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VCs want to be (and beat) Y Combinator

Protocol Pipeline

Hello, and welcome to Pipeline. My name is Biz Carson, and my love language is a group text thread. This week: It’s layoff season, why you shouldn’t throw a party after said layoffs, and silver linings found in these doom-and-gloom times.

The attack of the (YC) clones

It may feel like the end of the startup world if you’re judging by the “Winter is coming!” tweets and number of emergency board meetings being called right now. But these cycles inevitably lead to the next wave of “It’s time to build!” Medium posts, and no shortage of pundits, will tell you the best startups are founded during the lean years. If we are in for challenging times, there will be no shortage of eager advisers as big VC firms build their own programs to help entrepreneurs at the earliest stages.

Picking the best YC graduates isn’t the only path to finding hot early-stage companies anymore. Instead, more firms are launching their own in-house programs meant to give founders at the seed or pre-seed stages the combo of capital and curricula they’d normally get going through an accelerator.

  • Sequoia debuted Arc in March to teach early-stage founders company-building fundamentals. Founders apply to the eight-week program, attend a mix of in-person and remote sessions and receive a $1 million investment — a departure from Sequoia’s typical investing approach. Arc’s first session will begin in Europe this month, before the program opens in the U.S. later this year. Sequoia India already has a similar program called Surge, focused on Indian and Southeast Asian startups.
  • Two weeks ago, a16z unveiled Start, its early-stage program that seems closer to an application-only EIR program than a formalized accelerator. A16z will invest up to $1 million and help with anything from intros to co-founder matching to future fundraising.

It’s not just large multistage firms opening up applications. Even the earliest firms, like pre-seed specialist Afore Capital and Neo, are bringing new products to the fight for founders.

  • Afore took a different route than the accelerator model this week by debuting Afore Alpha, a new standardized deal with transparent funding terms that comes with a “cohort of 1” instead of large batches. (Its website is not exactly a subtle dig at some well-known accelerators.)
  • Afore Managing Partner Anamitra Banerji felt that founders wanted hyper-transparent deal terms, but ones that came with enough capital that could propel a company to a series A deal “instead of having to constantly fundraise three months into their journey.”
  • There’s also the individualized attention and support rather than batches, which he argues will get founders to pick a pre-seed fund like Afore versus the multistage firms. “If it's a million dollars coming out of a billion-dollar fund, you should anticipate that level of support,” he said.
  • Neo, another early-stage firm, has closed applications for its new Accelerator, which is set to open this summer. It’s only taking 20 teams. Founder Ali Partovi notes its founder-friendly deal terms, which he specifically compares to the standard YC deal.

Are these all going to dethrone Y Combinator? It’s unlikely, given the scale on which YC operates compared to the couple-dozen-or-so founders these programs can accommodate. But there’s a real question about whether YC will be a new founder’s first choice, back-up plan or something to bypass entirely in 2022.

  • Already, a slight majority of companies entering Y Combinator (55%) have raised prior funding, according to its winter batch stats. Although that still means that nearly half are using YC as their first funding round. In the future, founders could go through the Sequoia Arc before attending YC, or graduate from YC and join a16z’s Start program.

The good news is there are more choices for founders, and the venture firms are seeing the demand. After Afore announced Afore Alpha, the firm received 195 applications on the first day, despite being able to do around 15 investments through it a year. A16z said it had over 1,000 applications and has selected 11 entrepreneurs so far. Founders will have to figure out what they’re looking for, especially with potentially turbulent years ahead. “There are many paths to success in our industry,” Banerji said. “Just like there are many types of backgrounds that successful investors come from, there are many ways to serve founders.”


It was a no good, very bad week for many VCs. David Sacks said investor sentiment is “the most negative since the dot-com crash.” Rumors of layoffs are outpacing rumors of big deals right now, with the next six-to-eight weeks expected to be a “bloodbath”. Even in desperate times, as Jason Lemkin pointed out, there’s a lot of startups that raised larger COVID rounds and now have years in the bank to live off of, so there’s perhaps a silver lining for some.

“Climate and sustainability is going to be the new computer science,” predicts Kleiner Perkins Chairman John Doerr, who gave $1.1 billion to Stanford to start a climate school.

Party like you just laid off 87 people. Perhaps throwing a swanky NFT bash days after you let go of your Cameo Fameo isn’t the best idea.

Stripe vs. Plaid: A rare Twitter fight worth paying attention to. In case you missed it this week, Plaid’s CEO called out a Stripe exec in a now-deleted tweet claiming that the exec took multiple interviews and had sent RFPs asking for tons of detail before the launch of a new Plaid competitor. Of course, Bolt’s Ryan Breslow jumped in to reiterate his Stripe mafia claims and the discourse went sideways from there. But, unlike a lot of Twitter fights, this one reached a surprisingly insightful conclusion after Stripe’s co-founder Patrick Collison emailed employees with a few lessons learned from it.

I recommend reading the email posted here, but what stood out to me was Collison’s realization that a fintech startup shouldn’t be like Apple and surprise people with a launch, and instead err on the side of telling people about future plans because that’s likely to make them want the software more. Perhaps the days of “One more thing…” are short lived.


Our workplace has changed in many ways. Most work now happens inside technology, hybrid work arrangements appear here to stay, and organizations are trying to keep up. Join us May 10 at Guide: The Digital Adoption Summit to learn how your org can adapt to the digital workplace.

