Crafting that perfect Y Combinator application can seem like a daunting task. What are investors looking for? What story to tell? How to tell it? These are questions YC aspirants always grapple with.
So, for answers, we at Razorpay Rize reached out to a founder who knows what it takes to get into Y Combinator.
Daniel Kang is CEO & Co-founder of Flowbo, and was accepted to Y Combinator’s Summer 2021 batch. Flowbo provides capital to one-person businesses that don’t have access to bank loans. Kang was a former investor at Softbank and currently a venture partner at Pioneer Fund, a VC fund run by YC alumni.
Here is his comprehensive guide to writing the perfect YC application.
Before we begin…
Congratulations on starting your company and applying to Y Combinator. I got into YC with an idea — no product, no revenue. So if that’s what’s holding you back, you should apply.
There is endless content about “how to get into YC”. Don’t get stuck in that rabbit hole. Don’t waste your time micro-optimizing your application. The application is a straightforward process. In this piece, I’ll be consolidating advice and providing educated guesses having gone through YC and having been an investor on the other side of the table.
The purpose of this piece is to minimize the time you spend on optimizing the application and maximize your time on building your company.
But before I dive in, I’d like to share a few reminders to get you in the right mindset as you start preparing for your application:
- Y Combinator is not the be-all and end-all for your company. YC partners will tell you this as soon as you get in. In practical terms, that means you should have a plan to build and grow your company regardless of YC. YC should be seen as a multiplier. If your company will die without YC, then it is unlikely any investor, including YC, will invest. For me, that meant raising a pre-seed round before getting into YC to build my company with clear execution.
- The game you’re playing has asymmetric outcomes. There is a heavy luck component. Even if you have a killer company and a killer application, it is possible you might not get into YC. The best you can do is stack your odds. Apply to several accelerators if you need a community. I also applied to several accelerators — some turned out, and some didn’t. In the end, I chose the accelerator, not the other way around.
- The success of your YC application is NOT a proxy of your worth or chances of building a successful company. YC will also tell you this on the first day of the batch. Every respectable investor I’ve spoken to admits that they can be wrong about passing on your company. For me, YC was helpful, but it was not the source of my convictions.
Getting through the funnel
So we know that each year, over 15,000 companies apply, of which around 1,500 companies (10%) get an interview, of which around 200 companies make it into the program. That’s about a 1% acceptance rate.
Your job in the application is to maximize your chances of getting through the funnel and be a part of that 10% for an interview. In the screening phase of an investment, investors will need to answer at least three questions.
1. Do I understand it?
2. Do I like it?
3. Can I back it?
This is the funnel you should think about when crafting your application.
Before an investor can evaluate something, the investor needs to understand it. Too many founders do creative things to make their application stand out only to get filtered out on the first part of the funnel. Don’t sabotage yourself.
Reading through thousands of applications manually is not easy. It’s read by humans, and will necessarily have human components. Your application might be right after a brutal board meeting or putting kids to sleep or any range of circumstances.
Simply making things easy to understand and following instructions will get you to the top 50% of applications. Here are some practical tips.
Use simple, concise language
Your core message should be crisp and constructed in a way that an intelligent person who is not an expert in your sector/ function can understand. This means no jargon. This means no buzzwords.
In my view, lack of clarity is usually a symptom of not knowing what you say. Know what you want to say. There is a reason YC asks you to ‘Describe what your company does in 50 characters or less’ in the application. I’ll give you a made-up example.
- Clear: We help businesses sell invoices for faster access to cash.
- Unclear: We are revolutionizing the $3tn trade finance market and disrupting the procure-to-pay cycle using AI to scrape data and automate processes using API plugins. With over 20 years of experience, we bring the full procure-to-pay cycle as a one-stop shop.
Maybe the first one doesn’t sound sexy, but at least I understand what the company is trying to do. Of course, you’ll need to add a bit more flavour to the question, “What is your company going to make? Please describe your product and what it does or will do.” Dalton Caldwell, Head of Admissions at YC, did an entire talk on this stuff, sharing examples of good descriptions and poor descriptions.
Even native English speakers will have to put in the effort to get this right. Take the extra time with tools like Grammarly or even ChatGPT to make sure everything flows.
