by Y Combinator2/15/2017
Kat Manalac and Craig Cannon go through questions submitted on Hacker News.
To submit a question for Office Hours, send an email to Macro@YCombinator.com with a few sentences of context (e.g. what your company does) and your question.
0:08 – Kat’s intro.
1:24 – I want to start an incubator/accelerator in Ecuador for local founders with global scope. How would you suggest regional office leaders foster entrepreneurship in developing countries?
3:20 – How would you go about starting an incubator in another country?
3:56 – If I know someone who would be great for YC, what’s the best way to connect them to you?
5:11 – I brought my friend onboard as a cofounder seven months back. We haven’t incorporated yet so there’s no paperwork involved.
The first three months were very productive as we both worked on the web app but as soon as I started looking into the business side of things and asked him to concentrate on technology his output has gone down drastically. He hasn’t delivered any new features in the last four months.
Here are the things he told me when asked about his lack of work: 1. Lost motivation but still want to continue working. 2. Not getting enough time to work on startup, we both are still working on our day jobs.
How can I deal with this situation? Letting him go is an option but it is really tough to find a co founder.
7:47 – As a founder of company in the early stages, how should you identify a target customer base and how do you recommend developing a plan to market and sell to them? How do you identify your first customers?
9:30 – I was part of a previous YC batch and didn’t get anywhere meaningful due to a mismatch in team dynamics and, to be honest, a bit of hubris. I think I’ve come away with a new-found perspective and I’d like to reapply to YC and try again, but I’m worried that my past mistakes will reflect poorly on my future potential.
How do you, as investors, view self-inflicted failure?
11:17 – Which are the most common mistakes you have seen first time entrepreneurs and founders make?
14:00 – I’m a solo founder and dream of having cofounders to help drive this forward with me. So, right now I’m not sure if my primary focus should be on building the cofounding team, or if I should remain completely focused on proving this out on a smaller-scale by building a scrappy prototype that proves this concept is viable before building the cofounding team?
15:25 – When should you start recruiting people?
16:09 – We are a platform for moms to connect, facilitate and empower themselves in their journey of motherhood. We are pre-launch. How do we provide the data asked for in most incubator applications?
18:20 – I am looking to apply to YC and the project fits 2 categories of among the “Request for StartUps” categories [AI and Mass Media], Is this ok if the product touches on these areas but is not defined by them specifically?
There is no exact category for product ( it detects forms of hate speech and allows users to “talk back” through various specific tools, using ai, linguistics, and machine learning.
19:26 – Regarding the Diversity RFS, does YC mean the founder is “diverse” or the product is aimed at a “diverse” market? I am “diverse” but the product isn’t particularly aimed at a “diverse” audience.
20:25 – Do you ever let founders take less money (say 60k for 3.5% instead of 120k for 7%)?
20:45 – If the company/person does not have money and is not incorporated yet, how long does it take to get a minimum amount (just so you can deal with the expenses of getting there and being there initially) from YC once you arrive in SV?
21:35 – Do you consider someone who is self-taught and built the prototype herself but does not have a “real” CS background or has ever worked as an “engineer”, a “technical founder”?
22:19 – If you’re a company launching to the press for the first time, what would you recommend doing?
24:45 – Is it ever too early to think about getting press?
25:50 – Do you recommend people become industry experts?
27:17 – What are the three most important prepper skills?
Craig Cannon [00:00] – Hey, this is Craig Cannon, and you’re listening to Y Combinator’s podcast. Today’s guest is Kat Manalac, who’s a partner at YC. This episode is a bit different than the first five. Kat’s going to be answering questions sent in from listeners and we’re calling these episodes, “Office Hours.” If you have a question you’d like answered on a future Office Hours episode, you can email firstname.lastname@example.org. Okay, here we go. Could you just give us a quick intro?
Kat Manalac [00:23] – Yeah, sure, so I’m Kat, a partner at YC and before this, I worked with Alexis Ohanian, the co-founder of Reddit. I worked with him after he left Reddit the first time on his fund, a non-profit. At the time we were also doing a lot of political work around SOPA/PIPA. And prior to that, I worked at Wired Magazine for four years so have a lot of interest in media and tech and the way they interact. So I help a lot of companies in the batches of Y Combinator prepare for their first press launches.