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Inside track

Coatue chairman Dan Rose has seen market caps fall, startups go under and even negotiated Facebook’s pre-IPO down round. So you should probably listen when he has some advice on how to navigate today’s market.

“I regret it.” Former WhatsApp Chief Business Officer Neeraj Arora helped negotiate its $22 billion sale to Facebook, but now realizes all the ways it went wrong. (He’s also trying to fix it with his new HalloApp.)

Here’s a dirty secret in venture: Reserves are not always a good thing, according to Sapphire Ventures’ Laura Thompson.

There are four core benefits every startup needs, but a lot of “fringe” benefits are really a necessary part of the package, writes Renegade partner Susan Alban. She argues that things like child care support, mental health and paid time off should be an “expansion” benefit instead of an afterthought.

Need to know

Layoffs are hitting startupland. A week after I wrote about employees being about to be hit hard, we saw a number of layoffs hit this week and likely more to come. This week, Cameo, Mural, MainStreet, On Deck and Thrasio all cut teams.

Elon Musk assembled quite the cap table for Twitter. Joining Musk’s bid are firms like DFJ Growth, a16z and Sequoia. Hopefully it’s worth the extra legal work for a16z to navigate the Twitter-Meta awkwardness.

Backstage Capital is only going to fund its existing portfolio companies. After investing in 200 startups, the firm announced a “pivot” to only doing follow-on rounds. I can’t think of a fund that has made such a move before.

DST Global encourages side investing. While it’s typically discouraged at firms, DST is a rare firm that’s tried to make it work.

Cerebral is in trouble. The SoftBank-backed mental health startup has been under the microscope since a former exec alleged last week that it put profits over patients and the DEA reportedly began snooping around (Cerebral said it was unaware of an investigation). Cerebral announced this week that it will stop prescribing controlled substances as part of its ADHD treatment, starting Monday. Meanwhile its backers are rumored to be hoping it all blows over “just like WeWork.”

From Protocol: Tony Fadell thinks capitalism can solve the climate crisis. It just needs a few tweaks.

Your weekend reading: The COO of ZenLedger had all the credentials from an MBA to a Goldman Sachs stint to investing experience on behalf of Larry King — “If only all of that were true.” The New York Times found that the blockchain startup exec had made up nearly all of his background, and it’s a story about a lack of due diligence on many levels.

Five questions with… Forerunner’s Eurie Kim

Forerunner Managing Partner Eurie Kim has been with the firm since it started in 2012. A former entrepreneur and co-founder of All Raise, she has led investments in companies like Oura, The Farmer’s Dog and Away.

What product or service are you totally, even irrationally, loyal to?

Superhuman. Sadly, it does not make me superhuman, and my inbox is still a mess, but I do love it and it saves me from Gmail’s terrible UI. Thanks, Rahul! (Still wondering when I can invest!)

If you could have dinner with any tech executive you haven’t met, who would it be?

Gwynne Shotwell, president and COO of SpaceX. As a VC, I have the privilege of partnering with and backing ambitious entrepreneurs who are redefining their industries for generations to come. I can’t think of a more visionary company than SpaceX, and while I’m sure dinner with Elon would be riveting, I’m particularly interested in hearing about how Gwynne empowers and focuses the tens of thousands of people working at SpaceX to accomplish such incredible feats as their daily job. Each task ladders up to launching rockets into space — no doubt, each person has to maintain a level of excellence that must be ingrained in the culture of SpaceX. A lot of companies could use that masterclass in building high-performing teams and culture.

What was your first job, and what’s a skill you still use from it?

My first job was working a summer retail sales position at Banana Republic at my local mall when I was a teenager. First and foremost, I learned how hard it is to stand for eight-plus hours straight. Beyond that, I learned a number of critical life lessons that I draw on even today. One of those was that patience is a virtue: channeling Zen as my perfectly folded and stacked display tables were carelessly ravaged on a minute-by-minute basis by customers who pretended not to notice I was standing right there.

Forerunner turns 10 this summer. What’s one piece of advice you wish you would’ve received at the beginning of your journey?

Forerunner came to market in 2012. At the time, it was not common for new funds to be launched, much less launched by a female founder (Kirsten Green). Our investment thesis around the evolution of commerce and consumer behavior was also differentiated from other firms’ more generalist or stage-focused strategies at the time. We weren't given this advice around having a thematic focus when we started, but it has turned out to be essential in having a unique POV in the market and we share this perspective to new managers who ask the same question to us.

And what’s one piece of advice you’re glad you ignored?

Our aspiration has always been to build a best-in-class, early-stage venture firm, and though we started with a $41.6M Fund I, we always planned to evolve with the market and build our platform to be ready to invest wherever the best opportunities might be in the future. We often got “advice” to stay small and raise sub-$100M funds, because they are easier to return. But our strategy has never been to do something because it is easier. We challenge ourselves to grow and lean into where new opportunities are not yet fully visible; that’s what venture is all about.


What makes it hard to manage a complex IT portfolio? How can IT take the lead on driving software adoption? What role should cross-departmental partners play in their strategy? You’ll get the answers to these questions and more from leaders at Asana, Linksys, and ELF Beauty during our CIO panel at Guide: The Digital Adoption Summit. Join us for free on May 10.

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