What We Learned From Our Five Failed YC Applications and One Successful One
We applied six times trying to get into Y Combinator.
We applied six times trying to get into Y Combinator.
Not many startups would keep applying to YC this many times. Some rejects fail as businesses, others grow and don’t need YC anymore.
Each time we got our rejections from YC, we hoped to outgrow our need to get in.
But for the past three years, we've struggled to find the right problem to solve and gain even a small traction.
Each time we pivoted and applied to YC (and were rejected), we learned something new.
Looking back, going through YC’s application process six times actually helped to shape our ideas towards Relate, which is what we’re now building.
There’s a lot to learn from our journey over the past three years, with six different YC applications and five different failures/rejections. Here’s some of the highlights:
- Five pivots, five rejections
- The interview with Michael Seibel
- The final (hopefully) pivot – why did YC finally accept us?
- Why was YC still worth it after three years
- Meeting with Paul Graham
We hope that our experience applying six times to YC will give some insights for founders considering YC in the future.
Five pivots, five rejections.
It’s common for a startup to pivot. After all, that’s what startups do until you make something people want. But most teams we’ve seen either tweak their original idea or, at most, pivot completely a couple of times.
Our team was different. We pivoted five times over three years. And these pivots were hard pivots; we completely took a new approach and direction each time.
Here’s what we worked on and applied to YC with since 2019:
- a talent marketplace for designers (didn’t apply)
- a graphic design collaboration software
- a product design collaboration software
- a unified inbox software
- a simple sales CRM software for startups
Each of these startup ideas sounded good, and we were also able to raise some venture capital along the way. But none of it was good enough for YC to accept. Why?
I went back and read our previous applications. And in hindsight, it was rather obvious why we didn’t get into YC with our previous applications:
- Our ideas were long and vague.
- We had practically zero proof that we could execute our plans successfully.
- And as a result, our interview with YC went terribly.
Interview with Michael Seibel
The first three applications didn’t even make it to the interview.
It was only in S21 that YC gave our application a chance.
For those that are not familiar with how YC fills their batch: for each batch, YC selects a few hundred companies to interview, and they spend 10-12 minutes on each company. Then, they’d make a decision on the spot.
When it was our turn to interview, Michael Seibel, Managing Director at YC, and a few group partners peppered us with a series of tough questions.
I could see our interview going south 2-3 minutes in.
I could read their faces; clearly, they weren’t satisfied with our answers.
Finally, Michael asked three questions that led us to think hard about whether another pivot was in order.
“Why aren’t you making money?
It looks like you’re a B2C SaaS. Have you tried B2B?
After four pivots, you spent another six months on this, and now you have a few users. How will you grow much faster than now?”
We stuttered. Our answers were vague. I said something innocuous like, “Well, we will grow our user base first, and then we’ll charge them later.”
The 10-minute grilling finally ended. We were exhausted. Still, YC hadn’t said no.
I turned up my phone’s volume. If YC planned to invest in us, we’d get a call, not an email.
We didn’t get the call that night.
I woke up the following day. No calls.
I checked my emails.
We didn’t get in, and the main reason was we did not have paying users. But we learned a valuable lesson.
We needed to figure out a way to charge money for our product.
The final (hopefully) pivot – Why did YC finally accept us?
If your users don’t pay for your B2B product, you don’t have a product –– yet.
We debated about what to build. We needed a product that could get paying customers from the get-go. After many internal debates, several MVPs, and a few prototypes, we landed on a revenue-generating idea.
We built a simple, easy-to-use sales CRM for startups — Relate.
We charged from the get-go, and our first paying customer came on board in June 2021.
Even with paying users, we didn’t get into YC right away. We applied to YC (W22) with the CRM idea but didn’t get in. Regardless, we continued to build the product and add new customers.
And when the S22 application opened, we applied this time, we got in!
What was different with the sixth (last) application? These five were the biggest ones.
- Paying users
- User retention
- Clear go-to-market path
- No bullsh*t
- Knowing our business deeply
We listened to Michael’s feedback last time. The first thing we did when we landed on the new idea was to talk to customers and charge them money.
Eight companies signed up for our pre-product, early access deal. They’d pay a few hundred dollars to secure a spot when we launch our MVP.
One of the best ways to validate Product-Market-Fit for B2B software is by asking yourself these three questions:
- Do you have paying users?
- Do they use your product?
- Do they refer their colleagues, friends, and family to your product?
While we are still validating PMF, many of our early users were paying and used the product to run their sales. And some of them even told their friends about Relate.
Clear go-to-market path
Our previous ideas had unclear paths to the market. We had many assumptions that we didn’t validate.
Relate was different. CRM software helps businesses to track sales and customers. This means we have a clear buyer profile: Sales leaders (or founders at early stage startups).
During the interview, it was easy to explain our go-to-market strategy to YC.
We loaded our initial applications with vague and fluffy words. Too much bullsh*t. Looking back, we didn’t understand our ideas deeply enough.
As Paul Graham says, “convince yourself that your startup is worth investing in, and then when you explain this to investors they’ll believe you.”
We gave plain and straightforward answers to each S22 application question. We kept the wording simple and straightforward. We made sure our approach and execution were ultra-clear.
Know your business deeply.
YC’s 10-minute interview is difficult for a reason. If you stumble, it’s obvious to YC that you haven't thought deeply enough about your business.
But with this one, we gave clear answers and didn’t go over a couple of sentences for each.
When you can’t explain what your startup does, the investor (or whoever you’re pitching to) will be confused. It’s better to sound plain but back it up with proof (e.g., metrics, testimonials, etc.)
Consider Paul Graham’s recent tweet:
When YC asked us what we do, we answered: “We are a CRM software that makes sales simple and easy.” And we said, “we have some paid users.”
Why YC is worth it
We had already raised more than a million dollars to fund our pre-seed team.
YC’s new standard deal takes 7% for $125k and equity worth $375k next capped or priced round.
Any founder knows this is no small dilution.
Nevertheless, we accepted YC’s offer and decided to participate in the program mainly for the reasons below:
- Once you’re a YC company, you’re forever one. YC is Silicon Valley’s most powerful community filled with founders, investors, and mentors who all went through the YC program. They help and support each other by giving advice and intros and sharing knowledge.
- You surround yourself with some of the smartest and most ambitious people possible.
- Everyone knows how to build a big business — (1) find out what users want, and (2) go build and sell it. Obviously! But it’s rare to see it executed successfully. YC is all about execution: build and sell.
Building a business is risky, but building a business the “YC way” means you have a much better chance of building it to last.
Meeting with Paul Graham and what’s ahead of us
During the batch, we had a chance to get a few minutes with Paul Graham at Y Combinator’s Mountain View office.
We told him about our startup and asked for feedback.
He told us that we were doing it correctly and we should stay focused and continue doing it this way.
Meeting PG in person and getting his advice made us more confident in our path: Stay focused on making something people want.
This is what we need to do to succeed. And ironically we’ve known this from the beginning! It took us three years, six applications, five pivots, and five failures to finally understand this.
I hope our story can give you a few takeaways so you can avoid the mistakes and failures we went through.
In the spirit of doing things that don’t scale – If you’re a startup looking for a better CRM for managing sales and customers, I’d love to talk to you about what we’re building. Reach out or sign up for early access.