Craig Cannon [00:56] – Cool.
Kat Manalac [00:56] – Yeah, and I started at YC in 2013 as Director of Outreach, and that meant outreach to potential applicants. So when I started, Jessica and PG said, “YC has grown organically really well but what if we had one person thinking about how to expand YC, how to reach beyond the population of people that are already applying?” So, international has been a huge focus of mine. We do the Female Founders Conference to encourage more women to apply and start companies. And so that’s been a really fun piece of what I do, too, is working with all the potential applicants at YC.
Craig Cannon [01:33] – Awesome, alright so we have a ton of questions, so let’s go for it.
Kat Manalac [01:35] – Alright.
Craig Cannon [01:37] – “Kat, I want to start an incubator/accelerator in Ecuador for local founders with global scope. How would you suggest regional office leaders foster entrepreneurship in developing countries?”
Kat Manalac [01:49] – Alright so I do a lot of traveling and meeting with a lot of international founders for YC. And I’ve noticed a few things. I think the most important thing to do would be to find people in your region who have started companies, built companies, fundraised because you’re going to get the best advice from people who’ve done it. And my dream for YC’s international founder community is that they’ll build a billion-dollar company and then they’ll start re-investing in their startup ecosystem wherever they are. So there’s Rappi in Colombia, if Rappi becomes a billion-dollar company, hopefully, in the future the founders will start investing in Colombian startups, same for our companies in India and Nigeria. I think the best chance that a lot of these regional incubators or places have is being fueled by folks that have built big companies and have that skillset and advice that they can pass on. The next thing I notice is that, in most places outside Silicon Valley, it’s really hard to fundraise. And that’s because there doesn’t exist a local angel investing ecosystem. So one thing that local incubators or universities can do is to start trying to stoke that local investor ecosystem, like find people who are interested in investing in startups and educate them about the best way to be helpful as an investor to those early-stage companies. And if that ecosystem of angel investors doesn’t exist, maybe the most helpful thing would be to create a bridge, and to introduce them to funders in places like the Silicon Valley that are open to funding international startups and projects.
Craig Cannon [03:30] – So would you go about starting an incubator in another country by recruiting a bunch of investors first, or advisers, or what would you do?
Kat Manalac [03:39] – I mean ideally, it would be a program that was started by a founder or a former entrepreneur. Or if not, I would find an ecosystem of those mentors that could help. And then simultaneously, it’s kind of like the chicken and the egg, the marketplace problem. I would try to find, are there ways we can help support them with funding as well? So building up both sides of that marketplace a little bit.
Craig Cannon [04:09] – OK. “Kat, if I know someone who would be great for YC, what’s the best way to connect them with you?”
Kat Manalac [04:16] – So we just actually are launching a YC recommendation system, and this essentially will let anyone in the world recommend a founder to YC. So you can go to ycombinator.com/recommends and you can recommend someone, say you know someone from your school, or if you’re an investor and you met a founder who’s early-stage and is interested, you can send them our way through the system and then you can track their progress. One thing to note is that you don’t need a recommendation to get into Y Combinator. The vast majority of people we fund have never touched base with YC alumni or staff. And so we still are really proud of that, that we’re kind of open as a university is open. But we started this recommendation system so that it really becomes possible for anyone around the world to connect us with founders. And then also we were just getting all these recommendations through these random channels and so they were really hard to track. So now we’ll make it much easier for us to track who sends us great recommendations and then also to thank you when we end up funding one.
Craig Cannon [05:25] – Alright so, “Dear YC, I brought my friend on board as a co-founder seven months ago. We haven’t incorporated yet so there’s no paperwork involved. Three months were very productive as we worked together on the web app, but as soon as I started looking into business side work, and asked him to concentrate on the development, his output has gone down drastically. He hasn’t delivered any new features in the last four months. Here are the things he told me when I said he wasn’t working very well. One, he lost motivation but still wants to continue working on it, and two, he’s not getting enough time to work on the startup, we’re both still working our day jobs. So how can I deal with this situation? Letting him go is an option, but it’s really tough to find a co-founder.”
