In my previous blog post Our Tryst with Y Combinator, I wrote about our failed attempt at getting into YC and why it left us more enthusiastic than ever. In this blog post, I am sharing the details on how our preparation to get into YC helped us gain clarity and direction and why I feel every serious entrepreneur should answer the YC questions regardless of wanting to get into the accelerator.
To give an overview, YC calls for applications 2 times a year and you need to apply by answering a set of questions. If shortlisted, they fly the founders to California for a 10 minute in-person interview. We got the interview call on our third attempt.
I will attempt to list down the questions first with my thoughts and notes about the interview.
Part 2: The Questions
Q1. Describe your company in 50 characters or less
As simple as it may seem, this is the toughest question. It requires some serious effort to describe what you do in simple English without any marketing jargon. It should provide a sense of what you do to the readers and should leave them wondering ‘How??’. Our answers to this question are quoted below:
In our First & Second attempts:
Alumni Networks for Universities & Corporates
Auto updating Alumni Databases for Universities
You will notice that, in the first two attempts our focus was the solution we provided, in the third attempt the the focus was the pain point of a customer.
Take away: Make something that people want
Q2. What is your company going to make?
Three things you need to focus on while answering this 1. What is the pain point that you are solving, 2. How do you solve it, 3. Why you?
Idea plays an important role in YC selection. They are like any other VC. They would want to fund a company that is attempting to solve a real and interesting pain point. The problem that you are solving needs to be
a) Real Problem: A pain point that is validated preferably by paying customers or substantial traction / user growth.
b) Interesting Enough: “An Italian Restaurant” is real business but not interesting for an Investor. Investors like entrepreneurs who love solving challenging problems that can create a multi fold impact.
c) Big Enough: The math on return just does not work out for a VC if the market size is not big enough.
Having an updated database of Alumni is important for every university for recruitments, reputation building and fundraising, and we help solve that!
With more than 120+ paying customers, we have doubled our revenues in last 6 months.
Take away: Paying customers are the best way to validate if it is a real problem
Q3. 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?
Q4. 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)?
Q5. Who are your competitors, and who might become competitors? Who do you fear most?
Q6. How do or will you make money? How much could you make?
Q7. 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?
These are the questions you must have figured out by now if you have started the business, but if not, are the first you should answer.
The Why: YC partners do look for ‘Why’ you are doing it. Building a company is hard and enduring and if you are not passionate enough about solving the problem, you are most likely to quit at the first few hurdles. They look for “Can you work on this idea for a substantial part of your life?”.
Q8. What do you understand about your business that other companies in it just don’t get?
Every successful startup — be it AirBnB, Dropbox, Whatsapp or Stripe — changed only small but significant aspect of their industry. Online booking existed, Cloud storage was not new, messengers existed, Paypal was king of payments. Still each of these startups found something that incumbents did not.
This is a killer question! You will be able to answer this only if you have seriously worked on your startup. Sometimes called the “secret sauce”, the best way to find out is, as mentioned in Paul Graham’s essay Do Things that Don’t Scale is speak to your customers.
For us, very early, we understood that Indian Market is very different from west. Institutions here require handholding and must be educated to succeed. Because we focussed on this early, 20% of our customers are from referrals from existing customers
Take away: Speak to your customers
Q9. How far along are you? How many active users or customers do you have? If you have some particularly valuable customers, who are they?
Startups = Growth. Period.
Growth, not size, is the most important thing for a startup. A pre-requsite to know the growth is to “Measure”.
Its the YC way — Measure, Analyze, Improve, Iterate!
Remember, its not just growth rate, “Rate of Increase in Growth Rate” that is most important. Startups are meant to grow fast. Our growth was steady but the later isn’t, and that is the reason we did not get in YC. Here is the feedback from a YC Partner:
Unfortunately, we decided not to fund Vaave this batch.
“We believe what you’re building should exist and at scale, this could be a LinkedIn killer. In the end, we are worried about the pace of your growth. We’d love to see you sell and onboard schools at a faster pace.
Q10. How long have the founders known one another and how did you meet? Have any of the founders not met in person?
This is a necessary but not sufficient condition, the chemistry between founders is very important for startups success. You will have many challenges to face and you do not want the “Co-Founder” to be another headache you would need to deal with.
Ability to Hustle is another characteristic that YC looks. They ask in the founders profile: “When have you most successfully hacked a non-computer system to your advantage?”
You know what it was for us?
We signed up our first customer without our product being ready, Their cheque helped us build the version one of the product!
Answering these questions brings to you a lot of clarity of thought. It starts with why but more importantly, because you need to succinct, you need to know the why not for every answer.
The what and how is simple — Measure, Analyze, Improve, Iterate!
You should be able to answer everything in a succinct manner in a simple plain English, no marketing jargon! Metrics are the best way to convey!