Last April, my co-founders and I did a video call interview for Y-Combinator’s (YC) Summer 2019 cohort. Despite not making it past that round, I learned some key lessons about startup after reflecting on our performance during the interview process. In this post, I will share some of my learnings and takeaways.
About my startup
My startup is called Node App and we are a self-serve platform that connects Instagram influencers to restaurants. On our platform, restaurants can post exclusive offers that influencers can redeem in exchange for posting pictures of the food on their Instagram feed. The platform was launched in August 2018 and we currently have a team of 5 people. In the startup, my role is to lead the product and organizational directions and the design of the product and website.
It was our first time applying to YC and we were really eager to do the interview!
About the interview
We were lucky enough to have been connected with YC alumni before applying. They told us about their experience of going through the program and helped review our application. As an application tip, I strongly suggest talking to YC alumni because they will help you understand what to expect from the program and give you feedback on your application.
For this interview, we preparing by reading people’s experience on Medium, Quora, and Reddit. After preparing, our main assumption was that we will get asked questions regarding our product. Therefore, we mainly focused on preparing for product related questions. Take this with a grain of salt, but I felt that the YC interview felt like interviewing for a big tech company. You receive challenging questions (challenging unless you’re prepared), you get very little time (the interview is only 10–15 min), you need to be good at handling follow-up questions (be quick to think and reply good answers) and you can’t afford to make mistakes (it’s so competitive, you need to aim for a perfect or near-perfect score).
Here are some of the questions we got asked:
- How difficult is it for you to obtain new customers?
- How much do you charge? When will you charge more?
- How many customers do you have in the pipeline?
- What’s your user and customer acquisition cost?
- What’s your monthly growth and your churn?
The first thing you might have noticed is that our assumption was not aligned with the type of questions we got asked. Since YC regularly accepts startups without traction or revenue, we did not think that we would get asked these types of questions. We did have answers to these questions, we were just not prepared to talk about it in a clear and concise way. Despite my co-founders being optimistic, I knew we would not get it because we did not answer properly to some of their questions. After the interview, I spent some time thinking about why we got asked these questions and why we didn’t see it coming.
If you are building your startup in an incubator, lots of mentors will tell you to “know your numbers”. But in all honesty, it is a really general statement that seems obvious but was not actually that obvious for me. What does it mean to really know your numbers, what numbers should you know, and why does it matter?
After watching videos of the Tony Xu (DoorDash CEO), videos of Chamath Palihapitiya, and a podcast of Ray Reddy, I finally started to understand what we got wrong. Seeing the way they think about startups gave me an understanding of why we got asked these questions during the YC interview and why we should have seen them coming.
A lot of people in the startup world will tell you to “know your numbers”. However, this statement is broad and depending on the context, the definition of “numbers” will change. By digging through, I realized that “knowing your numbers” is about understanding of your “unit economics” (UE). I realized that all the questions YC asked us helped them understand our UE.
UE is a way to measure the profitability of selling one unit of product or service. It is about understanding the relationships of all the KPIs that will make your business profitable on the basis of 1 unit of a good. It is super important because it provides founders and investors an understanding of what it would take for the startup to break-even in relation to the business model.
Key Learnings and Takeaways
- I decided to include “good UE” in the way I define product-market-fit. As a result, the sentiment a user has towards a product and profitability are variables that are equally considered in my process of building a product.
- Have a clear way to communicate with other stakeholders regarding your UE. If your UE is bad or negative in the present, you need to understand how it will evolve in the future and how it will change as your startup scales. You could also pivot or change your business model if needed.
- If you don’t have the data available to prove that your UE works, you have to make assumptions in order to develop an idea of what you need to achieve in order to break-even. Then, you need to develop experiments in order to validate or invalidate that your UE works.