Y Combinator Hits $100 Billion: Interview With YC Co-Founder Jessica Livingston
Co-founder of the most successful accelerator of all time shares best kept secrets on how to become a unicorn
Y Combinator crossed a major milestone this summer when it hit $100 billion in market value for their portfolio of 1867 startups they’ve invested in since 2005. 15 alum are billionaires, 70 alum are valued at over $100 million, and 3 have made it onto Shark Tank. By all measure, YC is the world’s largest, most influential, and perhaps most beloved accelerator.
Just a quick look at the YC companies would make any investor drool: Airbnb, Cruise, Reddit, Twitch, Coinbase, DoorDash, Instacart, HipMunk, Mixpanel, Scribd, HumbleBundle, Dropbox, the list goes on and on. The accelerator has been so consistent in breeding winners that the YC moniker has become a mark of quality across the tech industry, with entrepreneurs proudly putting YC after their name like a professional designation.
Back in July, I had a chance to talk with YC co-founder Jessica Livingston about YC’s remarkable success and the impact their companies have had on the tech industry and the world. She recalled, “When we founded Y Combinator, our goal was to make funding for early stage startups accessible to everyone, but we never imagined it would become this popular.”
Along with her co-founders, her husband, Paul Graham, and his colleagues Trevor Blackwell and Robert Morris, they set out to create a new funding model. Instead of investing large sums of money in just a few startups like traditional venture capital, they decided to invest small amounts of money into a large number of startups, pioneering what’s now known as micro venture capital.
For over a decade, YC’s focus has been the internet and mobile, but more recently they’ve begun backing frontier technologies like AR, VR and AI recognizing that we could be at “one of the dividing lines in history where before and after look totally different.” YC now has its own AI vertical doing outreach for startups working at the intersection of AI and robotics across self-driving cars, personal transportation, smart homes, and manufacturing.
The YC Request for Startups (RFS) list reads like a dystopian sci fi thriller seeking founders working on merging humans and computers, downloading memories, reading and writing DNA, and biohacking longevity.
Additionally, they’re investing in solutions for automation displacement by funding companies that have the potential to create a million jobs, help creators and the working poor earn a sustainable living, and develop Brick and Mortar 2.0 solutions for the coming retailpocalypse.
“So many things are broken, so many things need to be disrupted,” Livingston told me as we talked about YC’s curation process. “Many of the best ideas we’ve funded were ones that surprised us, not ones we were waiting for.”
YC selects hundreds of startups twice a year for the Winter and Summer batches via an online application process. All ideas at any stage of development are welcome and founders need only be 18 years or older, incorporated in the United States, and have 10% equity in the company to apply. There are no other requirements other than being able to articulate their brilliant idea. The successful application that Drew Houston submitted for Dropbox is viewable online as a guide.
Startups are given $120,000 in exchange for 7% of the company, similar to other accelerators like Betaworks which gives $200,000 for 8%. The money serves as a 5–6 month runway to support the founders in their move to Silicon Valley where they spend 3 months being mentored on their investor pitches and go-to-market plans for presentation at Demo Days. YC benefits include access to a network of over 4000 influential alumni, special events and office hours. For categories like healthspan, YC is offering $500,000 to $1 million for 10–20% ownership including free lab space. For voice apps, there are partnering opportunities with Amazon Alexa and Google Assistant teams.
More popular than ever, the YC Winter 2018 demo days was the largest in its history featuring 141 startups, but according to statistics published on the YC website, the class was comprised mostly of male founders under 30, reflecting the similar lack of diversity that plagues Silicon Valley.
I asked Livingston what YC is doing to support women in tech. She responded, “We try to ensure our female founders will be successful by having female funders like Aileen Lee of Cowboy Ventures coach them on the fundraising process. We have external office hours for female founders with YC partners, highlight our female founders success stories on our blog, and host an annual Female Founders Conference.”
Livingston believes role models are the most important thing to encourage women to start startups, and that founders of the most successful startups make the most influential role models. In her talk at the Female Founders Conference last year, she talked about the need for more women-led unicorns and shared these insights on the key things that need to happen to become a unicorn:
1. Be lucky — most successful founders have the right idea at the right time
2. Have right motives — be fanatically interested in what the company is doing
3. Hit a big need — make something a lot of people will pay for, or pay a lot for
4. Do something basic — Uber drives you places, Airbnb finds you places to sleep
5. Be willing to work on a dubious idea — be a maverick and non-conformist
6. Don’t be afraid of a big idea — like expanding a site for the whole world
7. Be driven and resilient — no one has authority over you in a startup
8. Focus on life’s work — must be your singular passion
9. Be able to evolve into a manager — be great at product and people
I asked her about key metrics for measuring success in a startup and whether that includes Facebook MAUs, app store rankings, reviews or Alexa rank. She replied, “Measuring success for startups depends on each startup. But picking a metric and growing it is key. Revenue growth is the best metric.”
YC offers a free 10 week Startup School mooc (massive open online course) with lessons by some of the most inspirational leaders in tech including Paul Graham, Alan Kay, Sam Altman, Ron Conway, Peter Thiel, Mark Andreesen (a16z), Mark Zuckerberg and Dustin Moskowvitz (Facebook), Justin Kan and Emmett Shear (Twitch), Reid Hoffman (LinkedIn), Drew Houston (Dropbox), Anne Wojcicki (YouTube), Jason Kilar (Hulu), Brian Chesky (Airbnb), Ryan Junee (Parsable), Andy Bromberg (Coinlist), Jared Friedman (Scribd), Parker Conrad (Zenefits), Steve Huffman (Reddit) and Stewart Butterfield (Slack). If you’re a founder, you can apply for group office hours, an advisor, access to the community, and a $10,000 grant.
[Originally posted in BuzzFeed community on July 27, 2018, by me!]