80k may be a little tight for international founders, as flights and legal fees for visas can be very expensive. Also silly things like paying extra for deposits on rent/bills as you have no US credit history. But otherwise seems reasonable.
I don't think that taking this money precludes founders from raising more money if they need it, as they would have needed to do two years ago before the Start Fund.
The problem is raising money during the 3mo YC program is difficult and discouraged. YC founders have said they are discouraged from raising money until Demo Day or beyond, so they can focus on building stuff.
In very few cases will $80k vs. $150k make a difference before Demo Day, except for (IMO) hardware, certain other businesses with specific prepayments (maybe a licensing deal like "exclusive 12mo license for Kinect tech for pharmaceutical industry"), etc. But really hardware is the only obvious case.
I would actually go further and say it's not just difficult, I imagine it would be near fatal unless you were a well established company walking in. We found fundraising to be an incredibly soul sucking process and without at least a firm grip and a solid plan for what you're doing you wouldn't make it far.
While not nearly as bad as fundraising itself, I would also caution people not to underestimate how much work a successful kickstarter is. A lot of work is required, and is continued to be required long after it has finished.
It seems like the smart thing to do in this case is to then go down the Kickstarter route. I definitely wouldn't suggest it for software, as I genuinely think we got extraordinarily lucky, but for hardware it's an excellent choice.
Yeah. Getting early revenue or at least commits is key for anyone.
That said, I think I'd still want to have a bigger bank doing hardware. If you kickstart or take pre-delivery payment for something at ~cost, and you need to respin a few times, you may become the next Wakemake. Being able to just take your $50k reserve fund and buy all new parts or pay for an expedited mold or something could make a big difference early on.
I wish I had enough silicon-valley-version-of-Wasta to raise a $2-5mm microfund. Being able to finance hardware projects or other obviously capital-intensive YC projects on START terms with an extra $100-200k early on would be a pretty decent investment. It would still be a much more algorithmic decision than "which teams do I think will win", which probably wouldn't work as well. The ideal LP for this would be Jeff Bezos and maybe a few other guys who made bank off hardware or retail.
You'd almost be a bank, vs. an investor -- you would be investing based on a specific credible expenditure. Do it as debt + warrant coverage, or secure against revenue. Just be easy about it -- it should take 5 minutes to make a decision, and you should be adding hardware/distribution/retail/logistics clue to the process to help the founders.
YC hardware companies (and, honestly, all startup hardware companies) kind of sucked before the $150k START in W11.
Yup, the first thing I thought when I read this: I hope this doesn't end up hurting non-resident applicants to YC.
The "prevailing wages" for an engineering position (the minimum salary the company can pay an engineer on a H1B visa) in CA are about $75K. This means that there is almost no leeway even if only one of the founders needs an H1B: this funding alone would not cover it.
YC is very aware and supportive of immigrant entrepreneurs though, so I am sure they are already thinking about this.
Two mitigating facts:
- It is prudent to have enough money in the bank to pay the H1B employee for a year, but this is not a requirement before filing for an H1B, especially if you can show that there are other ways the company can continue to pay the employee. Most significantly: revenue :)
- The H1B is not the only route available to non-resident entrepreneurs: the O1 visa is another option, although the requirements are more stringent.
I have had to cross a few of these bridges myself, so if I can be of help to anyone reading this, please email me: hnusername@domainINprofile.com
The company has to prove that it will be able to pay the employee's salary for the duration of the visa. A lump sum in the bank is the easiest way of doing this. A steady or growing revenue stream per month is another way.
You are correct in that immigration in general, and H1B visas in particular are non-deterministic. Even having $1M in the bank and a top VC firm as an investor does not a guarantee a H1B by any means.
$80k would also be hard to do in SF for Americans. I think YC should do something around the Google Fiber initiative in KC - there's already a startup community congealing around the fiberhoods that have already gone live, and you can make it at least 1.5 to 2 years in KC on $80k, given the ridiculously low cost of living compared to SF.
Generally people are willing to accept a lower quality of life (in terms of spending) for short periods, like during a summer or winter of YC. Splitting a 2br apartment with a cofounder, even in SF or MV, isn't going to consume that much of 80k -- maybe $4k/mo, tops, including utilities, food, and the premium for month to month.
What screws people is when they have high fixed expenses -- like a founder who has a kid in college, a mortgage in another expensive city, non-working spouse, expensive medical insurance or medical costs, etc., or some combination of these. It's not hard to need $5-10k/mo to cover upper-middle-class fixed expenses, especially if you have to run it through payroll and thus ~50% total taxes, and then add living in the Bay Area for the summer on top of that.
That is why a lot of startup founders do it when they're young, not because being 22 is inherently better for doing a startup than 44.
But then you'd have to live in Kansas City, not the Bay Area, where all the investors and talent are. There are many parts of the Bay Area less expensive than SF proper.
That's why I'm saying that YC should take the first step, since it has the power to make a startup community in KC a real thing.
I also think that having the entire tech community concentrated in the Bay Area is a bad thing. It leads to mental inbreeding and a narrow perspective.
If YC was going to try and create a startup community outside of SV they would want to go somewhere else where actual hackers were. Certainly no where in the midwest. Maybe somewhere like Boston or NY... wait, didn't they try that?
