Q&A with YC Partners at Startup School SV 2016

I'm Cat, one of the partners at YC, and I'm gonna bring on a bunch of the partners with me today to help answer some of the questions that you sent us. Thanks for sending all the questions. Let's bring everyone out. All right, what's up everyone? Introduce themselves really quick. So, let's go down the line. We'll start with Adora.

Oh hey, I'm Adora. I'm Michael. I'm Dalton. I'm Kirsty. So, we just took all of your questions and are going to probably get through hopefully about ten. Then, if there are any that we can't get to today, we'll try to answer them online for you.

But let's start with, if you know you want to eventually start a startup, when should you do it? What's the best timing and how do you navigate the trade-off between becoming a domain expert and just doing it now? If you want to start and you have an idea, I think you should just start now instead of trying to figure out the trade-offs. I think when you start, and even if you're not an expert, you should be on your way to becoming the domain expert. You can do a lot by going in the field and doing the actual job itself or whatever research you need to do to make yourself a domain expert. But, you know, in one or two years' time, you better be the domain expert in that field.

Yeah, I'd add to that; if you don't have an idea, I thought Marc Andreessen's advice was really good. Go join a hot startup for a couple of years. Get an idea of what a well-run startup looks like so when you do have your idea, you're kind of ahead of the game.

So, what is a good process for discovering and vetting new ideas that might be worth building? I always tell founders two things. One, look in their lives and look in the lives of their family, in their community, and their work, and find problems that interest them. The other thing I say is think about what you want the first line of your Wikipedia article to be. Because, you know, every startup has the potential to be your life's work. So, you know, don't think about warm-up startups. Think about going on doing your life's work solving a problem in the world you care about.

Yeah, I think sometimes people come up with ideas that seem impressive to other people. You know you're gonna tell us more about your startup idea. You try really hard to make it sound fancy and to use buzzwords. I think a better way to do that, instead of that, is to find something that you're deeply passionate about and you can't stop thinking about. It may not actually sound impressive to anyone, right? There's a good chance that when you try to tell people about the thing you're actually excited about, it sounds stupid. They laugh at you and say it's a bad idea. If your only criteria is what impresses other people or impresses authority figures, that's—you can even go way off track following that criteria.

So, this segues into another question that came up, which is how do you choose between an idea that you love, that you're super passionate about, but it might be impossible to monetize? How do you choose between that and a product that has great revenue potential?

How do you know that you should work for YC? We would love to know that. One of the things that YC has emphasized over and over again is how hard it is to be a solo founder. So, there’s a question—do you have any advice for solo founders or how did Sh'ma, for example, convince YC to accept Gobble? What was it in her application that convinced you?

I think all things equal, it's better to have a co-founder. Quite frankly, you know, YC—we've accepted many companies with solo founders, and I think then you're gonna have to come to us with something that's very unique to you. I'm not sure exactly what Ishmael had in her application, but if you have traction, if you have some really unique insights on how you can acquire users, retain users, all these things, and you just know your stuff and you come across as very competent—more than confident—then we would definitely like to talk to you.

I think the other thing to bear in mind is that startups are hard for two founders, for three founders, for everybody. So, coming in as a single founder, you have to be pretty much superhuman because you have to do everything. You know, you either are out selling or you're out building the product or you're out fundraising. You have to be able to combine all of those things, whereas if you have a co-founder, and one of you is great at sales and one of you is very technical, there's more of an obvious split there. So, you know, there is definitely a superhuman element to being a single founder.

Yeah, I'd also add to that that starting a company is an emotional roller coaster and it's really hard to do by yourself. It's always nice when there's someone else next to you that feels the same pain, right? That you can commiserate with because it takes that to kind of get through some pretty tough times. If you're in a room alone, kind of absorbing all the pain yourself, it can be overwhelming sometimes.

Specifically, I remember when Oshima came through YC and when she applied. I remember that we just said throughout all of us had like "Lumen never gives up!" Like, Sushma will never give up. It was probably like, "Keep on fighting until this works." I think we'd seen she had already been working on Gobble for a number of years before she applied, and it was clear that this was something that she was very passionate about and that she was just gonna keep working on it. The story was similar to—you know, you have to be a cockroach. It reminded a lot of people, I think, of how the Airbnb's almost failed, you know, three times before they actually got things up and running.

And so, one question maybe for you, Kirsty, is what are some tools or services that you would recommend for founders who are just starting?

Yeah, there's loads of things out there to help. So, as some background, I work on more of the financial and operational side with startups and so I often get asked this question and there's so much out there that can help with that. So, from right from the very start when you're incorporating your company, there are services like Clerke that can help you do that. That creates very standard paperwork that all the YC startups use. There are services like Gusto that you can use to help you run payroll properly and make sure that you're withholding and paying taxes over. There are services like Ironclad, which helps you store all your NDAs and sales contracts all in the same place. So there are loads of resources out there to help you.

