I was supposed to be at YC this week, until an unexpected collision with a tree put me on the sidelines for a week (I’m ok, btw, just a dumb ski injury). As I wait for my MRI, I am trying to soak up what I can about what’s going on in SF this week. Kudos to YC for making a really excellent portal to be able to learn about the companies in their batch in a really efficient way.
This got me thinking about what kinds of things founders can glean from YC, even while just observing from afar. Below are my top 6 simple lessons from YC in general and from this class in particular.
- Building what people want never gets old. This simple phrase is still plastered all over the place, and is always a terrific north star. If you missed it, I recommend this amazing thread that Gary Tan kicked off
2. It’s amazing how clearly YC founders are able to articulate what they do and why you should care. It’s evident in the way they describe themselves in written blurbs and in their very quick presentations. In a world where you will always be selling every day, being able to crisply pitch your business or product is a necessary skill.
3. Entrepreneurship is happening everywhere! And the inspiration for new products and services are coming from a broader set of places. There have always been companies that are taking a concept proven by a successful US startup and then applying it to another large country. But what’s really cool to see is that the regions that are being targeted are more diverse than ever. Perhaps more importantly, it’s clear that the idea generation is starting to move in the reverse direction as well. I’ve always encouraged non-SF based founders to keep tabs on the kinds of products and tactics that are being employed by companies in the Bay Area because there is often much to learn from them. But increasingly, there is just as much to learn from companies in China, Korea, or in other rapidly growing regions.
4. Fundraising is an intense, parallel process. It is not sequential, and it is not something one can do on the side. Investors tend to hate the frenzy of demo day and YC fundraising. I think one good reason to hate it is that it creates pressure to make decision faster than would be possible to do responsibly. Even the folks at YC agree that you don’t want to over-optimize too much on speed. But another reasons investors hate it is something that is actually very good for founders. The way YC concentrates investor interest creates a frenzy of competitive pressure around certain companies. This drives investors to move quickly and with conviction, and results in higher market clearing prices for highly desirable companies. It puts investors on their heels because it supercharges the founder’s ability to run a broad parallel process effectively. That’s not great for investors, but is a good thing for founders. Here’s a great post from Paul Graham from 2013 that has some of the best fundraising advice on the internet: http://paulgraham.com/fr.html
5. It pays to be direct and clear about your expectations. I find that YC founders are exceptionally well trained to be very clear about what they are raising, how much, and what their expectations are for timing and pricing. I think they generally get very good coaching about what numbers to put forward, even if it makes investors a bit uncomfortable. Generally, I find that the valuations are usually 1.25–1.5X higher than I’m comfortable with and the time frames are 25% shorter than I’m comfortable with. That puts the heat on the investor but in a way that isn’t too off-putting, IMHO. The best investors will come up with their own POV, and either live with those terms and timeline, or work towards their own goals to see if the founders will bend to their preferences.
6. This stuff is hard and unpredictable. The companies backed by YC are led by world class individuals working like crazy to bring great products to market. And despite these great raw ingredients, an amazing network, and excellent training, the majority of these companies don’t achieve the level of success that everyone is hoping for. Don’t be discouraged as a founder when things are tough. They are tough for everyone. And often the very best companies aren’t the ones that seem like the anointed crowd favorite right after some artificial deadline or demo day.
