What To Do If Y Combinator Rejects You

What To Do If Y Combinator Rejects You
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Rejected from Y Combinator?

Congratulations. You might not be one of Sam Altman's advisees anytime soon, but you're certainly in good company. Yes, YC has produced unicorns like Twilio, Stripe and Airbnb, but they've also rejected a lot of now successful companies like SendGrid, Munchery and Buffer, who even published their rejected YC application.

When you don't have a lot of connections, startup accelerators can feel like the silver bullet you need to raise capital. While top tier accelerators regularly make headlines and produce unicorns with enviable valuations, they're not the only route to success. In fact, for some companies, it's just the beginning.

Last summer, for example, user onboarding software Chameleon was rejected from both Y Combinator and 500 Startups. With almost no connections in Silicon Valley, they weren't sure how they were going to raise the funds they needed to succeed without the introductions and mentoring these accelerators would have given them. They raised $1.9 million anyway.

Here's how companies like Chameleon, Sendgrid and Buffer manage to succeed by finding alternative routes after getting rejected from top startup accelerators.

Raise from friends and family to build a prototype

Oftentimes, raising from friends and family gives founders the run rate to build the MVP version of the product they need. It's what gave Sara Blakely the initial investment she needed to start Spanx. Sara called up people as far back as the 4th grade to ask if they would invest, and was able to turn an initial $5,000 investment into an undergarment empire. That small amount from friends and family allowed her to create a prototype that she then sold on cold calls to companies like Neiman Marcus.

An accelerator might have helped move the process along, but a family and friends round is what gave her the rope she needed to start the company.

Similarly, Pulkit Agrawal and Brian Norton from Chameleon were incredibly thankful that they had raised around $50,000 from family and friends before getting rejected from accelerators. If they didn't have that $50,000, they wouldn't have been able to build out a fully functional demo and go into private beta with companies like mobile analytics tool Amplitude.

With the insights they learned from that beta testing, they were on the road to creating a better user onboarding product that the public would want to invest in.

Jumpstart investor interest by pitching on online conferences and contests

Getting in the room with investors is certainly easier if you have a lot of connections, but there are lots of venues for you to do it if you don't. From conferences to contests, there are tons of forums where entrepreneurs can jumpstart investor interest.

The Pitch, for example, is a podcast, hosted by Josh Muccio and angel investor Sheel Mohnot, that's essentially Shark Tank in a podcast form. As Muccio says, “Ultimately we hope that we’ll be able to find hidden gems that would normally have a tough time raising money and give them a spotlight on the show.”

Not only do forums like The Pitch help whet investor interest, they give founders valuable feedback on how to hone your pitch to future investors. When Chameleon went on, for example, Dave McClure told them to think about defensibility and technical advantage. As a result, Chameleon updated their seed-stage roadmap to include using their customer network to provide deep insights on better user onboarding.

Other forums include competitions like LAUNCH Fest, where founders pitch to a room of journalists, founders and potential investors. By entering competitions like this, even founders who aren't well connected can get in the room with people who can make their visions a reality.

Companies like Mint (who won TechCrunch Disrupt in 2007 and has since been acquired by Intuit) often chalk up their success to these. As Mint says, “We hit 20,000 users within the first couple hours of the announcement. Our growth is from word of mouth, and the TechCrunch crowd are great amplifiers.” Winning TechCrunch gave them the users they needed to validate their product and eventually get investors interested.

Find your one angel who can get your foot in the door

Oftentimes, getting funding involves finding one totally committed angel investor on board. Once you find one angel investor who is well-networked, a lot of doors open up to you.

For Buffer, that angel and advisor was Hiten Shah. Buffer credits landing a spot at AngelPad to meeting Hiten. He helped get the ball rolling and figured out how they could get their foot in the door with other important investors.

Chameleon had a similar experience when they met Auren Hoffman. Auren typically writes $25,000 checks for angel rounds in SaaS companies, but pledged a lot more to Chameleon. His interest in the product made other investors do a double take and think that if it was something Auren had so much faith in, perhaps they should take another look.

Because of Auren's initial investment, investors began approaching Chameleon. In fact, True Ventures reached out to say that people they respected had invested in Chameleon, and invited Pulkit and Brian to attend True University, an event they host at Stanford every year. Alone, Chameleon probably wouldn't have initially garnered that kind of interest from True. But with Auren onboard, they had their foot in the door.

As is often the case, one great angel investor and advisor can be the gateway into an entire network of investors.

Stop asking for YC's permission to start your company

Perhaps one of the biggest benefits accelerators give founders is a confidence boost. Once they're accepted into YC, they know that some of the biggest names in the Valley have learned a bit about their company and have enough confidence to invest time and money into them.

This confidence gives founders the “permission” they were looking for to go forward with their idea. As Groove founder Alex Turnbull writes about YC,

“It’s a great program, but I hate to see entrepreneurs using it as a crutch, or waiting for an incubator acceptance to have permission to succeed. You don’t need YC’s permission, or TechStars’ permission, or my permission, or anyone’s permission. If you want to do it, do it.”
And in order to do it, you need to give yourself permission and find alternative ways to get your company off the ground. 

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