Cloudthread Y Combinator
January 24, 2022

Was Y Combinator Worth It?

TLDR: Definitely yes. Particularly if you’re a software company with no previous investments. 

This is a question I’ve gotten a lot since Cloudthread participated in Y Combinator’s S21 batch. When you’re giving 7% of your company (at least*), it’s a fair question. Especially because recent batches have been 1) remote and 2) bigger. 

What is Y Combinator?

As brief context, Y Combinator (YC) is the most successful accelerator in the world and has backed companies with a combined valuation of $400B+ including names like Dropbox, Airbnb, Instacart, Stripe, Twitch, Coinbase, Weebly and Reddit. 

Value that we got


Startups are an exercise in overcoming inertia and creating momentum. YC lights a fire under your butt from the moment you get in. All companies are required to define the growth metrics important to them and report on those metrics on a weekly basis in an ambitious peer group. 

Demo day looming on the horizon is a huge motivator. It’s hard to imagine replicating that sense of camaraderie and pressure outside of an accelerator. I can't compare YC's pressure with a different accelerator from personal experience.


For anyone who knows about the startup ecosystem, Y Combinator is an incredible brand.

In the noisy world of early stage investing, it's a strong signal for investors. When Cloudthread got into YC, VCs in my network were suddenly excited to chat and open up their connections (this is how we got our first angel investment). When fundraising after Demo Day, this stamp of credibility translates into a “YC premium” on your valuation cap. This premium on its own offsets equity that YC gets as part of the YC Deal**.

More important and less expected, for us as a SaaS company that serves engineering teams, YC created a strong signal for prospective customers - engineers that read hacker news daily, who were open to giving feedback and trying out our platform solely based on YC credibility. My email response rate soliciting feedback on what we were building increased significantly. 


YC admirably publicizes a lot of their educational content (video sessions, contract templates, etc) so there’s a lot you can learn without actually participating in YC (their youtube channel is a treasure trove). 

That said, by participating in a YC batch you’re engaging with and learning from group partners that can pattern match across hundreds of startups they’ve seen grow (or not) and from YC alumni that draw on personal anecdotes to educate and inspire. 

This education ranges from the extremely tactical (e.g. how to write good cold emails) to the more general (e.g. how to be an effective leader), ultimately leaving you with encouragement to hustle and a toolkit for building something people want. 

Does the fact that YC is remote make it not worth it?

The pressure and credibility I mention above are not affected by the experience being remote and therefore I would say that it’s still 100% worth participating in YC remotely. 

There is a social element that’s lost when the experience is remote and I imagine if it were in person you’d create stronger personal relationships with your batchmates (and partners). That said, all of our batchmates continue to find ways to get together in person and the YC community is undoubtedly my first stop when I have any startup related questions.

Who doesn’t think YC is worth it?

The few people I’ve spoken to who didn’t wholeheartedly agree that YC was worth it either:

  1. Are doing something niche, typically unrelated to software, and feel like the credibility YC provides isn’t as valuable in their space and that the educational content is not as relevant for them.
  2. Already had a significant amount of equity financing, were on a growth trajectory, and felt that given the current (Sept 2021) fundraising climate they could’ve raised their desired Series A/B without YC.

*as of Jan 10th, 2022, the YC Deal has expanded. Now YC invests $500K: $125K for 7% like before (Cloudthread accepted this deal) and $375K  on an uncapped safe with an MFN. TBD how this will affect fundraising dynamics but I think that fundamentally the answer is still yes, the YC Deal is worth it

** Although it's outside of the scope of this article and would require some data gathering, I'd be very interested to see an analysis of YC valuation cap premiums and the $/dilution tradeoff for YC companies because of it

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