Y Combinator Partners Q&A

Key Takeaways

I'm cat manik I'm a partner at Y combinator and honestly one of my favorite Parts one of the best parts of working at Y combinator is getting to work with the other partners so I'm really pleased um right now to invite them all on stage um and we're going to have them answer a bunch of the questions that you sent in to the startup school at y combinator email so let's bring them on they're telling me not to move the stools all right so I um am going to start I'm going to let everyone so basically what we did was we got about 75 plus questions and we had to col it down them down really fast so we have time for about 10 of them and um so the first question actually is was um could you tell us about your role as a why combinator partner so I'll have each of you guys answer that and introduce yourselves um you know you've actually probably seen everyone on stage at this point so so I'll start um I uh started at YC as the Director of Outreach and um part of you know one of the favorite my favorite parts of the job is um and a huge part of it is I get to travel around and I meet people every day who are working and building incredible things and uh really passionate about what they do so that's I think like honestly one of the best parts of my job and the other part is I I help a lot with a lot of the Press launches at YC so um I really love the storytelling piece um helping craft a story around what is what everyone's doing when what what the significance um of what everyone does is so my name is caster uh you guys can hear me okay my name is caster uh we did office hours I think you see what we kind of do um I help startups through office hours and um group and individual office hours basically build build their company uh my background is I'm an engineer MBA really straightforward my name is Kirsty um I'm the financial and operational partner I guess so I I work with the startups to to help with their financial questions and with their questions like how do I hire my first employee how do I pay myself um so so I help more with that than with strategy uh yeah with strategy or product um and I think the favorite part of of my job is that every day is different the questions we get are different the the problems that startups have are different the the great things that happen to startups are different and so we wake up every day not knowing what's going to happen that day which makes life really exciting my name is Justin um before joining YC i' had started a couple startups all funded by YC three times actually so I'm kind of the remedial student um I have the same job as CER basically working at advising um and helping the startup I think for me it's very exciting uh because it's always something new I really like things that are new and working with a lot of different companies uh is really fun for me and I guess that's it pretty fun so I'm Paul buight and uh I mainly just listen to people's ideas and then laugh at them I can verify that if yeah only if that wasn't true I would be laughing I'm just there for my own Amusement um I I really uh it sounds uh I don't know how to put it I I like I like to be in the place where history is happening um and I think PG is a very clever guy he has a real um insight into history and I think he he's never said it but I think he intentionally created this magnet for interesting people in interesting places so I just like to go hang around there I've actually been um uh officially a partner since I left Facebook in 2010 but I had started hanging around YC I think 2006 as soon as they came out to Mountain View um just cuz there's crazy people like this that I could like talk to and they would tell me their ideas and I would laugh and they wouldn't get offended which actually turns out to be a good feel to the people with a thin skin are I don't know um so yeah I basically just talked to Founders so we'll kick it off with the next question question so the next question and something we've been seeing a lot on Twitter um is that if you're starting a company where the main Market is in a specific geographic region so for example if you're targeting UK customers would you still suggest moving to the US or would you suggest moving so I have a lot of thoughts on that and I could probably go on for hours and I have in the past but I I really think that um one of the ADV advantages of California is even if you're going to start your startup your Market is somewhere else and you really want to continue your startup there it's worth thinking about visiting California even if it's not through YC even if you just come for a little while because there's such a huge offline Network effect in California around starting technology companies there's people who can help you who have done it before started companies with massive scale you know the Google and Facebooks um there's a huge amount of capital uh that goes into funding technology companies um that doesn't really exist outside of Silicon Valley so there's there's a lot of reasons to go even if your even if your customers are in another place and you should try to be close to your customers right you might move back and and start your startup or continue your startup in uh wherever your customers are but I think it's worth thinking about visiting California at some point we I was talking to some of the founders in between on the breaks and somebody said oh there's a lot of energy you feel a lot of people here are interested in doing really interesting things and I think that's just much more common in the valley my first startup was in Chicago Chicago is a great City it's had built great technology companies but there is the E it just feels very different when you go out and you tell somebody your founder that's not you know not that's not like a strange thing they don't