Kat Manalac [06:11] – So, co-founder disputes are one of the things that we see kill some of the most promising early-stage companies. And having this co-founder conversation as soon as possible is going to be really important. Because it’s such a hard conversation to have, but you have to be really honest with each other. Is this someone that’s going to double down and commit to the project? Is this someone who is as committed as you are? Ideally you each have 50% stake in the company, and so you want to be as committed as one another. And so hopefully, this is something you’d be working on for 10 years. So if you’re already having these issues now, if their heart isn’t in it, there’s a chance that it might not ever be. And so I would have the conversation about whether they want to stay on as a co-founder. Maybe they just want to be a contributor or maybe they’ll come on board later once you are further along. But honestly being a solo founder is better and less distracting than having a complicated or fraught co-founder relationship.
Craig Cannon [07:21] – And I think maybe an alternate path is bringing on a third person. Because I know a lot of people who are A, either just good at prototyping stuff, or B, don’t work well in isolation.
Kat Manalac [07:31] – That’s true.
Craig Cannon [07:31] – So that could be the problem, you could try that out. And also just, I know it sounds silly but getting stuff on paper early.
Kat Manalac [07:37] – Yes.
Craig Cannon [07:37] – To me is like, pretty huge..
Kat Manalac [07:38] – Yes, definitely. The equity conversation should be had if it hasn’t been had already. And paperwork should happen now.
Craig Cannon [07:50] – Yeah, because I mean, you’re now in a situation where it’s going to get personal, whereas if it were on paper it’s like, “Hey listen, you’re not getting this done. It’s not going to work out.” Okay, “Kat, as a founder of a company in the early stages, how should you identify a target customer base, and how do you recommend developing a plan to market and sales?”
Kat Manalac [08:12] – So I think the question is like, “How do you identify your first customers?” I think it’s best to go at it, have a hypothesis for who your target audience is. So when you’re building something, think through, “Whose problem am I solving?” or “Who is this a hair-on-fire problem for?” So for example, if I’m building a product that say, is helping small businesses with payroll processing, I would go out there and I’d talk to my potential customers, I would talk to as many potential customers as possible to see, is what I’m thinking right for you, do you have any feedback, and then I would start building that product. And get it into their hands, even just like the most basic version of it, into the hands of potential users as quickly as possible. And then you can iterate based on their feedback. YC partner, Paul Buchheit, always says, “You should focus on building a product that 100 people love, versus a product that 1,000 users just think is okay.” So if you can target 100 of those potential customers and get them using and engaged with your early product, that’s a really good sign and a sign that you should continue in that direction. If you learn really quickly that what you’re building isn’t right for them, you can either iterate, change the product, or you can try focusing on another subset of potential customers.
Craig Cannon [09:33] – Yeah and I would pause very quickly if I were in this situation because, if you can’t figure out if the product is good or not because it’s not your problem, you need to find those people.
Kat Manalac [09:41] – Yes.
Craig Cannon [09:43] – Because you can waste a ton of time. Cool, alright, so, “Kat, I was part of a previous YC batch and didn’t get anywhere meaningful due to a mismatch in team dynamics and to be honest, a bit of hubris. I think I’ve come away with a newfound perspective and I’d like to reapply to YC and try again. But, I’m worried that my past mistakes will reflect poorly on my future potential. How do you, as investors, view self-inflicted failure?”
Kat Manalac [10:09] – So I think as a YC alumni you should always feel free to reach back out to the partners at YC and to explain your situation. There might be a lot of partners, depending on how far back YC funded you, there might be a lot of partners now who don’t know the details of your story or that you might not know and I think it’s always a good option to just come and try to talk to us. And so we understand, we see so many different ways that companies fail and we’ve funded so many alumni at this point multiple times. We just recently had Denis Mars from Proxy, who is coming through his second time. Former YC partner, Harj, went through with TripleByte for a second time. So we love founding alumni, we love re-funding people in the community and we understand things don’t always work out the first time. And so, please do reach out.
Craig Cannon [11:06] – Yeah, and I think being bold enough to share your story and share that hubris is valuable, too.
Kat Manalac [11:10] – Yeah and being really honest, I think, is a great thing because we understand that people grow. We fund a number of founders who are quite young and it’s the first time they’re ever building a company and so you learn so much on the job and we understand that you might not really be the same founder or the same leader that you were seven years ago.
Craig Cannon [11:31] – Absolutely. “What are the most common mistakes you have seen first-time entrepreneurs and founders make?”
