The seed-stage venture firm has come to form its own startup economy over the years, with its network of companies and founders interconnecting across the tech industry and beyond. Find out how Y Combinator works today, and how you can become a part of it, in this discussion with CEO of YC Continuity Ali Rowghani and CEO and partner Michael Seibel.
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[Music] Hi everyone thank you very much before We get started please remember you can Send me questions through the TechCrunch Conference app that you have downloaded Already and I can get through them up Here so with me today two of the senior People leading Y Combinator today the Program is now in its second decade 14 Years 14 years and it is the leading What do you guys call yourself the Startup accelerator startup accelerator In the world by many measures today they Actually just released the top hundred And one companies based on valuation and It is if you’ve seen it at who’s who of Top companies in the valley and so what We’re going to be talking about here is How YC works in 2019 and beyond how you Can be a part of it why you might want To be a part of it and maybe get into Some of the other stuff as well So let’s just do it let’s just start off With Ellie and Michael Seibel talking About what was on the list that was Interesting to you what did you learn From doing this analysis of your own of Your own companies at the top was stripe Airbnb you there’s a technical about it On the Internet well I think they you Know the first thing is that after 14 Years it is so amazing to see how big The YC network has gotten you know we’ve Now funded over 2000 companies over 5000
Founders and the idea that there are Over a hundred companies that are worth Over 150 million dollars is kind of Inconceivable from kind of my Perspective when I first did YC back in The day when it seems so small I think The other thing that’s quite amazing is How many just very large companies there Are and we have over 20 companies that Are worth I’m sorry 20 gummies are worth A billion dollars And it seems as though basically every Year from this point forward there’s Going to be a YC company that goes Public We already have to erode our page of Duty in Dropbox but I think every year From this point forward we’re gonna be Celebrating an IPO which I didn’t even Know it was really contemplated when YC Was started in 2005 and and as a Disclosure I actually went through Y Combinator myself in the winter of 2007 So I’m I’m familiar with that it really Same batch yeah so let’s just talk like Let’s get into more of that report there The thing that really stuck out to me Was that over half of the companies are SAS how did that happen Intentional is that like just walk us Through some of the theory of how the YC Portfolio the companies came to exist so The first thing I’ll say is that you Know we don’t really have a strong
Thesis about what type of company to Fund well fund companies in any sector Will fund companies in any country Around the world but it has been the Case that there is a pretty strong Advantage for doing a b2b SAS company Within yce because you can sell to a Bunch of other YC companies there really Isn’t another investor out there that’s Producing about 400 new potential Customers for a b2b SAS company every Single year and so you know when you Look at gusto or at segment or at Brax Like these are companies that really Took advantage of that to grow very Quickly but we’ve got companies across The spectrum I mean FinTech hard tech biotech International companies we really try to Not have us too strong a thesis about What’s going to work we just like to Really fund motivated founders great and Before we dig into that more Le tell us A little bit more about what you do for YC growth which is a much newer part of The organization versus the the seed Stage venture fund as it’s sometimes Sometimes called yeah I I joined YC About four and a half years ago to help Build a later stage investing Advice-giving kind of practice and our Belief was that you know act 1 of every Startup is trying to figure out product Market fit an initial you know user
Growth customer growth and that’s what The YC program itself is all about and Act 2 for the lucky companies that get To find do find product market fit and And and are able to raise money and Scale further act 2 is really about Company building which means like Attracting all of these strangers that You’ve never met before into your Company try to get them aligned behind You and the mission that you want to Accomplish and continue to grow into the Demand that you found and find Additional areas to you know build into And the you know in interacting with the YC portfolio what was striking to us was The number of how much repetition there Was overlap there was between the Company building problems that one Startup whether it was a biotech Start-up or a payments startup or Consumer startup company building Challenges tended to overlap like eighty Percent and in a sense it was surprising But in a sense when you reflected on the Fact that company building challenges Are mainly about people hiring people Motivating people you know managing People at a greater scale it kind of Became more understandable why there was So much overlap so our goal our mission In life really was to try to help as Many YC companies scale effectively and To also provide very founder friendly
And engaged a later stage capital for The companies where it made sense for YC To invest in and partner with in a Deeper way can you walk us through what That means like not every YC company That raises later stage funding is Raising it from you guys that seems like It could be complicated politically Emotionally yeah well it is sort of Complicated but on the other hand you Know we think of ourselves we on the Later stage team the continuity team we Think of ourselves as insiders already In every YC company and I mean we were On the cap table we owned stock and we Generally have known them and certainly The early-stage partners have known them And my team has known them for a long Period of time so you know from our Point of view like whatever they do That’s in the best interest of the Company like is in our interest Sometimes that means taking additional Money from YC Sometimes it doesn’t but like our view Is like as long as they’re making great Decisions for the company were aligned So we don’t stress that much about it Yeah I’m gonna intermingle questions From the audience so this is from Adrian Humphrey how strong is an application of A company that was in top 10% they Applied again went through startup School product has now launched and