they really understand what that means they can and I think that somehow emotionally feels good when you you feel like you're kind of part of the ecosystem part of the community and I think to bring it back to the UK as well the and and the mentality you know the the standard British mentality is oh that'll never work whereas the the mentality over in California is oh that might just work and so that's that's where you're starting from you know you've got a different base Point probably the most popular question we got probably maybe 25 of the questions were are you starting a y combinator in blank so a lot of them obviously were the UK are you starting them in Italy are you going to Africa are you going to launch you know basically every country in the world was almost every country in the world was represented so guys are we starting Y combinator in Europe no I I think if we Tred to start a program in every country Kirsty would quickly get overwhelmed um but we would like to fund companies in many many different countries and we do and we do we last batch had 25 so yeah this batch has Founders that were born in 27 different countries and uh the companies in this batch there's 85 of them now and uh nine of those companies were started outside the US so there's you know Founders from all over the world um companies that have started in multiple countries it's you know it's definitely something we encourage yeah I think I mean really what that question is asking is like why Silicon Valley and there we were talking a little bit about this and there's kind of three things that exist in Silicon Valley which are hard to replicate uh first is just the the The Talented tech technical talent I mean it is uh there are more engineers and probably a couple of buildings at Google than exist in entire States and that is important when you're trying to build a technology company you're trying to find co-founders you're trying to find early team members the second is this sophistication of the investors themselves you know very early stage you have to see a lot of volume you have to see patterns you you just have to be exposed to uh a level of company a number of companies that you just won't see in other countries you know I'm from Pakistan you're just there's a lot of it in Pakistan but there isn't that volume that you see in in the Bay Area uh and the third is you have liquidity events you have acquires the ecos system is probably an order of magnitude larger than any other in the world and that's probably an understatement I mean you just drive down the 101 or drive down 28 you'll see you know hundreds of technology companies and so it's very tough to replicate that in in another country another environment and so you know YC did start off actually in Boston it didn't start off in California it moved to California so it's not a dig on other cities or other you know countries but it's just that that current ecosystem exists and we want you know the best ecosystem to help you guys succeed and I and i' like to add I think the the really key thing is attitude toward risk um and it's very hard for people outside of the startup world to quite comprehend how crazy we are um and the reason is that it all works on a power law right like I'll happily fund a 100 stupid ideas if one of them turns out to be Google and that approach to risk is not something you're going to get if you've been working in banking your whole life because if you're a banker the thing you want to do is avoid losses but I already like assume that most of my invest are going to be losses I'm just looking for you know maybe Justin TV will be a big thing right and that that mindset is very hard for people to get into if they haven't really lived it themselves um so this might be a Kirsty specific question but if uh if you have a UK company if you start a company in the UK do they need to reincorporate to be part of YC we do require that you are a US company for us to be able to invest um and that's not just for our convenience um as as you can hear from all of us we strongly believe that it makes sense to to start a company in the US and and you know that's opening yourself up to many more investors who who will only invest in US companies because of the difficulties in investing in foreign companies um so we want to get you set up in the best way possible for you to take the company forward and we believe that that is being a US company um for companies that come to us like cat was saying we have had companies in this current batch I think nine you were saying that um had started a company in another country and we actually we help them to to change the structure of their company so that they can have a US parent company and then a a a subsidiary in the UK or we've had um a company from Turkey this time um and so we can we can help with we can help you figure out what the best structure is how to deal with it um and we can we can do a lot of the work for you but obviously we don't know really anything about Turkish company law um so in situations like that you do often need to get councel from the country that that you're moving from as well but we do as much as we can to help so this next next question is probably one that I get the most often as I travel and and meet um Founders and they want to know what is the most important quality that you look for in teams or Founders grit like determination that you meet people that certain people and it's not necessarily the smartest or not necessarily you know the coolest the most socialable whatever it's people who are determined to do something and if that case is building an early stage company that that's something that that's a person I really want to be you know with for me one of the questions I'm always asking and it's very difficult to quantify this but it's essentially can they actually