Company

Our Experience Going Through YCombinator

June 3, 2020

It's already been a year since we took part to YCombinator with the Summer 2019 batch! Here's a short article reflecting on our experience at YC, hopefully this is useful if you're curious to understand more about YCombinator or are thinking about applying.

To introduce each topic, we've used one of the typical question that YCombinator partners like to ask during admissions interviews.

Except we're NOT answering the question as Data Mechanics, but as YCombinator itself!

What are you making?

Got lazy, this is from Wikipedia.

Y Combinator (YC) is an American seed money startup accelerator launched in March 2005. It has been used to launch over 2,000 companies, including Stripe, Airbnb, Cruise Automation, DoorDash, Coinbase, Instacart, Dropbox and Twitch.

How does your product work in more detail?

YCombinator has 2 batches of startups per year (winter: Jan-Mar, Summer: Jun-Aug). As of 2019, each batch had 200 startups, divided in 4 groups, each of them mentored by 3-4 Partners. The startups relocate in San Francisco Bay Area during the batch (note: the current batch which is remote because of COVID). Startups do not get office or living space.

A typical batch week consists of:

  • An evening with a batch-wide (or half-batch wide) dinner, followed by an inspirational talk by an alumni (eg Airbnb founders) and more strategic talks by YC partner (e.g. Press Relationships during the batch).
  • An office hour (actually half-hour) with one of your group partner, to discuss your must urgent need. You can do more than one, and we'd encourage it.
  • (Every two weeks) A 1-hour session with around 8 startups from your group. Each startup tells about their progress in the last two weeks, while the others listen, Alcoholic Anonymous style. A great time to feel like you're not the only one full of doubts (except if you have only rockstars like the Tandem founders in your group).
  • (Punctually) A one-time event like Sales+Marketing bootcamp, or a "CTO Demo Day" in front of Silicon Valley CTOs for B2B startups (our favorite YC event).

But most of the time, you're by yourself, working from your rented apartment with your cofounder(s), meeting prospects/customers/users while biking around SF — at least that's what we were doing  😃

The fastest way to chain prospects or VC meetings in downtown San Francisco.

How do you make money?

YCombinator has the same business model as a seed VC. They invest $150k in exchange for 7% equity with pro rata rights. Like all investors, they'll make most of their money from the top 1-2 company per batch which will grow to become a 1B$+ company. The sum of the valuations of all the other companies in the batch will probably be a rounding error in comparison.

What does this mean? The good news is that they'll want you to be successful and will help you a lot to make it happen. A lot of people claim there are two negative consequences:

1. "Like VCs, YC will push you to take as many risks as possible, to get a small chance at becoming HUGE, they won't care if you fail".
We didn't experience this. YC partners are former founders who'll give you honest and often cautious advice like:

Raise a lot of money, put in the bank, and don't burn it until you find product market fit.
If you can control your spend and become profitable without raising more capital, even if it means you don't become huge, do it.

2. "If you're just a startup doing poorly or even average, they won't care about you, you'll have a hard time".
Again this is partly true, you will have a hard time standing out and raising money after demo day if you're doing poorly. But YC partners will care about you and spend time advising you, making prospect and investor intros. In fact they'll spend more time helping companies who have a hard time raising money after demo day (because the process can take months), rather than "hot startups" who closed their round in two weeks. They do this not out of pity or moral obligation, but because a lot of the most successful YC companies first did poorly during the batch.

What is your key value proposition?

  • The brand. The YC brand helps with selling, fundraising, and hiring.
  • The mentorship. YC Partners are experts in early stage startups. They won't know the specifics of your business. No YC partner ever saw a demo of our product. But they'll help you find answers to the most important questions nonetheless (and identify these questions). And they're amazing at fundraising.
  • The network. Being part of the YC community gives you access to an internal network of friendly entrepreneurs. This is particularly amazing if you can sell to YC companies — that's why many successful YC companies build a product for startup (or started targeting startups as their niche). We (Data Mechanics) are customers of Stripe (payments), Brex (credit card), Mercury (bank account), Gusto (payroll), Clerky (Legal), Webflow (website hosting), and many more. Even if you can't sell within YC, many YC founders says the network is where they’re get most of the value out of YC in the long-term.

Tell us something surprising or amusing that you have done

YC partners will make founders repeat their 2-min demo day presentation dozens of time, until it doesn't feel like a pitch anymore, but a theatrical representation. We spend two weeks preparing these two minutes (and the conversations that follow).

Sometimes you'll give your presentation to a YC partner who has never heard about your startup before — in our case, Paul Graham was here the day before Demo Day. They'll hear your pitch for the first time, and then they'll say "See, I think it would be more powerful if you put it this way". And then they'll give a much better pitch than you just did, every time.

What do people hate about your product?

The food on dinner nights, it's just average.

Quoting Paul Graham: "People must always complain about something. So if they complain about the food, it's a good thing."

Conclusion

JY & Julien in matching shirts

YCombinator was amazing for us — a special shoutout goes to our YC Partners Dalton, Gustaf, Aaron and Holly. They helped us become more ambitious, made introductions for critical early customers, and enabled a seed round from top investors while we were still very early.

We'd do it again any time.

But YCombinator was also a stressful time.

Like Michael Seibel said during his welcome speech, "This is the highest leverage time of your life". So you feel a lot of pressure to be successful (even though this pressure mostly comes from yourself). This is the part where we do not entirely agree with the YC culture. You should build a startup because you believe in your mission and you like your work and your cofounders. If success is your main goal, you have a high risk of failing (there's a lot of data to back this claim). The difference between working yourself 11 hours a day and 14 hours a day will not raise your chances of success by an order of magnitude (we don't have data to back that one). Most people who get into YCombinator are driven and focused individuals already. So our advice to them would rather be to encourage them to live a healthy life — take a break from work sometimes, and you'll come back with fresh ideas.

Do you have any questions about YC? Do you seek advice on how to get in, on how to prepare for the interview? Reach out to us, we love to help out!

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