3 Ways An Accelerator Impacted Dropbox And The Overall Venture Market

Accelerators are successful business models enabling cohorts of graduates to garner institutional venture funding. In 2015 alone, 1/3 of US startups who raised a Series A went through an accelerator. But it can be hard to quantify the impact of an accelerator and if startups are coming out of these programs more prepared. However, it is quite clear that Dropbox benefited from the value Y Combinator provided in 2007.

Dropbox, a file hosting service, went public with its stock popping 35% by the end of the first day of trading last Friday and a market cap north of $11B. Dropbox has achieved an exceptional balance of scale due to a combination of virality as a consumer company with the predictability and monetizaton of a SaaS company. Dropbox now has over 500M registered users, but the company came from humble beginnings with the help from Y Combinator (YC).

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Congrats to @drewhouston and @arashf--we found the checks @jesslivingston wrote you in 2007 for YC! Long way since...

 — @sama

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There are nearly 700 US-based organizations that identify as an “accelerator” or “accelerator/incubator”. YC is not only one of the first to launch, but is also rated one of the best early stage accelerators in the world. Since 2005, they’ve funded over 1,588 startups that have a combined valuation of over $80B

Recently, YC co-founder, Jessica Livingston, wrote a congratulatory post to Dropbox. In it, Livingston harkens back to Dropbox’s early days revealing a number of ways the startup benefited from their accelerator experience. Below are three that particularly stood out to me:

Mentorship

Dropbox received expert advice from the YC staff. When Drew Houston applied fresh out of MIT to YC, Dropbox not even incorporated yet, he applied as a single founder because the person who had agreed to work with him fell through. After applying to the accelerator, Drew was invited to in-person interviews. Paul Graham sent him an email suggesting he’d be better off with a co-founder. After a few weeks, he’d found fellow MIT student Arash Ferdowsi, who would provide strong technical skills to the venture. Had it not been for the advice of YC’s Paul Graham, it’s likely Drew wouldn’t have chosen a co-founder and Dropbox might have gone down a different path.

Network

YC provided a risk-controlled environment where founders could gain innovative insights and rapidly test new tech with each other. Livingston stated, “The Dropbox founders were determined from the very beginning to win by making a product that was better than anything else. They used their batchmates, and us, as their guinea pigs.” Over the next year, Drew and Arash continued to improve their product, still using the YC community as their early adopters.

Funding

YC not only seeded Dropbox’s initial capital with $15k, but also facilitated their engagement with other reputable investors. YC hosted two Demo Days — one in Cambridge and another in Silicon Valley — to pitch to investors. After their Silicon Valley pitch, Dropbox received $1.2M from Sequoia the following month. Four years later, VCs invested in Dropbox at a $4B valuation. YC fought for their startups and it’s clearly shown by hosting Demo Days on both coasts to get seen by as many investors as possible. Drew is now worth over $3B and co-founder Arash owns shares valued at more than $1B.

“Drew Presenting at Demo Day in Mountain View. Arash driving the slides.”

The accelerator experience is a process of intense and rapid learning within a fixed-term cohort. YC was able to compress the time cycles of Dropbox’s growth in just a few months. This might be the first IPO from YC, but don’t be surprised to see more in the coming years from alumni like Stripe, Airbnb, Instacart and Coinbase.

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3 Ways An Accelerator Impacted Dropbox And The Overall Venture Market was originally published in Hacker Noon on Medium, where people are continuing the conversation by highlighting and responding to this story.