In this post you will find:
- How LayerCI got into Y Combinator
- How to write your YC application
- How to prepare for your YC interview
- Is it worth it?
After getting into Y Combinator ourselves and reviewing over 100 YC applications last year (3 successfully applied to W21), we decided to share our experience applying, interviewing, and going through the first-ever remote YC batch in summer 2020.
Disclaimer: by no means are we YC partners or speaking on behalf of the organization - this is just from our personal experience as founders who went through the program.
How LayerCI got into Y Combinator:
LayerCI got into YC after applying twice - once in 2019 and once in 2020. We applied with the same idea each time. Here is a high level overview of the differences between 2019 and 2020.
- Presence: The website was up but no demo video.
- Team: One full-time founder.
- Product: Product in alpha but launched.
- Launches: none.
- Preparation for YC: Paul Graham essays
- Result: No interview request but received a phone call to ask more questions.
- Presence: The website was up and a demo video was present.
- Team: Two full-time founders, 50:50 ownership split. We went from lone dancing guy to a founding team (see video for reference).
- Product: Product iterated after speaking to 1000 people. Acquired some paying customers.
- Launches: Show HN, Betalist, Linkedin.
- Preparation for YC: We read The Launchpad, Paul Graham essays, public YC apps, mock interviewed with 10 YC founders, friends, and a former YC partner.
- Result: invited to interview, accepted into Y Combinator.
- A key point as well to note in 2020: we had started to speak to investors, and got the opportunity to get about the same amount of funding as what YC was providing. Although we did not mention this in our application, we were protecting our startup in every way possible.
Looking back, the level of commitment to our business in the second application was a lot more apparent with both progress and preparation. We embodied the "success = preparation meets opportunity" mentality.
How to write your YC application:
From our experience, the YC application should look like a business plan with no buzzwords. When re-applying, we first took a look at our 2019 application to look for good answers and bad ones. We studied a couple of public YC applications and discussed why they might have been successful. One of the best-crowdsourced resources to help construct your application is this blog post here.
Some of the most important questions that you need to answer are:
- Product: What are you building?
- Traction: How do we know people want it?
- Founders: Why is your team special?
- Why now: What's your unique insight? Why build this thing now?
- Market sizing: Based on your current business model, is there a clear path to $1M? What about $100M?
- Red flags: Any immediate IP or founder dynamic issues? Is the cap table "clean"? Is there some key trend in the market that makes this a bad business idea?
We discovered some common mistakes to avoid while reviewing other YC applications:
- Product: Too many buzzwords are used to describe the product.
- Traction: Not launching early, no market research and no website present.
- Founders: No clear division of roles and very lopsided equity splits.
- Why now: Not clearly teaching the partners something new about your market. You should be an expert on what you're building, who you're building for, and trigger events in the market that make today the best time to build.
- Market sizing: The market is too small (less than $1B Total Addressable Market), or the market is explained badly. It should be a bottoms-up calculation based on your product's business model. A good bottoms-up calculation template: "At our current price point of $X annually, we would need X amount of customers to get to $1M. We would only need X customers or only need X% of the market to build a billion-dollar business."
- Red flags: Explained above.
Sounds a bit like an investment pitch, doesn't it? That's because it is.
How to prepare for your YC interview:
When we found out we were invited for an interview, we had a little under a week to prepare. We wanted to appear confident with good founder dynamics and a clear understanding of our business. Unless you're a natural-born speaker, it's probably a good idea to practice to keep your answers sharp. Nobody is expecting perfect answers, but you should be articulate enough to sell your vision in 10 minutes.
Here are the steps we took to prepare for our interview:
- We first looked for sample questions that might be asked: https://lironshapira.medium.com/sample-questions-for-the-y-combinator-interview-3895913ffe89
- We took the questions and made a Google Sheet with three tabs. Tab 1 was the list of potential YC questions divided up amongst the two founders with dot jot answers for each question. Tab 2 contained a feedback chart for the tips we received from mock interviews and what questions we can improve on. Tab 3 contained all the YC partners and whether or not they were technical (as a developer-focused company we wanted to make sure we communicated well to non-technical partners too).
