Lessons learned from Y Combinator and Seedcamp (Volume 2)
I’ve already posted our lessons from Mini Seedcamp, here’s a follow-up post about our experience with Y Combinator.
Y Combinator has a different model of startup funding compared to that of Seedcamp. Twice a year they invest a small amount of money (average $18k) in large number of start-ups. The selected start-ups move to Silicon Valley for 3 months, during which Y Combinator people work intensively with them to get the company into the best possible shape and refine their pitch to investors. Each cycle culminates with a presentation to a large audience of investors.
We were attracted by the nature and goal of the program. The idea of intensive 12-week camp caught our tech guys’ appeal and our business development people already started thinking about how to conquer the Valley from the very heart of it.
We applied, and one day an e-mail popped in: “Your application looks promising and we’d like to meet you in person … See you in California!”. We learnt that we had been invited for a 10-minute interview to see if Y Combinator sees us fit for the program. The only thing not so exciting about it was the fact that the interview place was more than 5000 miles from us. That raised an obvious question: “Can we afford the travel costs and justify the trip even if we don’t get selected?” Since Y Combinator offered $600 to reimburse the travel costs for people flying in from outside of California, we decided to give it a go. With so much at stake – a possible 3 month program to boost our company’s efforts, plus Ron Conway’s and Yuri Milner’s offer of $150k for every startup in Y Combinator – we headed to California.
It had been more than 10 years since my last visit to California (working with Southwestern Company as a door-to-door salesman for 3 months over the summer of 2000 in Los Gatos), and the place was still as beautiful as I remembered it. We (the other half of “we” being the company’s co-founder Ragnar) arrived 2 days before the 10-minute interview with Paul Graham. We knew we had enough time to prepare ourselves for the 10 minutes that could dramatically change the upcoming summer for Pipedrive team.
We collected our previous pitch notes, knowing that this time the idea was not about pitching but being able to answer questions from Paul Graham and Y Combinator team. We ran through a set of likely questions, and prepared our best answers to these.
Since we were in the the best area for a startup to be, we also took the time to arrange some meetings. Ragnar dived into his LinkedIn contacts and started searching for people in the Bay Area with B2B background. Any information or experience regarding entering the US market with Pipedrive was greatly appreciated.
After our efforts, we managed to arrange 7 other meetings with exciting people (from companies like Mint.com, Nokia, Twitter and IO Ventures, plus some other early stage VC-s). Not knowing it at the time, this push proved to be extremely valuable for us.
The Day of the Interview
We arrived to Y Combinator venues 30 minutes before our time slot. In the building, we spotted at least 3 other startup teams waiting for their turn. Strangely, the fact that we were to face Paul Graham and Co for 10 minutes only, started to make us more anxious than we would have wanted, but we had to live through this “by-product”.
Once in, we were greeted by Paul, Jessica Livingston, Paul Buchheit (founder of GMail) and Harj Taggar. We sat down and questions started pouring as we had expected:
- “So, guys, show us what you have.”
- “How does it (the product) work?”
- “How are you different?”
- “So what is the problem with CRM-s (in response to our respective claim)?”
- “Where and how did you get your customers (we had acquired more than 40 by the time)?”
- “Do you have international clients?”
- “What do your customers want?”
- “What do these people want who decide not to be your customers?”
- “And where are your hackers (referring to the fact we had come together with Ragnar, leaving our tech team home)?”
We had been prepared and could keep our answers to the point. Eventually, Paul wrapped it up casually, and we left. With this interview behind us, it was very difficult to sense if we had “succeeded” or “failed”. Y Combinator promised to let us know by 6pm whether we had made the program or not.
Well, this time they decided not to fund us. And I think the best piece of feedback again came from behind the “no” – essentially, that we are in a very crowded market and that the key to really grow would be to differentiate. Not rocket surgery, especially out of context, but the kind of feedback that pushes us to make our company more appealing potential investors, but more importantly, makes us work harder in making Pipedrive users happy.
The Conclusions from Y Combinator
- Apply. It is such a great chance to lift your start-up to a new level and do it faster that it would be outright stupid not to apply. Some might say that Y Combinator is eyeing hackers (in other words, new technologies) more than business inventions, but it is immature to make a conclusion like this before you meet potential investors. After all, people who invest look at you and your team and your product, and try to make a prediction if it can all grow big fast. Go and check it out with them.
- Be ready to relocate. Once selected, you move to the location for 3 months with the whole team.
- Prepare to answer fast at the interview. 10-minute time frame could prove tricky even if you are a fast talker. It makes great sense to simulate the interview with your team-members or friends or advisors, and be ready to answer obvious investor questions (check applications to these programs for questions they ask).
- Meet more people once you are in Silicon Valley. Had we not met other people in California, then I would have called our trip a failure and an expense I could not have justified. While Y Combinator is awesome, there are many great companies and people doing the same things out there you could meet and learn from. You might need to knock on many doors of potential partners and investors until you meet the one(s) that see what you see and are ready to take the risk to fly with you.
Despite not being selected for Y Combinator, the time in California was well spent for Pipedrive. We met many people, had really exciting conversations, got introductions to others, and some immediate value was created. All of this combined to Y Combinator experience has already lead us to greater things. And there’s more to come. I am absolutely sure of that.