Founders full-time it’s really hard to Know how good a YC application is Without reading the YC application I Will say that we’re in the middle of Reading applications now and it’s kind Of the most fun part of the job There’s just never another opportunity To see so many different ideas all in Kind of one place and all kind of Communicated in a very like simple Straightforward manner and so yeah I Would say to ever ask this question good Luck um but yeah I you know there a lot Of people who applied to this batch and We have our our job cut out for us great What I mean try to tell me a little bit More about what the theory of YC is Right like why is it different from the Other accelerators out there that are Funded by all sorts of people and Created it for all sorts of things like What is it that is like made YC this Thing you know it’s interesting I think If I were to pick out what separates YC From most other early-stage programs It’s the quality of the people who Participate you know one of the things That I often talk about when talking to People who apply is that if you look at A school like MIT what makes it special It’s not the building’s not the Administrators not the professors it’s The students you take that student base And you put into the community college
Down the street that’s now the number One engineering school in in the country Or in the world and so with YC I think That it’s grown really slowly and we did A lot of work can you unpack that a Little bit well yeah I mean run it Doesn’t I mean yeah when we when we did YC in 2007 I think Was like 16 companies when I did it Again 2012 was like 64 companies so like We don’t have the growth curve of like a High high speed startup but we have done A really good job of making sure that Regardless of whether the company Succeed or fail because there’s a lot of Luck involved in startups the people in Your batch are people that you respect That you look up to that you want to Measure yourself against and that you Want to be in the same room with and you Want to get support from I think that’s The thing that really distinguishes us I Think that we didn’t try to grow too Quickly by adding people who would not Give you that feeling as a founder we Kind of took our time and made sure that We’re accepting people who are just Gonna inspire you to do better work and Support you when you have trouble Because that’s what happens in all Startups they’re always problems yeah Everyone thanks please so you know to Michael’s point about MIT I think the Best way to understand YC is to draw an
Analogy to a to a great University you Know my mind YC is like the closest Thing to the University for startups That really exists and like other great Universities there is a network effect That’s connected to the quality of Alumni and the commitment of the alumni Back to YC and I think we’ve been lucky As Michael said to have had really Awesome alumni who had good experiences Of YC and are willing to give back to The institution by helping other Founders and that creates a really Positive Network effect for us and I Think that means that as we continue to Grow carefully slowly YC should get Better as it scales because they’re just The network of great founders that are Willing to help other founders try each Other’s products give advice etc gross If you’re just joining us by the way you Can submit questions to me through the TechCrunch of in SAP and I’ll get them Up here thanks and so I’m getting some Questions that are related to this this Is from Eduardo petiole what is the key Element that makes YC the accelerator The mentors in network the capital Presumably all of the above all the Things do you measure that kind of stuff I mean are you like here’s our here’s Our number one I mean that like we do Measure a lot of things we measure of Course a lot of things on the applique
Process around the fundraising process And around the feedback we get from the People participate in the program but You know what’s interesting is that like I think a lot of people try to reduce YC Down to one thing and it’s really hard It’s a pretty intensive experience but If I reduce it to one thing it’s Actually just the support of the people Around you being a founder is very Lonely being a pre product market fit Founder requires you to be a very kind Of inspired individual because it’s Really hard and just being in a room of People you respect we’re going through The same thing sometimes all a founder Needs to do is just believe for another Day like just take the next step believe For another day believe for another day And like we try to make that the Environment of YC and I think that’s Like the hidden advantage that is hard To see from the outside but when you go Through it it’s the thing that comes up Time and time again from the Alumni you Know I also think Y sees changed a lot Just in the last few years I mean I’m Sort of a symbol of that change the fact That there’s a broom for YC for someone Like me who’s focused on later stage Companies and really what we’re trying To do is we’re trying to build programs And and unique services to stay involved In helping companies longer so a couple
Of examples of these iam Michael Mentioned the help that we give b2b Startups in terms of finding customers And just distribution You mentioned Breck’s by the way Britax Just launched a huge product today Breck’s cash so you guys should check it Out bank account replacement for Startups but you know we help startups Launch and get initial customers we help Startups now through the series a Program raise their series a rounds Those are now happening one to three Years after YC and so we re engage with Companies at that point we have a Program every startup one of their Challenges is hiring engineers we have a Platform called work at a start-up where I think there are 17,000 active Candidate profiles 70,000 total cannot Profiles six thousand active profiles of People looking for jobs at startups that This platform is only available to YC Companies we have something that my team Runs which is called the YC growth Program which is kind of like grad School for startups just focused on Company building And so all of these programs are kind of Have evolved over the last few years and They allow us along with the later stage Capital that we have to you know stay Involved in the lives of startups longer And make a bigger impact to the sort of
