How did Y Combinator's batch funding model benefit early-stage founders?

The batch funding model provided founders with colleagues, reducing the loneliness of the startup process. It also allowed YC to efficiently provide support, including weekly dinners with guest speakers, help with incorporation, and general advice, fostering a strong community.

What is The Muse and what problem does it solve?

The Muse is a company that helps people navigate their careers and connect with companies more authentically to find the right fit. It serves over 50 million people annually and partners with hundreds of companies like Facebook and Goldman Sachs to tell genuine hiring stories.

What hiring mistakes did The Muse make in its early days?

The Muse made two main mistakes: not adequately vetting for values and mission alignment (hiring an engineer who only wanted the 'sexy' YC startup label and demanded co-founder status) and hiring people passionate about the mission but not the actual job (salespeople who didn't want to do sales). These taught them the importance of a structured hiring process and assessing both skills and alignment.

How can Founders improve diversity and inclusion in their hiring, avoiding "culture fit" bias?

Founders should actively fight against vague 'culture fit' interviewing, as it often leads to bias against introverted individuals or communities of color. Instead, clearly define what 'culture fit' means in terms of specific company values. Moreover, commitment to diversity and inclusion from day one provides a competitive advantage, as it becomes harder to change company culture as it grows.

What unique business model features allowed Zola to succeed in the wedding industry?

Zola addressed common e-commerce problems: returns and inventory. They implemented virtual returns and only shipped gifts when couples were ready, virtually eliminating physical returns. They also used dropshipping from partner warehouses to avoid holding inventory, making the business more capital-efficient and sustainable. Additionally, the wedding registry model provided forecastable demand due to fixed wedding dates and pre-selection of items.

What advice does Shan-Lyn Ma offer about fundraising as a female founder?

Shan-Lyn Ma advises female founders to verbalize their internal conviction externally during pitches. She observed that male founders often boldly claim their business will be a billion-dollar success, while women tend to be more modest and factual. She emphasizes the need to confidently state audacious goals to investors, even if there's a small internal doubt.

What does "doing things that don't scale" look like for startups?

For Abodeco, it meant manually copying furniture listings from Craigslist to their site and personally fulfilling sales by paying sellers in cash. For Bulletin, it involved renting vacant lots for outdoor weekend flea markets to test their retail space concept. For The Human Utility, it was sending physical postcards to target specific zip codes for donations, as their beneficiaries weren't on social media.

How did Scentbird validate its product and ultimately find a winning business model?

Scentbird initially struggled with monetizing a fragrance recommender and failed with a discovery kit and a 'try before you buy' full-bottle model due to high fraud. After mentoring, they pivoted to a 'fragrance rental' subscription: shipping a 30-day supply for under $15. This simplified model, launched with a basic one-pager, quickly gained 105 orders in a week, proving product-market fit and generating positive cash flow.

What is Ginkgo Bioworks and its mission?

Ginkgo Bioworks is a biological engineering company that designs organisms to spec. Its mission is to make biology easier to engineer by programming DNA—the 'A's, 'T's, 'G's, and 'C's—to create biology that performs specific functions. It's the first female-founded Y Combinator 'unicorn'.

Why is it important for a startup to have a 'Scrooge McDuck' figure?

A 'Scrooge McDuck' figure is crucial for a scaling startup to maintain financial discipline and efficiency, especially after raising significant capital. This person pushes back against excessive spending, manages headcount bloat, and ensures that growth is decoupled from disproportionate increases in expenditures, which is vital for long-term health and optionality.

What is the "Mission to Metrics" concept for scaling startups?

Developed by YC partner Ali Rowghani, 'Mission to Metrics' is a framework for leaders to define their organization's mission, commercial strategy, and quantitative metrics to measure success. By making these clear to the entire team, it aligns everyone's daily work with the company's overarching goals, fostering efficiency and competitive advantage.

What type of product is Frontier 7 developing?

Frontier 7 is developing a virtual data scientist platform that performs automated customer segmentation analysis. It ingests, cleans, organizes, and analyzes customer data to provide insights for companies, helping them understand who their customers are, predict behavior, and target marketing efforts more effectively, all without requiring in-house data science expertise.