see a little bit of reality like do they have Vision something that they're they're they're feeling at a a visceral level or are they just chasing after a trend um and we get this a lot of times where I'll ask someone how do you know this is a good idea and they'll say well there was a tech crunch article about it like to me that's the opposite of evidence like um [Laughter] so like I want someone who's actually H has experienced it for themsel you know like if it's a Founder where they've actually had this problem they're solving their own problem or or or it's just one of these crazy things where they have that gleam in their eye that they just think that there's something real there and they they just genuinely know it at a visceral level because if you don't I think you just give up like you really have to feel that this is a real problem that you're trying to solve cuz it's it's a tough road yeah and in particular again the way our business works is that all of the money is essentially made off of you know really huge successes and the dream of course is yeah you fund a Google or a Facebook but you never get there you don't become Facebook if you sell to Yahoo for a billion dollars right not that a billion dollars is a bad thing but to have that kind of conviction necessary when you're I don't know how old Zuck was like 22 years old and everyone in the world tells you come on man you're an idiot like you've got to sell your company to Yahoo it's like just a little so social network for college students like a billion dollars is a lot of money and he says no and then fires them all like that takes a special kind of madman um so the next question is how far along should a company be before applying to YC so I I think that people often think that we're on one end of the spectrum I actually hear both either YC doesn't fund early stage companies anymore or YC doesn't fund like companies that are as far along as I am and the answer is that we actually fund companies at all different stages um you know some companies have raised a some money a seed round before they join YC and some companies have you know they just have an idea and a team and they don't really um they haven't they haven't even really gotten their start yet uh so we look for you know we really look for the people like smart people who are dedicated to doing something and um that's that's I think what we primarily consider and think about can you guys give two example like an example of a team that was really early stage and then a team that was a little bit further along and kind of talk a little bit about that the differences or probably one of the uh best examples of an early stage company is one of the most famous companies Reddit uh they actually applied with some kind of bad idea I don't know what it was it was called my mobile menu or it like theit before the iPhone so this was like the disastrous mobile ecosystem that existed back then um so they actually came in and the idea of Reddit they worked on together with PG um so that's that's a very early stage example an example of later stage in the current batch is a company called carpo uh which helps you sell your car and they had already raised the seat round and kind of had a small team when they when they came in this summer cool all right um so what are your current thoughts on the solo founder and then uh this we'll start there so as you've heard today startups are tough and there's always a million and one things to do and time to do about five of them in a day um and so it's really hard to be a solo founder because you just can't do everything you can do sales or you can build products or you can fund raise whereas if you're in a team you can divide and conquer um so you know we really do think that that being a solo founder is kind of just changing the the the probability for you slightly um that being said we do fund solo Founders yeah we definitely fund them it's just you have to be about four times as good um but actually I think instacart was a solo founder right and that's a great company very we're very happy to fund solo Founders it's just it's really more for your benefit if you can possibly find someone um it really does help but take that very seriously finding somebody yeah I I mean my personal view is it's so so difficult to do all these things well alone because they're very different skills whether it's selling I mean building and selling are very very different skills it's rare for one person to have that uh and it's just I mean honestly you know I've done a couple startups it's just more fun to have a crew like to have two or three people that you hang out with who are living with you and you just you know I remember distinctly one time uh we came back from a investor pitch and it just had not gone well and our third co-founder was you know sitting at home and so me and Mike got back and we said oh that was awful and he's like whatever and that like just having that perspective from that other Co founder was you know it's it's important um it's really really tough to do it alone yeah I would say that like my company would never have survived if I didn't have my co-founders um not just cuz I couldn't have created it but also I I wanted to quit every year I remember like every single year and you know startups are like a you know that people say it's a roller coaster I think it's like a sine wave and your emotional state you know goes up and down and up and down and if you have too long of a protracted period of time when you're in the low State then you just give up um but when you have co-founders it's like you're combining multiple waves and it balances um you you know kind of your aggregate emotional state is is not too long in that like low period And so it's much less likely that you just kind of give up and die so while we're on the