Success and trajectory of the companies That we would it be fair to say that These sorts of programs are meant to Counterbalance any sort of dilution is Probably not the word you would like From the large increase in the number of YC companies you’re putting through each You know what I think a lot of the Source of why worksite about these Programs is that there’s a new Generation of people running YC who many Of whom are former YC founders and so a Lot of us ask the questions what do we Wish we had when we went through I say And so you know a lot of the programs at All he’s running a lot of the programs That otherwise he partners are running Are just the result of like us kind of Imagine being a customer of a product And then being able to run it like Suddenly man you can start building all The features you always wanted we always Needed help hiring bam we have that we Always needed help raising a series a BAM we have that and so to me that’s Been the fun part is that we can look Back on our experience and say what are All the features we wish we had what are The features that we wish YC would built And we can build them one other aspect Of what you guys have been working on in Recent years is diversity can you tell a Little bit more about what your efforts Have yielded or not or what difficulties
You’ve encountered and in essentially Aiming to pull from the world and not Just a certain group of people in Silicon Valley yeah I mean I think the Diversity now is a huge huge problem and I think that as we’ve I try to attack it We’ve encountered two things one are Societal and socio-economic issues and Issues of bias that we can talk about And we can kind of elevate the Conversation for but we can’t change the Second is a lack of fair and equal Distribution of information about the Startup world that one we can change Drastically it shouldn’t be the case That because you come from a certain Background or from a certain country you Don’t know the basics about how to build A start-up that’s just purely in And that should be available to everyone So when you think about all of our Products are our products around to Shipping that knowledge the best ones Startup school startup school now has Over eighty five thousand participants Who are just consuming the basic Knowledge of how to do a startup and Leveling the information playing field That I think keeps a lot of people out Of this game in the startup world looks Big because it’s attached to the tech World it’s actually a really tiny Insular world that people don’t know Much about and YC has always been trying
To figure out like how do we open up a Side door or a back door to that world And so much of that is just providing People with information they don’t know Terms like just basic knowledge that’s Gonna make their startup a little bit More likely to be successful great so The questions are piling in and people Are voting on them so I cut myself off What criteria is YC currently using to Assess consumer companies this is from Anonymous I would say that if I were to Think about when I’m reading an Application probably the biggest things I’m looking for our canned team build The product what’s the progress over Time and what insight do they have about The product or the customer or the Problem that they believe the Competitive set or the industry doesn’t Believe those are the three things I’m Trying to extract from the application As a follow-up question do you have a Sense of what percentage of your most Recent classes have been consumer versus Other categories do you think it’s gone Down in recent years you know consumer I Think is always some between 10 and 20 Percent of most batches I think that It’s kind of probably moved a little bit But not not significantly no yeah so if You’re doing consumer you still have a Chance I guess everyone’s got a chance So you know category we don’t fund so
Speaking of what you do fund this is From Alex what is the minimal growth Pace that makes you interested in a Startup to X 5x or more that’s not how I Think it’s based on the 7 person a week Yeah I would just say that this is not Hiring an application I don’t read an Application and kind of say like oh is It growing is the company growing this Fast or not this is not that how we do It How important is current monetization Strategy of a product when applying an EPS from anonymous really depends I Think there are some companies that are Providing a service that customer should Pay for and that they’re gonna only get Information or whether customers really Love the product if they’re charging for It in which case monetization is really Important I think there are other Business models where that’s absolutely Not the case and so it really is depend On the type of business you’re building We usually do though tell people to Default to charging if they’re doing any Kind of service default to charging and You just learn a lot more when you ask Someone to pay you about whether they Really really want the product or not It’s really easy to try things when They’re free another one from anonymous I understand most of the time the Younger the time younger the founder
Higher the chance of getting into YC With all things what would it take Older entrepreneur to get in I think That most people be surprised that the Median age of YC is somewhere between 29 And 31 so half the founders are older Than that and is that gonna over the Years would you say is it yeah I Startups are gotten more popular for Sure yeah I think I was younger than That when I went yeah yeah me too Are there any practical steps to stand Out in a YC application are there any Particular progress metrics that you Give an application more credit for and This is another way of asking the Previous question you see what they’re Saying yeah lately like I said the most Important thing I can talk about for Attraction is what’s your progress over Time I think the what all investors are Interested in is are you executing at a Fast pace for some people that just Means building something you’re just Getting a prototype done fast for other Products that are easier to build and Means getting customers getting growth So and so forth But it’s just am i impressed with the Pace at which you are operating I think That’s that’s a better way of saying it Versus like the shape of a curve or the Exact percentage of growth or anything Like that this is from Vuitton do you
