Applying to YCombinator
Previously, I shared how being resourceful allowed us to experiment better and helped us build our startup on our terms. This post talks about our decision to apply for YCombinator, and not go for it.
We saw that YCombinator applications were open. We were using their startup school weekly update format religiously to track our weekly progress. But we were not sure if YCombinator would be the right choice for us. We definitely had fundraising in our minds but we still had a few months before we would start fundraising. We spoke to several previous YC alumni to understand what would we get at YCombinator. It was definitely not for the deal they were offering, we were in the middle of the funding ‘boom’ and I was very confident that I could raise money on much better terms than what YC was offering, so the reason had to be stronger. We learned that YCombinator can bring in their experience of making you focus on one key metric and do everything to maximize that and show you how to stay on track and never lose momentum. Another big reason we found was that it would put us in front of several potential target companies that are YC alumni. There were some voices that also suggested that getting into YC might make raising a seed round.
We also realized that one of our biggest competitors was a YC company, and interestingly, they joined YC when they were already at $1mn ARR, so money-wise, they did not even need YC, so it was definitely for something else. We suspected that they might have reached out to every potential YC company that would fall under their criteria already, which was verified with some backchannels. And YC had already invested in a few companies similar to ours. Despite knowing all this, we thought it wouldn’t be a bad decision, and in my opinion, the questions in their application were quite thoughtful, they helped us answer straightforward questions about our startup. It was not a lot of effort and felt worthwhile. We decided to apply.
We googled what makes an application successful. We learned that our answers need to be straightforward, they should show a clear understanding of why we are doing what we are doing, and that getting referrals from YC alumni holds a lot of weight. So we got several referrals from YC alumni and sent our application and forgot about it. We got a YC interview on the day of Diwali, which is as big as Christmas for Indian people. Since my founders were in different time zone, they took that interview around three in the morning still dressed in their festival clothes.
We learned that these interviews were like rapid-fires and last around 10–15 minutes, and even if you live and breathe your company and you are very clear about what are you doing, you need some practice so that you know how to put your thoughts in words when under fire. This is where generous help from several YC alumni came in handy.
But a few days later, we got an email from YC that they would consider us if we get a sale on the SaaS management line of business rather than the procurement side. We were always clear that we don’t want to charge for the tool that we are offering, we wanted to give that away for free, and we wanted to make that money from the sellers. A concept that I learned early in my life was that if you are facilitating a transition between two people, charge the one who is getting money, not the one who is already paying money because the receiver would happily give something away if your contributions were valuable. For example, if you are a property agent, charge the landlord, because they will earn money, not the tenant because they are already paying money for the rent.
We gave this suggestion serious thought. It was tempting. We sat down and discussed it with each other. This is where my co-founder suggested going through the basic hypothesis of why we were doing this. He was a ‘value investor’ and he would build a thesis on why he is investing in a company, and would stay put until that thesis doesn’t stay valid anymore. Upon reviewing our initial thesis, we realized that what we want, vs what YC wants from us is very different. We decided that we would stick to our strategy because this is what we believe in, and this is where we want to go ultimately. This sadly would mean we would have to let go of this opportunity, which felt very hard to let go, but we took the call that we believed in, despite not being comfortable with it. We were happy about our decision.
Things we did well:
Trusted in ourselves.
Things we didn’t do well:
Got distracted by shiny objects and ended up spending a lot of time getting past them.
In my next post, I will talk about circumstances that hindered our progress and why we stopped working on CleverSpend.
This post is part of five post series that was intended to walk you through our journey of building our startup and shutting it down. Please find all the posts?here.