I think it's really important that those are the things that you shouldn't be trying to reinvent the wheel. You know, use all your brainpower to figure out your product and to figure out how you're going to make your company grow. With all these other things, that's not gonna make your company a success, so just do the basic simple vanilla option and move on to other things.

So, on that note, is there anything that you find really early-stage founders wasting a lot of time on that you wish they would just automate and move on? Are there any specific things that you wish founders would spend less time on early on?

For me, it's things like—they try to come up with funky voting structures or weird vesting schedules, or they're trying to protect themselves from some unknown company that's gonna come in and steal all their ideas. You know, those kind of things you just don't need to worry about in the early days. Just keep it all simple and concentrate on everything else because as you start to grow, if other things come up that need to be fixed, you can afford to pay lawyers at that point and they can help you fix them.

I think being secretive and trying to protect your idea—sometimes I meet founders who think they have this secret idea and the idea is super valuable if they tell anyone. They'll create a hundred copycats. In fact, the more common problem as a startup is that you'll tell your idea to a hundred people and all of them will kind of shrug their shoulders like, "Yeah, whatever." So as a startup, in most cases, you should be like telling your idea to literally anyone who will sit and listen because they might have some valuable piece of feedback.

Do you have thoughts on how people should think about competition?

Beyond that, I think you should be highly aware of it and what they're doing, and sometimes they are doing some things right. When they are failing, you shouldn't assume they're incompetent. They're probably really smart people; in fact, they came with the same ideas you did. So, you know, I think, again, just be aware of what they're doing, track what they're doing, but don't follow them and don't assume that when they do something wrong, that's a bad idea. You know, there's a lot that goes into execution and sometimes, you know, a good idea is just badly executed. So yeah, just follow but don't copy necessarily.

So, is it more important to move fast or perfect your product? Talk to us a little bit about perfection.

So I'll take a crack at that. Sometimes when we do office hours, founders ask us these binary questions like, "You know, should we grow really fast or should we make a lot of money?" or like "Should I hire a hundred people?" or "Should I...?" and the point is, they want us to give them an answer like it's this binary thing. What's so frustrating is 99.9% of the time when we're in office hours, and founders are pushing us for a binary answer, the answer is like, "Well, you know, both." People would say, "Well, should I be focusing on the product or growing faster?" and it's like, "Well, both!"

That's unfortunately how most of life is; it's a lot of gray area. You're gonna have to do the impossible. Whenever we hear that, it's someone kind of asking for permission to not work on the thing they don't want to work on, right? Unless, you know, unless I'm really feeling sorry for them, usually I don't give them permission to, you know, "Oh, don't worry, don't work on the product, who cares if your product is good, just keep growing." You know, that's what they want to hear.

So if you find yourself in these kinds of dichotomies, right? If you're like, "Should I be working on revenue or should I be doing what I'm passionate about?" you know, if you're trapped in these sorts of chains of thought, I think it's always good to try to zoom out and realize that life is not black-and-white and these are not usually zero-sum decisions.

And if you get to the root of what you're concerned about or where you're trying to solve for, realize that you kind of—you always have to do both. Let me add one thing: if you have a retention problem with your product—if only ten percent of your people are returning on a monthly basis—don't spend a lot of time on PR, right? So don't try to grow super fast if people aren't sticking around. Focus on the product, but focus on your real problem, which is retention, before you go try to tell the world.

Very similarly, one rule I tell a lot of people is like: everyone wants to know, "Should I keep growing fast or, you know, should I work on the product and make it really good?" It's, I think, you know, in the early days, acquiring users shows that this is something people want; you should continue to do that. But you should always have this metric, or this like threshold, usually something like retention or NPS or something, and continue growing fast. But once it gets below a certain point, like stop and really focus on the product and why people are not retaining, why the NPS is so low, and don't even focus on growth at all.

So, for a startup that's recently launched, what would you consider a good growth rate?

When I talk to startups and try to give them a rule of thumb around growth, what I try to tell them is like what I look for when I read a YC application. Basically, what I look for is how long have you been working on this project and am I impressed with what you've done? The growth rate is very, very dependent on a business, and different businesses have very different growth rates.

I still think a better way of thinking about it is that like, if you had to be super intellectually honest with yourself about how fast you're moving and how much progress you're getting in the amount of time that you've had to work on this compared to other people, that's a good way to kind of start figuring out, "Oh, am I impressive? What am I doing is impressive?" I think that like having us reduce that to like seven percent or fifteen percent is like not really gonna be that helpful for you.

