Y Combinator Startup Podcast - #6 - Office Hours with Kat Manalac

Episode Date: May 24, 2017

Kat Manalac is a Partner at YC.Read the transcript here - https://blog.ycombinator.com/office-hours-with-kat-manalac/

Hey, this is Craig Cannon, and you're listening to Y Combinators podcast. Today's guest is Katmaniolic, who's a partner at YC. This episode is a bit different than the first five. Katz can 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 macro at ycombinator.com. Okay, here we go.

Could you just give us a quick intro? Yeah, sure. So I'm Kat, partner at YC. And before this, I worked with Alexis O'Hanian, the co-founder of Reddit. I worked with him after he left Reddit the first time on his fund, a nonprofit. 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 kind of media and tech in the way they interact. And so I help a lot of the companies in the batches of Y Combinator prepare for their

first press launches. Cool. Yeah. And then I started at YC in 2013 as direct of outreach. And that meant outreach to potential applicants. So, you know, when I started, Jessica NPG said, you know, YC has grown organically really well, but what if we have one person thinking about, you know, how to expand YC, how to reach beyond the population of people that are already applying? So, you know, international has been a huge focus of mine. We do the female founders conference to encourage more women to, you know, 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 of YC.

Awesome. All right. So we have a ton of questions. So let's go for it. 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? All right. 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, fundraise, because you're going to get the best advice from people who've done it. And so it's sort of my dream for YC's international founder community is that they'll build a billion dollar company and then they'll start reinvesting in their startup ecosystem wherever they are. So, you know, there's RAPI and Colombia. If RAPI, you know, becomes a billion dollar company, hopefully in the future, you know, the founders there will start, you know, investing in Colombia. 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 kind of skill set 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, you know, investing ecosystem. So one thing that local, you know, incubators or universities can do is to start trying to stoke that local kind of investor ecosystem, like find people who are interested in investing in startups and educate them about, you know, the best way to be helpful as an investor to those early stage companies. So, 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. So would you go about like starting an incubator in another country by recruiting a bunch of investors first or advisors or what would you do? I mean, ideally it would be, you know, a program that was started by, you know, a founder or a former, you know, entrepreneur. And then, you know, or if not, I would find, you know, an ecosystem of those mentors that could help. And then simultaneously, it's kind of like the chicken or 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.

Okay. Kat, if I know someone who would be great for YC, what's the best way to connect them with you? So we just actually are launching a YC recommendation system. And this, like, essentially will let anyone, um, in the world recommend a founder to YC. So you can go to Ycombinator.com slash recommends, and you can, you know, recommend someone, say you know, someone from your school or if you're an investor and you met, you know, 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, you know, we still are like 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, you know, 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 it will 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. All right. 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 he asked for, 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 as an option, but it's really tough to find a co-founder. So co-founder disputes are one of the things that we see kill some of the most promising early stage companies. And, you know, having this co-founder conversation as soon as possible is going to be really important because, you know, 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, you know, double down and commit to the project? Is this someone who is as committed as you are? Ideally, you have, you each have 50, you know, percent stake in the company. And so you want to be as committed as, you know, one another. And so hopefully, you know, this is something you'd be working. on for 10 years. So if you're already having these kind of issues now, if their heart isn't in it, it probably, you know, there's a chance that it might not ever be. And so I would have the conversation about whether, you know, they want to stay on as a co-founder. Maybe they just want to

be, you know, a contributor or maybe it will come on board later once you are further along. But honestly, being, you know, a solo founder is, is better and less distracting than having a complicated or, you know, fraught co-founder relationship. 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. That's true. So that could be the problem.

You could try it out. And also just like, I know it sounds silly, but getting stuff on paper early. Yes. It may is like pretty huge. So, okay. Yes, definitely. I mean, the equity conversation should be had if it hasn't been had already. And you should get it.

You know, paperwork should happen now. 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. 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 in sales? 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, you know, when you're building something, think through who's problem am I solving? And or who is this a hair-on-fire problem for? And then, 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, like, 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. But, you know, YC partner, Paul Bukite 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, you know, 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, you know, change the product, or you can try focusing on another subset of potential customers. Yeah, and I would pause very quickly if I were in this situation because of like, 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. Yes. Because you can waste a ton of time. Cool. All right. 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 eubris. 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? So I think, as As a YC alumni, you should always feel free to reach back out to the partners at YC and to explain your situation. And, you know, there might be a lot of partners, depending on, you know, 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, like, we see so many different ways that companies fail. And we funded so many alumni at this point multiple times. You know, we just recently had Dennis Mars from proxy who is coming through his second time. You know, YC, former YC partner Hage went through with, you know, triple bite for a second time. So it, you know, we love founding alumni. We love funding, refunding people in the community. And we understand, like, things don't always work out the first time. And so please do reach out.

