YC is worth 7% of a company because it provides unfair advantages in fundraising, including higher valuations, better investors, and faster fundraising. Being part of the YC batch offers support and friendly competition from other founders. YC provides founders with access to software and resources, and offers programs to help with Series A funding and growth. YC's reputation serves as an unfair advantage when fundraising. Startups should raise money at the earliest possible moment and consider factors beyond valuation. Achieving product-market fit can take years and distribution plays a crucial role. YC supports companies that choose not to raise VC funding. YC works with post-launch companies and those that have incorporated or raised small amounts of money. YC looks for traction in startups and values founders' belief, work ethic, and resilience. Pitches should be clear, concise, and engaging. Finding mentors and advisors should happen naturally over time. Startup School is open to all startups and should be approached as a learn-by-doing experience.
Why is YC worth 7% of your company?
YC is worth 7% of a company because it provides unfair advantages in fundraising, including higher valuations, better investors, and faster fundraising. Additionally, being part of the YC batch offers the advantage of being surrounded by other founders in a similar state, providing support and friendly competition.
- YC provides higher valuations, better investors, and faster fundraising
- Being part of the YC batch offers support and friendly competition from other founders
- YC provides founders with access to a variety of software and resources
- YC offers programs specifically designed to help founders raise Series A funding and navigate the growth stage of their companies
- YC's reputation serves as an unfair advantage when fundraising
Generating leverage when fundraising
Generating leverage when fundraising is crucial for startups, especially during Series A fundraising. Here are the key points to consider:
- Fundraising advice is often biased and may not be in the founder's best interest.
- Raising money when running low on funds is not always the best approach.
- Startups should consider raising money at the earliest possible moment.
- Valuation is not the only important factor; other terms like option pool size and preferred stockholder rights are crucial.
- Without leverage, founders struggle to negotiate these terms.
- Timing is important; raise money when the startup is at a local peak in terms of leverage.
- The first peak usually occurs when the startup hits product-market fit.
- Founders should be aware of their position on the leverage graph and raise funds well in advance of running out of money.
- Founders with previous exits or experience perform better in pre-product market fit Series A rounds.
- First-time founders should have strong numbers and data to increase their leverage in fundraising.
Youssef asks - How did you validate your product market fit?
Validating product-market fit is crucial for a company's success. It goes beyond building the right product and involves experiencing uncontrollable growth and struggling to meet customer demand. Achieving product-market fit can take years and distribution plays a crucial role. The example of Socialcam highlights the importance of ensuring customers are using the product as intended and that the business side is functioning well.
LC Carrier asks - How does YC feel about companies who don't want to raise VC after the program?
- Y Combinator supports companies that choose not to raise venture capital (VC) after going through their program.
- YC emphasizes that the decision is up to the founders and they are not solely focused on maximizing profits.
- YC is happy to work with companies that become profitable without raising VC funding.
- YC provides guidance and connections to VCs if desired.
- The goal of YC is to provide support and advice to startups, regardless of their funding path.
Edmilson Rodrigues asks - Do companies need to be incorporated already to participate in YC?
The participation requirements for companies in Y Combinator (YC) have expanded to include post-launch companies that have incorporated or raised small amounts of money. This addition to their services allows YC to work with a variety of companies at different stages, creating a sense of cohort pressure and motivation.
Alex Rodriguez asks - What do you look for in startups that haven't had good growth but continue to push through (e.g. AirBnB) that makes you accept them?
The key points discussed in the video are:
- Y Combinator looks for traction in startups, which refers to the progress and work they have made.
- Airbnb is used as an example of a startup that demonstrated impressive achievements before applying to Y Combinator.
- The founders' belief in their idea and unique insight are important factors.
- Startups should have a strong work ethic and resilience, constantly pushing through challenges.
- The founders' personality traits, such as being nice, hard-working, and committed, can make it easier for others to help them.
- The unique networking culture in Silicon Valley, where strangers reach out to each other for support and motivation, is highlighted.
- Investors value startups that iterate and learn from their experiences, rather than making drastic pivots.
- Persistence and giving startups enough time to exhaust all ideas before considering a pivot is important.
- Hard work and constant iteration are emphasized in building a successful startup.
- Applying the same solution to multiple problems can hinder progress.
