YC interview advice

http://sam.bluwiki.com/blog/2009/04/advice-for-yc-interviewees_12.php

by apwalker • 17 years ago

22 18 17 years ago

sam.bluwiki.com

sho5• 17 years ago

"It has become clear that in this market you should have revenue by demo day. Ideally you're ramen profitable. It'll be much harder to find investment if you're not."

If you're "ramen profitable", why do you need a VC at all? You're self-sufficient by that time, you have proven your product - you should be talking to a bank, not YC.

Sam_Odio• 17 years ago

You're partially right, although this is outside the scope of my article. The article is simply stating that it's easier to find any investment (debt or equity) when you have revenue. Ironically, its easiest raise money when you're already making it.

Regardless, there are still good reasons to seek VC investment when profitable. Several YC startups are going down that path. A bank might lend you $10-50k if your net is $2k/month while a VC might invest $1-5 million.

gcheong2• 17 years ago

"Ironically, its easiest raise money when you're already making it."

I don't think it's ironic at all. VC investment involves a risk calculation, profitability means a lower risk but in return the VC should be willing to accept a higher valuation.

pclark• 17 years ago

How true is this? I'm not doubting you, just curious for other opinions.

We're raising money currently, and our investors have told us that revenues would come quite distant in terms of variables on if they'd invest. They love a great team, a huge user base and a lead on the market. Sure, having revenues extends your runway, but most investors seem to be of the opinion "users now, profits later".

I guess my question is, would a VC prefer a massive unmonetized user base, or a much smaller user base with revenues?

sho5• 17 years ago

"Regardless, there are still good reasons to seek VC investment when profitable."

Oh I agree of course. VC will be judging you on future potential; a bank will be judging on current performance. If you need a million dollars to really scale up, you need the VC. Facebook or Youtube come to mind, they could have never achived what they have without VC.

But if you don't need the huge cash injection, if you just need to incrementally ramp things up slowly, then VC is not your only option; that's all I'm trying to say.

gcheong2• 17 years ago

Because VC can oftentimes get you to the next level beyond ramen profitability faster than you can on your own. Even at ramen profitability you are still quite vulnerable to the whims of the market; it may make sense to have some VC cushion even at that point.

pg4• 17 years ago

Because a bank wouldn't give you money. They wouldn't trust mere revenue. They'd want assets as collateral.

sho5• 17 years ago

They might not give you much money, but they'd give you some! There are plenty of small businesses out there without any real saleable assets beyond their viable business activities and future income, indeed for many banks such a market is their speciality. You won't see a $10m loan on $2k/month, of course, but I should be very surprised if you couldn't at least get a $10k or $20k overdraft, which may well suffice to buy another couple of servers or contract a graphic designer or whatever it is you need to scale incrementally.

Conservatism is rife in the banking sector at the moment but at the same time, making loans is their job, after all.

potatolicious• 17 years ago

Mentorship and non-financial support? I don't know the full scope of what YC does for its startups, but you may get to ramen profitability on your own, but growth may be extremely difficult.

pg4• 17 years ago

"the answer probably shouldn't involve ads"

Actually we're not as down on ads as other investors seem to be. We liked Heyzap, and they make money from ads.

"The last thing you want to do is argue with the partners."

That's an overstatement. We don't like people who supinely agree with everything we say. That's as bad as refusing to listen to anything we say. What we look for is a middle ground: people who respond intelligently to our suggestions.

Some of the suggestions we make are stupid. If people agree with those, we conclude they're stupid. (We don't do this on purpose to catch people. We just don't understand very well yet what each group is doing.)

palish• 17 years ago

What do you do when you realize you invested in a stupid team?

pg4• 17 years ago

I don't think it's happened yet. Between the application form and a 10 minute conversation, we can usually tell roughly how smart people are. And being super smart is not that critical anyway. Determination is more important.

The real problem is when a team turns out not to have enough determination to see a startup through. Startups are hard; most people wouldn't be determined enough.

When a group we've funded seems demoralized, we try to encourage them. It takes a few iterations to tell whether a group is just suffering from a temporary setback, or whether they intrinsically lack energy. If by Demo Day they've gotten nowhere, we start to think it may be the latter. But we're naturally optimistic. Usually groups give up before we give up on them.

netsp• 17 years ago

Maybe the statement should be a little sideways: "If your answer is ads it is likely to be the wrong answer."

At least more so then other answers you might hear.

Doesn't mean there aren't good businesses to be built on ads. Just that there tend to be many not good ones.

danielrhodes• 17 years ago

The YC interview is so quick you are going to be out of there before you realize it has started. In other words, be on top of your game. Anticipate questions, especially the ones that you don't want to answer about the weakness of your product (they will come up). Don't be defensive. Have a demo ready to go when you walk in the room which gives a quick and good first impression. It's not going to be a lot of idle chit-chat, they are going to dive right in.

YC interview advice

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