Yeah. And I think, like, being bold enough to share your story and share that. Eubris, like, is valuable too. Yeah, and being really honest, I think, is a great thing because we understand that people grow. You know, we fund a lot of a number of founders who are quite young and it's a first time they're ever building a company. And so you learn so much on a job and we understand that like, you know, you might not really be the same, you know, founder, the same leader that you were seven years ago. Absolutely. What are the most common mistakes you've seen first time entrepreneurs and founders make? So the major, you know, the major

first mistakes, I guess 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. Right. So what like, when you know you're at that point? Like at what point does a project flip over? So I guess you're, you're, talking about, hey, we've been building this thing together or even just talking, you know, or even just talking about starting to build together. And we think like this could be a company. Like we could grow this into something. And so would you want to come on board as co-founders?

Ideally, we like to fund things that have a 50, 50% split or, you know, equal among all the co-founders. And having, you know, it doesn't hurt to have that conversation like on day one even. Just so that you know any like awkwardness. comes out early and you can address those and get in front of those. And it's, it is so awkward, but it's worth having that conversation as quickly as possible. I mean, there's no harm in kind of bringing it up on day one. Yeah, I think it's like, as soon as you realize it's gone past the point of like talking about it over beers and you're actually working on it, then it, yeah, it feels like the right time. Yeah.

So yeah, what are the other mistakes? The other mistake I see is not talking to customers. So not talking to potential customers, you know, before you. start building or not talking, you know, basically just like 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, you know, founders 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. You know, I feel like a lot of founders are perfectionists. just want things to be like pristine and that's, you know, that's not the ideal scenario because then, you know, 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, you know, that's the best way to get real feedback from people

actually using your product. Yeah. There's almost no downside. I've, let way too many things die on my laptop. Yeah. Just like 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 not 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. So if you can build product, then I think it's helpful to start building a prototype or something because it'll make it way easier for you to convince other people to come on board. And it doesn't have to be anything spectacular, just something, you know, just getting start on it, I think is a good, you know, place to go, place to start. But that said, building a startup is so hard. You know, it helps to have more than one person carrying the burden. I mean, 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. So we funded solo founders. Right. You know, 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. You know, try finding the people that you'd love to work with, that you'd love to spend 10 plus 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. So what's the point at which I'm like, okay, this is enough to start recruiting people with? I mean, honestly, ideally you can recruit without, you know, 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. And it might take a little while to convince them to leave their jobs or, you know, 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 you're trying to convince them, and while you're trying to convince them, you can start working on the prototype. Yeah. Sometimes you've got to flank them 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 and bringing them in. Yeah.

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? 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 gain some insights into the space based on your own experiences and the experiences of your potential users. And then, you know, so digging into those two things a little bit.

In terms of, you know, ability to execute, we look at what problems. has your team worked on before? Like 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's some proof that you can work together and build something. And then, so then we like to see, 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, you know,

unique, that's super excellent. Like, we get really excited when we learn something new. So I would say even if you're pre-launch and you can't show user growth, you know, showing those two things, your previous, like, 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 on, maybe it's just a Facebook community. But if you show, like, hey, we, you know, started this email list and we're getting, you know, 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. 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-launched for like two years. Yes. And yeah, you never go publicly. Yeah. A lot of folks say, you know, I've been working on this for four years, you know, but they haven't launched yet. And then you're like, so what has happened in that time? why haven't you launched? Yeah. You know, what are the obstacles there? It doesn't necessarily block you, but it can hurt you. Yeah.

Next question. Okay. I'm looking to apply to IC and the project fits two categories in the RFS, so request for startups. Those categories being AI and mass media. Is it okay if the 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. allows users to talk back through various tools using AI, linguistics, and machine learning.

Okay. So when we're reading applications for startups, we don't worry or focus too much on category. So choose whichever category you think fits best. It's not going to help you or hurt you, you know, whether you're an AI or mass media. It's basically something that we just use internally for our own kind of knowledge on what percentage of companies are coming in for each category. But it doesn't really impact your chances. Yeah. I mean, to be clear, you don't have to pick an RFS.

Yeah. You don't have to pick at all. Next question. Also, so this is from the same person. The diversity in the RFS category, diversity is it a category? in the request for startups. Does Y.C mean the founder is diverse or the product does aim at a diverse market? I am diverse, that's in quotes, but the product isn't particularly aimed at a diverse audience. So we are focused with diversity, not on whether the founder is

diverse. We're looking for companies that are, you know, I think that the wording in the RFS is, you know, we want to fund nonprofits 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 funded is Jobwell. So Jobwell is a job marketplace that connects founders of color with tech jobs. And so that would be perfect for the diversity RFS. But that's, yeah, again, I wouldn't worry too much about category or RFS, but that's what we were intending with that one.

