Essential Startup Advice During a Pandemic

[Music] Hello everyone, my name is Alex. I'm here from TechCrunch to talk a little bit about the startup world, the pandemic, what has changed, and what is the same. I'm very lucky to have Jeff Ralston from Y Combinator here with me today. Jeff, uh, before we get into all the work stuff, you doing good? Family safe? Everything okay?

Jeff: Thanks for asking, Alex. Yeah, everyone is really doing great. I feel very fortunate in fact because life is pretty good right now. It's a really tough world out there, but yeah, everything's good. I hope the same is for you and your family.

Alex: Yeah, no, we're doing good. I feel like you and I are living kind of the software company life during the pandemic. We're doing fine. Well, there's a lot of struggling out there in the broader market. But let's talk about the pandemic and what's changed. You know, if we go back to the March-April time frame, startups were culling staff, pulling back on spend, thinking a lot about, you know, extending runway, trying to figure out ways to make sure they had plenty of cash.

Then if I go over the summer, much more aggressive investing, startups raising extension rounds to go out there and really leverage on growth. Where are we today in terms of the risk-on, risk-off sentiment inside the startup world?

Jeff: You know, I have to admit I've been surprised at how seamlessly the venture world transitioned to investing over Zoom. I think that's sort of the biggest wake-up that I've had during this whole pandemic is that it turns out that they haven't slowed down much. I think there was a little slowdown right in March-April-May time frame when we didn't really know what was going on, and then sort of seamlessly they just got back to business, and so did startups.

So I would say that the overall perspective is super positive. Lots of folks are starting companies, as many as ever. We're getting applications at rates that are somewhere above what we got last year and the quality of the founders is terrific. The summer batch, we can talk more about that, which was entirely virtual, went great. The fundraising of that batch afterwards went great; it's still going great. So I'd say overall, the signs are mostly or even all positive.

Alex: Yeah, it feels very risk-on right now. I mean, that's what I keep hearing from people at the kind of early, middle, and later stages of the VC community. It's amazing how fast things flipped over the summer into this more bullish perspective. But, you know, when you’re talking to, let's just say, companies from the summer batch of YC that are now, you know, graduated in the market operating kind of under their own steam, do you guys say that they should have, you know, more cash than you might have a year ago? Is there any push to be a bit more conservative on the financial side, the investing side for these companies?

Jeff: Yeah, I think, you know, look, the advice we give startups now is not radically different than we give all the time. You know, Paul Graham wrote this essay a long time ago about being default alive. It's always good to be default alive, to try to find a place where you can survive without raising more money. I would say it's more intense now, so think just a little bit harder about getting to product-market fit and making sure you have product-market fit and being honest with yourself about it.

And you know, conserve cash. We always say hire slowly and fire quickly—well, hire even more slowly than you might otherwise and be more careful. Growth is obviously key to startup success, but you need to think about how you're growing and when you're going and whether you're doing it in an intelligent way more now than ever before, just because the economy is so uncertain. That, you know, before the election, that was even more true. But now, what is 2021 going to look like? I think is an open question that is very difficult for anyone to answer.

So creating a startup in that environment, I think you have to be just a little bit more wary of the potential pitfalls out there. Does that wariness...