You’re applying to Y Combinator and you want my advice about how to get in. I get a lot of emails like this, so I’m compiling the insights and thoughts I’ve had in the last two years, since One Month went through YC (Summer 2013).
First, I’m going to put forward a model for how investors generally decide whether they should invest in a startup, which is all about de-risking. Investors think about four different risks of a startup:
1) Market Risk
2) Product Risk
3) Team Risk
4) Execution Risk
Does the product that you’re building actually solve a problem that is big enough to create a large viable business around it, quickly?
There’s a lot in that question that needs to be unpacked.
Your product should solve a problem. Not an inconvenience. In order to convince investors that it’s a problem worth tackling, you have to be able to clearly articulate who exactly has the problem, how many people that is, and how big the problem is for those people.
There are a number of ways to convince investors that your startup has low market risk:
- Go after a market / problem they already believe is big enough
- Show them that you’ve talked to people with the problem / have done your research
- Actually make money or get users by selling your product to people who have the problem
On top of investors believing that the market you’re going after currently exists, you need to be able to convince them that you can identify a core set of innovators & early adopters (see the technology adoption lifecycle), and that you have a reasonable strategy for expanding from those early adopters to a larger majority of people.
Let’s say you’ve managed to convince investors that the market of people with the problem you’re tackling exists and it’s large enough. Now you need to convince them that your product actually addresses that market in a way that provides significant enough value that your company can grow big, quickly.
It’s not enough for your product to be better than any current alternatives, it has to be significantly better (in order to overcome switching costs).
The best way to convince investors that your startup has low product risk is:
- build a product they already think should exist
- show them promising early results / tests / customer development of users in your target market using your product
- actually have product usage, ideally where users are paying for your product
You should know that because investors get a large number of pitches all the time, your product idea probably isn’t as novel to them as you think it is. Especially if you’re in a fairly crowded space, it’s likely that they’ve already heard some variation of what you’re pitching.
What’s the chance that your team is going to blow up because of some co-founders strife? This is actually a fairly large issue that a lot of startup founders don’t think about. When investors look at a company, they look at the founder dynamic, and they decide whether they think this team is right for each other.
The best way to convince investors that your team is right for each other is:
- already have had a successful product or startup between your founding team
- have known each other for a while
- get along well enough to convince investors that it won’t be a problem
You want to have a team (solo founders are significantly less likely to succeed), because having more people helps eliminate some of the execution risk I’ll talk about below. It’s very hard for just one person to do anything, and being unable to convince other people to work on your startup with you is a big red flag (a major part of successfully building a startup is convincing people — including investors, journalists, customers, and potential employees).
If you’ve convinced investors that there’s low enough risk in all of the above, the biggest major question left is: Will you actually be able to execute your plan? Do you have what it takes to not burn out? To be able to overcome all the ‘No’s? Is there any other major factor that could prevent you from doing what you need to?
Execution risk is kind of a catch-all for a large set of potential problems. This includes legal risk like Airbnb had. A lot of big investors missed Airbnb because they thought it wouldn’t be able to overcome the legal and liability issues involved in having people rent out rooms to strangers at scale. It turned out that they were wrong, but the risk was still significantly high.
The best way to mitigate investor concerns about execution risk is:
- having successfully started and exited a startup in the past, to show them that you have what it takes to personally overcome the difficulties
- demonstrating industry expertise, to show them that you’re able to anticipate potential problems in the industry
- being “formidable”
Y Combinator is an Investor
Now Y Combinator is in some sense is like any other investor. They want you to eliminate as much risk as possible while still being in the sweet-spot of the kind of startup that they invest in / accept. Because they’re very early-stage, they’re willing to accept a lot more risk than other investors are, but still not a huge amount.
You’re very unlikely to get accepted into Y Combinator with just an idea. Startups that only have ideas still have a significant amount of all the risks I mentioned above.
Even building a working prototype at least demonstrates that you can build something, which eliminates some team and execution risk.
Then getting that prototype in front of users and getting early feedback will further address all four risks: market, team, and execution. If the feedback is positive, then you’ve also addressed some of your product risk.
The ideal is that you have a product that is already out there and successful, meaning it has a large number of users, and/or is already producing revenue. That may be a lot to ask from a startup, but you should know that it’s your ultimate goal anyway.
Now some specific points about Y Combinator. It helps to have recommendations from other Y Combinator founders. They have a system that allows past Y Combinator founders to recommend startups applying to the current batch.
For One Month, the way I did this was by asking other past YC founders I knew to review my application and give me feedback several weeks before the application was due. Once they gave me feedback, I submitted the application, let them know, and then asked them for a recommendation. YC has a formal process that allows alumni to recommend applicants applying for the current batch. If you ask for a recommendation, they’ll know what you mean and exactly what to do. I probably got about 6 or 7 positive recommendations by the time they reviewed my application.