What is the recommended approach for founders to find a co-founder?

It is generally advised that founders look within their existing network for co-founders, such as college friends or former colleagues, rather than actively 'finding' one. These organic relationships, built on prior trust and familiarity, tend to form the strongest founder teams.

When is the best time for a startup to raise money?

The best time to raise money is when you don't desperately need it, rather than waiting until you have only a few months of runway left. Initial seed funding can be raised from individuals based on an idea and founder's reputation, while later institutional rounds require demonstrating traction, growth in users or revenue, and manageable churn to paint a story of billion-dollar potential.

Key Moments

Female Founders Conference - New York

Y Combinator

Science & Technology8 min read219 min video

Jul 1, 2018|4,149 views|61|2

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TL;DR

Virtual humans are now nearly indistinguishable from real ones — but each one costs $1M to capture.

Key Insights

Y Combinator, founded in 2005, has funded over 1,800 startups with a total value exceeding $100 billion, evolving from being considered 'irrelevant' in Silicon Valley to a global accelerator.

The Muse (a YC W12 company) emphasizes 'alignment not ratings' for hiring, believing culture fit is crucial and stating that for every 10 hires, if one isn't managed out or fired, performance management is likely too soft.

Zola (valued at over $600 million) implemented strategies to overcome common e-commerce 'killers,' achieving 'virtually no returns' by delaying gift shipments until after the wedding and using drop-shipping to eliminate inventory costs and improve capital efficiency.

The Human Utility, a non-profit, addressed the challenge of reaching people without social media by mailing 500+ postcards to targeted zip codes in Detroit and Baltimore, effectively getting help to over 1,000 families.

Scentbird (a YC W15 company) experienced a 30% fraud rate with a 'try before you buy' full-size fragrance model before pivoting to a subscription-based 'fragrance rental' of 30-day supplies for under $15, generating 105 orders in a week.

Ginkgo Bioworks, the first female-founded YC unicorn, advocates for raising 'lots of money' but not spending it carelessly, emphasizing the importance of a 'Scrooge McDuck' figure to maintain efficiency and avoid organizational bloat.

Unconventional qualities predict success in new venture models

Jessica Livingston, co-founder of Y Combinator, reveals that her success stemmed from a unique combination of qualities often overlooked in startup profiles. Despite a mediocre academic decade after transferring to Andover, her 'social radar' (ability to discern subtle social cues), aversion to being controlled, and 'straight shooter' directness were crucial for YC. She also highlights her background as an experienced event planner and a 'maternal, empathetic' approach, which fostered a family-like culture at YC. These traits, combined with financial disinterest, allowed YC to take risks and be benevolent to failing startups, even clashing with traditional investors. For example, YC once helped a struggling husband-and-wife team secure jobs at a large company, prioritizing their well-being over a potential aquihire, much to the exasperation of another investor. This unconventional approach, stemming from her personal ethos and professional experience, was essential for YC's unique model of funding in batches and offering extensive support, demonstrating that the most successful ventures often emerge from a founder's 'weird' combination of abilities and interests. This suggests that founders should embrace their distinctiveness and not conform to stereotypical molds, as unusual qualities can be the most valuable assets, especially for disruptive and 'weird' startups.

Hiring for alignment, not just skills, prevents costly mistakes

Kathryn Minshew and Alex Cavoulacos, co-founders of The Muse, emphasize that hiring must go beyond skills to deeply align with company values and mission. They recount a mistake with an early engineer, 'Bruce,' who was technically competent but ultimately demanded co-founder status and equity right before Demo Day after only seven weeks, holding the company hostage. This revealed a misalignment with values. Conversely, they also erred by hiring first salespeople who were passionate about The Muse's mission but disliked actual sales tasks, like cold outreach. These experiences led them to develop a structured hiring process that thoroughly assesses both skills and genuine desire for the role, alongside value alignment. Minshew notes that if a company doesn't manage out or fire at least one person for every ten hired, it's likely being 'too soft on performance,' underscoring the importance of rigorous evaluation. This highlights that while passion for the mission is vital, it must be coupled with a clear understanding and desire for the practical demands of the role to ensure sustainable growth and prevent internal conflict.

