The YC Rejection Post-Mortem I Never Posted
In 2012, Eric Yang and I applied for Y Combinator for PhotoWhoa, a daily deals site for photographers, and got rejected, despite having done about $35,000 in revenue in our latest month and having several direct referrals into the YC program (thanks a lot Joshua Baer (OtherInbox) and Lloyd Armbrust (CEO at OwnLocal) for helping to make intros).
Getting rejected was very painful. In fact it was one of the most painful moments in our careers up to that point because everything else was going so smoothly. We didn’t expect to be making so much money so quick, yet YC saw through our business model and ended up rejecting us. Note that this was also back in 2012, when the caliber of YC applicants was a lot lower than it is today. Nowadays it’s pretty common for companies that have $35,000 monthly revenue or higher apply to Y Combinator.
At the time I wrote up this blog post, but never decided to publish it because I didn’t want to be reminded that I had failed. Reading through it I realize how defensive I sounded at the time. YC ended up being right. Daily deals wasn’t as hot anymore, but PhotoWhoa still was a nice little lifestyle business for me and gave me enough money to survive and hire an employee for a couple years. It never became a huge success, but I did learn a lot from it.
A year after our rejection, Eric went on to become a general manager at Topaz Labs, a company he co-founded with his father, while I kept on working at PhotoWhoa before it was strategically acquired by a company running several deals websites. After that I moved to Los Angeles to pursue new ideas.
For a little nostalgia I decided to post it, 4 years later.
It’s a few weeks after our rejection to Y Combinator’s Summer 2012 class, but I just wanted to jot some thoughts down.
After we got the rejection e-mail, I felt like shit, probably for the rest of the night and the weekend. After the interview, my co-founder Eric and I both thought that we had a great chance to get in. After five months of hard work, we had started grossing over $30,000 in monthly revenue, something that Eric and I were both very proud about.
When we got into the interview room we met our interviewers, Sam Altman, Garry Tan, and Paul Bucheit. It turns out, Sam Altman and Garry Tan were both photographers, so we thought, wow, we lucked out. They must understand how f*cking huge this market is. Paul Bucheit looked like he didn’t care, but whatever, Garry Tan and Sam Altman seemed enthused about what we were doing.
The ten minutes did go by pretty quick. I remember them asking how big our market was (photography). “It’s 68.4 Billion dollars globally in 2011 and growing,” I replied to them confidently. A lot of people don’t realize that photography is such a huge market, but it is, and there is actually research to back it up.
There weren’t really any hard questions actually. They asked almost the exact same stuff that we prepared for. How big of an idea is this? How many paying customers do you have? How many people are repeat customers? How many people are signed up? There wasn’t anything that really threw us for a curveball.
Again, coming out of the interview, I felt like we had a solid shot.
But in the end, Garry Tan gave us an e-mail telling us that they didn’t think the market was big enough for our particular business and that they didn’t think startup investors would invest in this product. It’s understandable, I guess. As a daily deals site, investors in the valley are just not that interested, especially right now during Groupon’s apocalypse. Never mind the fact though that we don’t really operate like a daily deals site since our products are sold internationally, not locally.
They probably also had concerns about the fact that we sold mostly digital products and peripherals instead of cameras and lenses. True, cameras and lenses comprise about 55% of the market, but the other 45% of a 68.4 billion dollar market is nothing to scoff at either.
YC always says they invest in the founders, not the product, so I’m wondering if they also had doubts about us as a team. Did we not appear passionate enough? Smart enough? We’ll probably never know.
After reflecting upon our rejection, we had some great take-aways from the experience. We are ramen-profitable after only 5 months, so we are pretty damn confident about our ability to make this into a multi-million dollar business. And truthfully, Garry Tan made a good point about the fact that we might not be what Silicon Valley investors are looking for, and as a result, not what Y Combinator is looking for.
But whether we’re the next AirBnB or not, it doesn’t matter. All we know is that we have a product that people want. People are paying us money. We’re making profit.
And while Silicon Valley might never be thrilled about us, there are lots of people here in Austin who are interested in businesses like ours. After our rejection we decided to keep our base of operations in Austin for a time and talk to great people like Josh Baer and others who are dying to help us succeed.
And who knows, staying here might be the best choice for our company.