My cofounder Ishaan and I just graduated from the Summer ‘13 batch of Y Combinator with our mobile analytics company, Watchsend, and it was undoubtedly critical to our development as entrepreneurs. This is the advice I give others about applying.
I begin with some general advice, then down below I go through the entire application question by question.
The best advice I can give you is to make sure your business would do well with/without YC, and that it shows on your application. Advice on doing well with/without YC would constitute advice on doing well with your company in general, which is quite a topic of its own [relevant].
Basically, make it look like your company’s expected value is high.
Expected value = potential value of your company * probability of your company being that potential value
Your application then serves to make it look like your company could be huge, and that you are the team best suited to make it huge. “Could be huge” is important here, your company just needs to be able to be huge.
YC plays a game of hedging its bets amongst many companies with high expected values. Startups are crapshoots oriented towards rapid growth. They either succeed with a huge upside or die trying. Thereby a startup’s probability distribution of success would look something like this:
YC wants to capitalize on the long tail by the right, the companies with a low chance of succeeding but with a huge upside if they do. You need to look like one of those companies on the right.
Your business idea itself needs to have a huge potential to succeed. You don’t need to have it all figured out, but some permutation of your original business could be a billion dollar company.
If you are a clothing store, you need to make it apparent that, in some universe, what makes your clothing store unique could mean you’re making 7 figures in just a few years. If you are a new analytics tool, you need to be so much better than existing solutions that you could possibly be running on all the software in the world in just a few years. This doesn’t actually need to happen, but it must be possible. Some businesses are deliberately small, like the small mom-and-pop coffee shop around the block that can barely operate the one store and refuse to share their recipe with anyone outside of the family. They may be very successful as they are, but they would never get into Y Combinator because there is no huge upside to the investment.
Further, you need to be the right founding team for the job. Paul Graham, founder of YC, cites often that they put more faith in the founding team than even the business idea itself. Pivots happen all the time, but the team usually stays the same. You need to be:
- intelligent/imaginative (generally likely to make the right decisions for your startup and good at coming up with new solutions to problems)
- flexible/clever (will pivot if necessary, won’t stubbornly stick to a certain idea if it isn't working, can flexibly exploit existing systems to their advantage)
- capable of executing your idea (technically skilled, if that’s applicable)
- have domain expertise on the problem you're solving (an edge over anyone else)
- passionate about the problem you're solving/generally determined (startups are hard, and without the passion to persevere your startup could die prematurely)
- work together well (solo founders are definitely less likely to be funded than teams. Startups are hard and are usually far too much for a single founder to take, no matter how driven or capable)
- [PG’s list of the same few characteristics]
With that in mind, read through your application and make sure all of this comes through. If it doesn’t, you likely won't get into YC.
You simply need to look like a possibly big company with a very well suited team.
Don't be too verbose, not only because it’s harder to focus on all of your strengths, but also because it’s endemic of not having real answers to all of these questions. You'll circumlocute in a futile attempt to hide that you don't have good answers for questions with such obvious, clear intentions and they will notice.
Let’s go through the application, question by question, analyze the intent and answer them as best we can. To make it easier we'll be considering a fictional startup (on demand appliance repair, from a manager of a large appliance repair company):
- company name: not important
- company url, if any: important insofar as you’ve reached this step, and have a .com
- phone number(s): with which to contact you
- Please enter the url of a 1 minute unlisted (not private) YouTube video introducing the founders: higher fidelity introduction than the one you make for yourself in text
- YC usernames of all founders, including you, <username>, separated by spaces. (That’s usernames, not given names: “bksmith,” not “Bob Smith.” If there are 3 founders, there should be 3 tokens in this answer.): they may look at your HackerNews activity, recent comments, submissions, etc. to get a better understanding of who you are. If you are thoughtful and productive on HackerNews, this will be to your advantage. If you aren’t, as far as I know, it isn’t to your disadvantage.