Tell a story, but pick the right genre
A great application will come to tell a good story. Many people will advise founders to tell a good story for applications and fundraising without prescribing what kind.
It’s not a mystery novel — don’t hide the main message. It’s not a thriller — we don’t need plot twists. It’s also not a literary piece with deep character development.
Instead, I’ll share two frameworks I use to tell a story when answering questions in both written and verbal form.
- ABCs: This is a technique a friend of mine from Harvard Law School shared. A — Answer the question directly. Don’t avoid the question, don’t talk about what you want to talk about, and don’t lie. Give a direct answer with evidence. B — Bridge to what you believe is the material part of the discussion. C — Close strong with the few points you want to drive across in your application.
- Pyramid Principle: The order of your answer matters. This is a required reading for almost all management consultants. I also read this when I worked for BCG and Oliver Wyman. The crux of it is this: Start with the answer, then summarize supporting arguments, then provide evidence. In that order. No need to read the whole book, but read the summary and do a few practice questions.
YC already does a good job of asking questions that minimizes these errors from the applicants. But there are times when explaining is required. For example, to “How far along are you? Please explain.”, start with an honest answer backed by data, and then add context rather than starting out with a defensive sentence.
- Starting with an answer: We have a working product, 30 daily active users, but no revenue. We prioritized onboarding, growing 10% a week, and are now setting up payments to start charging. During our user interview, we saw that users were paying $x to solve this problem and showed a willingness to pay. We’ll validate this next week once we start charging for our product.
- Starting with a defense: We’re going to make $y MRR from our users. We’re 100% sure of this because, during our interview, our users said they’d pay $x for our product. We’re just about done with payment integration on our website, which is the only reason we haven’t generated revenue yet. Our product is out and have hundreds of registered users who are obsessed with our product.
See the difference here? I know it’s exaggerated, but one sounds honest, calm, and in control. The other one sounds defensive, deceptive, and insecure.
YC has specific instructions on how to complete the application. Follow the directions. Complete the whole thing. Keep the word/ character count. Use proper grammar. Now is NOT the time to be creative.
For example, “Please enter the URL of a 1 minute unlisted (not private) YouTube video introducing the founder(s). This video is an important part of the application.”
It’s a simple set of instructions, yet apparently many people get this wrong. A partner mentioned receiving a 20-minute spiritual journey video instead of a 1-minute video required in the application. Don’t do that. Have the founders present, record it in a quiet space, make sure it’s unlisted, and make sure the link works.
One side point I’ll make is on recommendations. Most of you will know that YC alumni can recommend start-ups. Will it help? I think it depends. If you happen to know a YC founder well, feel free to ask for a recommendation.
But if you don’t know anyone, don’t worry about this or try to “network” with YC partners. You might think this is hustling, but this is not helpful.
In fact, one problem YC identified and tried to solve was to help founders without connections to investors raise capital and run a company. In my view, networking with YC partners to “find the back door” runs contrary to the ethos of YC. YC partners also talk about stalkerish behaviour when it comes to this stuff. That’s not good.
Nail the basics. Focus on fundamentals. Stand out for the right reasons.
Great, you’ve made it easy for Y Combinator partners to understand your company.
In theory that should be it. You’re done. You shouldn’t change your business to appeal to investors, and you definitely should not be lying.
However, I did want to share how many investors think about taking the first pass on a company for founders who are less familiar with the space. It’ll help you understand the perspective of investors and guide what pieces of information you should emphasize.
Understanding Y Combinator
For this section, I’ll reference people directly involved in YC – including Paul Graham, the Co-Founder of YC – supplemented by my views of what investors look for.
Investors try to capture the upside of a high-potential investment while de-risking Type I (investing in a bad company) and Type II (passing on the next unicorn) errors.
Your application should demonstrate how your company “builds something people want”, and if successful, could become really big, really quickly. That’s the mantra of YC and the definition of a start-up according to Paul Graham. Hopefully, this isn’t news to you.
Investors have a set of mental shortcuts and heuristics to quickly assess these two points. We call this pattern matching. In the early stages, the most important metrics are team, market, and idea, usually in that order with market and idea being distant second and third.
You are your company.
Paul Graham posted his process for reviewing applications. While some of the questions have changed, I think it’s still valuable. It’s like your customer is telling you exactly how they do things. This is where insights happen.