topic of Founders um someone asked um what are the biggest uh co-founder dispute issues that you've had to deal with um and that's that is one of the biggest things we see break up early stage startups are co-founder disputes so I'll let you guys so I think I mean having a co-founder relationship is like having a marriage um and it goes through good times and it goes through bad times and it's how you work things through and in the same way that communication is key in a marriage it's the same in a company um and so generally a lot of the the disputes that we that we see amongst Founders are because Communications have broken down for one reason or another and that could be that one founder is not as committed as the other um it could be that there's an imbalance of power between co-founders that are causing problems I mean there can be any number of of reasons for it um but often it does come back down to communicating and you know it's it's a pressurized environment doing a startup and so everything is magnified including your emotions and so with with co-founder disputes the the key thing is to to talk about it early and not to let it fester and turn into this really irreparable relationship which you know startups rarely recover from one uh explanation that was given to me by a co-founder uh whose uh co-founder relationship fell apart was um that a good test is if you could travel around the world for a few months together and like not end up hating each other because he had actually done that with his co-founder and then they ended up hitting each other for a while but then they started a company anyway and then ended up hating each other but it's the same sort of thing where you're you're on top of each other all the time right people are essentially living together working together you know 24/7 there's a lot of very stressful issues um and so you have to be good at resolving your differences and not not just hating the other person yeah the opposite is one you know test that I had for for the for talkman the YC company I founded was my co-founder Mike I mean I genuinely enjoyed seeing Mike and like talking to him about companies and about and it was great that we had complimentary skills that's kind of the ideal situation in terms of like what is difficult to do in a startup getting the right co-founding team is one of the most difficult things um and if you get it wrong it's kind of like the foundation of your house the it's going to be very hard to build on on top of that and it's part of the reason why we really uh emphasize the importance of uh equal Equity if you want to you know when you know we look for teams that are have like an equal balance of equity because that that is part of you know what starts a number of co-founder disputes usually indicates people are in it together yeah and and it should be right I mean I mean I I've one common thing you'll hear is well I I had the idea you know I had the idea so I deserve like 80% and he deserves 20% uh that's nonsense the main reason it's nonsense is most of the work is well ahead of you so it's like I just came up with something 2 weeks before you and therefore I I deserve 10% more of the company or 20% more of the company is just not thinking about the relationship that is ahead of you which is years and I mean so one thing that you should remove from your mind is startups are short and easy they're not they are long long I'm talking about 5 years seven years and so that's a path ahead of you and everyone's going to work just as hard so you should share in that uh in that you know value so the uh YC did an experiment where um at a certain point we put out a note saying that we would take Founders without an idea um and so the question is what is your um opinion on the no idea founder experiment so it was a great experiment um and what we learned is that we're not going to do it anymore it turned out and I mean like I I'm serious experiments are always worth trying even if they don't work um what we learned is that people who didn't have ideas would continue not having ideas um and it is a little bit counterintuitive because the reason we got into it was we noticed that we accept a lot of companies who would then you know partway through YC change to a different idea and they would they would do great so we thought well why did require the first idea and it turns out I think that the first idea is an indication that they can come up with ideas and so if they don't have a first idea they may not have you know a second one or a third one so the next question is how do you turn down or say no to applicants after they've interviewed with you well um after we actually do send out um a message and we describe why we didn't fun and it it is uh I mean being on both sides of the YC table um uh we actually put a lot of effort into it it is not a not not a you know trivial thing that we just copy and paste some form rejection um and it's often after a very long day of interviews and uh I I I was very proud that the that the partners spend that much time to give honest reasons because if you don't get that honest feedback and it's just like oh we're not interested in that market or you know some generic kind of VC talk uh that's that's pretty terrible because you came out to interview and took time out of your time you know out of your life to to talk to us so uh yeah that's specifically we do we actually send an email with the reasons why we didn't uh you know fund and the actually the thing that's that I like the most is um a lot of Founders will actually take the feedback they got from the interview and actually take it to heart like we'll tell them you don't have any customers and they'll go get customers um and then they'll reapply and we have in every batch um quite a few startups that we had previously rejected and often times