- Having a compelling pitch when presenting the company to investors is crucial.
Fedor Paretsky asks - Do you have techniques you encourage to make pitches sound more exciting?
The most profound aspect of the text is the emphasis on using clear and concise language in pitches to make them more exciting.
- Pitches should be able to explain the app in three sentences.
- Avoid starting with the founder's background unless it is one of the top three most interesting things about the startup.
- Engage the investor and make the pitch feel like a conversation rather than a one-sided presentation.
- Clearly explain the problem the startup is trying to solve in the first 30 seconds of the pitch.
- Focus on the founding team, traction, and the motivation behind solving the problem.
- Take responsibility for explaining the pitch well if the listener doesn't understand.
- Tailor the pitch for investors and avoid using jargon that may not be understood by non-industry peers.
- Use clear and concise language, avoiding unnecessary complexity.
- Real confidence comes from impressive past accomplishments or having solid numbers.
- Tell compelling stories and paint vivid pictures to effectively convey challenges faced by international founders.
- Include relevant facts in pitches to demonstrate knowledge and expertise.
David Chen asks - How to find mentors and advisors?
Finding mentors and advisors for startups is the topic of discussion. The speaker emphasizes the importance of practicing pitching before seeking out mentors and advisors. He dislikes the term "mentor" and prefers to provide advice without the formal commitment. Clear and concise questions are valuable, and he offers free advice to those who ask. Seeking out mentors is discouraged, and founders should simply ask for help when needed. Having a mentor's name attached to a project is not important for investors. Advice should be taken with a grain of salt, and mentors do not guarantee success. Mentorship often develops naturally over time through friendships.
building EatNeat asks - What if anything are you specifically looking for in a startup that wants to be a part of the Startup School 2018?
- Startup School 2018 is open to all startups, regardless of their stage
- The program aims to provide value to startups
- Criteria for grants will be determined after the program
Ryan Carl Mercer asks - What's your preferred way organizing your time?
- The speaker discusses their struggles with organizing time and admits they are not good at it.
- They mention using a to-do list and prioritizing important emails as strategies for managing time.
- Having support from family and hiring help has been crucial in effectively managing their time.
- The topic transitions to discussing the effectiveness of intrapreneurship.
John Rigler asks - Can intrapreneurship be effective? I recently returned to IBM, have a patent, and yet have only vague ideas about how to signal and organize other like-minded folks. Could this path sabotage my dreams?
The topic of the video is about the effectiveness of intrapreneurship. The person asking the question is unsure about how to signal and organize like-minded individuals within their company, and is concerned about the potential impact on their dreams. The speaker acknowledges their limited experience with intrapreneurship, but acknowledges that there are successful examples of big companies inventing new things through intrapreneurship.
Horacio Chávez asks - How would you approach an investor who says "I won't invest unless you have a patent"?
- Investors who require a patent before investing may not be knowledgeable or interested in technology startups.
- It is recommended to find investors who have a better understanding of the startup ecosystem.
Yahya Elamrani asks - Why does it feel like entrepreneurs aren’t marriage material? Should an entrepreneur look for an entrepreneurial spouse?
- The topic is about whether entrepreneurs are considered marriage material and whether entrepreneurs should look for an entrepreneurial spouse.
- The speaker shares his personal experience and suggests that different people have different preferences when it comes to relationships and work.
- An entrepreneurial spouse should be someone who is independent and doesn't require constant attention.
Yahya Elamrani asks - How intense do you really have to be to found a startup?
Founding a startup requires a certain level of intensity, but it is not a constant state. The key is to be resilient and bounce back from low points. Doing what you love and aligning your setup with your interests can make the intensity feel less overwhelming. Understanding the engineering culture in the startup world is also important.
Is there a particular stage of company that's best served by Startup School?
Startup School, offered by Y Combinator, is a free and low-risk program for founders to explore without any commitment or cost.
How do you get the most out of Startup School?
To get the most out of Startup School:
- Dedicate significant time each week to making progress in your company goals
- View it as a learn-by-doing experience, not just an educational program
- Set specific metrics and milestones for where you want to be at the end of Startup School
- Map out a path to reach those goals week by week
- Leverage the resources and support provided by Startup School
- Accelerate your progress and achieve milestones like launching your MVP and acquiring your first customers.