of experience and their intuition and insight I'm sure leads to better decisions regarding startups, but they're in no way infallible.
I suppose my main point is that there are plenty of good companies that are fund worthy that don't get into YC for various reasons. One of those reasons being that YC doesn't have the time or resources to take them in. The YC model has been successful but there is still an underserved market here and that is why others are popping up, not that there is a bubble necessarily as the author suggests. There's no reason why angels wouldn't "invest in companies that are not vetted by Y Combinator?".
Keep in mind that YC didn't exist when Facebook, Microsoft, and Apple were started. It's quite possible that the next wave of those companies will be part of YC or are already part of YC.
The point is, granted that YC will improve your chances of success, just like being on american idol will help make you a success, but most stars next year will not be from american idol or from YC.
While I personally think YC is a great program with a lot to offer, which is why I applied, they don't have the resources to take on every group that applies. It also wouldn't be in their best interest. I was skeptical about YC Reject at first and wasn't sure about applying or looking for work and working on my startup part-time but I'm considering it more and more now.