The hidden benefits of Y Combinator

Posted on May 26, 2014

When startups consider participating in  Y Combinator (or any accelerator) there are a number of obvious benefits including mentorship and funding.  I would argue that the hidden or unspoken benefits of the program in many ways can outweigh the obvious benefits.  With 7 companies from Velocity attending Y Combinator we have some good anecdotal data on the additional benefits of joining the YC program.

From my perspective there are three key hidden benefits:

1. Geographic isolation and building a new network

All Velocity companies are based in Waterloo Region (Canada) and as such participating in YC necessitates moving to the Bay Area for the program.  Most founders in our program will not have family or a close personal network in the Bay Area.  The biggest hidden benefit is the geographic isolation.  There is nothing for the founder to do every single day but work on their business.  No family commitments.  No friends asking for a beer.  No random coffee requests for help.  Just complete and utter quiet as you focus on building your business.

2. Living with your co-founders

On top of the geographic isolation, most founders choose to live together during the program for a variety of reasons.  It is more cost effective and it is easier to find one house/apartment for 4 months than multiple places for that short time period.  Living with your co-founders intensifies the benefits of geographic isolation.  When you wake up in the morning you are talking about your business over breakfast.  After breakfast – working.  Lunch – talking about the business.  After lunch, work.  Companies can make a tremendous amount of progress in three short months and I believe it is because of these two factors.  Even better, living with your co-founders strengthens the bond making the team that much stronger to withstand the challenges of building a startup.  If you cannot live together, it is unlikely you will be able to successfully build a company together over the long term.

3. Competition and short term focus

YC runs dinners on Tuesday nights where they bring in a speaker to share insights off the record.  When I started at Velocity over two years ago we had a similar program for everyone in the Velocity Residence and Velocity Garage.  Over a two year time period we tried just about every experiment we could to see what value was being driven by the dinner program in an effort to optimize the benefits.  The lessons learned are enough for several blog posts but as part of our efforts we tried to understand the benefits that YC obtained from running the dinners.  It wasn’t to feed anyone.  It wasn’t the camaraderie from breaking bread together.  It wasn’t the speaker (although there are certainly benefits) sharing insights.  It was the friendly competition between the different companies in the YC batch.  Each week, founders would show up at the Tuesday dinner ready to brag about what they had accomplished over the past week.  No founder wants to show up at the dinner with nothing to show for their time spent on the business in the past week.  The competitive element drove the teams to work hard (further intensifying the benefits of points 1 and 2 above) to create a sustained period of intense productivity.  Several of our teams still talk about how productive they were during their time at YC wishing they could be half as productive now with larger companies and more demands on their time.

Of course, none of these elements are sustainable over the long term.  Eventually you will build a new network in the Bay Area that will reduce your geographic isolation if you company stayed there.  Eventually you would stop living with your co-founders or you would start to explore other elements of your life outside of your startup.  But this should provide guidance for companies as they consider accelerator programs for their own companies.  I would NOT recommend attending the local accelerator in your community.  You will gain so much more from attending one in a new community for all of the reasons listed above assuming the obvious/main elements of the accelerator match your needs.

What other hidden benefits have you seen from YC or other accelerators?

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