As I said, concentrating the community in the Bay Area leads to mental inbreeding and a narrow perspective. Funding Midwestern startups might lead to successes that couldn't have been achieved in the Bay Area. Also, such startups could be funded with less money and will have a longer runway.
Why would it be less money? For software startups human capital gets to be the most expensive. Unless KC has a rather large community of brilliant senior engineers, who also happen to be unemployed, you'd have to offer something significant to convince people to move there and pay their (and families') relocation.
Bay Area inbreeding partially works because (a) young companies don't have to spend as much on relocation, (b) availability of public transportation makes living and working in different cities plausible.
> you'd have to offer something significant to convince people to move there and pay their (and families') relocation.
That's why I'm saying that a push by YC combined with Google Fiber could be that initiative. Like I said, there is already interest in the startup community in KC because of Google Fiber. For example, someone started a "startup house" in the first fiberhood to get hooked up, and is now renting it out to startup founders. He's got a lot of reservations already.
As for moving their families, I don't think that's a big concern. There are a ton of young, single potential founders who would have no problem moving halfway across the country.
> Bay Area inbreeding partially works because (a) young companies don't have to spend as much on relocation
These costs can be much lower in the Midwest. Finding an apartment is not the multi-month ordeal it can be in SF, for example.
> (b) availability of public transportation makes living and working in different cities plausible.
There's no need for public transportation in KC. Gas is cheap, taxes are low, and parking space is plentiful. Just get a car. In fact, I'd prefer not to take public transportation if the train stations need to be cleaned by Hazmat crews[0], as they do in SF, with BART.
Relocation costs to the Midwest would be lower per relocated employee, but the lowest relocation cost would be 0 because the employee already lives there. This is the benefit of the Bay Area.
Traditionally the tech industry has been centered on suburban Silicon Valley, not San Francisco proper. But more and more educated young people want to live in real cities with culture, diversity, mass transportation, and walkability, which is they they live in San Francisco. There are other places with some or all of those benefits--New York, Chicago, Seattle, Portland, London, Berlin, Vancouver, BC--but Kansas City has close to none of them.
In addition, the San Francisco Bay Area has the Sand Hill Road VC's, tons of angels, a large talent pool, two world-class CS departments at Berkeley and Stanford pumping more talent in every summer, and lots of other technology companies in town to collaborate with. It even has lots of suburbs if you really want that. Kansas City has Google Fiber. Not even Y Combinator would tip that balance.
What does Google Fiber have to do with anything? Are any of these startups really hosting anything in their work space? I doubt it, and either way, hosting a server on Google Fiber is currently prohibited and they don't offer business service. Beyond that, I don't think working on a 1gb connection is going to make the founders any more productive than regular 30mbit connections.
YC gives a measly $600 for travelling expenses for the interviews, but suddenly $80k isn't enough?
$4k gets you anywhere in the world, and maybe half the western world is reachable with $1k or less. You're not going to spend a substantial portion of $80k on flights unless you go home and back every weekend.
Visas cost 5-10k per founder. We had to pay an extra month of rent as 'deposit'. You will need to fly in and out of the US several times while the visas get process, as the ESTA is only 3 months. A round trip from LON-SF can be 1k per person, and that's from a hub. I've already got enough miles to be bumped up on my frequent flyer prog.
It's not the end of the world, and the typical YC company will be resilient enough to survive whatever.
However it does add up fast (40k easily), it's not something you can avoid, like say buy a less shiny laptop, and reduces your runway in a meaningful way.
Use visa waivers. They let you stay in the US for 3 months at a time and spending $1k on a ticket at the end of each 3 months is cheaper than paying $5-10k upfront for a visa plus additional flights.
If you are worried about the number of times you can enter on a visa waiver, don't - I have entered the USA 50+ times on a waiver and the guys at immigration ask me how I am going and wave me on each time.
This was even more fun before they closed 'The Mexican Loophole', where you could drop out to Mexico for the weekend and get a new visa on the way in. I had a lot of fun weekends in Mexico before they shut that down. You now need to leave the North American continent (they included Central America when people started flying to Belize to get new US entry visa's)
Visa waivers (ESTAs) are fine during YC, but after 6-9 months it becomes necessary to have legal status to do things like fund raise (many investors only do local), paying yourself, staying in the country for more than 6 months in a year etc. Obviously there is also the risk of the nightmare scenario that immigration dude has a bad day and doesn't allow you to enter the US. Whilst this is rare, I know of it happening.
Most international YC companies end up moving to the US, and they sort out visa issues after demo day as it takes too much time during YC.
The list of countries that you can get a waiver from is a lot longer now than it was when I started doing it. The USA realized that they depends on business tourism/migration, so they have been steadily expanding that list of countries and the scope of the waiver program.
I know of two people who did something like that and it went wrong. If you are not lucky you get the "wrong" immigration officer and then you won't get into the US anytime soon.
Immigration costs close to $10-15K if it's a real move. Without a US credit history, you're going to have to put down a lot of deposits just to get basic things done like getting a credit card.
Maybe I don't. But what about founders before 2010? There are plenty of companies that succeed without being based in the US. Is spending almost 20% of your business runway on immigration worth it?
You can also stay with Chez JJ, which has no such requirement. We've hosted over 20 YC companies in the past year, many of them international, and we also help with orientation to the Bay Area.
Can I use this quote? Working on a company built around supplementing credit information to solve this problem. Would be curious to hear an international perspective on this.