- YC usernames of all founders, including you, <username>, who will live in the Bay Area January through March if we fund you. (Again, that’s usernames, not given names.): they want to see that all of you will come to the Bay Area. It’s critical to your success and not coming out here will signal weak commitment
- What is your company going to make? a concise description of the company that should still pique their interest if it’s a good idea: Fixd is an on-demand appliance repair service.
- If this application is a response to a YC RFS, which one?: your company solves a problem they want to fund. You’re likely to get in if you legitimately have some novel insight or are particularly apt to solve the problem.
- For each founder, please list: YC username; name; age; year of graduation, school, degree and subject for each degree; email address; personal url, github url, facebook id, twitter id; employer and title (if any) at last job before this startup. Put unfinished degrees in parens. List the main contact first. Separate founders with blank lines. Put an asterisk before the name of anyone not able to move to the Bay Area: You can’t do much to change your answer here but if there is evidence in your online presence that you are spectacular in any way it’ll improve your chances of being accepted.
- Please tell us in one or two sentences about the most impressive thing other than this startup that each founder has built or achieved: come off as intelligent, capable, impressive in some manner. Bonus points if your impressive thing isn’t the startup but shows off your uniquely advantageous characteristics. E.g. Eastern region manager of the largest personal appliance repair shop chain in the world, Ralph’s, at only 25 years old.
- Please tell us about the time you most successfully hacked some (non-computer) system to your advantage: They’re looking for evidence that you are clever. The ability to think out of the box and manipulate large systems to your advantage are critical to gaining an edge on the market when you have no capital advantage (which is usually the case with startups)
- Please tell us about an interesting project, preferably outside of class or work, that two or more of you created together. Include urls if possible: show off what you’ve built before to look impressive, to appear as though you can build what you’ve told them you can. E.g. While building Ralph’s new HQ I came across the idea of a web dashboard where I could interact more closely with, and monitor the progress of, our chief architect. I learned how to code to build that web dashboard, and the architect loved it so much he got his firm to purchase the technology from me for six figures. Web based architecture monitoring systems are now the industry standard, only a few years later, and the architecture firm is now significantly more successful than all of its competitors.
- How long have the founders known one another and how did you meet? Have any of the founders not met in person? Founder breakups are a leading cause of startup failure. You need to be in it for the long-haul, together. Display evidence of having worked with your co-founder before on projects or having known your co-founder for a very long time.
- Why did you pick this idea to work on? Do you have domain expertise in this area? How do you know people need what you’re making? They want to know this is a compelling problem that you’ve experienced yourself or know first hand that people want solved. Tell a story about how you came upon this and realized you have the particular set of skills best suited to solving this. E.g. I’d been met with annoyance several times from customers regarding the inconvenience of calling in and having to work through several schedules to come up with a good time for an appliance repairman to come in. I offered to hire more repairmen in all stores so that orders could be fulfilled immediately, and our volume not only tripled, but so did our profits. Customers have been sending emails asking for the next step to be streamlined, for the phone call to be taken out of the equation, but most of our staff aren’t trained that way. I’m ready to make this happen on my own, outside of Ralph’s, and with my technical ability+knowledge of the domain I know exactly how to do it.
- What’s new about what you’re making? What substitutes do people resort to because it doesn’t exist yet (or they don’t know about it)? present your problem as a hair on fire problem, one that people would use immediately if they knew existed because the switching costs are negligible compared to their existing suffering. On demand, quick and convenient, appliance repair simply doesn’t exist. The industry is old and resistant to change, but the customer base is not. Most customers resort to calling their friends who are less than experts despite the risk they pose to their equipment just because of the hassle of scheduling a repair. They gladly pay their friends just as much if not more than they pay us just for that convenience.
- Who are your competitors, and who might become competitors? Who do you fear most? Be realistic and reasonable regarding your competitors. Startups are made by people with delusive passion, but who still have an understanding of their environment and assess risks appropriately. Our biggest competitors are the local repair shops that already have low demand so they can easily offer close to on demand service and don’t have a very congested or convoluted phone line/schedule. Large repair shops like Ralph’s would need to significantly reorganize their businesses to accommodate an on demand system.
