Y combinator has funded an incredible amount of successful companies.
When we first started I would read Paul Graham & Sam Altman articles and I loved how simple both of their messages were.
Fast-forward 4 years and we now work with the New Zealand Olympic Team, the New Zealand Stock Exchange and some amazing companies in Australia.
We are a software and AI company and basically solve complicated problems for companies.
The secret to all of that success?
Four Y Combinator principles.
I thought this would be interesting to write about as it’s a slightly different story given that:
- We never raised VC money
- We aren’t a startup in the strict sense of the Y Combinator meaning (The Silicon Valley definition of startup is “company designed to grow fast”)
- We live in New Zealand
- We were profitable from day one
- We are an agency and so are exposed to a number of different clients and problems.
I’ve never had an idea that I thought was worthy of raising VC money but I liked the principles so much that I wanted to apply them to our business.
Rule 1 — Do things that don’t scale
“One of the most common types of advice we give at Y Combinator is to do things that don’t scale. A lot of would-be founders believe that startups either take off or don’t. You build something, make it available, and if you’ve made a better mousetrap, people beat a path to your door as promised. Or they don’t, in which case the market must not exist.
Actually startups take off because the founders make them take off. There may be a handful that just grew by themselves, but usually it takes some sort of push to get them going. A good metaphor would be the cranks that car engines had before they got electric starters. Once the engine was going, it would keep going, but there was a separate and laborious process to get it going. “
Paul Graham Do Things that Don’t Scale
A couple of points that jump out here. Startups take off because founders make the take off.
How we have done that.
- Deciding to set a clear objective in the business and systematically work to achieve it.
- Not losing motivation.
- Being consistent and showing up everyday for the last 4 years.
- If there is an AI project and we need to manually label data then we do it!
- If there is something extremely hard and monotonous that a client needs that we can’t automate for whatever reason, we find a way to do it!
I believe this rule and reading about the work ethic of the early founders of Airbnb and other successful startups like Stripe and Reddit is a huge source of motivation and quite eye opening at the lengths that you need to go if you want to be successful yourself.
Rule 2 — Most companies don’t die because they run out of money
Paul Graham wrote this article, How Not to Die.
If you can just avoid dying, you get rich. That sounds like a joke, but it’s actually a pretty good description of what happens in a typical startup.
I really like this description of running a business. Rather than setting the target of being a billionaire, you just set the target of staying in the game.
Our company has had every reason to not exist and die. Here’s some bullet points.
- Starting a company and then 2 months later having a global pandemic start. Our country then proceeds to have one of the strictest lockdown protocols in the world, making it extremely difficult to get any new meetings.
- Having our main client say they are going to sign a contract and then at the last minute pulling out, giving us 2 weeks to find a way to make payroll.
- Our country has gone through the largest recession since the GFC.
- I got cancer and had 3 rounds of chemo and 3 surgeries including a brain surgery.
And yet, here we are. Still not dead.
So how exactly have we not died?
- Number one, experimenting with different things. Usually our biggest problem has been getting leads and new work, so here are the things that we have done.
- Called 100 people
- Emailed 10,000 people
- Messaged 100’s of people on LinkedIn
- Knocked on doors of different businesses around us.
- Created proactive pitch decks for clients for ideas that they should implement.
- Belief that we will be successful and that we will find a way to figure things out.
- Honest conversations.
Of the above list, the thing that has been the most effective might surprise you.
Cold email.
Surprisingly, we have found that time and again, email has been the best way of finding new business.
Follow that up with some tailored proactive decks and that has really saved us on a number of occasions.
I could write a whole article on this topic, as the last 4 years have felt like a pressure cooker of trying not to die, but I’ll keep going.
Rule 3 — It’s better to have 100 customers that love you than a million customers that just sort of like you
This one has taken a while to fully appreciate, and we’ve only focused on it in the last year, as shown in the tweet below.
So how has it gone since that tweet?
- We have dropped all of the customers that kind of liked us and that we didn’t like.
- Our customers love us now. How do we know? Because they tell us all the time!
- Our revenue has grown and our company is the most stable it has ever been with the biggest backlog of work that we have ever had.
- Work is the most fun that is has ever been!
We set the goal of getting testimonials from clients. It’s actually super difficult to do and forces you to really nail the customer experience.
Rule 4 — Make
Rule 4 — Build a product(company) so good people tell their friends
Build a product that people love so much, they naturally recommend it. This represents 80% of the work towards becoming a successful startup. Sam Altman
If you replace the word product in the above sentence with company then that has been our mission.
This is in the same vein as rule 3 but it has been really important.
You see in the past we used to set revenue goals, like growing 3X in a year and none of that seem to help at all. We were more stressed and our clients didn’t love what we were doing.
So I decided to go back to basics and just focus on making something really good. So now when we do a job, we try to do an amazing job and think how we can go the extra mile and suprise and delight people.
So where to from here?
Well for me personally, I’m still working on rule 4. One day I would like to build something that people love and I would love that to be a product as it would be awesome to experience the thrill of having a vision and having others find joy and delight in that vision too!
In the meantime, I’ll be doing things that don’t scale, trying not to do, while getting 10 customers to love us and building something so good that people tell their friends.
Some bonus Y Combinator Content that might inspire you
If you skip to 19:30 of the above video you can see Paul Graham & Sam Altman being pitched an idea called Flexport, a company that is now estimated to be worth more than a billion dollars.
Yes this is what Sam Altman used to do before OpenAI!
It’s also great to see Paul Graham in action.
In the video below, Sam shares 25 lessons on how to succeed as a startup. I’ve written a full breakdown of them here at the Cubthinktank.
4 years ago….
Originally published on Medium