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Detroit, MI

Castle explains how it got into Y Combinator

The three co-founders of Castle knew they were getting into Y-Combinator even before anyone at the world-famous startup accelerator could tell them.

The team from the Detroit-based property management startup didn't have any inside information. There wasn’t a fix in their favor. But they knew not long after finishing the interview part of the process in Silicon Valley. In fact, they knew before they even got back to where they were staying.

"That day at 7:30 we got the call," says Max Nussenbaum, co-founder of Castle. "We were just getting off the train at the BART station in Oakland. We knew who it was from the Cali number. If you don't get in they tell you over email. The only thing a call could mean is good news."

Check that, great news. Y Combinator is arguably the most prestigious accelerator around. Over 10 years its alumni includes Reddit, DropBox and AirBnB. Getting into Y Combinator means a startup not only can get a chance to pitch just about any investor it wants but it has real leverage when negotiating investment terms with venture capitalists. To say getting into Y Combinator is a big deal would be an understatement.

Castle has been trying to get into Y Combinator since it launched a little more than a year ago. Back then Nussenbaum and Castle's other two co-founders, Scott Lowe and Tim Dingman, were just trying to stay warm.

The three 20-somethings were part of the inaugural class of Venture For America, a Teach For America-like program that pairs promising college grads with startups in economically challenged cities like Detroit. The trio bought an abandoned mansion in Virginia Park during the 2013 Wayne County Tax Foreclosure Auction with plans to renovate it as a future home for Venture For America fellows. It took more than a year and well in excess of $100,000 to renovate. There were times when the friends bundled up because there was no working heat and bathed in make-shift showers. Once or twice they even wondered if the work would ever be done.

Right about that time work was wrapping up the three amigos were launching Castle, a startup that is streamlining property management services with software. They also started applying for Y Combinator shortly after that. Y Combinator was the only accelerator they were applying to. The first time they were basically pitching the idea behind Castle, and they got turned down. The second time they had some customers and were working from their newly renovated mansion/headquarters. But they were still figuring it all out, and got turned down again. This third time was last fall when they got in. More importantly the experience allowed them to show progress to the Y Combinator judges.

"We always viewed Y Combinator as a super long shot," Nussenbaum says. "But the application process helps you sharpen the focus of your company."

Castle closed on an angel round of $300,000 earlier this year. It was in the process of landing a Series A round worth more than $1 million when it got into Y Combinator. Now it has delayed closing on the Series until they finish their Y Combinator stint in the late spring of 2016.

"We decided to delay (closing on) the Series A until the Y Combinator demo day," Nussenbaum says.

When asked how Castle was able to separate itself from the pack of other Y Combinator applicants, Nussenbaum could think of only a couple firm reasons. One is the strength of the team of founders. Most startups fail because the founders break up and go their separate ways. Nussenbaum says they were able to show why that risk is minimized at Castle.

"If we could get through living in a house with no heat and no running water we could probably survive building a startup together," Nussenbaum says.

He also credits good timing.

"I always thing there is more luck in this than anyone wants to admit," Nussenbaum says.

- Written by Jon Zemke

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Related Resources

  • Venture for America
    Venture for America will provide a program for young, talented grads to spend two years in the trenches of a start-up with the goal that these young graduates will become socialized and mobilized as entrepreneurs moving forward.