Keep a check on the applications that You don’t accept into the program I Think it’s meant in a positive way yeah One of the things that I’ve done is just Today actually was follow up with a Number Of companies who applied last batch Didn’t get in but I kind of liked them Just to see what they’re up to and where They want to do I see this batch but It’s considered a good team education Domain expertise experience to start up Something else we make this the last Application question topic of the panel Yeah I get that um I think the that’s a Hard question answer right like the Actual definition of a good team is a Team that’s actually executing and like I don’t really care what school you went To so if you’re always fighting with Your co-founders if you’re always Fighting with the Kevon is probably a Problem but like more importantly there Are no credentials that were really Looking for other than can you build the Product and are you executing this isn’t Like a credential collection business at All yeah even though to some people YC May be seen as a credential I think it’s Going that these days yeah I think it’s It was interesting I was just doing a Talk to startups and I kind of talked For an hour about kind of what it’s like To go through YC and one of the things
That we tell people the first day of YC Which is that getting into YC does not Mean you’re successful and the most YC Companies fail and you know I got an Email back who from a founder who Basically said wow you know I really Thought YC was just about fundraising Prudential and I didn’t realize all the Other stuff that’s involved and you know I was hardened by that because a Credential potential was only worth so Much right like you got to go out there And execute and really the value of YC Is how we help you execute not oh I can Say I’m a YC founder like that only gets You so far in this world as a student Who is currently not working in a Start-up what can I do to be involved in YC work at a YC startup yeah to be Completely honest like that I think is You would be surprised at how many People apply to IC after being employees Of YC startups and and get in and build Great something’s of their own I’m gonna Say on top of my head quit my founders Perfect example Brian was an employee at Airbnb There are many examples of this by the Way I believe you started to shout Resources stop recently but how People work at YC company Tuesdays I Think it’s around 50,000 people yeah and You were saying whenever backstage it That is the real Network discovered yeah
You know speaking to Ali’s point about The kind of b2b SAS advantage I used to Think that when you’re selling within The YC community you’re just selling the Founders and so you can reach 5,000 People but the reality is is that you Know for example a company like Brax They deploy cards throughout the company So you’re not really just reaching the Founders of a company when you’re Selling to them you’re reaching all Their employees and when they move to The next company they ask the CEO why Don’t we have Breck’s cards and so it Turns out that like kick-starting people Knowing about your product both founders And executives and employees is one of The best advantages that we can give Away a start-up and something that I Completely agree with Olli it only grows As YC grows so I kind of asked this Before but this is from Maui what is why Is his perspective on promoting Diversity among founders and broadening Access to economically disadvantaged Communities I think one of the most Important things the startup community Has to be better at is finding people Who’ve encountered more life problems And helping them figure out how the Startup world can help them solve them I Think one of the things that’s kind of Sometimes depressing about working at YC Is when you encounter extremely talented
Founder who’s really never encountered Any problem in their life and so they’re Almost at a loss of what to make and Some of the ideas that come up with are So esoteric sometimes you have to ask The question like do you have problems Like is there anything like did you ever Have a problem um and I’ve had that Conversation more than once and so I Think that like there’s a whole set of Products that will only be built if There’s much more accessibility to the Startup world and you know YC certainly Has been a pioneer about this by having An open application before we started The only way to raise money is if you Knew someone that was like the ultimate You know old boys club But I think that there’s so much more Than the tech community can do to to Increase diversity and I think there’s Actually so many more interesting Problems when we encounter founders from Different backgrounds you know I’ll give You an example is a company named Promise that went through YC a couple Batches ago and their goal was to Decrease mass incarceration Incarceration in America that’s not the Typical application you read and they Had all different ways that software Could be applied to the problem and it Was one of the most exciting companies We worked with and and we’re starting to
See a lot more founders looking at the World and saying you know I’ve Encountered this problem this problems In my community there’s problems in my Family I want to create a product to Solve it going forward well why cease Focus well why see focus more on Accepting international companies from Africa or other emerging markets and There’s a second question that’s related How many applications did you receive is YC going to scale physically with posts Outside of the US faster after getting China launched so the international Question yeah so 40 percent of this last Batch was international so we are deeply Committed to funding international Companies in fact we’re running Interviews and we ran interviews in Tel Aviv and then running them in Paris and Bangalore on this batch for the next Batch so international is certainly Something that’s always been hugely Important for YC we’ve funded a number Of amazing companies from Africa and we Plan to continue doing it and I’ve been Actually pleasantly surprised by the Sort of community this really safe Investment community here being Welcoming to startups that sometimes are Solving problems they don’t understand Very well in terms of opening up other Locations I think the most important Thing that I go through time time again
