How one startup CEO got kicked out of Y Combinator — then raised $1.5M from Kleiner Perkins

Jon Crawford is an entrepreneur with the dubious distinction of having been kicked out of Y Combinator. But rolling with the punches and continuing to fight for what he believed was right for his startup, he took a $1.5 million investment from VCs including Kleiner Perkins six months later.

But how?

He and his cofounders moved from Austin, Texas to the S.F. Bay Area for the Y Combinator class of 2010. On the first day, Crawford shut down the revenue-generating part of his business, parted ways with his cofounders, and got kicked out.

Not exactly a recipe for success.

However, Crawford persevered, and today his startup, Storenvy, offers one of the world’s easiest storefront platforms, plus a social marketplace. Over 20,000 stores sell almost 350,000 products, such as T-shirts, novelties, and pet accessories, all on their own URLs. And there is that nice $1.5 million seed round of funding. …

We asked Crawford how he did it.

VentureBeat: What was your original idea for Storenvy?

Jon Crawford: Storenvy started because e-commerce is still too hard for most people. Opening and operating your online store should be as easy as blogging and as social as Twitter. We set out to bring the usability of the consumer web and the community focus of the social web into a new area: custom online storefronts.

VentureBeat: Why did you not get into YC?

Crawford: We actually did get accepted into YC. We moved from Austin to the Bay Area to participate in the Summer ’10 YC batch. But we got kicked out on the first day because I parted ways with my cofounders and shut down the revenue-generating part of our business — a T-shirt screen-printing service.

Yeah, a little left-field. That’s why we shut it down.

The YC team said it was just too much change at the last minute.

VentureBeat: What did that teach you?

Crawford: It showed me what I was made off. Getting kicked out sucked. A lot. People dream about getting into Y Combinator and then cry over rejection. But to get in and then get kicked out? That’s way worse! It was a big emotional setback for us. But we didn’t let it stop us. We powered through and built enough buzz and traction that we were able to get the business funded anyway.

VentureBeat: What did you change after that in your business idea?

Crawford: Nothing. But I did take a few months to regroup before heading back out to pitch. It was a big personal shock to get kicked out, and I needed to get my feet back under me.

Also, I gave myself a few months to learn how the San Francisco startup scene works and to create a solid network.

VentureBeat: What did you change after that in your pitch?

Crawford: I actually didn’t mention the YC story in every pitch. I don’t want to be know as “the guy that got kicked out of Y Combinator.” I want to be known as the guy who built an amazing product that people love. So it didn’t really alter my pitch other than that we had more traction since more time had passed.

VentureBeat: How’d you get the meeting with Kleiner Perkins and other investors?

Crawford: I met KP through AngelList, which had launched earlier that year. For a big VC, getting involved with AngelList was a fairly grassroots move on their part, which I respected. The rest of the investors I met through my network.

It’s important for founders to get intros to investors through other entrepreneurs. So every good intro I got during the seed round raise was from someone whom that investor had already funded.

VentureBeat: Why was going VC successful while YC wasn’t?

Crawford: A lot changed for our business in a very short time during the week leading up to YC, and their leadership wasn’t comfortable with that change. But the waves died down after a few months, and we proved that our business was stable and built to last.

VentureBeat: YC seems so different than VC: early-stage vs later-stage, small dollars vs big dollars, accelerator vs VC. How could you go from one to the other?

Crawford: We were actually already raising a seed round when we got into YC. So when we got the news about being accepted, I contacted all of the investors to tell them that we were going to wait to raise the round. So we went back to those same investors six months later to resume the conversation.

VentureBeat: Talk to me about valuation: Is it better to go VC than accelerator?

Crawford: YC almost unquestionably improves your valuation by more than they take since they get you in front of so many investors. The feeding frenzy that ensues on demo day drives your valuation higher than many could get it on their own.

The amount of money you get and the amount of equity YC takes, and the valuation implied from that combo, isn’t really the reason you should do YC. It’s about the network and spotlight.

VentureBeat: Talk to me about experience: What did you lose by not doing YC?

Crawford: I think we missed out on a powerful network and possibility more exposure. Instead, we’ve had to build all of our own momentum and exposure, which takes a lot of energy.

VentureBeat: What did you gain by not doing YC?

Crawford: Again, I think we learned a lot about ourselves and how we’re able to recover from setbacks. Knowing that you can overcome hurdles and setbacks is crucial to being a confident entrepreneur.

VentureBeat: Would you do YC again, if you knew then what you know now, and they said yes?

Crawford: Absolutely. It’s a great program that includes a lot of great entrepreneurs, product visionaries, and mentors. Although I doubt they’d ever say yes to me if I keep doing interviews like this.

VentureBeat: How has Storenvy changed from your original vision?

Crawford: Honestly, it hasn’t changed. We’re still building the initial product that I envisioned three years ago. In a startup culture full of pivots, I think there’s something to be said for focusing on a vision and seeing it through.

I’d estimate that we’ll be close to my original product vision this time next year, but we’ll see!

photo credit: Jiuck via photo pin cc