Y Combinator specializes in helping entrepreneurs “build something people love.”
Since March 2005, the Silicon Valley-based business accelerator has, in exchange for 7 percent of equity in fledgling companies, provided startup help to scores of “very product-focused” entrepreneurs. Specifically, Y Combinator offers crucial resources like seed money, and connections to experts and investors, that founders need to grow their ventures.
Aided by those experienced mentors, “the program works with companies very closely to help them with company strategy and product strategy — to figure out how they can be successful and what has to be in place for that to happen,” says Kirsty Nathoo, CFO and a partner at Y Combinator.
Participating entrepreneurs move to the Bay Area and, for 3 months, immerse themselves in their businesses and refine their ideas in anticipation of Demo Day. The concluding event — which, despite the name, actually spans several days — gives business owners a chance to get in front of top investors. This event “will make it a little bit easier to fundraise — though not easy, because it’s never easy to fundraise.”
It’s an especially critical opportunity for female participants, who often struggle to connect with and secure funding from investors. A growing number of women are participating in Y Combinator; the current class includes over 150 businesses, 26 percent of which have a female founder, Nathoo says. Over all, of the more than 3,500 founders who have gone through the program, 288 have been women.
To recruit more female applicants, Y Combinator launched the Female Founders Conference in 2014. In addition to providing networking opportunities, the half-day event features panel discussions and founder talks.
“We want to be able to show that women like you can stand up in front of a room full of people and talk about a successful company,” Nathoo says. “We have really great speakers who talk about how they succeeded, and they are great role models for female founders.”
Y Combinator has also added other programs over the years, including an online class that replicates the experience of its in-person accelerator, allowing it to expand its reach.
When searching for its next set of stars, Y Combinator looks for evidence of early market interest in an applicant’s products. Nathoo points to initial sales and high online engagement as proof points that an idea could have legs.
Related: Read about a Y Combinator alumna.
But while a compelling product is fundamental, Nathoo says the accelerator knows that it is the founders who make or break a business. “Startups are always going to have down periods when things are going badly. Our founders won’t just give up when things get a little hard — they’ll work through and find solutions, and come out on the other side.”
To assess resilience and other vital entrepreneurial qualities, Y Combinator carefully reviews online applications and introductory videos. That “helps us see the person, see how they interact and communicate,” Nathoo says. “A large part of building a successful company is being a great leader. If you can’t communicate or you aren’t so good at getting ideas across, it’s going to be much harder when trying to recruit, sell or raise money.”
For women entrepreneurs in particular, “it’s all about confidence,” she adds. Don’t underestimate yourself, she advises. And most importantly: “Apply. Our whole job is to find the right company, and if you don’t apply, it’s hard to find you.”
Making the Most of It
Once a company is accepted, Y Combinator works with the founders to achieve a shared goal: success.
Nathoo says that assessing a participating venture’s success post-accelerator isn’t one-size-fits-all. Revenue is a good marker, she says, but even that traditional focal point can be subjective. For one founder, $100 million could be the number to reach, while another won’t be satisfied until they cross the $1 billion mark.
Regardless of where the bar is set, Y Combinator can point to entrepreneurs who have leapt above it. Including those whose founders have since exited, 15 alumni companies are valued above $1 billion — these are their “top stars,” Nathoo says. And, 74 companies have exceeded $100 million. The total valuation of the companies that have gone through the accelerator is more than $85 billion. But Nathoo asserts that “the main definition of success is still being alive — still having potential.”
So how can a business owner use what she learns at Y Combinator to stay afloat, or even become a top star?
For starters, Nathoo advises participants to be upfront about their pain points. To be successful, it’s vital “to be honest and to ask for help when you need it. We can’t help you if you don’t tell us” what you’re struggling with.
She also encourages founders to make the program and the firms they’re building their top priority and “get rid of unnecessary distractions.” Go ahead and“use Y Combinator as an excuse” to say no to things. “You need to be 100 percent focused on the company.”
Lastly, founders should network whenever they can — starting by reaching out to Y Combinator alumni. She says the accelerator’s graduates — which include the minds behind Dropbox, the online-storage giant, and Airbnb, the sharing-economy powerhouse — engage frequently with current and recent participants. “It’s incredible, really, that even as the network grows, people are so passionate about helping each other.”