Should you pick YCombinator or the LAUNCH Incubator -- the shocking answer!

Someone on Quora asked, “What is Jason Calacanis’ Launch Incubator like and should I apply to that or YCombinator?”

The easy answer to that question is, you should certainly apply to both because the chances of getting accepted to either program is low (like really, really, really low).

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YOUR CHANCES ARE LOW

For background, we had 150 folks apply to the 1st Incubator class and we wanted to accept 20 of them. We settled on seven. It was a 5% chance of getting into the first class vs. really, really tough competitors.

However, three of the startups accepted I had a previous relationship with. In truth, we only accepted four out of 150 people who came through the front door -- less than 3%!

YCombinator probably has 1-2k applicants each cycle and they have accepted 50-100+ of these. So, 2.5-5% of applicants get accepted, I’m guessing.

PAYOFF IS HIGH, BUT DON’T GET HIGH ON YOUR OWN SUPPLY

Getting into either program will change your life forever. Acceptance ensures, unless you are a complete and utter screw-up, that you will land enough funding to go for at least 12 to 18 months.

Additionally, being anointed a YCombinator company means your valuation will be two to three times what you would get by not being a YCombinator company. Said another way, having the YC name means you can screw investors!

I say that in a joking way, but there is a serious anti-YC sentiment in the industry around the issue of valuation and entitlement. As one very, very prominent investor said to me recently, “Total public market cap of YCombinator companies? $0!”

Another VC, who made their bones doing elite-level growth, said to me that YCombinator’s scale has resulted in a cookie-cutter approach to growth that was easily detected if you did any level of diligence. He actually used the word “fraud” to describe the growth, before toning it down to “gamed growth.”

From my position, meeting with a half-dozen YC companies per month, I can confirm that they are “going for it” in terms of valuation universally, and yes, some are goosing their growth numbers by simply buying Facebook Ads and saying silly things like, “We’re growing 15% per week!” and “500% per month,” before backing off when asked for the actual numbers (i.e., we went from seven clients to eight clients -- a big % on a small number).

All of this is to say that getting accepted to the elite YC program is a double-edged sword, which is not dissimilar to Harvard: you’re clearly smart, but you’re not that special.

Same thing with LAUNCH Incubator startups: You’re going to have all of my friends rush in and offer you investment because, well, I’ve got a fairly sick track record of picking companies (three unicorns in 120 investments). Folks assume that in every YC or Incubator class there will be another AirBnB, Dropbox, Uber or Thumbtack -- and that’s reasonable.

What’s not reasonable is for every company to game it to make themselves look like that, or ramp up their valuations beyond what those very companies asked for in their first rounds of funding!

In fact, I worked with the LAUNCH Incubator’s first class to explain how getting the right people (think Mark Cuban, Chamath, Kevin Rose, etc.) is worth keeping the Seed stage valuation to $2.5-5m -- and it worked! We got the all-star investors, not the rookie angels who I meet at most demo days (i.e., the idiots who will give a 20-week-old company a $5-10m valuation -- or no valuation cap! Huzzah! ).

WHAT IF YOU GET INVITED TO BOTH?!

This is a really, really easy answer for me to give -- and it’s probably one you wouldn’t expect. If you get invited to both you should email Sam Altman and myself and say, “Can I do both?” Sam and I are old friends and I’m guessing if someone did get accepted to both he would be wise enough to realize that a LAUNCH+YC double-down would be a smashing success!

Do both! Don’t choose!

If you did have to choose, I would say pick the LAUNCH Incubator if you want a very personal experience. For example, all seven companies present their startups to every speaker, every week …YC simply can’t do that.

If you want to maximize your valuation and you’re a huge fan of one of the spectacular partners at YC (and you can get them as your partner -- key point), then go there. If my dream mentor was PG, Sam, or Alexis, I wouldn’t think twice about saying, “I’ll join if you will agree to X, Y, and Z with my startup if we accomplish A, B, and C!”

IN CONCLUSION

Harvard (YC) and the Navy Seals (LAUNCH) are not competing with each other, and if you happen to be accepted to both, well, the world needs a Harvard Grad with the training of the Seals!