Paraphrased, he (1) Tries to understand the idea (2) Assesses the team archetype and track record of founders (3) Examines unique insights that have been discovered.
Like many early-stage investors, the largest emphasis is on the team. I.e. What is the team archetype and have they demonstrated achieving some extraordinary thing in their lives?
Here is another mental model. Good investors want to believe that a startup will work. And the “need-to-believe” analysis is the set of assumptions I’d need to believe in order for the company to be successful. Each of those assumptions is going to have some risk associated with it.
In reference to Daniel Kahneman’s work on System 1 and System 2 thinking, here’s my attempt at deconstructing what this mental model might look like:
- Demand risk — do people even want this thing? YC emphasizes talking to users for a reason. Investors are probably better at running theoretical scenarios. What they want to see is who your users are and that they truly want this thing — that’s your unique insight. Traction is probably the best way to demonstrate that this is de-risked.
- Product risk — can the founders build the thing? Okay, so maybe I’m convinced that some users actually want this thing. Can the founders even build it? If you’re a first-time, non-technical founder who used to do strategy in consulting, this becomes a really hard sell. At a minimum, a tech company should be able to build the tech. A devices company should be able to build devices. This becomes important for companies that require domain expertise like rockets or cancer drugs. MVP or track record for building similar things is one way to demonstrate this is de-risked.
- Sales risk — can they sell the thing? If you’re an upmarket B2B SaaS company going after Fortune 500 companies, then having zero sales experience becomes an issue. Some proof of commitment such as signed pilots can help.
- Team risk — are they the right team to do this? Why would this team do better than all other people who are working on similar ideas? Demonstrating founder-market fit through domain expertise, past experiences, or some unfair advantage is important here. Co-founder break-ups are also one of the leading causes of death for start-ups — so showing good teamwork is important. A few other points are the integrity of founders (are you going to be a con artist) and the motivation of founders — they really want to get to know you.
- Business risk — can they make money? You don’t need to have your entire business model figured out, but you should have some idea of how this thing could make money sustainably. Selling $1 for $0.99 may de-risk demand and product risk but wouldn’t work out as a business. Even one transaction showing positive unit economics or a strong case for levers to generate positive unit economics are good ways to demonstrate this is de-risked.
- Market risk — can it become big? How big is the market, how fast is it growing and where is it going? Show similar public companies that became really big. Who are the major players doing this, and why is another company needed to serve the market? This is the unique insight component that can only come from talking to users.
By the way, these are also risks that you, as founders, should actively be looking to hedge. This is not just for the application.
Sam Altman, the former president of YC and current CEO of OpenAI, talks about this in his talk How to Succeed with a Startup. If you’re a B2C company, maybe talk about your distribution. If you’re a lending company, maybe talk about your source of capital.
Being a little pre-emptive is okay as long as it’s not distracting from your core message. You, as the founder, should’ve thought through many of these aspects if you are seriously thinking about building a company.
Deciphering the intentions behind the application
Let’s assume that investors want to de-risk high-potential investments as discussed above. Let’s also assume that the investor is thoughtful.
Then it follows to say each question on the application form has a specific purpose. That purpose is to gather information needed for the investor to make a call on how the company might be big, and how likely (or risky) it is to get there. It’s not to trick you.
To be clear, I’m not a YC partner. But if you don’t believe me, here’s what the Head of Admissions at YC says:
Applying to YC is actually really straightforward and well-documented, and intentionally so. So there are not a lot of secrets, and we’re not looking for people to do too much tricky stuff.
— Dalton Caldwell, Head of Admissions
Here’s my educated guess of what some of the questions are trying to get at:
Question 1.9. Who writes code, or does other technical work on your product? Was any of it done by a non-founder? Please explain.
- Product risk — can you build the thing?
- Legal risk — who owns the IP?
Question 3.1. Why did you pick this idea to work on? Do you have domain expertise in this area? How do you know people need what you’re making?
- Team risk — is there a founder market fit? Is there some advantage these founders have to build this? What’s the motivation here?
- Demand risk — Do they know their customers? Do people want this thing?
Question 3.2. Who are your competitors? What do you understand about your business that they don’t?
- Idea risk — is there a unique insight?
- Team risk — is there some unfair advantage to winning against the competition here?
