By Victor (Arne) & Liangyi ye
DropBox, Inc. is a relatively new company.it was founded in 2007 by Drew Houston and Arash Ferdowsi as a Y Combinator startup. It was released in September
2008. Dropbox is selling a file hosting service.
It allows the consumers to not only save but also share their files through cloud storage, file synchronization, personal cloud and client software.
It is available in 16 languages and comes in more than 8 operating systems.
It is also accessible via folder, DropBox’s official website and mobile app.
Drew Houston was determined to find funding for his idea. So he turned to Y Combinator.
It offers seed money, advice and connections at two three-month programs per year. Typically, the investment is between US$20,000 and US$50,000. The application process is open to anyone, but highly competitive with acceptance rates of about 3%. In exchange for its services Y Combinator usually takes an equity of about 6%. So Houston defended his idea, highlighted its great potential and finally submitted an application for funding through Y Combinator’s within the given deadline. He wasn’t the only one; other well-known companies that received funding through Y Combinator include Reddit and Airbnb.
What is remarkable is that Houston stated that if someone were to offer him 2 million dollars for his idea, he would not decline. This is ironic given the fact that DropBox is now worth a staggering 4 billion dollars. Recently DropBox did a round of crowdfunding and raised 350 million dollars, which implies that dropbox has now far outgrown its former startup status.
So why was DropBox so successful and why would we recommend an accelerator as a way of funding your startup? First of all, Houston had a great idea and took all the right risks in order to bring dropbox to life. From the beginning he had a number of engineers working for him to make dropbox compatible with all computer platforms and operating systems (android, IOS, microsoft…). What was great about his funding through Y Combinator was that he was able to raise money without having to give great equity to Y Combinator. If he had turned to an Angel Investor for example, he would have been forced to share a much larger percentage of his company. Instead, he was able to build up his company with the support of an accelerator with a strong reputation. He was so successful that Steve Jobs was interested in taking over DropBox. At this point however, Houston already felt confident that he could build his own empire. He went on and kept that promise.
A second advantage of turning than accelerator is that you have to infuse less money yourself, which allows you to do more with fewer risks. On top of that Y Combinator also solved Houston’s problem of having only one initial co-founder, Arash Ferdowsi (a fellow student), which meant a small cash input given the fact that they were both students.
To conclude with, new startups could definitely benefit from the help of an accelerator. Y Combinator is definitely not alone. In fact[,] the number of accelerators has been skyrocketing in the past few years. They can provide a considerable cash input in exchange for a relatively small part of your company. If you can present your idea in a professional manner and you have the skills to make your startup sprout, an accelerator is likely to acknowledge your efforts.
An accelerator, however, can do more than funding alone. Because an accelerator is usually a company that is investing in multiple startups, they have plenty of experience and information to share with you. In some cases an accelerator will even pay for your education if they think it could benefit your startup. Although we do recommend seeking the help from an accelerator when starting a business, it is always wise to consider possible downsides. First of all you should consider if the accelerator you are approaching is the right fit for your idea since every accelerator is different. Second of all you should not give away too much equity, as that might come back to haunt you during a second or third round of funding in a later stage of your company’s development. Lastly you should keep in mind that attending an accelerator might require you to relocate your company (DropBox for example relocated to Silicon Valley).
We hope this information has been helpful and provided you with information to get started with your own round of fundraising. Good luck!
HYDE STREET JOURNAL 