Culture 'fit' can be a dangerous breeding ground for bias

Alex Cavoulacos warns against the concept of 'culture fit' in interviewing, calling it an 'amazing for bias' in the absence of clearly defined values. She observes that inexperienced interviewers often equate culture fit with personal comfort, leading them to inadvertently select candidates who are similar to themselves. This results in bias against introverted individuals, women, and people of color. The Muse actively combats this by requiring interviewers to articulate which of the company's core values a candidate might not align with, rather than relying on vague feelings of 'not clicking.' They stress that being extroverted, for instance, is not a prerequisite for working at The Muse. This intentional approach to hiring, focused on aligning with specific values rather than subjective 'fit,' is deemed critical for building diverse and inclusive teams. By establishing this value-driven process from day one, companies can transform diversity and inclusion from a later-stage challenge into a competitive advantage, combating unconscious biases that can unintentionally shape a homogeneous culture.

Scaling an e-commerce business by subverting traditional 'killers'

Shan-Lyn Ma, founder of Zola, shares how her experience at Gilt Group informed Zola’s strategy to overcome common e-commerce challenges. She identifies returns and inventory as the 'silent killers.' Zola tackled returns by implementing a virtual return system, where couples can exchange gifts via the app before anything is physically shipped, resulting in 'virtually no returns.' For inventory, Zola built backend technology for drop-shipping products directly from partner warehouses, avoiding the need for their own inventory and significantly improving capital efficiency. Additionally, Zola leveraged the predictable demand of wedding registries — couples register seven months before their wedding, providing a clear forecast of sales up to a year in advance. This foreknowledge allows Zola to manage inventory effectively and provide a better customer experience while operating a more sustainable business model. This strategic design, based on overcoming inherent e-commerce problems, contributed to Zola’s rapid growth to over $600 million in valuation, distinguishing it from other wedding startups that struggled.

Unconventional outreach can be critical for hard-to-reach users

Tiffani Ashley Bell, founder of The Human Utility, faced the challenge of connecting with people who lacked access to social media. To help families unable to afford water bills, her non-profit initially relied on social media for crowdfunding. However, to reach the individuals needing assistance, they adopted a 'low-tech' solution: designing and sending postcards to specific blocks and zip codes in Detroit and Baltimore, identified through their database of applicants. This direct mail strategy bypassed the digital divide and proved effective in reaching those without social media connectivity. This underscores that while digital tools are often prioritized in startups, creative, non-scalable (but effective) methods are crucial for engaging specific user segments, particularly in service-oriented or non-profit contexts. Her success demonstrates that adapting outreach to user realities, rather than relying solely on conventional tech solutions, can lead to significant impact.

Learning to pitch with conviction: A female founder's challenge

Shan-Lyn Ma reveals a common challenge for female founders in fundraising: expressing conviction. When pitching in later rounds, often to rooms of predominantly male investors, she was consistently told that male founders 'bang their fists on the table and they swear that this is going to be a billion dollar business,' while women, including herself, tend to be 'more modest and more factual, and not really as aggressive.' Ma initially hesitated to make bold claims due to the small chance of not hitting targets. However, she learned to 'verbalize externally during the pitch the conviction that I feel internally,' recognizing that strong internal belief needs outward expression. She cites an anecdote of a male who pitched a 'trillion dollar business,' highlighting the need for women to adjust their pitching style to project the same level of audacious confidence. This insight suggests that female founders may need to consciously amplify their conviction in pitches to align with investor expectations, even if it feels unnatural, to secure funding more effectively.

Persistence pays off, even after multiple rejections

Maria Nurislamova, founder of Scentbird, credits her ultimate success to sheer persistence, including applying to Y Combinator three times. After two rejections, she applied a third time and got in, which she believes 'changed the DNA' of her company, shifting focus to 'week over week over week' growth. This journey highlights that rejection isn't always a definitive 'no,' but can be a redirection. Her experience underscores the value of iterating not just on the product and business model, but also on the pursuit of critical support networks. This demonstrates that continuous effort and evolving one's approach in the face of initial failures can eventually lead to significant breakthroughs and the right ecosystem for growth.