- Market risk — are any competitors a publicly traded company that is large? Is the market big/ can it get big?
Question 4.4. If you have not formed the company yet, describe the planned equity ownership breakdown among the founders, employees and any other proposed stockholders. If there are multiple founders, be sure to give the proposed equity ownership of each founder and founder title (e.g. CEO).
- Team risk — Is this a partnership or a founder with employees? How might this lead to founder conflict that kills many early-stage companies? Has it even been worked out i.e. Are founders able to work through hard conversations?
These questions can probably be put in clusters. For example: “Are founders serious about starting a company?”
- Question 1.2 “ Company URL, if any” It’s hard for me to imagine a reasonable excuse as to why a company website might not exist. Is it a capability problem that founders cannot even build a website? Is it an execution problem where founders cannot agree to create a simple website to showcase their product? Even if you have hours left until the application, set up the domain first for submission, and finish your website soon after you submit — that’s the good thing about the internet. Carrd.co or Webflow are good resources.
- Question 2.2. How long has each of you been working on this? How much of that has been full-time? Please explain. Demonstrating some level of conviction is important. Now, there are exceptions. One famous example is Warby Parker.
Adam Grant, a professor at Wharton talks about how not investing in Warby Parker was the “worst financial decision” of his life. In his book Originals, Grant talks about how the founders hedged themselves with full-time job offers while working at Warby Parker part-time. However, I think this is more of an exception than the rule for how investors gauge the conviction of founders.
- Question 4.1. Have you formed ANY legal entity yet? (Yes/No). I think this is less of a commitment question, but a logistical question. But in my view, given how easy it is to incorporate companies, at least in the US, it’s hard to see why a founder may not have incorporated before applying to YC. I was in the UK when I incorporated. Companies like Clerky and StripeAtlas make it easy to incorporate companies in the US, even from abroad. In India, Razorpay helps you incorporate your company seamlessly. I talk about this in another article, but “Not willing to put up $1,000 of your own money can sometimes speak to the level of conviction on the idea. Not being able to put up $1,000 can sometimes speak to the need to de-risk other parts of your career before starting a company.” Again, this is my take.
On the topic of application questions, a few people have asked about the question related to “other ideas”.
5.1. If you had any other ideas you considered applying with, please list them. One may be something we’ve been waiting for. Often when we fund people it’s to do something they list here and not in the main application.
Honestly, I think it means what it says. Sometimes investors might have a thesis on a good market and idea in mind, looking for a good team that can execute the idea.
If the founders seem promising but the idea doesn’t, I check the question near the end that asks what other ideas the founders had.
So you should still spend some time on this question. At the very least, it increases your chances. It’s also a space where you can demonstrate your natural interest in solving hard problems and your capability to reason through how systems work.
If it helps, here was my idea:
Reverse auction market for funeral services. It solves pricing and customer journey problems:
Customer journey: people answer 6–8 simple questions on when and what they need for the funeral and receive options in 24 hours. It’s better compared to the existing solution of googling funeral homes and calling every one for price and availability.
Pricing: By pooling large demands, have the leverage to enter into reverse-auction mechanism with funeral homes. Use auction theory to get the lowest or second lowest bid. Because funerals are tough to “advertise”, a steady stream of customers would be worth the price cut (volume advantage > price margins). This assumes not all funeral homes are owned by a 1–2 PE firm. Currently, the difference between the cheapest to the most expensive funeral home for the exact same service is as high as 700%.
After, we can start developing in-house products for standardized services like cremation, wills/ notarization, etc.
The caveat to all of this is not to overthink it. Just be mindful.
You also shouldn’t change your company just because it’ll appeal to YC partners. However, you should understand what minimum things an investor is looking to see in a company.
If you do all of this, you’ll probably be in the top quartile of applications.
Y Combinator Partners have been founders and operators. In my view, they are quite empathetic to fellow founders and root for their success.
However, they are also investors and need to do their jobs. They also put their reputation on the line. Remember that real people are reading your applications and flagging your company and choosing to interview you. They’re taking a chance on you.
Doing steps one and two correctly is like playing all the right notes in music. But you need to do more than play the right notes to stand out. Obviously, if I had all the answers to this, then all my founder friends would be getting into YC. I don’t. But I’ll share a few things I’ve seen that work well.