Do you ever let founders take less money for a different amount of equity? So against the standard terms of 120? K for 7%. Our standard deal is 120K for 7%. So we have not done any of those other deals, other types of deals. Cool. If the company person does not have money and is not incorporated yet, how long does it take to get a minimum amount from YC once you arrive in the valley? So once you get funded by YC and if you're not incorporated and you use our standard docs, it should be a really easy quick process. Like it could really take you know, about a week. But of course, you know, and I pinged our lawyers about this who work on

all the incorporations and then they said that the devil is in the details as always. So, you know, based on, you know, 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, you know, it's a clean slate and we can help you do it right from the very beginning. Agreed. All right. Kat, do you consider someone who is self-taught and built a prototype herself,

but does not have a, quote, real CS background or have her worked as a quote, I don't know why engineers in quotes, but that's a real job. Engineer, do you consider them a technical founder? Yes. We've funded so many people that are self-taught, you know, developers and engineers. And I think that's super impressive. That's like potentially just seeing that you have. had, you know, the will and gumption to, like, go out there and learn and build yourself is,

I think, potentially more impressive. But yes, I would definitely consider someone self-taught the technical co-founder. Okay. 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? Okay. If 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, you know, nine out of ten 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 or just try to find someone who can

give you a warm intro to the reporter that you want to target, then that's the ideal. It still might be 50-50 in terms of whether you get a response, but it's, you have a better chance. Second, I would say really focus on like what I would do some research. We would do research on, you know, each, you know, major publication that you want to be in and the reporters. And they're usually reporters have beat. So if you're building a drone company and you want to pitch tech crunch, you'll want to reach out to Laura Kalladne, for example. And you should kind of have a sense, you know, create a little document that shows all the reporters that cover your beat. And then what I do is if you're doing an exclusive, stack rank who you want to reach out to.

And if, you know, hit your first, you know, choice first and offer them an exclusive. Then, you know, 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 whiteboarding process. And it basically just goes over likely questions that you're, you know, 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, you know, who your competitors are. Like, why would someone use you over them? You know, why is now the time that, you know, this startup is going to take off and why are you the team to do it? So we help them, you know, we help the founders kind of come up with all those answers in a really succinct way. And I always think it's great to have those answers drafted.

You know, basically make a personal FAQ for your, company so that you can use and have on hand when you're talking to the 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, that's or have fundraising announcement, that's probably ideal. Is there a point at which that it's too early to start thinking about launching or doing press in any way? Yes. I think, you know, when TechCrunch and when YC started in 2005 and TechRunch started, you know, after that, I, you know, there were not that many startups. So any startup that existed, you know, you know, folks like TechCrunch would cover. But now they, you know, I'm guessing they get

tens, if not hundreds of pitches. Every week, you know, each individual reporter is seeing all this stuff come through. So ideally you're going to pin your, you know, pitch to news. Like you're announcing something, you know, 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 they're, you know, if you see, you know, 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 I would kind of wait till you have that.

And what about becoming like an industry expert type person on a subject? Do you recommend people do that? I mean, I think that I would focus more on building your product than becoming an industry expert. Like maybe that can come later. And you become the person that everyone calls when they have questions about, you know, the drone industry. Okay. But I would focus on building product. I think, you know, not to stress about press too much because press is not a sustainable user acquisition strategy,

not even for, you know, consumer companies. So it's not something to spend too much time thinking about. But I would say that the, that, you know, it can help. But a better way, I think, before you even do press, is get in front of communities, right? Communities that you can pull in early sets of users. So I really like product hunt. A lot of the YC companies, you know, when they're really, like, reasonably early, we'll launch our product hunt and get their first, you know, a few hundred users

from there. Or, you know, you do a show, show H.N., like a show Hacker News, and you present, you know, the link to your product for the first time and get, you know, great early feedback. Some of it can be harsh feedback, but it's, but it's, I think it's some of the best feedback you could possibly get. Yeah. And so hitting up those early communities before going to press, I think is, is a good move for, for most companies. I think it also helps you develop a thicker skin, which is very, very important. Yeah. Okay. Last question. What are the the three most important doomsday prepper skills. Motorcycle license.

Ability to shoot a bow and arrow and having a repository of supplies somewhere that you can access easily. Done. All right, thanks for listening. Please remember to subscribe to the show and leave a review on iTunes. After doing that, you can skip this section forever.

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