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Y Combinator Looks for Outliers

Marketing Updates from GinzaMetrics

It’s application season again at Y Combinator again, so I thought I’d share my perspective on what they are looking for and why you should think about applying.

I often get emails from people asking me to talk about my experience at YC and what they are looking for. Some people wonder if there is any chance of getting accepted, because they perceive some weakness or deficiency in their application, idea, team or experience. So, here’s my experience (and resulting opinions).

First, despite the overall demographics, stories you hear and pictures you see, there isn’t really any issue with how old or young you are. You don’t need to be from a top-tier school and it doesn’t matter if you are married, have kids, etc. It doesn’t matter if you’re from another country. It doesn’t even matter if you don’t have a co-founder. It is true that all of these things may or may not make it harder, both in doing YC and in running your startup in general, but I have yet to hear a good reason why any of these things should stop you from applying.

The reason, I believe, is this. Y Combinator looks for outliers. Despite the lip service that all investors pay to you, this is contrary to the actions of almost every investor I’ve ever talked to1.

Most angel investors will tell you they invest in the team first but, in most cases, they invest in social proof first. They want to know who else is in and will often drag entrepreneurs along for weeks waiting to make a decision, simply because they are waiting for everybody else.

It’s critical to understand this because, whether or not you apply for YC and whether or not you get in, you will want to know early on who really believes in you. Y Combinator gets so many applications now that they can’t invest in everybody but they have been so successful precisely because they look for a few core traits. I believe that it is these few things that largely determine whether or not you can be the type of outlier that YC wants to support.

Persistence

You’re not going to stop. This is one of those things that just reveals itself in your personality, especially after you’ve been through situations before where most people would have given up.

I was lucky enough to learn this about myself, just before I applied to Y Combinator last February. Late in January 2010, I walked up to the ATM at Mitsubishi UFJ in Shibuya and checked the balance on my corporate account. ¥7,000. (Less than $100 USD.)

Not good, especially with a wife and two small children depending on me. I had shut down nice consulting contracts about 6 months prior to focus full-time on building an early version of the product that became Ginzametrics. I went home and talked to my wife. She said “if you’re running a startup, it’s safe to expect that you’ll have lean times. Go figure it out.” Aside from the obvious lesson that I had married the best woman in the world, the experience really thickened my skin. I had no desire to give up myself, I had a specific experience that I could look back on and use as a reminder to be persistent.

And things got a lot better from there. I applied to YC and got accepted. We moved back to the States in a mad flurry and I launched a completely new version of Ginzametrics, to great response. But the lessons I had learned earlier that year stayed with me.

That Fall, I had a hard time raising money right after Demo Day. I talked to some angel investors and a couple of VCs. Because I was a one-man band, I couldn’t spend a huge amount of time on fundraising, deciding instead to focus on my product and my customers. But I did receive a number of rejections. I was even rejected at a party in San Francsico. By three separate investors. At the same party. (You guys rock.) They couldn’t understand how I was going to make money selling software, was the primary message.

That was a shitty, lonely night but there was no question in my mind, at that point, that I was going to keep bringing it. Remarkably, things got better within almost a month. Revenue surged, customers loved what I was doing and suddenly I have investors coming out of my ears. I guess they get it now.

So, the point is, sometimes it’s going to suck and sometimes it’s going to be awesome. It’s like a wave and you just have to learn how to stay on the board. (Probably my first sports metaphor ever.)

Succinctness

Given the length of this post already, I get the irony, but this one is really important. I’ve talked to enough YC-hopefuls to have developed a reasonably accurate sense of their chances of getting in.

Interestingly enough, it seems almost entirely weighted towards how succinctly they can explain what they are doing. Which seems to be a function of how succinctly they can communicate in general. Some people can talk for 45 minutes at a time without saying a single thing. It’s amazing to me. If you’re in this boat, you can fix it but that’s another post. The point is, your description of what you’re doing should be no more than 5 words and it should be as concrete as possible.

Flexibility

Persistence is the most important thing but dumb stubbornness is something else entirely. You need to develop a sensitivity for whether or not things are working. If they aren’t working, you have to invest the time and resource to fix them. Sometimes this is called pivoting. I hear that word used so many times now that I think some companies pivot too frequently. If you pivot seven times before you even launch, you’re firehosing. You need data about what doesn’t work before you can pivot and you can’t get that data without launching, or at least talking to a lot of potential customers. So that’s not what I’m talking about when I mention flexibility.

Flexibility is something that reveals itself in the interview at YC. PG and the others (well, mostly PG) will rapid-fire questions at you about your idea. This is a good exercise (for him and you) to see how easily you are able to traverse the idea space of your startup. This matters because there is a good chance that your idea is going to have to change as you talk with customers and launch your product. In the case of Ginzametrics, my overall idea hasn’t changed that much but there have literally been hundreds of little lessons that I’ve learned along the way, all of which were quite counter to my original (strongly-held) opinions. I’m still getting better at this but if I had stuck to my original beliefs, I wouldn’t be nearly as far as I am now.

Conclusion

One last thing: don’t self-select yourself out. I hear people tell me that they aren’t going to apply because they don’t feel like they fit the profile. If you’re just looking for an excuse, then you’ve probably found a good one, but if you honestly feel that way, just look at me. I’m a single-founder, mid-thirties, with a wife and two kids and I didn’t go to a top-tier school (Go Bucks!)

Stuff matters only if you let it.

The deadline is March 20th, so get your application in.

1 500startups is the other seed fund that is really good at looking for outliers. Dave McClure and his team excel at seeing the potential in early startups.

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