Lessons from the Questions on the Y Combinator Application
Y Combinator is, by far, the most popular seed fund for startups around the world. The organization is famously known for both their seed fund and Hacker News. If this tells you anything, they have 1M Twitter Followers. Y Combinator ‘created a new model for funding early stage startups’ in 2005 and was founded by Paul Graham, Jessica Livingston, Trevor Blackwell, and Robert Tappan Morris. In the past 15 years, they have funded over 2,000 startups and their companies boast a combined valuation of over $155B.
Yes, you read that correctly. That was a B. For billion.
The number seems extremely realistic when you look at some of the superstar companies they have invested in. Stripe, Airbnb, DoorDash, Coinbase, Dropbox, and Reddit are some of their most notable. By merely looking at this incredible repository of previous investments, it is clear that Y Combinator know what they are talking about.
Twice a year, Y Combinator invests $150,000 in a large number of startups. Each startup selected moves to Silicon Valley for 3 months and they work on their product with the end goal of continuing the venture capital cycle by raising more funding. They purely focus on the first phase of launching a startup and reaching investors. Y Combinator is especially lucrative because of their glowing reputation and alumni network. They boast an ability to properly incorporate and prepare startups for the ‘big leagues’ of business. Furthermore, the Y Combinator alumni network contains some of the most powerful and connected individuals in Silicon Valley.
Without applying and beating the 1% acceptance rate, there is still a ton of knowledge to be gained just from the questions they are asking. I have copied some of my favorite in hopes of analyzing and extracting knowledge.
What is your company going to make?
This one is obvious. Distilling the idea into a small sentence of phrase is extremely important. With that mastered, it makes the vision, market, and mission easier to find based on this core idea of what you are creating.
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?
Y Combinator is essentially asking if you have a competitive advantage and proven market. Without a competitive advantage and proven market, you won’t get too far. This is fundamental when creating a business, pivoting that business, or even growing that business. Typically, businesses don’t succeed on passion or interest alone. There has to be an advantage.
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)?
Building onto the concept about competitive advantage, some aspect has to be innovative or unique. Creating just another cell phone isn’t cool. But if you create a cell phone that flies and never has to be charged — you have winner. It is also asking a question about saturation. Whatever the business is, we don’t want too much competition or high barriers to entry.
How do or will you make money? How much could you make?
Finally, the actual golden question. Revenue is, obviously, very important. It will create a sustainable business model that isn’t always bleeding out and always relying on investors.
In my opinion, this offers a beautiful vetting process for ideas and different market strategies. An idea must successfully go through all of these different questions in order to be deemed viable.
Y Combinator currently offers a great online course called Startup School. They feature an 8-week course plan, but personally I really like the ability to browse all of the video lectures and slides from Startup School on this page
If you are interested in applying to Y Combinator, fill it out here. https://www.ycombinator.com/apply/