Scaling requires a 'Scrooge McDuck' mindset to optimize efficiency

Reshma Shetty, co-founder of Ginkgo Bioworks, argues that one of the biggest challenges for scaling startups is not just raising money, but intelligently spending it. She counters the advice to 'not raise too much money' by suggesting founders 'raise lots of money' for their life’s mission, but then adopt a 'Scrooge McDuck' role to maintain extreme efficiency. This role involves relentlessly focusing on key growth metrics and optimizing for 'output per person' rather than merely increasing headcount or spend. Shetty notes that for female founders, this 'Scrooge' role can come with a 'personal risk' of being stereotyped as 'the battle-ax' or 'unsympathetic.' However, she asserts that this pressure for leanness is 'hugely important for the long-term health and success of your organization,' as efficiency is a critical competitive advantage. Organizations tend to expand unnecessarily after a funding round, leading to bloat and increased burn, making subsequent fundraising harder. By defining metrics that include efficiency, companies can 'decouple' revenue growth from headcount and spend, leading to a much stronger and more durable business model, irrespective of the capital raised.

Mentioned in This Episode

●Software & Apps

●Companies

●Organizations

●Books

●People Referenced

Common Questions

Jessica Livingston identified three defining characteristics: being a 'social radar' (perceptive of social cues and relationships), disliking being at anyone's mercy, and being a straight shooter. She also highlighted her experience as an event planner and maternal empathy as crucial, atypical qualities for an investor, emphasizing that these unique traits were critical for YC's unique model.

Topics

Mindset & Self-Improvement Technology & Innovation Business & Entrepreneurship Company Culture Product-market Fit Work-life Balance Startup Funding Hiring Strategies Growth Hacking E-commerce Business Models Diversity In Startups

Mentioned in this video

Locations

Minneapolis

Jessica Livingston's birthplace in 1971.

Baltimore

One of the cities where The Human Utility provides assistance by paying water bills for families.

Detroit

One of the primary cities where The Human Utility operates, paying water bills for families.

Boston

The city Jessica moved to with her father after her mother left, where her grandmother lived.

Silicon Valley

The location where Y Combinator decided to fund its next batch of startups to establish its presence.

The Malt House

The venue for the reception after the conference.

People

Shan-Lyn Ma

CEO of Zola, a company reinventing the wedding gift registry, now valued over $600 million.

Sharon Pope

Head of Marketing Programs at Y Combinator, moderating the YC Partners Q&A.

Carolyn Levy

Partner at Y Combinator, participating in the YC Partners Q&A.

Adora Cheung

Partner at Y Combinator, moderating the panel on essential startup advice.

Katherine Minshew

Co-founder and CEO of The Muse, a company helping people navigate careers and connect with companies. She shares insights on hiring, culture, and external partnerships.

Jessica Livingston

Co-founder of Y Combinator, she shares her personal journey and experiences in starting and scaling the accelerator, emphasizing the importance of diverse qualities in founders.

Jerry Kaplan

Author of the book 'Startup' about his company Go, which influenced Jessica Livingston's career path.

Trevor Blackwell

A co-founder of Viaweb and Y Combinator, who joined Jessica and Paul Graham in their initial plan for YC.

Kirsty Nathoo

Partner and CFO at Y Combinator, introducing Shan-Lyn Ma, CEO of Zola.

Kevin Ryan

Founder of Guilt, Business Insider, and co-founder of other ventures in New York. He provided seed funding for Zola and served as a mentor to Shan-Lyn Ma.

Alex Cavoulacos

Co-founder and President of The Muse, a career navigation platform. She discusses the importance of identifying core company values and setting up a structured hiring process.

Tiffany Ashley Bell

Founder and Executive Director of The Human Utility, a non-profit organization that pays water bills for people in need, discussing the genesis of her organization and overcoming obstacles.

Maggie Brain

Director of Product at Bulletin, previously from J.Crew, who transformed the business by selecting the right brands, products, and price points for the retail stores, leading to full product-market fit.

