What Founders Ask Founders About Getting into Y Combinator
about.gitlab.com
about.gitlab.com
Where are these kinds of entrepreneurs supposed to go? Is it still YC, when they have to compete with already-successful applicants?
Kudos to GitLab bootstrapping to $1M ARR though. That's truly incredible. They should write a story about that part. :)
Thanks for the kudo's. If someone wants to interview me to write that story I would love that. BTW I think the $1m number it was our last month multiplied by 12 instead of being true ARR as I know it know.
Is that a misconception?
If your company is so so (i.e., you are making money but growth is anemic, etc.) then YC is not for you. But you can always close the company and start a new one and apply to YC.
At least that is my understanding and experience.
But YC knows very well that there can be many reasons for slow growth. Many times easy to make changes can have big effects on product/market fit and growth rate. And YC is great at helping with that. So don't be afraid to apply even with flattening growth, it is called an accelerator for a reason.
Congrats on your success!
But we also wanted to make GitLab a great and popular solution. For this we need the best marketing and sales people. When we tried to hire those they wanted options in the company. It is not fair to give options if it will take very long to cash them. So we needed a liquidity event in any case. In that case it was better to take outside investment so the chance of getting to IPO was higher than without it.
If we would have not gotten in we would have continued GitLab and probably applied again for the next batch.
Since we took outside investment that period is about 5 years. Without outside investment it will take longer, maybe 10 years. Many potential hires don't want to wait that long. They might wait 10 years but only if you get a substantial windfall at that point, not the first small profit share.
Partnerships are more common at consultancy and finance firms where labour generates direct profits. I think they are less suited for product firms where the labour comes years ahead of the revenue. A liquidity event is a great way to bring the 'windfall' forward.
Of course things are not black and white. We choose a 4 year vesting period https://about.gitlab.com/handbook/stock-options There are startups now doing 6, 8, and 10 years. We didn't have a good reason to deviate from the norm, so with our vesting time we stuck to what is usual in order to be an attractive employer and hire the best executives.
(I totally understand you can't do this for everyone who'll ask.)
P.S. I'm also open to a peer feedback session for anyone else applying!
I'll be in https://gitlab.zoom.us/j/351494573 at that time for anyone that can discuss their application publicly.
If you attend please comment so, if you can't also comment so we can try to find an alternative.
By the way, I'm a YC participant and not a YC partner. I don't speak for YC and I'm just trying to help.
Thanks!
"...to create and grow a competitive open source offering you need to have a proprietary commercial version to generate scalable revenue, support income alone is not enough."
I've often wondered if you can make money selling an open source software product that isn't dependent on support or services. In your application form, you're essentially saying this isn't possible.
Do you have any advice for people creating open source products regarding this view of open source vs closed source for sales and revenue?
Do you still feel that anyone with an open source product should also be providing a closed-source commercial version which will actually be the main source of revenue?
How have people in the Open Source field reacted to this viewpoint given that there is a strong negative reaction to closed source in some quarters.
I'd love to find a way of selling an open source product that didn't have to rely on a service contract or support for revenue. Is it impossible without a closed source offering?
Any thoughts, much appreciated.
Another thing to think about: If your open source support is good enough, they may not pay for your support offering either.
Of course some products and markets have been able to make the support model work, like RedHat.
But it is very hard to pull off and I think it used to be easier in the past when companies where very worried about support and licensing. Nowadays they are much more comfortable with open source.
What we are seeing is that companies that pay for our premium support tend to cancel that after the first year because they didn't need it.
We want to make a product that is easy to install and maintain. This reduces the demand for support. There is a incentive for companies selling support to be a bit less aggressive documenting everything.
An open core model needs a very careful balance between being a good steward of the project and the need for revenue. We documented what we learned so far on https://about.gitlab.com/about/#stewardship and keep our ears open on forums like these.
and the consensus has been that you need a lot of components for the support contract to work.
One difference we've found for example that seems to work pretty well is providing support for deep learning models. Each "model" solves a problem like "face detection" "cat finder" "fraud detection" and we charge for the platform used each time for each model. This reflects the amount of work we do for customers but also provides an SLA for deep learning they might not otherwise have.
Source control has a wider user base and tends to favor an easy to install integrated experience.
Machine learning applications tend to have fewer people who know how to build them but they are just as critical for the business.
Eg: points of accuracy in a model can directly map to revenue or profits. That's easy to explain to an enterprise customer.
So despite the smaller potential user base "data scientists" in this case, we've found it fairly easy to go to market.
One thing I think people miss is that the bulk of open source infrastructure companies tend to be devops or operating systems with lots of moving parts.
They don't tend to be applications or machine learning.
I think what a lot of us are finding is that you have to innovate on the business model itself in order to really capture value for both your user and the customer as well as your startup.
1. You can do more than you think. We came in wanting to grow into a 30 person company in 2020. Now we're 100+ people and plan to IPO in 2020. You realize that you have only so many years left and you want to make them count. And that with some help you can aim higher. Not every company should take VC and I love companies like Basecamp. But YC helped these two EU founders be more ambitious.
2. You can ship faster than you think. Seeing what is now https://www.wayup.com/ and other people in our group achieve much more than us every two weeks made us question how we worked. We learned to iterate and launch the minimal iteration as soon as possible. It was a counter-intuitive lesson that greatly increased how effective we are.