- We tapped into our network to ask non-YC and YC friends for 10-minute mock interviews. We ended up scheduling 10 mock interviews and dramatically improving our pitch by the end.
- "What are you building?" was the hardest question we had to answer. We discussed this often and made a decision tree of what we might be asked next. We wanted to avoid the follow up question to be: "well, how are you different from X?"
- To prepare for the "what are you building?" question, we iterated our landing page and we created a Show HN post here a couple of days before our interview. We stayed up to see why people would convert or leave. This ultimately became our opening pitch to the YC partners.
- On the day of the interview, we dressed up in our matching LayerCI shirts to show team spirit and double-checked our computer setup before going live.
- During the interview, we sat next to each other and had an agreed upon protocol to make sure we did not step on each other's toes when it came to questions. We purchased a tiny microphone that we would slowly pass to the other person if we felt like they were the better person to answer.
Some insights from our remote interview experience:
- Don't forget to smile! It's a cool experience to meet YC partners and to have people be excited about your idea. Smiling even if you're nervous makes you look extra confident.
- It's a 10-minute interview on Zoom video with about 3-6 YC staff members on the call.
- You should test out your camera and microphone in advance of the interview.
- You should go into "gallery view" on Zoom the minute you enter the Zoom room.
- The first question asked by the YC partners is always "What are you building?"
- You should give concise, yet "meaty" answers. If a partner wants to hear more about something, they'll ask.
- You may be asked to be interviewed again in the same day or a couple days after if YC is looking for more information.
- You'll get a call if you get accepted and an email if you get rejected.
Is it worth it?
There are two parts to answering the "is it worth it" question.
"Is it worth it to apply to Y Combinator?"
When it comes to the application process, to do a good job you do have to invest a couple of hours of you and your co-founding team's time. It will and should bring up tough conversations when it comes to commitment, equity, or the business idea itself. All of these hard things are important to bring up anyway, so think of applying as a productive way to reflect on your startup while getting the chance to join a prestigious network. Chances are, if you find holes in your business or founder dynamic, it will reveal itself earlier rather than later which is beneficial for you in the long run. The answer is always yes to this question - shoot your shot!
"Is it worth it to go through Y Combinator?"
This is a tougher question to answer.
Let's look at the basis of the investment you receive. YC says, "we'll invest $125k on a post-money safe in return for 7% of the company when the safe converts".
- Pro - the post-money SAFE terms (found here) are very founder-friendly compared to most other investment vehicles at an early stage.
- Con - 7% is a lot of ownership for YC, not to mention the 4% exercise rights for future financing rounds even after the SAFE is converted into equity.
The network effects of joining YC are pretty strong for these cases even as the program switched to remote delivery:
- Fundraising signalling - many people raise a seed round thanks to YC's original investment.
- Early adopters - this is the best place to find early adopters in the 5 stages of technology adoption framework. Many people get their first 10-50 customers through YC to prove out early traction in a friendly environment.
- Future proof - if you start another company you have a wider network than you did previously.
- Emotional support - given the shared commonality of running startups, there's nowhere else in the world you can find as strong of a founder community.
Here's where you have to think about the investment opportunity on your own given your unique stage of the company. Here are some helpful questions to answer before taking investment:
- Do you have significant early traction?
- Would you be able to raise at a fair valuation without YC's signalling?
- Are you an experienced founder?
- Do you have a strong founder network already?
- Do you have employees and/or investors who will be impacted by this decision?
If the answer is "no" to all or some of these questions, joining Y Combinator may increase your startup's survival rate. If the answer is "yes" to most or all of the questions, it could go either way in terms of value-add. It is best to have an honest discussion with your team and evaluate your options in both cases.
Where to apply: You can apply to the Summer 2021 batch here (due March 19) https://www.ycombinator.com/apply/
Colin + Lyn