- What do you understand about your business that other companies in it just don’t get? Your critical insight. Your secret that makes your business competitive against your competitors and likely to succeed against all odds. That customer convenience trumps all other characteristics of a repair service. Appliances are often critical machinery of a household, and thereby require immediate care, but repair businesses do not treat them as emergencies that require immediate resolution, instead architecting their entire businesses around a queue system for repairs instead of on demand parallelization.
- How do or will you make money? How much could you make? (We realize you can’t know precisely, but give your best estimate.) You could potentially make a ton of money, but be reasonable in making your estimates. Make bottom-up estimates, not top-down ones (e.g. don’t say “if we capture 10% of this 100 billion dollar market, we’ll be making 10 billion dollars!” because those estimates are often wildly inaccurate and don’t represent thoughtful estimation) We will charge customers the ordinary cost of a repair plus a 15% convenience fee. Ralph’s currently operates over 50 repair shops in each state for a grand total of 290 stores. Each one operates on only 10 customers per day, because others call in and are turned off by the 2 week wait time.When new repairmen were hired last year, the average cost of a repair went up 50%, but the volume of repairs also went up 100%, tripling revenue. Operating profits went from $1.2 billion/year to $3 billion/year. From this, based on the volume of repairs in San Francisco alone being over 150 per day, and the average cost being about $400, we could be operating at about $70k per day in just SF.
- If you’ve already started working on it, how long have you been working and how many lines of code (if applicable) have you written? Evidence that you can actually build it and aren’t just building it for YC. Although, they also want to see how quickly you can execute. 2 years to build an iPhone app is too long. I’ve been working on it for about a month and already have a prototype of the iPhone app built. It’s about 1500 lines of code on the app side and 1000 on the server side.
- How far along are you? Do you have a beta yet? If not, when will you? Are you launched? If so, how many users do you have? Do you have revenue? If so, how much? If you’re launched, what is your monthly growth rate? (in users or revenue or both) Have a high potential of success. This can either mean there is already evidence of great success to come, or there isn’t. What’s bad here is evidence to the contrary. If you’ve already launched but have little traction, it’s often worse than having not launched at all. Done the prototype. We haven’t launched but I have been signing up customers for pre-ordering their first repair to the service at a 10% discount for the past month and I’m already at 2500 pre-paid repairs, which is about $135k in profit already.
- If you have an online demo, what’s the url? What have you built so far? Pretty straightforward. If it’s impressive, good. If it isn’t, bad.
- How will you get users? If your idea is the type that faces a chicken-and-egg problem in the sense that it won’t be attractive to users till it has a lot of users (e.g. a marketplace, a dating site, an ad network), how will you overcome that? You’ve thought about your biggest initial hurdle, getting people to know about you and pay you for your product. Be specific, don’t generalize with things like paid ads or strategic partnerships. We got our first 2500 pre-paid users with my connections to local repair shops. I used their existing infrastructure to sell the coupons and they will provide the services when requested from the app until I’ve built out the infrastructure ourselves. This partnership with local shops will continue until our own staff are able to compete.
- The rest of the questions generally deal with commitment. They want to see that you have no other obligations and will be committed to working on this full time. Make it appear as though you’ll succeed with/without YC and thus are fully committed to working together regardless.
- If you had any other ideas you considered applying with, please list them. One may be something we’ve been waiting for. Often when we fund people it’s to do something they list here and not in the main application. If they like you but not your business idea, any of these ideas may turn the tables in your favor . Therefore it is to your advantage to put something here. I’m sure you have other ideas.
- Please tell us something surprising or amusing that one of you has discovered (The answer need not be related to your project): demonstrate that you are an interesting person.
Y Combinator was the most incredible, transformative experience of my life and it can truly propel you in whichever direction you choose to let it push you. I matured in those 3 months and Watchsend, my company from the Summer ‘13 batch, wouldn't be where it is today without the help of YC.