Show, don’t tell
After wrapping up section 1, I said “In theory that should be it. You’re done”. This is true. The easiest way to stand out and cut through all these tactics is to just build what people want.
- Showing user growth is 10x more convincing than any intellectual prose about what your users want and why.
- Showing revenue growth is 10x more interesting than the best competitive analysis and discussing unfair advantage on why you’ll win.
- Showing a working product is more powerful than the credentials of the team.
There is no way around this stuff. You have to build a company, not a YC application. Show the correct metrics and growth. If you have this, then you’re done with step number one. Keep your focus on what matters.
The same thing applies to you as founders. I mentioned that the most important thing is usually the team. Building a successful company is quote “extraordinary” according to Paul Graham. So showing that you’ve done some extraordinary thing in other parts of your life is probably good. You can say you’re a hustler, gritty, or whatever else you think is cool, but having a concrete example of how you’ve done something outstanding is more powerful than any amount of words.
But sometimes, you haven’t built anything to show. You might be pre-product, pre-user, or pre-revenue. That was the case for me.
Here’s the next best thing.
The “idea maze” — the second-best option
Balaji Srinivasan, the former CTO of Coinbase, wrote a good essay on the concept of an idea maze: “The idea maze shows all permutations of an idea — branches of the decision tree that make up a giant state machine.”
Parenthetically, this is apparently the one thing Marc Andreessen at a16z looks for in his investments.
My own interpretation of the idea maze is this: “Does your company even work in theory based on the currently available data?” You need to put in the work to do this not for investors, but to build internal conviction for yourself.
The mantra of startups is to be action-biased, but that’s not a license to be thoughtless.
In fact, if you do this right, all of the pointers I talked about in sections one and two will be a common side effect. For example, let’s talk about pricing. It might start with:
- Are you charging for your product (Yes/ No), if so why?
- What is the pricing model? Free vs. Freemium vs. Paid? If so why?
- What is the business model? Take rate vs. subscriptions vs. in-app purchase vs. one-time payment. If so why?
These three basic questions alone have over 24 permutations. Imagine adding details like if it’s freemium, how many features would be free? Which ones? How many tiers of the premium version? Why this range of prices? You’ll quickly have thousands of decisions you’ll need to make thoughtfully.
To make things more concrete, I’ll share a few examples from my own application, which by the way, was important in the interview stage.
My company had obvious risks. For example, we were going after creators, but both of us were finance guys. So the obvious question is how would you acquire your first customers? We had talked to over 40 creators and had an LOI for a pilot agreement with Multi Channel Networks (MCNs) who managed over 300 creators in aggregate. I want to highlight an important nuance here.
The moral of the story is not that I had an LOI.
The story wasn’t “Boom! Pilot LOI for Go-to-Market!”. LOIs actually hold very little weight in my view.
The story was, “hey I’m a founder who’s thought through the implications of acquiring users who are outside of my domain expertise and network. And I translated that thinking into action by talking directly to users for problems and acquiring partnerships with businesses that manage hundreds of creators.
I’ll take another example. Another obvious thing we need to figure out is how are we going to fund our customers.
Here, I had raised a pre-seed round of $650K (excluding YC) and signed an LOI for a $10m debt facility contingent on data such as default rates (like did our users pay us back) and IRR (how much money did we make in a given time frame).
Again, the moral of the story is not that we raised money or we had an LOI.
The story wasn’t “I have the network in finance to get the money I need”
The story was “I’m a founder who thought about how to go from 0–1. I have enough funding to do about X financing, assuming the average size of capital, default rates, time to pay back, and estimated returns.
If my hypothesis is correct, then this data will unlock another $10m to continue to grow. If it isn’t true, we have safety mechanisms to find out early and iterate our product with our pre-seed round.
Perhaps just as importantly, I shared why I’m working on this company.
It wasn’t on a whim I started Flowbo. Providing fair access to capital for everyone has been my mission for about a decade. Now you can’t share everything in an application or in a 1-minute video, but your sincerity should come through.
In an early-stage company, it’s expected your company will iterate and change. So you are the constant. You matter a lot. In fact, in most cases, you are your company. Make that shine through the application.
Take some time for introspection. It’s a hard journey. Why do you want to do this?