If you don’t know any past Y Combinator founders, your job will be to identify past companies that are similar to what you’re working on. Choose ones in a similar industry or solving a similar problem because they’ll be more likely to be interested in you, your product, and helping you out. Check out yclist.com for a list of past Y Combinator companies.
I’m pretty sure positive recommendations have the biggest effect only in getting you to the interview stage of the application process. Once you’re there, it’s all about the partners.
The Y Combinator Application Process
There are two stages in the Y Combinator application process:
- The online application
- The in-person interview
Once you’ve submitted your online application, if they like it or you then your team will get selected to visit for a short in-person interview (just 10 minutes in my case).
There will be several partners in the room with you for the interview. In my case it was 5 partners. And it’s fairly random which partners you get in your room.
I believe that it might help you to have talked to one or several Y Combinator partners in advance of the interview, but it’s also much easier said than done. Leading up to applications, partners get a ton of requests for meetings and advice, so it will be hard to stand out.
Pick a partner or partners that are interested in the market or industry that you’re going after (look at other companies they’ve invested in). The best way to connect with partners is by talking getting intros from past Y Combinator founders. For example, if you’re working on a hardware startup, befriend several other past hardware startups that have gone through Y Combinator, and then ask them for introductions to partners that have been the most helpful for them.
Having an in with one or two partners can help in the application process. It can probably at least guarantee you an interview, and is likely to be helpful if you happen to have the partner in the room with you for in-person interviews. If you don’t, then you’re kind of out of luck, but that’s how things go.
There are a few cases of startups getting a special meeting with partners before or after applications, but it’s very rare. I don’t know much about that.
The in-person interview
During the in-person interview, you’re going to be bombarded with tons of questions coming at you from different partners very quickly. They won’t give you much time to answer each one before cutting you off and asking another question. This can be very frustrating, overwhelming, or anxiety-inducing. That’s kind of the point.
It’s hard to repeat memorized answers in a high-stress situation like that. They want to know whether you really understand what you’re talking about. Whether you really believe it. So the rapid-fire approach tends to eliminate the faker or non-believers.
But it’s unfair to say that they do this just to test founders. Mostly it’s because they’re trying to get a lot of information in a very short amount of time. During the interview stage, partners are meeting with dozens of companies every day, so they don’t really have time for hour-long conversations. Also, they feel like they can get enough information very quickly.
The questions I remember them asking me (and it’s been two years so I don’t remember it all as vividly as I once did) were:
- Who uses your product?
- Why do people need your product?
- Why is now the right time for this product to exist? (Rather than 10 years ago or 10 years from now)
- How are you going to make money?
- How big can this get?
- How will you grow?
- How far will you be by the end of Y Combinator?
I prepared for the interviews by printing a big stack of customer testimonials from existing customers and putting them in my backpack. I planned on taking out the stack and putting it down on the table to demonstrate the need for my product. But then I totally forgot about it during the interview and didn’t remember until I was walking out of there.
The interview process itself is inherently destabilizing, so it’s unlikely that you’re going to feel great coming out of it. Most founders I talked to who were accepted felt as if they had fucked up during the interview and wouldn’t get the call (if you get accepted, you’ll get a call from one of the partners that very same day, otherwise you’ll get an email later that day that you weren’t selected).
In order to reduce the regret coming out of the interview, I recommend to most founders to decide in advance the top 2–3 important things that you want to convey to the partners during the interview, and then make sure that you say those things. The time is so short and you’ll forget anything else, so take it easy and just focus on those things.
In terms of demeanor during the interview, I’ve heard a lot of different things. They’re always looking for formidable founders. It helps to really be passionate and know a lot about what you’re talking about. You want to be firm, but also not stubborn in the face of feedback. You may hear a partner recommend that you do something different or explicitly question one of your assumptions. I think in those cases it’s best to thank them and tell them you’ll consider it rather than get defensive or tell them they’re wrong (eg. “That’s interesting, thanks for your input” or “Hadn’t thought about that, I’ll consider it”).
Finally, if you don’t get in the first time, don’t worry too much about it. A lot of Y Combinator startup founders were rejected the first time around (including me). And plenty of successful startups were never accepted by Y Combinator.
Plus, Y Combinator shouldn’t be the end-all-be-all. It’s still only a step on the way to success or failure for your company. If not getting into Y Combinator means your startup is going to give up, or won’t succeed, that’s already a very bad sign. That being said, Y Combinator is a very cool and valuable experience that benefits just about every startup.
If you have any other thoughts about getting in to Y Combinator, please post them in the comments.
Edit: A lot of people have been reaching out asking me for advice with the Y Combinator application process. If you decide to email me, please read this first. Also, here’s a copy of One Month’s Y Combinator Application for those who have asked. If you’d like to learn more about what Y Combinator actually consists of, check out my post on The Value of Y Combinator & Accelerators.