There have been quite a few posts about Y Combinator over the past few weeks. I recommend reading the ones from Lawn Love and Shout. They are both great posts about why you should apply to Y Combinator.
I won’t repeat all the things they’ve said about why new startups should apply to Y Combinator. I won’t even tell you how you should apply and what you should write in your application. You should read PG’s essays for that information.
This post will focus on whether people who have startups that are a bit further along should apply to Y Combinator (spoiler alert: yes.).
Story of Kash
Before applying to YC, I had the impression that people who apply to YC do it on back of a napkin without having a product built. After all, when you look at the videos for past YC applicants you very rarely see anyone say “oh btw, we’ve already built this thing.”
So I was a bit skeptical about applying to YC.
Danny, Geoff, Pritesh and I have been working together for almost two years now. Like most startups we’ve had our pivots and turns, but we’ve been working together for quite a while and our focus this entire time has been on fintech. When we applied to Y Combinator we had a product on the market and lots of paying customers. We had also raised a small amount of money. We were just starting to build out what would eventually become Kash, but we were making money on our other products.
We were making money already. How could YC help us? We only applied to Y Combinator because two people we respect told us that we should.
Y Combinator is for all startups
One of the first things I noticed when I joined Y Combinator was that of the 85 companies in our batch, quite a few were already far along. Blockscore had loads of clients, including some really big names. Pretty Padded Room had been making waves for almost two years. ClearTax had already become the largest tax filing software in India.
And the biggest of them all: Quora. They had already raised a bazillion gajillion bucks. Quora was my homepage on Chrome. And they were in our batch.
If you are a startup that is a bit further along and even if you have raised a couple of million bucks, you should take comfort in the fact that you will not be alone in a Y Combinator batch. At the rate YC is growing, I wouldn’t be too surprised if Ford’s CEO were filling out his YC application this weekend. Given how Ford is doing, frankly, there are worse places than Mountain View for Mark Fields to spend a few weeks.
What do more established startups get out of YC?
Y Combinator at its core is about three things: advice, network, fundraising.
- Advice: Y Combinator partners are really smart people. So are lots of people who are not YC partners. So why is YC advice so good? Y Combinator advice is really good because YC partners have added pattern recognition to their intelligence and experience. Just think of it this way, there have been nearly 1,000 YC companies over the various batches. Almost all startups are faced with similar problems. Should I use channel sales? Should I focus on SEO? Which feature should I build? Should I focus on growth or engagement?If you have seen the same problem 1,000 times, you start being fairly intuitive about the solution. To a YC partner a marketing problem is about as intuitive as a multiplication table is to grade 4 student. (Do they still use multiplication tables or has common core math gotten rid of them?) Y Combinator is not a small boutique consulting shop. Y Combinator is the AT Kearney or Accenture of Startups. They see the same problem over and over again. There is nothing size specific about this. They can give very specific, useful advice to a later stage startup.
- Network: You know how hard it is to get an introduction to someone at Dropbox or to Andrew Mason? If you are a YC alum, it is really easy. You just e-mail Dropbox’s co-founders or you just ping Andrew.Before YC, I would spend a significant amount of my time trying to figure out how X company had solved Y problem. I now don’t spend all that much time trying to figure it out. I just ask. This is insanely valuable.
- Fundraising: Y Combinator’s SAFE terms are public. As is the new deal. Y Combinator’s SAFE is incredibly entrepreneur friendly. I used to be a lawyer and I did some work in this space. There is no way anyone is going to volunteer to give the SAFE terms to any company. You should take the SAFE because you want as much future money as possible to come in on the SAFE. Pre-YC, it was not uncommon for fundraising consultants or advisor to take 4-5% of a startup’s equity to give them fundraising advice and to make introductions. That is 4-5% given away for nothing. Even today, this happens with some frequency. I know of startups that have engaged such advisors. In the public market, a company that shops around your IPO is always going to take a massive chunk of the deal. Yes there is underwriting risk there, but so much of the work is the leg work of making introductions and selling the equity. YC’s equity stake is worth it just for the fundraising help, even if they were to give no advice, invest no money, and provide you with no network.
Before applying to Y Combinator, I talked to a YC alum who told me “Applying to YC was the best decision I made in my life.” At the time I thought it sounded a bit cultish and a little odd, but having been through the whole experience I totally understand what he meant. For Kash, joining YC is the best decision we’ve ever made.
Do yourself a favour: apply. It is not too late to start the application. We did it over a weekend.