Seed Fund Reject Still a Ne’er-do-well
This is a guest post by Walter Chen, co-founder of Leasely. Below he muses over his experiences applying for the Y Combinator & Tech Stars seed funding programs.
Before our Y Combinator interview, Rodrigo, Nathan, Silas and I bummed around in a park. We each tried to find our zen place, I guess. I think Nathan was asleep. The night before, Silas snored like a bear and Nathan proposed that we drink bottles of Guinness. I don’t think any of us slept well, Silas aside. Rodrigo got up early to finish some mockups that were going to blow the minds of Paul Graham and the gang. On our walk to the interview, Nathan bought a giant box of strawberries for like $25 from one of those Mexican dudes who stand on nondescript residential street corners. We ate as many as we could in the park, and then Nathan hid them in the upper branches of a tree. After our disastrous interview, Nathan climbed that tree to retrieve the strawberries. We ate those tasty strawberries mournfully.
That was the summer of 2008. The group to interview before us was Posterous, and those guys are now a big success. After we walked out of the Y Combinator offices, I threw my notepad on the ground and stomped on it. Rodrigo was more optimistic – he bet me his notebook for mine that we would get YC. I am now the proud owner of a Moleskine filled in with quantum physics doodles. We got drunk on margaritas for a few hours in downtown Mountain View before we received an email with additional questions from Paul. I tried to type something before Rodrigo took over with coherent, responsive thoughts. I went to the bathroom and misfired all over my shoes.
We had a crack team on paper for the “Google of legal research” that we were building. Two Ph.D students (math and physics), a domain expert (me), and a religious nutjob (Silas). The interview was crazy. Rodrigo was in the corner showing Trevor and Paul (maybe) a screen of how dumb Westlaw looked. I remember Paul asked Nathan about how Nathan went from studying machining in community college all the way to the highest reaches of our educational system. Jessica asked me about whether I didn’t believe in the project because I had already committed to clerk for a judge after law school. That’s kind of funny in retrospect because I had assured Rodrigo that Jessica would fall in love with me. But that was mostly a blur. One moment stands out — Paul asked straight up, “Who is the leader of this group?” We sat around in silence. Later, Paul would email us to say that he didn’t think the project could happen with a part-time founder and wished us the best.
I went on to clerk for a federal appellate judge. This is a big deal to some people. Then I went to a big law firm and pulled in a quarter million. But, as that old saying goes, “A quarter million dollars isn’t cool. You know what’s cool? A web startup which makes the apartment rental process happen online.” Wizened by art such as Hollywood’s The Social Network, I walked away from my lawyer gig and crashed my girlfriend’s NYU dorm room where we shared a twin-sized bed and I subsisted on turkey sandwiches from Torrisi and Grom frappes. I knew my next move. My old crony Rodrigo had emailed me and said it was time to right the wrong that was Sonya Labs (artfully named after a Chekov character). He told me that he was following his vegetarian girlfriend to San Francisco. I said, “It’s on!” We found another Chinese guy in Eric so our team was complete.
Seed stage accelerators seem to have changed over the last couple of years while I’ve been doing the lawyer thing. You know, in law, they say something like, “Law is the accumulated wisdom of the ages; progress comes slow.” How was I supposed to know that the sands of the startup world were shifting beneath me?! Rodrigo, Eric, and I applied to YC this fall with only an idea, and we were summarily dismissed. By the time Techstars NYC rolled around, we had a product, but no real traction. Dave Tisch flirted with us — I mean, he really got my motor running. I told Rodrigo and Eric, before I went to Techstars for a Day, that I was going to New York to make out with Cathy and bring back that money. Well, I had a good time at least and ate a few turkey sandwiches from Torrisi. Dave said that they wanted to see more traction from Leasely before funding us and wished us well.
Where have the days gone where seed stage accelerators would fund dudes with cool haircuts and plausible startup concepts? While I do mourn those days, I grudgingly accept that if I were as cool as I say, I would just go out and get traction. I have that rationalization that I’m doing something more grandiose than your average consumer web startup play. I mean, think of the trees! We’re transforming an industry! Rome wasn’t built over a weekend of Four Loko-fueled hacking! But for a nobody like yours truly who’s living off savings, it makes the most sense to accomplish the grandiose by way of the unassuming MVP, acquiring customers and making money, and building off of that.
With Leasely, we’re bringing together landlords, brokers, and tenants to deal with the apartment rental application and tenant screening process online. We had a big decision to make: who is our customer? There are big- and small-time brokers, their agencies, property management folks, landlords big and small, and the tenants themselves. If we chose the apartment broker as our customer, for instance, we’d have to build a product that accommodated the application form and tenant screening solution favored by the landlord, because the landlord was the ultimate decision-maker when it comes to accepting or rejecting a tenant. However, the big landlords with the cash typically work through brokers. In other words, our bigger play requires more time and resources. We decided to go after the individual landlord, because that landlord is the all-in-one decision maker who we can persuade and then convert. There are tens of thousands of them in New York City alone compared with around 10 big boys which presents a distribution problem but also represents a tremendous opportunity.