they end up you know at or near the top of the batch so um rejection is by no means a bad thing it's a temporary thing and um and again people who are able to take that advice incorporate it and move forward that's actually a really strong signal of a good founder and Drew was Drew from Dropbox was was actually someone who had been rejected and then reapplied thankfully yeah just think about that that's amazing yeah so so Drew Drew is rejected and it's a good thing too by the way his original idea was SAT test prep so we actually believe it's harmful to accept people sometimes um with the wrong idea or the wrong team you know he may have worked on that dumb idea for years and then never started Dropbox and I think I think people that there seems to be a myth out there that applying to YC is a one time only chance and like everybody has said it it's not you know we we do welcome repeat applications um and you know so we take it very seriously what what we are telling people um but the other thing that we hear from Founders who have been rejected and then go on to reapply or or maybe don't go on to reapply is that they actually find the the process of applying and completing the application form and answering the questions is actually a very very useful way for them to get their thoughts in order about their company and so you know the the conclusion in all of this is you have nothing to lose from putting in an application and everything to gain you will be learning something you may get accepted you'll be get you may be getting some really useful feedback that you can action on so you should do it yeah and even if you don't submit it it's actually great to do the applic even if your current idea and then you're you know funded and YC's not it's actually great those questions are structured in a way to help you think about your company I I find yeah I find it pretty useful in itself we actually even had one company that somehow managed to raise money off of the rejection rejection email and then we funded them for the next batch and and with some of those kind of co-founder relationships there's questions in there about you know the equity split and the cap table so if you haven't yet had that conversation with your co-founders it's kind of a a catalyst to do so you you kind of have to figure out um those issues before you kind of turn in the application um so yeah so then the next question is how is the first round or how did the first round of nonprofit startups in YC go so for those of you that don't know we we funded last batch a group of nonprofits and then a year ago we funded watsy which was our first nonprofit um and again it was another experiment um I think the answer is is that it's too early to tell um you know with with any company with any startup probably a year is is not long enough to pick out the real winners um so I guess watch this space and and see I would say that we're interested in continuing to fund nonprofits and um would encourage any of you guys out there who are interested in starting a nonprofit who have friends who are interested to um you know apply and reach out to us so I might break break the question why do you fund nonprofits as some people might be thinking that well we don't fund them for a start we donate to them um so so in a way it's it's our way of giving back to the world World um so you know it's it's our way of of helping the world and and we look for a specific type of of nonprofit as well that that we feel will have a really big impact so the the I think the root of the idea was that we realized that nonprofits actually hit a lot of the same issues as the for-profits um in particular the ones we're looking for are ones that are very scalable so we're probably not going to fund like the local soup kitchen but something like watsi ESS does all the same things that our regular companies do they have to acquire users they have a website they they the only difference is that they're nonprofit instead of a for-profit um and it's actually turned out to be really great having them there I think um they gained a lot and then I actually thought it just brings like a nice energy and dynamic to the batch they're great to have I think they benefit the for-profit companies as well cool okay I I really like this question it was why is it that all the YC Founders seem to sleep on the floor in tiny Apartments uh someone who's done that uh it's like practical to live together I mean there one of the pieces of advice I got before YC um uh is to live with your co-founders if that's possible it was hugely beneficial for our company because when you're just around each other all the time and you and the point you generally enjoy being around each other you I think like everything that we did we were like just talking about the company and uh to Echo what's been said throughout the day the most productive kind of time in my life life uh because you're just surround the people all the time and it's and and and it's not work I guess it never felt to me like work it felt like I don't know another experience that is not work I think uh one of the things that you know we look for is people who are Frugal with their resources and really make good use of the the resources they have and you know that starts when you don't have any money um in the early days and that's something that carries on in the DNA of your company as you move forward um when we started Justin TV my co-founder Michael was sleeping on the balcony actually because we didn't have any room for him so it was it was pretty you know we were we were doing it on a budget but it was it was good for us because we were able to survive this like major economic downturn in a couple years later off of not very much Capital raise because we had kind of like every dollar that we had we we watched Pretty carefully