Build Your Own YC

Y Combinator is often seen as the ‘Harvard of startups’ and perceived as a ‘must-have’ for early-stage startups. However, (1) YC does come at a cost in terms of dilution (on average 10-12%, fully loaded dilution, for $500K¹), and (2) YC’s low acceptance rate (1-3%) can be, sometimes, discouraging. Thankfully, there’s an alternative: you can build your own YC.

YC’s Context

To close a pre-Seed or Seed you’d typically need to speak to 50-100 VC funds and/or angels. Having an established track record or being part of a startup studio can get you immediate access to these volume of investors. If you have neither, getting into YC is often seen as a ‘must have’ to get access to this network.

YC brings to the table:

1. A network of investors (e.g., 50-100 warm intros to VCs)
2. Advisers (by verticals (e.g., robotics, SaaS, D2C) or topics (e.g., marketing, product)
3. An early governance structure (or accountability mechanism)
4. A sizable amount of cash ($500K today)
5. A brand (that can be clearly leveraged for hiring, fundraising, and selling)
6. A community (that can be leveraged for selling, partnerships, etc.)
7. A brand for the founder (YC founder); it’s a pedigree that can be comparable to Harvard MBA for a consultant, etc.

YC costs:

1. 7-12% of your cap table post-YC depending on the valuation of the round you’ll raise after accepting to join a YC batch

The alternative: build it yourself

So you weren't accepted in the next YC batch? Don’t worry; there’s an alternative². You can build your own YC! While you might not be able to get the ‘cash’ component of the YC offer, building a solid suite of advisors yourself will get you:

1. ✅ A network of investors (e.g., 50-100 warm intros to VCs)
2. ✅ Advisers (by verticals (e.g., robotics, SaaS, D2C) or topics (e.g., marketing, product)
3. ✅ An early governance structure (or accountability mechanism)
4. ✅ A brand³ (that can be clearly leveraged for hiring, fundraising, and selling)
5. ✅ A community⁴ (that can be clearly leveraged for selling, partnerships, etc.)

The advisors will cost you:

2. 0.15-0.3% of your cap table per advisor

Not bad.

The method: how to do it

Here’s how to do it:

1. Quality: start by building something interesting. Get traction with a prototype, early customers’ contracts or feedback, a pitch deck, a financial plan, and an executive summary. Don’t come unprepared. You won’t find a quality advisor that wants to ‘catch up for a coffee.’ Show something tangible and potentially very valuable from day one.
2. Be selective: Make a list of everyone you know (you can export your network in .xsl from Linkedin) and rank them by ‘seniority’ and ‘relevancy’ (vs. your startup).
3. Be tactical: Start with the advisors you’re the closest with and that have the highest probability of telling you ‘yes.’ Just like fundraising, future advisors will be easier to convince once they see an existing solid team of advisors.
4. Come prepared: Have a ready-to-sign advisors’ agreement (I recommend DocuSign). If your company is already incorporated, have a tool to issue digital shares/options certificates (e.g., Carta) - the more tangible, the better.
5. Build the system: I recommend having 30 min recurring meetings every two weeks with the advisor and pairing them with the relevant founders (e.g., Growth Advisors with CEO, Tech advisors with CTO, etc.)
6. Leverage more: Your advisor can help you on topics that are above their realm of competence. For example, you can ask your Tech Advisor for intros to investors and clients or product usage feedback.
7. No cash: I would advise not paying your advisors in cash. For me, it’s generally a red flag and means they don’t believe in the equity story. Also, I would be mindful about taking cash from your advisor - it will generally change the dynamic of the relationship, and your founder-advisor relationship will evolve into a founder-investor relationship, which is quite different.

Conclusion

While having advisors early on might not bring you the cash you need to bring things ‘off the ground,’ it can be an efficient way to ‘get things in motion,’ benefit from expert advice, open doors, and ultimately bring you the investment you need.

Your advisors will often provide more value vs. ‘cash.’ On top of their respective expertise (e.g., ops, revenue, product), they will support you in the journey, the ups and downs of the startup, and offer a regular, external view of your startup. Build the relationship!

1. The exact dilution will depend on the post-money valuation of the next time you raise after accepting YC. The YC standard deal is $125,000 for 7% and now also invest an additional $375,000 on an uncapped safe with an MFN.
2. Actually, I would advise you to both build your own YC and apply to YC at the same time. Both bring traction and learning and you can always decide if you want to join YC once you get an actual offer.
3. The brands of your advisors.
4. The companies of your advisors - you can start selling there.