September 26, 2014
Editor’s Note: This essay was written by DreamIt Ventures Co-Founder David Bookspan as a counterpoint to Y Combinator president Sam Altman’s post on the topic of Exploding Offers.
Typically the Y Combinator blog provides valuable information and perspectives for startups. However, Sam Altman’s recent post about time-limited offers confuses YC’s interests for those of the community it purports to serve.
YC invented the “exploding” offer. YC gave founders five minutes to accept its offer. As explained in Newsweek Magazine:
When Graham calls the winners, the founders have only five minutes to accept. “If people turn us down,” he says, “as far as we’re concerned they’ve failed an IQ test.”
And as Sam’s post acknowledges, YC had no business reason—beyond its “IQ test”—to impose this time limit. It is ironic that YC now disparages other accelerators whose structure and services require an acceptance in a few days so that they can best serve the startups.
At DreamIt, we ask companies to respond to our offer in 48 hours. If a company needs more time, we accommodate it as best we can.
We need a relatively quick answer because we start working with companies immediately upon acceptance—well before the cycle officially begins. This includes:
We source and match mentors 1:1 based on the particular needs of each company. These mentors generally are “been-there, done-that” entrepreneurs with domain expertise in the market being addressed. We expect a lot from these dedicated mentors—asking them to spend 3-5 hours/week with the company—and they need to clear their schedules to do so. (We also have a pool of advisors available to our companies for ad hoc advice, like YC.) We need to know which companies are in so that we can source and recruit the right mentor for them. And frequently they start working with the companies before the DreamIt cycle begins.
Law Firm Matching:
Every DreamIt Company gets matched with an elite law firm that represents the company pro bono during DreamIt. Once matched, that law firm frequently starts working with the company before the official launch of DreamIt, so the company can hit the ground running.
Unlike YC, DreamIt provides office space for all of our companies. Indeed, many of our companies report that the communal experience of sitting in the same room with 50 other incredibly talented and passionate entrepreneurs is among the greatest benefits of DreamIt. With significant space constraints, it is imperative that we know who is in and how big their team is so we can accommodate them.
Because of these constraints, from thousands of applications we accept a maximum of 15 companies per cycle (in contrast to YC accepting upwards of 70 companies per cycle). The competition for each slot is keen. And we move very fast. Once applications close, we go from application review, to finalists, to interview, to selection, to offer, in 3 weeks. In the uncommon circumstance when a company declines our offer, knowing quickly can allow us to extend an offer to provide these advantages to other elite founders.
Companies that have accepted our offer over YC’s generally have done so based on these and other differences. Our focus is on helping companies build scalable, sustainable businesses (e.g., SeatGeek, Adaptly, LevelUp). In order for us to help each company the most, we need to know who is in so we can get to work.
We have found that two days tends to be enough time for companies to make a considered decision, which may include “shopping” our offer. If YC is considering the same company, two days—the equivalent of 576 IQ tests—should also be enough time for YC to decide whether or not to extend an offer.
DreamIt’s accelerator program provides hands-on support to the brightest high-potential teams to hone their ideas, develop and execute strategies, and ensure their ideas develop into real, fundable companies. DreamIt has found that giving time-limited offers is the best way to facilitate growth in the most effective way possible—by giving us time to prepare the personalized, quality resources that each incoming company needs to build a scalable business.
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