So this might be a good segue to the question: what do you look for when you're reading a YC application? Another question that came up was, you know, what do you look for when you're interviewing the companies when reading the applications?

I look for: do they have unique insight on how they're going to acquire customers? There are many factors, but that's the one thing I look for. And then in terms of an interview, it's how can they communicate their ideas in a very brief manner so I understand it. If you spend the entire ten minutes of the interview trying to tell us what you do, that's really a bad sign that you don't really understand the product quite yet.

Yeah, I think my biggest thing when reading an application or evaluating a founder is to be biased towards people that are action-oriented and actually do stuff. A very large percentage of people that have startups haven't done anything. They haven't made a thing; they haven't given the thing to other people. Their application is basically asking for permission from us as authority figures to let them work on their startups so they can quit their job or whatever.

On the other hand, you have folks like when we talked about earlier, "Hey, I have shipped the service, I've given it to real people, here's what we figured out, here's our website—you can click on it, we have customers." The more evidence that someone is action-oriented as opposed to conceptual in their approach to startups, that is highly correlated with success across the board.

That would be my advice to everyone on this. Like, "Well, how do we think about what YC looks at?" I mean, if you have evidence that you've made a thing and given the thing to people and gotten money for the thing that you made, that makes your application 10x better than spending more time, you know, rewriting your prose to seem a little fancier or something. There are all these things—people have all these tricks they try to do, and those are much easier. Just like do your startup and make progress on it; that would be my suggestion.

I think the other thing that people often ask about this is they think we have kind of a checklist that says, "Oh, if they have 10% growth and they have revenue and they have this, then great, they’re in," and that's not how it works. It's a balance of a number of different things and a lot of different things that we're looking for. So, it's very difficult to say, "You know, this is what makes a successful application."

In terms of concrete things, it's much more about can you concisely explain your idea? Can we get to the end of the application and we actually understand what the company is doing? You'd be surprised at how many applications we don't understand. So, it's much softer things than just being able to say, "Yes, I have achieved this specific thing."

For me, what's helpful is if you don't bury the lead. You know, we're humans and we have to read literally hundreds of applications. So, like, don't wait for the last question in the application to say, "And we have a hundred and fifty thousand users; we're making 2 million dollars in revenue a month and growing 50 percent month-over-month." Like, dress it up probably in the like, "What does my company do?" It does this.

And then I think the second thing is— a lot of these things actually serve as filters. What I would say is: you should apply. The only way you know you're gonna get into YC is if you apply. It doesn't cost anything; it's open, and it's pretty easy. I would say the software is good, so just apply.

The number of founders who tell us that even not getting in, answering those questions helps them build their business is so high. So you should never hear any of these answers and say, "Oh, that means that I shouldn't apply." Oh, I see, even if you think you're a single, non-technical co-founder with a horrible idea and you haven't quit your job—apply, and roll the dice. You know, you don't need to know us; you don't need an intro; you don't need a warm intro. Just apply on our website. There's a link.

The vast, vast majority—I know the stat off the top of my head—of people we have no contact with whatsoever. And 40% of the startups we funded in the last batch have never had a single touchpoint with YC. They haven't come to any events; they have never exchanged an email with a partner or an alumni, and it's kind of cool. I mean, it's unlike other, you know, VC funding type situations where you need the warm intro. You have the ability to just apply, and it's free and it's open to anyone.

The thing that I think a lot of us tell a lot of people who are thinking about applying is that the application is very simple. The questions are very simple, and it's actually a really good way to think about your business. It's a good framework. So, even if you don't get in, just fill out the questions. I think it'll actually help you think about your product and business better.

So, a question that always comes up and that came up today is at what point should a company apply—like an optimal time in the lifecycle of a company?

I think there's two things here. I think people use this as an excuse to not apply because their company is too early or their company is too late, and they're like, "Oh, I can't possibly apply to Y Combinator," and that's not true. There is no too early and there is no too late. We can be helpful to companies at all different stages.

And, you know, this also comes back to the question: should you polish your product a little bit more? It doesn't matter. You know, we can help you at any stage. The other thing to bear in mind is if you do apply and you're not successful the first time around—no problem, you know, apply again. There's no black marks against you for doing that; there's no problems with that. So just, even if you're a little bit early to the first time, six months of more working on the company, it could totally change things.

Just to put facts on that: in the last batch of a hundred companies, there was a company that literally didn’t start writing code until two weeks before their application was submitted. There was a company that had a forty million dollar revenue run rate, and everyone in between, and they all got tons of value out of YC. Everyone is probably somewhere between those two points.

To add a final stat to that question, out of the hundred companies in the last batch of YC, about 50 of them had previously applied and been rejected, and they were accepted on their second, third, or fourth application. So apply—by twice.