Kat Manalac [11:37] – So the major first mistakes I see are not having the equity conversation quickly enough with co-founders or not having that conversation about what the split looks like. Sometimes people wait really long until it becomes a problem. And you just want to have that conversation up front, as early as possible, as early as you know that you want to co-found a company together.
Craig Cannon [12:01] – Right, so like, when do you know you’re at that point? At what point does a project flip over?
Kat Manalac [12:07] – So I guess you’re talking about, “Hey, we’ve been building this thing together, or even just talking about starting to build together and we think this could be a company. We could grow this into something.” Would you want to come on board as co-founders? Ideally we like to fund things that have a 50/50% split, or equal among all the co-founders. It doesn’t hurt to have that conversation on day one, even. Just so that any awkwardness comes out early and you can address those and get in front of those. It is so awkward, but it’s worth having that conversation as quickly as possible, I mean there’s no harm in bringing it up on day one.
Craig Cannon [12:48] – Yeah I think it’s like, as soon as you realize it’s gone past the point of talking about it over beers, and you’re actually working on it, then that, yeah, feels like the right time. So what are the other mistakes?
Kat Manalac [13:02] – The other mistake I see is not talking to customers. So not talking to potential customers before you start building, or, basically just working on it by yourself, having everything in your own head and not getting actual feedback from real people. That’s the most important thing I would say any founder should do, is really talk to their users. Then the other thing is just not launching. A lot of people want everything to be perfect before they see anyone in the real world using it. And I understand that. I feel like a lot of founders are perfectionists, they just want things to be pristine and that’s not the ideal scenario because then you’ll wait and wait until you’ve spent all this time building and then you don’t have any feedback and suddenly you get it out in the world and no one wants to use it, or not enough people want to use it. And so if you just get like a really embarrassingly basic version out as quickly as possible, that’s the best way to get real feedback from people actually using your product.
Craig Cannon [14:06] – Yeah, there’s almost no downside. I’ve let way too many things die in my laptop, just from not pushing it. Next question. “So, Kat, I’m a solo founder and dream of having co-founders to help drive this forward with me. So right now, I’m sure if my primary focus should be on building the co-founding team, or if I should remain completely focused on proving this out on a smaller scale by building a scrappy prototype that proves the concept is viable before building the co-founding team?”
Kat Manalac [14:37] – So if you can build product, then I think it’s helpful to start building a prototype or something because it will make it way easier for you to convince other people to come on board. And it doesn’t have to be anything spectacular, just getting started on it, I think, is a good place to start. But that said, building a startup is so hard. It helps to have more than one person carrying the burden. As a lot of founders know, you could be doing a million things at any given moment but just having one other person to split those million things with is super helpful. We’ve funded solo founders, and some of them have done really well, but overall we’ve seen this pattern where it’s just so hard as a solo founder. And so the answer is, unfortunately, both. Try finding the people that you’d love to work with, that you’d love to spend 10+ years of your life working on this project with. And then also, if you can build simultaneously, start building and that’ll make it even easier to convince them.
Craig Cannon [15:40] – So what’s the point at which I’m like, “OK, this is enough to start recruiting people with”?
Kat Manalac [15:43] – I mean honestly, ideally you can recruit without a prototype. So from day one, if you’re really excited about what you’re building and you know some folks that you’d love to work with, start talking to them about it. It might take a little while to convince them to leave their jobs or work with you on nights and weekends, but if you know those people and you have them in mind, why not start at the very beginning? And it might take a while to convince them and while you’re trying to convince them, you can start working on a prototype.
Craig Cannon [16:14] – Yeah, sometimes you gotta flank ’em too. You have to just like, ask for advice, or ask for an intro to another friend, and then you’re really just moving around them, bringing them in. “Hey Kat, we are a platform for moms to connect, facilitate, and empower themselves in their journey of motherhood. We are pre-launch, so how do we provide the data asked for in most applications for an incubator like YC?”
