Practical Handbook for Applying to Y Combinator

Chapter 1: What YC Looks For In Startups

September 2020
Y Combinator Founder Paul Graham with early YC alums.

Before diving into the mechanics of the admissions process, it’s important to understand what YC considers to be a great company in the first place. The nice thing is that by striving for these qualities, you’ll put your startup in a better position to succeed regardless of whether you actually end up going through YC.


👯 The Team


Startups ultimately come down to their people, so more than anything else, YC will take a close look at your team, and make a bet on it. While there are no formulas for the perfect team, there are some attributes that do tend to present in successful ones:

An Actual Team

Ideally, you’ll be a team of 2-4 co-founders with a somewhat equal split of equity. While solo founders can succeed and go through YC every batch, they tend to have a harder time seeing their startups through. This is in part due to the broad skill set required, but mostly due to the lack of partners to share the emotional burden of being a founder. If you’re a solo founder, be prepared to explain how you’re covering your shortcomings through key hires.

Proven Team

One of the main reasons startups die is because of co-founder conflict. As such, YC wants to see that you’ve worked together or collaborated as a team in the past, and know each other well during good and especially bad times. In other words, it’s probably not a great idea to immediately start a company with the random person you met at a hackathon last weekend.

Technical Team

Building a venture-backed tech company is incredibly difficult on its own, and it’s even more so when the founders can’t take care of the early versions of the product themselves. In short, this is because it’s vastly more expensive, and it’s significantly harder to iterate quickly. YC CEO Michael Siebel does a great job explaining the topic in this video.

Team-Problem Fit

In general, startups are more successful when founders have personally experienced the problem, and/or they have some sort of relevant expertise to tackle it. Building for yourself works not only because you have more knowledge and intuition about the issue, but because you have more passion to keep going when things get tough.


🌈 The Idea


Many companies in each batch either completely pivot their idea, or at least somewhat adjust it (in fact some of YC’s most successful alums like Brex were major pivots). Why is it then that YC places any value on your idea? On a basic level, it’s clearly important in case you don’t pivot. More importantly, it says a lot about how you think through problems and communicate your vision. These abilities are crucial when hitting walls day-to-day, and speak to how you will handle a pivot if it comes to it.

Real problem

At its core, your idea shouldn’t be a neat opportunity to fill a hole in a market, but a direct response to a real and painful problem. Successful founders are capable of clearly articulating the problem they are looking to solve, why it’s worth solving, and how they will solve it.

Market

Something founders tend to forget, is that just because a problem exists and you’re equipped to solve it, it doesn’t mean it’s worth solving. You have to look at the magnitude of the opportunity. This basically boils down to: if everything goes right, how big will this company be? If the answer is not measured in Billions, raising VC funding is likely not the best way to go.

Unique insight

Beyond knowing the problem and its surroundings like the palm of their hand, founders should ideally understand something about it that no one else does. A way to think about this is to ask yourself why no one has solved it yet, and what you’re doing differently in response to that.

Unfair advantage

This is not a must-have, but it always helps when startups have some sort of unfair advantage (such as regulatory, head start, or rare expertise) over current and potential competitors.


⚡️ Progress


There is no specific milestone you need to hit in order to get into YC. Batches are as diverse in stages as they are in ideas; some companies get in with $100K MRR, and others with just an idea. Instead, YC looks at what you have accomplished in the context of your story.

Speed

The simplest way to estimate your future progress is by understanding the speed at which you move as a company. Speed is not a specific milestone, but rather, the ratio of what you have accomplished and the time you’ve been working on it. If you built an MVP and got 500 users in two months that’s pretty impressive. If the same took you two years, not so much.

Learnings

Good companies are not those that get it right the first time, but the ones that learn and adapt quickly. You should be able to articulate the mistakes you’ve made so far and the changes you made as a consequence. Even if you have speed, partners will pay close attention to whether you are actually making progress, or just running in circles.

Launching & Customers

The best way to learn is from your current and potential customers. YC knows this, so they love companies that aren’t afraid of shipping imperfect products, and spending inordinate amounts of time with users to learn as much as posible.

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