I was on a panel with a bunch of alumni, and the question came up from the audience. Literally, everyone—all the alumni on the panel—had applied more than once, four times or three times.

Interesting. So, we're getting to the last few minutes, so I kind of wanted to go down the line and ask, is there anything you wish you'd known when you first got started? Any particularly helpful advice that you got or would like to pass on? Or someone can volunteer?

Sure, I'll start. I wish someone had told me it was as rewarding as it ended up being. Right? I just kind of did it because it sounded like it was interesting and I was passionate about the idea, but looking back on having started several companies, it's unbelievably rewarding because it's so hard, and to get through it and be successful at it on many different levels, you know, it just looks back to Ed as some of the best experiences of my life.

I wished someone told me to let go of being in the nitty-gritty so much because when you're starting—especially for myself—I went through three or four years of just nothingness, and so I was always the one coding and building the product. Then, as my company starts scaling up fast, I didn't let go of that stuff fast enough. So I think there's a lot to learn in terms of scaling a company and when you should—what you should be managing and what priorities should be.

Yeah, I wish I had asked for more help. When I started my first company, I was 21 and I dropped out of college to do it. I never actually had like a real job before, so I only had this sort of dim understanding of how companies actually worked on the inside, gleaned maybe from TV shows. All of a sudden, I was managing like 30 people and I had no idea how to do it. I actually felt very isolated and alone, and I didn't know who to ask for help. I've learned since then that, particularly in Silicon Valley, people are incredibly willing to help even if there isn't anything apparently in it for them. They'll just help you just because.

So, I really wish I just asked lots of people for help. The best piece of advice I got was actually this guy named Gideon who yelled at us and told us that we were stupid. We had got Justin.tv profitable, and we actually were making a couple million dollars a month—not a year, sorry—in profit. We were kind of sitting back and patting ourselves on the back, and Gideon said, "You've built something that's useless. It will fade from the internet in the next three years, and nothing you've done will ever be known ever again." After we kind of picked up our egos, we started thinking about new things to build, and a couple of them worked out. So, yeah, that's probably the best piece of advice I got: don't rest on your laurels.

Yeah, I think my piece of advice is just to watch out for cargo culting on a lot of the aspects of startup culture that you may or may not agree with. I think a lot of people have all these ideas about how they're supposed to act or who they're supposed to go to meetups with. You're supposed to go to this and you're supposed to hang out, you're supposed to network— and you don't have to do any of that stuff. Like, that’s totally not necessary. If anything, that can be a signal of being distracted from your startup. Instead, I would suggest the way to think about this is that in most jobs in life you have to conform to someone else's culture or someone else's company. You get to control every aspect of things. If you're designing your own job, you get to choose who you work with, you get to choose what your work style is like, you get to choose your hours, you get to choose what you're actually even working on.

So you should open your mind to create an entire reality that really serves your needs and your passions and what makes you happy and not this cargo cult ideal of like, "Hey, I read on this blog post that, you know, 14 of the most successful founders all went to Stanford," or, you know, whatever that thing is. Just write your own damn story, right? Like, stop reading all these blog posts about how to be like famous people, and do it your own way. And I just—that's really my encouragement when I talk to people that sometimes get lost in reading too much advice to remember that this is your story and you're gonna do it your own way versus just aping whatever you've read, you know, in the popular press.

So that's my advice to you. I think my advice is that, you know, when you hear about people talking about startups all the time, they're always killing it, they're always growing, they're always hiring people—and that's actually not reality. So I think, you know, finding yourself some trusted people that you can go to and say, "Things aren't going so well. I'm finding this a little bit tough," or, "Things aren't quite working how I want them to work." You don't have to broadcast that to the entire world, but if you have a few people that you can actually talk to about that—whether it's other founders or whether it's a couple of your investors or whoever it might be—that can actually really help to take a load off so that you can feel like you're not constantly acting and you're not constantly having to be the startup founder where everything's going fantastically well for.

Thank you! I think all of us are going to be out in the Sunken Garden for the reception. So, if you have any particular questions for us, you can come up and just ask us in person.

I wanted to take this opportunity to give a couple of thank yous. I wanted to thank all the people that were involved with making this happen—all the partners, all the staff. A huge thank you to Dominique who runs events for YC, and Tom who got the Wi-Fi working, and Jared who built a lot of the software for us, and Steven and everyone else. And then also thank you to all of you for coming. It's a huge pleasure to get to meet you and get to hear what you guys are working on. A big thank you to the startups who came up here and did office hours today and pitch practice. Like, it takes them a lot of grit. A lot of them—you know, they were all really great sports.

So there is a reception right outside until 7:00 at the Sunken Garden, and we will see you there! All right, thank you!