Kat Manalac [16:37] – So if you’re pre-launch, we like to see a few things. We like to see your team’s ability to execute, we like to see that you’ve talked to users and gained some insights into the space based on your own experiences and the experiences of your potential users. So digging into those two things a little bit. In terms of ability to execute, we look at what projects has your team worked on before? Maybe you’ve worked together before at school or at work or you’ve done previous side projects together. We’d like to see that there is some proof that you can work together and build something. We love learning new things when we read applications. So if we’re reading your application and you provide us with some insights that you’ve gained from your users, insights that we might not have thought of before, or something unique, that’s super excellent. We get excited when we’ve learned something new. So I would say, even if you’re pre-launch and you can’t show user growth, showing those two things, your previous ability to execute and that you’ve talked to users is great. The other thing I would say is if you have any proof that there is a need for what you’re building, say you’ve built an email list or maybe you’ve built a community. Maybe it’s just a Facebook community, but if you show like, “Hey, we started this email list and we’re getting 10% user growth or subscriber growth every week,” that’s really impressive and that shows us that there is a large audience for what you’re building.
Craig Cannon [18:11] – That’s a good point. And adding to the pre-launch data, the one data point that can hurt you, is if you’re pre-launch for like two years. And yeah, you never go public.
Kat Manalac [18:18] – A lot of folks say, “You know I’ve been working on this for four years,” but they haven’t launched yet and then you’re like, “So what has happened in that time, why haven’t you launched? What are the obstacles there?”
Craig Cannon [18:32] – It doesn’t necessarily block you but it can hurt you. Next question, “Kat, I’m looking to apply to YC and the project fits two categories in the RFS, Requests for Startups. Those categories being AI and mass media. Is it okay if a product touches on these areas, but is not defined by them specifically? There’s no exact category for the product. It detects form of hate speech, and allows users to talk back through various tools using AI, linguistics, and machine learning.”
Kat Manalac [19:06] – So when we’re reading applications for startups, we don’t worry or focus too much on categories. So choose whichever category you think fits best. It’s not going to help you or hurt you whether you’re in AI or mass media. It’s basically something that we just use internally for our own knowledge on what percentage of companies are coming in for each category but it doesn’t really impact your chances.
Craig Cannon [19:32] – Yeah, like to be clear, you don’t have to pick an RFS.
Kat Manalac [19:36] – Yeah, you don’t have to pick.
Craig Cannon [19:38] – At all. Next question. “Also,” so this is from the same person, “The diversity in the RFS category” diversity is a category in the Requests for Startups. “Does YC mean the founder is diverse or the product is aimed at a diverse market? I am ‘diverse’ but the product isn’t particularly aimed at a diverse audience.”
Kat Manalac [20:02] – So we are focused with diversity, not on whether the founder is diverse. We’re looking for companies that are, I think the wording in the RFS is, we want to fund non-profits and startups that are working on making technology a place that is more inclusive and attractive to people of all ages, races. So one company that comes to mind that we’ve funded is Jopwell. So Jopwell is a job marketplace that connects founders of color with tech jobs. And so that would be perfect for the diversity RFS. Again, I wouldn’t worry too much about category or RFS, but that’s what we were intending with that one.
Craig Cannon [20:41] – “Do you ever let founders take less money for a different amount of equity, so against the standard terms of $120K for 7%?”
Kat Manalac [20:49] – Our standard deal is $120K for 7% so we have not done any other types of deals.
Craig Cannon [20:57] – Alright, cool. “If the company/person does not have money and has not incorporated yet, how long does it take to get a minimum amount from YC once you arrive in the Valley?”
Kat Manalac [21:08] – So once you get funded by YC, if you’re not incorporated and you use our standard docs, it should be a really easy quick process. It could really take about a week. But of course, and I pinged our lawyers about this who work on all the incorporations and they said that the devil is in the details as always, so it depends based on your company and your specific needs, but generally it’s a very fast process, especially if you’re not incorporated. We actually almost prefer companies not to be incorporated because then it’s a clean slate and we can help you do it right from the very beginning.
Craig Cannon [21:46] – Great, alright. “Kat, do you consider someone who is self-taught and built a prototype herself, but does not have a ‘real’ CS background or ever worked as an ‘engineer’,” I don’t know why engineer is in quotes, but that’s a real job, “Do you consider them a technical founder?”
Kat Manalac [22:05] – Yes. We’ve funded so many people that are self-taught developers and engineers and I think that’s super impressive, that’s potentially just seeing that you had the will and gumption to go out there and learn and build yourself is, I think,
Craig Cannon [22:22] – Yeah, agreed.