Ali Rowghani

A YC partner in charge of the YC growth program, who shared the concept of 'Mission to Metrics' with Reshma Shetty, advising leaders to map out their mission, strategy, and metrics.

Sam Altman

Referred to by Reshma Shetty regarding advice on fundraising, specifically being smart about how money is spent after raising.

Maria Nurislamova

CEO of Scentbird, a fragrance subscription service, sharing her journey of building the company, early mistakes, and fundraising experiences.

Michael Seibel

CEO of the Y Combinator accelerator program (at the time, a successful entrepreneur), who mentored Maria Nurislamova and helped her pivot Scentbird's business model.

Alana Brason

Co-founder and CEO of Bulletin, a company that provides physical retail space for direct-to-consumer brands, reflecting on a pivot from a failed initial idea.

Naira Molum

Founder of Frontier 7, pitching her virtual data scientist platform during an onstage panel.

Paul Graham

Co-founder of Y Combinator and husband to Jessica Livingston, known for his problem-solving skills, ability to expand ideas, and candid advice to founders.

Robert Morris

A co-founder of Viaweb and Y Combinator, who joined Jessica and Paul Graham in their initial plan for YC.

Rahan Feroz

Co-founder and CEO of Abodeco, a marketplace for furniture, sharing experiences on scaling and user acquisition.

Reshma Shetty

Co-founder of Ginkgo Bioworks, the first female-founded YC 'unicorn' (a privately held startup company valued at over $1 billion). She discusses scaling strategies and the 'Scrooge McDuck' role.

Johnny Ive

Apple's chief designer, mentioned in a Wired Magazine article comparing Ginkgo Bioworks' organism designers to him.

Holly Liu

Visiting partner at YC, introducing the onstage pitch panel and acting as an investor during the simulated pitch.

Companies

Viaweb

Paul Graham's previous startup, which he sold to Yahoo.

Ginkgo Bioworks

A biological engineering company based in Boston that designs organisms to spec, and is the first female-founded YC 'unicorn'.

Capital One

Mentioned as one of the hundreds of best companies that partner with The Muse to tell an authentic story for hiring.

Shopify

E-commerce platform suggested as a tool for engineers to launch their products quickly, even if they might be embarrassed to use it.

Dropbox

Mentioned as one of the hundreds of best companies that partner with The Muse to tell an authentic story for hiring.

Goldman Sachs

Mentioned as one of the hundreds of best companies that partner with The Muse to tell an authentic story for hiring.

Carrot Fertility

A company mentioned as an example of advancements in science that can help women extend their biological clock and manage fertility alongside career goals.

L'Oreal

A large fragrance company that Maria Nurislamova considered working for, but ultimately decided against it to pursue Scentbird.

Yahoo

The company that acquired Paul Graham's startup, Viaweb.

Airbnb

A successful startup that received its first investment check from Jessica Livingston around the time a particular photo was taken.

Autodesk

The company that acquired Michael Seibel's company.

Food & Wine magazine

One of the places Jessica Livingston worked after leaving Fidelity Investments.

Twitch

Founded by people in Y Combinator's first batch, though they were working on a different idea at the time.

The Muse

A Y Combinator alumnus (Winter 2012) based in New York City, which helps 50M+ people annually with career navigation and connects them to companies for an authentic fit. They have 120 employees.

Frontier 7

A company building a virtual data scientist platform that enables non-statisticians to understand data and make data-driven decisions using automation of deep statistics, machine learning, and natural language processing.

A startup from Y Combinator's first batch of funded companies.

Abodeco

A furniture marketplace based in New York City, which handles pickup, delivery, online payments, and verification, started out of the founder's frustration with Craigslist.

J.Crew

The company from which Maggie Brain, Bulletin's Director of Product, was hired, bringing merchandising expertise that helped transform Bulletin's business.

Scentbird

A fragrance subscription service that allows people to 'date fragrances before marrying them', founded by Maria Nurislamova. It overcame early business model failures to achieve significant growth and funding.

