Archive | January, 2013

An Unexpected Wrinkle in Preparing to Launch a Tax Business

25 Jan

Imagine preparing for the SAT, only to find out three days before the test that it had been struck down, and was no longer required for entrance to college.  That’s sorta what today felt like.

As Benny and I prepare to launch our tax preparation and advice startup, GoodApril, we have been prepping to take the Registered Tax Return Preparer exam with the IRS to help bolster our tax credentials.  While the test is really intended to ensure your local preparer knows their stuff, we thought passing it would help with fundraising and gaining customer confidence.

It turns out, however, that the United States District Court for the District of Columbia struck down the IRS’s registered tax return preparer program on Friday and is preventing it from enforcing the regulations.  As a result, the IRS today suspended the entire program, including its qualifying exam.

With the tax-filing season starting Jan. 30, hundreds of thousands of return preparers won’t have to register with the federal government, pass a competency test or meet continuing- education requirements.

So, it’s back to the drawing board on how to demonstrate that our product is being produced by financial technologists with legitimate tax “chops.”

I guess entrepreneurship is all about rolling with the punches.  In the meantime, you’ll just have to trust us: we know tax.

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How to Improve the Y Combinator Interview

16 Jan

yc500Benny Joseph and I were thrilled to have our startup, GoodApril, selected for an interview with Y Combinator (YC) for the Winter class of 2013.  Getting into YC is competitive – acceptance rates were just 2% in Summer 2012 – so getting one of the final 250 interview slots to be one of the 50 companies accepted, was exciting unto itself. While we weren’t accepted, the process was a valuable experience, but could have been even more entrepreneur-friendly.

What We Got Out of our YC Interview

We’re glad we chose to apply to YC, and don’t regret the time we devoted to the original application and interview preparation.  We gained some real benefits from the experience:

  1. New friends – In order to prepare for the interview, we actively built many new relationships with YC companies and founders to better understand the program and selection process.  This new network of peers has already proven invaluable for introductions, best practice advice, and camaraderie in the ups and downs of being an early stage startup.
  2. Incentive to revisit the big picture – After working intensely on customer development (interviews, surveys, advertising tests, etc.) it was good to be forced to come back to the “30,000 foot view” of the business we were building, to put to the plan to paper, and practice saying it.
  3. Pitch practice – Paul Graham’s famed hatred of marketing speak forced us to figure out how to describe our business in real, simple language, and to practice delivering our messages in succinct ways.  We now feel quite comfortable in pitch settings, whether describing the business at a cocktail party, to a potential employee or vendor, or a potential investor.
  4. Enhanced credibility – Kudos to the YC team for their standing as the top-tier startup accelerator program.  Just being selected for an interview has earned us impressed “ohhhhs” from others in the Valley.

How the Experience Could Have Been Better

In total, the application and interview preparation process was a substantial investment of time – writing and re-writing a tight, compelling application, filming a video, prepping answers to dozens of potential interview questions, practicing those answers, discussing tactics with YC founders, going through practice interviews, and more.  YC was top of mind and at the top of the to-do list for weeks.

While we definitely benefited, the experience felt one sided: dozens of hours invested for a 10 minute meeting.  Here are a few ideas on how it could have been better for us, as startup founders:

  1. More exposure to the partners – I still have never met Paul Graham or Jessica Livingston, the most prominent YC founders, nor seen them present.  My entire exposure to 5 members of the extended YC partner group lasted the 10 minutes of our interview, and the “thanks, but no thanks” email we received later that night.  YC hosts an event called Startup School, but not all YC interviewees gets invites – I did not. To give entrepreneurs a little more “bang for the buck” of the experience, I would challenge the team to host a lecture and networking event for invited interviewees the day before interviews begin.  Give us a flavor for the YC dinners we would enjoy if accepted.

  2. More constructive feedback – We received a couple nuggets of useful feedback in our rejection email, but mostly it boiled down to “we don’t believe customers want this product” and “we tried to think of a better, similar idea, but couldn’t.” There’s an opportunity to “pay it forward” to the rejected entrepreneurs by giving them a taste of the sage wisdom YC could provide as startup mentors and advisors.

    What made you question our evidence of customer demand for this product?  What approaches could we take to test market demand further?  Were there nuggets of the product concept, of the market, of the customer acquisition strategy, of the monetization model, that you thought had promise? I recognize this would come at some cost to YC: either more time invested per interviewing team and more days of interviews, fewer interviews, or longer delays in notifications of rejection. Nevertheless, if the interviewers invested 5 minutes post-interview brainstorming some tips for each team, these could easily be communicated by a single interviewer.

  3. Demonstrate your commitment to “The Team” – Little about the questions asked in our interview, nor the rejection email, reflected YC’s statement that their primary yardstick for inclusion is the quality of the team, not the idea.

    How do we choose who to fund? The people in your group are what matter most to us. We look for brains, motivation, and a sense of design… Your idea is important too, but mainly as evidence that you can have good ideas.

    The interview experience should reflect this. Ask us to bring screenshots or include links to our prior work if you want to see our sense of design. More importantly: address the shortcomings you saw in our team in your rejection – that way we can seek self-improvement and/or recruit to plug the hole.

Why Y Combinator Should Care

YC remains undisputedly the most successful startup accelerator program.  At the same time, competition is coming from many angles, including accelerators with similar models like AngelPad and TechStars, incubators with a more hands-on and resource-intensive approach like The HatteryRaj Kapoor‘s more intimate “operating advisor” model with CoFounder.co, and others.

For YC to continue to lead the pack, it must continue to have a disproportionate number of biggest startup successes coming out of its program.  The only way to do that is to keep seeing the best ideas and entrepreneurs.

The best way to ensure they see the best entrepreneurs?  Make sure YC has a sterling reputation both in the eyes of those who succeeded in getting accepted, and those who didn’t make it on their first try.  They should want to make sure they see not just GoodApril, but also my next startup, and those of the next generation of founders who ask me about my experience.

Closing

Let me re-iterate that we don’t regret our YC experience.  YC should keep innovating, however, to make the experience even better for the entrepreneurs.

Many thanks to BoDavid, and Jason (YC founders at FutureAdvisor, Bump, and Leaky), Brady (of Khosla Ventures) and the several other friends and acquaintances who helped us prepare for YC.

Appendix 1 – How our interview progressed:

Almost exactly 10 minutes total

  • Shake hands, get seated
  • Asked to close laptops with prototypes loaded (they never looked at it)
  • “How are you different from TurboTax?”
  • “Are you guys tax experts?”
  • “Who needs this?”
  • “What was the specific situation [Benny] had with the IRS [that inspired the idea]?”
  • “How much money can you save the average customer?”
  • “What are the top 3 tax saving algorithms?”
  • “You data do you need beyond what you can get from banks, and how do you get it?”
  • Thanks, shake hands, walk out