Kat Manalac [22:24] – potentially more impressive, but yes. I would definitely consider someone self-taught the technical co-founder.
Craig Cannon [22:29] – OK, so I have a couple questions. So if you are a company that’s going to launch, you want to do some PR, marketing, whatever, what would you recommend?
Kat Manalac [22:39] – OK, you are a company that is launching to the press for the first time, the number one thing I would do is to find warm intros, so if you shoot cold emails to reporters, I would say 9 out of 10 times you’re going to get no response at all. So if you can find other founders in your community or if you’ve talked to potential investors, just try to find someone who can give you a warm intro to the reporter that you want to target, then that’s ideal. It still might be 50/50 in terms of whether you get a response but you have a better chance. Second, I would say really focus on, I would do some research. Do research on each major publication that you want to be in, and the reporters, and usually reporters have beats. So if you’re building a drone company and you want to pitch TechCrunch, you’ll want to reach out to Lora Kolodny, for example. And you should have a sense, create a little document that shows all the reporters that cover your beat. And then what I’d do is if you’re doing an exclusive, stack rank who you want to reach out to and hit your first choice first and offer them an exclusive. Then, what we work with YC founders a lot on that I think, and if you can share a link, we can share a link to our questions is, we help them through what we call our whiteboarding process and it basically just goes over likely questions that you’ll be asked by press. And so it’s really basic stuff, like what you do, why you’re better than what’s currently in the market, who your competitors are, why would someone use you over them, why is now the time that this startup is going to take off and why are you the team to do it? So we help the founders come up with all those answers in a really succinct way. And I always think it’s great to have those answers drafted, basically make a personal FAQ for your company that you can use and have on-hand when you’re talking to a reporter. And ideally you have some amount of news when you’re pitching someone. If you have news that is timely or you’re part of a trend, or have a fundraising announcement, that’s probably ideal.
Craig Cannon [24:59] – Is there a point at which it’s too early to start thinking about launching or doing press in any way?
Kat Manalac [25:06] – Yes, I think when YC started in 2005, and TechCrunch started after that, there were not that many startups. So any startup that existed, folks like TechCrunch would cover, but now I’m guessing they get tens if not hundreds of pitches every week. Each individual reporter is seeing all this stuff come through. So ideally, you’re going to pin your pitch to news like you’re announcing something. The reason that a lot of companies do fundraising announcements is because that’s the first time that something pressworthy, newsworthy is happening to them. If you see a reporter who’s really interested in your space, and you have a prototype and can show a demo, you can reach out to them and give them a heads up and that might be enough. But I would say if there’s some kind of newsworthy event, I would wait till you have that.
Craig Cannon [26:07] – And what about becoming an industry expert-type person on the subject, do you recommend people do that?
Kat Manalac [26:13] – I mean I think that I would focus more on building your product than becoming an industry expert, like maybe that could come later and you become the person that everyone calls when they have questions about the drone industry. But I would focus on building product. I think not to stress about press too much because press is not a sustainable user acquisition strategy, not even for consumer companies, so it’s not something to spend too much time thinking about. But I would say that, it can help but a better way, I think, before you even do press, is get in front of communities that you can pull in early sets of users. So I really like Product Hunt. A lot of the YC companies, when they’re reasonably early, will launch on Product Hunt and get their first few hundred users from there. Or you do a Show HN, a Show Hacker News, and you present the link to your product for the first time and get great early feedback. Some of it can be harsh feedback, but I think it’s some of the best feedback you could possibly get, and so hitting up those early communities before going to press, I think, is a good move for most companies.
Craig Cannon [27:26] – I think it also helps you develop a thicker skin, which is very very important.
Kat Manalac [27:28] – Yeah.
Craig Cannon [27:31] – OK, last question. What are the three most important doomsday prepper skills?
Kat Manalac [27:38] – Motorcycle license, ability to shoot a bow and arrow, and having a repository of supplies somewhere that you can access easily.
Craig Cannon [27:47] – Done! Alright, thanks for listening. Please subscribe to the show, and leave a review on iTunes. After doing that, you can skip this section forever. And if you’d like to learn more about YC, or read the show notes, you can check out blog.ycombinator.com. See you next week.
Y Combinator created a new model for funding early stage startups. Twice a year we invest a small amount of money ($150k) in a large number of startups (recently 200). The startups move to Silicon