Fidelity Investments

Jessica Livingston's first job after college in their customer service group, which she found awful but valued the experience of working and earning money.

Guilt

An e-commerce company where Shan-Lyn Ma and her co-founder had previously worked, providing valuable lessons on business models, returns, and inventory management for Zola.

Etsy

An online marketplace that Bulletin initially tried to compete with, but the idea failed, leading them to pivot to providing retail space.

Y Combinator

The first accelerator, co-founded by Jessica Livingston, which has funded over 1,800 startups with a total value of over $100 billion. The video details its unique batch funding model and approach to supporting early-stage companies.

Google

An example of a successful company whose early founders were initially pressured by VCs to hire an outside CEO.

Facebook

Mentioned as one of the hundreds of best companies that partner with The Muse to tell an authentic story for hiring.

Johnson & Johnson

Mentioned as one of the hundreds of best companies that partner with The Muse to tell an authentic story for hiring.

Bulletin

A company that builds physical retail stores for direct-to-consumer brands, operating two stores in New York City filled with female-led brands, offering retail space for a monthly membership fee.

Sephora

A beauty retailer from which Scentbird's founder initially collected free fragrance samples to sell, an unscalable and temporary business model.

Books

Startup: A Silicon Valley Adventure

A book by Jerry Kaplan about his pen computing company, Go, which inspired Jessica Livingston's interest in startups.

Radical Candor

A book recommended by Katherine Minshew for those who struggle with giving candid, direct feedback.

Fortune

The publication where Katherine Minshew publicly shared her story about an investor proposition, leading to his stepping down.

Founders at Work: Stories of Startups' Early Days

A book of interviews with startup founders written by Jessica Livingston, published in 2007, reflecting her growing interest in startups.

Software & Apps

Zola

A wedding registry and e-commerce company that reimagines wedding planning and gifting for millennials. It has reached a valuation of over $600 million.

Mathematica

A computational software program mentioned by Naira Molum, further positioning Frontier 7 as a comprehensive solution beyond traditional tools.

Slack

Mentioned as one of the hundreds of best companies that partner with The Muse to tell an authentic story for hiring.

Jerry Kaplan's pen computing company, featured in his book 'Startup', which deeply inspired Jessica Livingston.

Craigslist

The online marketplace that inspired Rahan Feroz to create Abodeco due to his frustration with its furniture selling experience.

SPSS

A statistical software package mentioned by Naira Molum, highlighting Frontier 7's broader capabilities in data analytics.

Slido

A platform used for submitting and upvoting questions for the YC partner Q&A panel (slido.com/FFC).

Tableau

A data visualization tool mentioned by Naira Molum, who suggests Frontier 7 is more comprehensive, combining data ingestion, analysis, and interpretation beyond Tableau's capabilities.

Work at a Startup

A platform launched by Y Combinator for engineers to browse jobs at YC companies.

Organizations

NYU

One of the universities where Naira Molum is a professor, teaching data science concepts relevant to Frontier 7's product.

USPS

An organization used by The Human Utility to send postcards, directly targeting blocks and zip codes, to reach people in need of assistance who may not be on social media.

Columbia University

One of the universities where Naira Molum is a professor, teaching data science concepts relevant to Frontier 7's product.

MIT

The institution whose grad student stipends served as the basis for Y Combinator's initial funding amount for founders.

ERA

A New York-based accelerator program that provided Scentbird with $40,000 in funding, which was partially wasted on a failing business model.

The Human Utility

A not-for-profit organization that crowdfunds money to pay water bills for families in Detroit, Baltimore, and surrounding cities, having helped thousands since July 2014.

Media

Wired Magazine

A publication that featured an article comparing Ginkgo Bioworks' organism designers to Johnny Ive, highlighting their design-centric approach to biology.

Business Insider

A company founded by Kevin Ryan, who was an early investor and mentor to Zola's founder.

TechCrunch

Referred to by an early, problematic engineer hire at The Muse, who desired recognition in the publication as a co-founder.

Scrooge McDuck

A fictional character invoked as an archetype for the person in an organization who keeps everyone focused on key metrics, efficiency, and frugality, especially after a large funding round.