it's it's funny to hear the the story but when you're actually doing it it's not that fun so I think I think it's something about also like to reflect back or something because it it is tough I mean who you know when you're grown up why do you want to live with like two or three other people in a very small place cuz it's practical it's cheaper Etc so I think uh we probably have time for one more but so maybe to wrap it up um what is your you know the one best piece of advice you could give to people who um are looking to start a startup or apply to YC so do it now I think I was talking to some Founders earlier uh if you're like 30 you have something like 400 months left in your life just let that sink in for a bit if you're like yeah if you're in your 20s you can do the calculation uh and what's so striking about that concept at 400 months or whatever is that it's like very tangible I think you just say like thousands of days or weeks or whatever it's very hard to understand like that's a real number that is counting down every single month and you don't get that time back no matter who you are so like take action just don't and and and what that means more practically because you hear that generic advice all the time for me what it meant in my life was I was working at a company and I saved money and I saved money specifically so I could get a Year's Runway if I didn't get funded and about 6 months in I got funded through YC and that was great uh but like you have to take practical steps uh to to to see that if you don't do it it's not going to happen uh then don't lie to yourself just like stop thinking about startups and go do something else I think my piece of uh advice would be that startups aren't for everyone it takes a very specific type of person to be able to deal with with the the things that come with with being a startup founder sleeping on people's floors and the pressures and everything else and you know it's not for everyone and if it's not for you then then that's fine too and you need to you need to make that decision and you need to decide if if it's the right thing for you to do one piece of advice that I always give people is don't give up um one of the things that we I was with my one of my co-founders and we were reminiscing when we we started YC for Justin TV we had um we lived in this building with all of these different startups early startups like uh scrib and Dropbox and uh discuss and Weebly and uh one of my my co-founder was saying man we knew a lot of really smart like people back then um they were all successful now like all those companies are worth like eight or you know nine or 10 figures and I was like no they weren't that smart they just like stuck around because the fact is that the internet is like a huge growth market right things that were even served a very small niche market in 2007 grew up to be like very big companies because more and more people came online and became their customers and so just by surviving there's so many companies out there that I knew seven years ago and and just by surviving even though they'd made no money for the first two or three or four years um eventually it you know turned into a big Market uh and so the only way you can get there is by not quitting even though you know all evidence might point to you wasting your time I think my one bit of advice is make sure you're in contact with reality uh I see a lot of these startups where they've been working at it for a long time and I'll say like how many users do you have and they say well it's not ready yet um I think that's terrible or like how many customers do you have they don't have any customers they're building the product still like you should never build something until you have customers or users or something get the customer first sell them you know if it's something you're going to sell sell the product and then you build it don't do it the other way around otherwise you might build it and then no one wants it um and if it's a consumer thing still you can have a user have a handful of users um that you can really focus in on and it's always remarkable how small and how really honestly like crappy of a product you can give someone and get some kind of information out of them um like for Gmail for my for myself I tried to build the first version in a day and it just the only thing it did was search over my email but I still released it to other people um and the first feedback was just you know it's useful but it' be better if it searched over their email instead of mine and so like I had real us I had real user feedback and and and I just iterated every single day I would go talk to users and and see what it would take and um the goal for quite a while was to get 100 happy users inside of Google so I would go to each person and I would say what is it going take to make you a happy user cuz I actually had a list um and they would tell me and some of them I'm like no that's too hard and then I go to someone else and it might be something easy and just working one person at a time it's very unscalable but but at an early stage that's what you have to do otherwise you can just be off floating in outer space building something that nobody will ever want all right so we are you know there were so many good questions that were asked and we didn't have time to answer all of them but what we're going to do is we're going to look through those questions and try to answer more and we'll release a blog post so hopefully we'll get to your question if we didn't you know answer it or address it on stage but also we're going to be around um for you know the next couple hours and um at the reception so please feel free to chat with us and ask us your questions you know face to face we we you know love to hear from you so thank you that was thank you guys [Applause] [Music]