Venture investor Jason M. Lemkin argues Y Combinator's brand carries the weight of a Harvard or Stanford degree. He cites Front, Algolia, and Treasury Prime as founders who struggled to raise until YC opened doors. His advice: if you're unsure about the equity cost, do it anyway.
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I think that, and listen, I don't work at YC, right? I think if you're not sure, do it. Because the YC companies I've invested in, it, look, YC is expensive. It's a lot of dilution for a little bit of capital. When the earlier waves pre-YC that did this back when I was starting my career used to do it, they were founder ripoffs, okay? Give us 7% for like 1 hour of a designer's time. That was like the biggest ripoff back in the day. But YC is not that wise. And listen, I'm not into brands. I don't know where any founder I invest in went to college, but YC is Stanford, Harvard, MIT, and Caltech all rolled into one. And even if you don't learn a goddamn thing from the program, it— all things being equal, you might as well go to Harvard or Stanford or MIT, right? Not that I care. I don't care. And I went to Harvard, and maybe that's why I don't really respect it or even ask for founders I went to, but it doesn't hurt. Right? And, and VCs so respect it. Now look, there are like 220 companies in this batch, right? They can't all be the next Stripe, right? There's got to be a few, a few that will struggle and a few dogs. So, but, but everyone's looking for signals in this world. There's too many startups, there's too many opportunities, too many companies to join. There's too many companies to fund. And the network at YC is powerful. And the first time I saw it, I was— I'm a small investor in Front, which just raised $1.7 billion, and I saw the power to Mathilde going through it. I invested in Algolia, which is here, which is worth $3 billion. They were very seasoned French entrepreneurs that raised a seed before YC and gave up a lot to do YC. And they will all tell you it was worth it to get them to the next level. And then later, for example, there's a company called Treasury Prime, which is a banking as a service API I invested in. And the best CTO I know in the world is the CEO. Back in the day at Echosign, Adobe Sign, I offered him half my stock when we were at $10 million to join me. And half a million a year, and I would take nothing. He's that good. Okay? And, but he is, he's a romantic. He didn't join me. We would both be billionaires if he had, but whatever. Chris, if you're watching this, dude, I love you, but you should have taken the offer I made 6 years ago. It would have benefited both of us. Anyhow, so then he went, and he was a romantic, and he did a search company, Hard, Great Engineer Hard Problems Search, right? Didn't quite work out. And he needed a job, and I connected him with a great YC founder who was building a company called Standard Treasury really early in banking, like way too early. But they got bought by Silicon Valley Bank. He made a little bit of money. And anyhow, so he'd done this. He'd done another startup that sold for $200 million where he was the CTO. He'd had an exit. He was wicked smart and he wanted to be a CEO this time and run the whole show. And he's seasoned. I mean, he's not— he's not old, but he's not young. And he had these wins and he could get VCs to give him the money. Right. But he didn't have the whole thing. And I said, listen, just do YC. This will, this will create that missing slice that you're lacking, this confidence, this branding. And he's like, I don't know, I'm not the wrong guy for YC. I'm like, hold on, listen, I've never worked there. I'm gonna write your script. And we practiced it, and immediately they, they, they, they, you know, he got in in whatever, in 60 seconds. It's not that hard. He's like, hi, I'm Christine. I was co-founder of Merced Systems. We were acquired for $200 million. Then I was the CTO at another company, YC company, the Treasury The first one, Standard Treasury, the Silicon Valley Bank, and it became the core of their existing API. Now I'm running the whole show myself. I want to reinvent how banking is done in the 22nd century. I mean, you'd fund that, wouldn't you? Yeah, pretty good. Yeah. So, so, and, and I've tried to give that advice again, and then most recently there's a, there's another one like Chris, one of the best CTOs in my life, right? I will do anything for them. That's starting a company as a first-time CTO. He's had a billion-dollar exit. I Another exit, wicked smart, and he didn't have a lot, he had a little trouble raising money, but it wasn't that hard, right? Because he's got, in the grand scheme of things, and I told him to do YC. I said to him, look, you're gonna raise the money, but you're missing this slice, and YC is not magic. You know, watching a few things online, and now we can do it online, and I love Gary Tan, I love all these folks, I'm like, it's not so much, but it's gonna solve this slice for you, and he didn't do it, and I'm 1000% sure for him it was a mistake. So if I had to distill it all down, if you think YC is not a good deal, a rip-off, if you think you can raise the money, I'm sure there are, you know, Parker from, from, from, from, sorry, I'm getting tired. What's Parker's second company? Parker Conrad? Rippling. Yeah, Parker will tell you to do it. He did it again. He didn't have to. Lots of folks will tell it to you. I say if you're like Parker, maybe don't. Like if you— Parker's— I mean, it's different, but if you don't think there's benefit at YC, don't do it. Right? If you're so far along, you can— and you just— you think it's a cool brand, but if you think there's a chance it will add that slice, that's the advice I give. Just do it. So if you're not— it's a rambly answer, but I think with some good examples. If you're not sure, I always tell founders, just do it. Even if you have the revenue, even if you have— if there's a missing slice, like just go to Harvard, MIT, and Stanford, get it done, and it's worth it, right? Yeah. Thank you so much. I think I need that slice, so— Okay, then do it. Yeah, do it. Yeah.