Applying as a non-US founder
The good news for you is that the proportion of non-US companies in Y Combinator is increasing over the years. This seems to especially be the case for India with more than 90 companies funded in the last few batches.
I was also a non-US founder, so hopefully, I can share a few things to keep in mind when you’re applying.
To be absolutely clear, this should NOT be taken as financial or legal advice. You should make the decision as the founders of your own company.
Minimum legal requirements
This is less of a concern at the application stage, but suppose you want to think ahead. There are minimum legal requirements that YC has in order to invest in your company according to their website.
If your company is already incorporated somewhere other than the United States, Canada, Singapore or the Cayman Islands, in order to participate in YC you will need to create a parent company that is in one of those jurisdictions. The existing company will then become a subsidiary of the new United States, Canada, Singapore or Cayman parent company.
Many companies in each YC batch do this process in order to join YC. While we will connect you with lawyers who will drive this process, it will require a significant effort on your part.
For some companies, re-incorporating entirely in the US was an easier process, especially for idea-stage/minimal traction companies.
Again, this should not be top of mind for you at the application stage, but here are some things to think about. Directly from the YC FAQ section:
If invited for interviews, we will assist you with navigating visas. If accepted into the program, we can help you with incorporation.
If you apply and are invited to join Y Combinator, we will connect you with an immigration attorney who will work with you to develop an individualized immigration plan for you.
Apparently, there were interviews being held in Bangalore back in 2019, so maybe this will come back.
But let’s say you do want to work in the US. Is that because of YC? Is that because you want to build a company? You know how I began this whole thing by saying you should be building your company, not relying on YC? If you really want to work in the US for your startup, you should be finding ways to get there without YC.
To share my experience, my first institutional investor was Unshackled Ventures. They are former founders with exits and phenomenal, empathetic investors. To get to the point, they specialize in immigrant founders who are coming to the US, and as a part of their value-add, they help you with the visa application process.
I’m not going to pretend I did things perfectly, but I knew that I needed a work visa if I want to create a US company. I knew I needed to solve this problem. I got lucky. This is certainly not the only solution, and I’m sure there are several startups and services that can help you with this, if you really need to be in the US.
You’re entrepreneurs. Solve this problem for yourself.
Frontload the work
Unfortunately, as non-US founders, we will necessarily have to put in more work to build and work in the US. We’re playing the game in hard mode.
The above-mentioned are just two issues I highlighted. There are countless things to consider like leaving your family and friends behind, and taking care of your mental health in isolation. You’ll be living in a foreign country as a foreigner. You need to create a bank account and you need to find a place to live. When you try to sign a place to rent, they’ll ask for your bank account, and when you try to open up a bank account, they’ll ask for your address. How do you square this circle?
So we know that there is going to be lots of work and this is foreseeable. Back when I used to be a venture capitalist and management consultant, we used the phrase “front load the work”. If you know work needs to be done, do it upfront. Find out what you need to get done, and do everything you can now, so you can fully focus on building your business during YC.
I enjoyed my journey at Y Combinator. I’m glad that I did it. I’m proud to be a part of this community that continues to solve problems in the world through technology. My own experience getting into YC wasn’t exactly smooth, but that’s okay. Prepare for the worst and hope for the best.
Prepare for the worst
Even if you don’t get in, I’d want to share the same thing I’d tell myself.
You had the courage to apply. YC has a 1–2% acceptance rate. You took the calculated risk, and you know your hard work was not wasted. You can still build your company.
It’s not a sign of failure. Every investor I know, including YC, acknowledges that they make mistakes. Investors make errors passing on the best companies of our generation. There are more start-ups that became successful without YC than with YC. You can do this.
Hope for the best
Throughout this piece, I aggregated the best advice I’ve seen on getting into Y Combinator and supplemented it with my own frameworks.
It comes down to this:
Be the human being you are. Be the founder you aspire to become. Build the company you dream to build.
Then, help people see that and join you on that journey.
Don’t forget the essence. The goal is to build a start-up. YC should be a means to an end. Focus on what matters.
Best of luck to everyone.
Are you a founder looking to make your YC Summer 2023 application stand out? Razorpay Rize will help you refine your application and offer you all the support and guidance you need.
Disclaimer: This post or website is not sponsored or endorsed by Y Combinator. Nothing here should be taken as legal or financial advice.