It is without question that most people applying to incubators apply to a few of them, in case they don't get into the (obviously) best one, YC.
Its my guess that some of the less exciting incubators give these exploding term sheets to make the founder think:
"Damn, I got into Incubator X but I have to say yes in 48 hours. I wonder if I will get accepted into YC also when answers go out in 2 weeks. Should I risk walking away with nothing, or just take the offer I have now..."
Would not be surprised to see more incubators doing this anyways, with or without exploding term sheets. They will likely just move up the dates their sessions start (and the date you need to say yes by), to make sure its before YC answers go out.
On the same hand, I am not sure what you expect other incubators to do. YC is hands down the most prestigious incubator to get into and everyone knows that. So, you have a bunch of other incubators that have to think scrappy to get people into their programs. These guys don't just want YC's cast-offs, after all.
If YC was to start doing rolling acceptances for a start date, it would solve the issue of other people doing exploding term sheets. If I apply to YC today for the winter batch and can interview and get a yes in a few weeks, then the motivation for other incubators to do this behavior is gone.
YC partners need to realize they are the cause of other incubators giving out exploding term sheets. I know YC likes to make a event of doing all the interviews/acceptances on one day, but it would certainly be much more entrepreneur friendly to have it be rolling admissions. The start dates for sessions can still remain the same of course.
> These guys dont just want YC's cast-offs, after all.
That is thoughtfully provocative. I have literally zero evidence to go from, but I suspect that Y Combinator is like Harvard or Yale: they could get rid of the group that they actually admit and go for the next tier, then achieve similar outcomes. (In other words: there are so many strong applicants that they can't take them all.)
This is just to say that even taking YC's cast-offs could be perfectly acceptable. YC is dominant for now, but it's not hard to imagine a world in which there are a few accelerators which are true YC peers (just like Harvard, Yale, Princeton, and Stanford are variously preferred by different people with real differences in preference).
You raise an interesting point. James Gosling went to my university for undergrad (U. Calgary) and then went on to do a PhD from Carnegie Mellon after being turned down everywhere else. The day of his graduation, they told him that each year they randomly accept one individual they originally rejected and that he was the first one to graduate. I'd love to see the results of this after a 5-year run.
> I have literally zero evidence to go from, but I suspect that Y Combinator is like Harvard or Yale: they could get rid of the group that they actually admit and go for the next tier, then achieve similar outcomes.
I agree with this, and I don't think that actually needs much evidence. It follows straight from assuming that:
- YC has prestige and is recognized as a top accelerator (which is true)
- YC is competent at picking strong applicants (which also appears to be true)
- there is no magical cutoff in the applicant pool where applicants below it are significantly worse than above it, and the cutoff point happens to be exactly at the point where YC stops accepting people (proposing the opposite would require serious evidence)
Im sure a ton of the companies who apply to YC and dont get in are still Grade A. But you have to trust YC knows what they are doing, and the A+++ companies will be picked over before they hit second or third tier.
You have to remember that investing in companies is a lottery game. Most angels/vc's profits are made on that 1 in a million company with a 1000x return.
If YC wants access to truly the best companies, they need to institute a rolling admissions. Otherwise, these scrappy second tier incubators will get lucky a few times when a nervous founder takes a bird in the hand over two in the bush. The policy only hurts YC itself.
But you have to trust YC knows what they are doing, and the A+++ companies will be picked over before they hit second or third tier.
IMO, there is still too much luck involved to make this true to the extent it matters in this case. YC has picked several things that didn't pan out, and of course several that did. There have also been multiple follow ups from YC rejects that went on to be much more successful than some companies that WERE picked
We turned down an exploding offer from another incubator in order to have time to interview at YC. We ended up getting into YC, so in hindsight it was absolutely the right decision, but scary at the time.
I'd love to see YC innovate in this area rather than shame other incubators into better behavior. Accepting applications on a rolling basis instead of once every 3 months with a 2 month wait, for example. I'm not sure how well that idea would work, but I'm sure there's something that could be done.
It's occurred to me that competing for business by making the process better for the founders, rather than worse, would be the way to go, or at least one business model that other incubators should explore.
It is without question that most people applying to incubators apply to a few of them, in case they don't get into the (obviously) best one, YC.
Its my guess that some of the less exciting incubators give these exploding term sheets to make the founder think:
"Damn, I got into Incubator X but I have to say yes in 48 hours. I wonder if I will get accepted into YC also when answers go out in 2 weeks. Should I risk walking away with nothing, or just take the offer I have now..."
Would not be surprised to see more incubators doing this anyways, with or without exploding term sheets. They will likely just move up the dates their sessions start (and the date you need to say yes by), to make sure its before YC answers go out.
On the same hand, I am not sure what you expect other incubators to do. YC is hands down the most prestigious incubator to get into and everyone knows that. So, you have a bunch of other incubators that have to think scrappy to get people into their programs. These guys don't just want YC's cast-offs, after all.
If YC was to start doing rolling acceptances for a start date, it would solve the issue of other people doing exploding term sheets. If I apply to YC today for the winter batch and can interview and get a yes in a few weeks, then the motivation for other incubators to do this behavior is gone.
YC partners need to realize they are the cause of other incubators giving out exploding term sheets. I know YC likes to make a event of doing all the interviews/acceptances on one day, but it would certainly be much more entrepreneur friendly to have it be rolling admissions. The start dates for sessions can still remain the same of course.