Is where can we run the best program and I don’t think every company should be Located in San Francisco but I think This is the strongest startup community In the world and so every company should Have a strategy of what they can take From it whether it’s funding or advice Or employees or customers and so my Challenge with locating somewhere else Is that one of the powerful things about YC is giving people and Into this ecosystem and and I wouldn’t Want to dilute that great just getting Back in a little more the late-stage Stuff can you tell us the the programs That you work on now for the later stage Companies those grew out of the problems That you experienced yourself Walk us through what those problems are Like what are the things that are Killing the startups the most that you Work with or hindering their success in Any way and what are the programs are Like really trying to do when they Address that yeah I would say you know As I mentioned you know the biggest Challenge and the common challenge that Growth stage founders face is company Building and there’s a lot they can Teach each other and learn from each Other and when they’re in that phase and So what we’re really trying to do is Bring the power of the YC Network both The founders but also the all the
Executives and other people who work at Those companies bringing the power of The YC Network to bear to help founders Learn quickly You know if you what are some examples Of that how we do that Yeah just of like things that like a way You helped a company yeah the challenges That the later stage companies are Facing yeah okay so every later stage Company faces a challenge of learning How to hire and manage senior executives People who trying to get people to join Them that they in some ways have no Business landing and some founders were Really good at that and they deploy a Set of tricks and a set of practices That you know that work and you want to Show right now yeah I mean they’re not It’s funny yes sure I mean I think that Um they’re not when you when you think About a none packet they’re not that Mysterious but effectively what a lot of A lot of the more successful founders do Is they first spend a bunch of time Researching who’s really great and try To meet the really great people in a Given field like CMOS and then they will Try to build relationships with one or Two of them and be very patient and Cultivating those relationships over Like a year plus they’ll find ways to Make the CMO perspective CMO Intellectually engage and the problems
They’re trying to solve sometimes they Recruit them in as advisors and make Them you know financially kind of Connected to the outcomes and and then Over time based on that trust they Figure out like what are the things that Really gets this person excited and with That like deeper knowledge of the person Then they have more hooks to be able to Bring in a candidate to bland the Canada Ultimately so I mean that’s often what You see so yeah that’s one example so Getting back to the the acceptance Questions how many applications did you Receive for the current winter round and How many do you usually choose is there A cap and I my follow-up is how bigger These classes gonna get yeah so the First question we’re still receiving Applications you can apply to isolate And so I don’t have a final number yet Because we will get applications up Through the first day of YC in January What was the second part of it how big Are these gonna get I mean you’ve scaled them to like There’s no cap like I think that in some Ways YC acts like a start-up first we Want to figure out all of the companies That we want to fund and then we figure Out how to modify the program to give Them as good or better of an experience Than we gave last time and that just Keeps going and almost every innovation
In the program was driven by something Not working so was having to build Something better how do you manage the Insights that YC gets from helping the Startups in acremant program and use That to accelerate future growth for YC And future progress future prospects From you go young well I’ll give a Specific example um one of the things That we started doing a couple batches Ago was one of our partners dalton who Heads up admissions started doing a Post-mortem talk at the end of the batch And he started talking about what are The characteristics of companies who Graduate YC who are successful versus Not and one of the things that we see Founders kind of policy make the mistake Of is they feel that fundraising is akin The product market fit our success and So we sell the stories about the Companies that did really well Fundraising and did not execute and it Shows what the companies that have Challenged fundraising but did execute What ended up happening and so one of The things that we’re trying to use is Use our understanding and the data of How companies do afterwards to kind of Inform the batch and basically give them A bit of a cheat sheet on how not to Make the mistakes that people came Before them and one things I was About with our founders is that like we
Don’t want you to die in a typical and Predictable way mmm like die in some Unique different special way that can Kind of like teach the next group of People who come after you something Really important like if you die cuz you Over higher and think you’ve got product Market fit when you don’t and spend too Much money it’s like boring yeah we got A we got a whole file folder we actually Are out of time already guys I’m very Sorry I believe they’ll be around yeah We hang out yeah and know they’ll come Find you guys oh I’ll let them take Their microphones off thank you very Much everybody having us [Applause] [Music]
