Inside Scoop on How Y Combinator Chooses Companies
Y Combinator, the renowned startup accelerator, is known for its highly selective application process. Out of the 27,000 applications received in the last batch, less than 1% were accepted. To shed light on the “secret sauce” of getting accepted into Y Combinator, Garry Tan, the president and CEO of Y Combinator, shared some insights during an interview with Teresa Carlson at the Economic Club of Washington, D.C.
One notable aspect of Y Combinator’s process is that applicants don’t need to have any connections to get in. Anyone can apply on the website and submit a one-minute video. The applications are then reviewed by YC’s 14 partners, who assess the applicant’s potential customer base and their past accomplishments. The top applicants proceed to answer a set of questions from the partners.
Unlike traditional venture capital firms that often reject numerous pitches before finding one they like, Y Combinator operates differently. Tan pointed out that YC is interested in founders who can create a market and envision technologies that others haven’t yet considered. An example he gave was Brian Armstrong, the founder of Coinbase. When Tan first met Armstrong, he was still working at Airbnb as an anti-fraud engineer but had a radical idea after reading the Satoshi Nakamoto white paper.
Armstrong believed in the concept of a sovereign cryptocurrency and wanted to work on software that could bring this idea to life. Despite being a fringe idea at the time, Tan emphasized that Y Combinator looks for such “fringe things” – new technologies that deeply technical people are obsessed with and have the potential to impact society at large.
Once Armstrong was accepted into the program, Tan worked closely with him and realized the immense potential of Coinbase. Tan acknowledged that Armstrong’s ability to recognize a niche opportunity and his commitment to building a solution were key factors in his selection. Y Combinator doesn’t just look for visionary ideas; they also consider founders who possess a first principles mindset. This means that founders not only believe in something that others don’t yet see but also have a plan to validate the problem-solving potential of their ideas.
In the recent round of interviews, Tan highlighted that all the founders he chose to fund had made new discoveries by interacting with technology itself. These discoveries were often based on first principles insights, such as stumbling upon a robotics manufacturer making humanoid robots for $16,000 and aiming to be the first to commercialize them.
Y Combinator’s approach to selecting companies is driven by a desire to foster innovation and identify founders who can create markets with groundbreaking ideas. By seeking out fringe technologies and founders with a first principles mindset, Y Combinator continues to be at the forefront of startup acceleration.