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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
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Performance-Based Acquisition Marketing

12 Jul

Zecco Logo

I recently completed a year-long period managing acquisition marketing for online brokerage firm Zecco.com.  One of the most important changes that I brought about during that tenure was to transition our markting focus from being purely CPA-based to consider not just cost of an account, but also its resulting quality.  Recognizing that different channels, and even specific partners within a channel, could yield dramatically different kinds of accounts was an important insight that led me to drive for this change.  Additionally, I recognized that a multi-year focus on getting as many, cheap accounts as possible had yielded an unbalanced, unscalable marketing machine.

In order to justify spending in more expensive channels like online banner display advertising, we had to be able to prove that the resulting accounts were “worth it” and generated sufficient revenue to justify the acquisition cost.  In order to do this, we had to overcome a lack of tracking and reporting tools to evaluate new account value based on acquisition source.  We had to solve this on two fronts: First, through the development of a reasonably comprehensive data warehouse which brought together account-level trading details to the website user-level at which we could track the original source of a new account. Second, through the adoption of tracking technologies that enabled us to more definitively attribute a specific new account to one of our multiple marketing channels.

Once we had established a way to track performance, we had to settle on standardized measures of account quality.  With input from our Finance team, we settled on using the average of an account’s first three months of account activity, extrapolating that average out to a year, and dividing that annualized revenue figure by our cost of acquisition.  If the average “payback period” on the accounts from a particular channel (ultimately, we got this down to the publisher and affiliate level), was less than one year, we considered that a success since the average customer lifetime of new accounts was a multiple of that.

While we only had a short period of time running this new approach at full-speed prior to Zecco’s acquisition by TradeKing (I apologize I can’t therefore share robust figures to demonstrate the impact), it proved to be an exceedingly valuable marketing management tool.  We could quickly evaluate a new display advertising partner’s promise, and re-allocate spend to the partners that were outperforming the others.  We were also able to identify specific affiliate partners were substantially under-delivering on account quality and remove them from our network.

I’d be happy to get into more detail to help other online marketers understand this methodology and approach.  Get in touch!

California Clean Tech Open Finalists

22 Jul

California Clean Tech Open

The California Clean Tech Open, a business plan contest with considerable, hefty backers, this morning announced its list of finalists.  I found the list of technologies and business ideas so interesting I decided to share it here to help bring attention to these impressive entrepreneurial ventures:

Air, Water & Waste Category Finalists

  • Clean Coal Inc.: Removes contaminants from coal
  • Over the Moon Diapers: High performance reusable diapers and service network
  • Porifera: Carbon nanotube membrane for reverse osmosis desalination
  • PURE-T: Salt free water softener using nanobeads
  • Purite: Zero-energy chemical-free whole house water filtration
  • SequesCO: Microbial CO2 capture and conversion to biofuel
  • Waste Water Works (WWW): Microbial wastewater treatment also generates electricity

Energy Efficiency Category Finalists

  • Atomic Precision Systems Inc.: New semiconductor process for ultra-cheap LED lighting
  • Enovative Group: Smart pump for hot water circulation
  • NexChem: Energy-saving process improvement for zinc galvanizing
  • Transoptic: Solar energy assistance for conventional water heaters
  • Viridis Earth: Domestic HVAC retrofit to improve efficiency
  • WicKool: Energy efficient water recovery for existing rooftop air conditioning

Green Building Category Finalists

  • BottleStone: Ceramic stone countertops include 80% recycled glass
  • en-vis-age: Green, modular and customizable buildings
  • Green Design Systems: Straw wall building panels
  • GreenHomeAnswers.com: Home improvement website for green products and services
  • GroundSource: Residential geothermal system with installation services
  • ISTN: Eco-friendly building insulation
  • Parco Homes: Manufactured green (zero net energy) home kits
  • Solar Red: Low cost rooftop PV installation system and components
  • Team Wawa: Water-conserving shower system

Renewables Category Finalists

  • Covalent Solar: Organic thin film solar concentrators
  • Focal Point Energy: Solar thermal water heater for industrial processes
  • IEM Applications: Landfill methane accelerated recovery
  • Renewable Fuel Technologies: Agricultural waste biomass converted to Green Coal
  • Solar Ice: Solar powered ice maker
  • Solindis: Optical solar concentrator for thin film PV

Smart Power Category Finalists

  • 1ARC Energy: Higher capacity lithium-ion batteries
  • Cooler: Carbon calculator to allow B2B targeted advertising in LOHAS
  • Energy Empowered: Home display and control to reduce standby power usage
  • Enverity Corporation: Greenhouse gas tracking and compliance
  • Power Assure: Data center energy management software service
  • Renewable Voltage: Treat organic waste to provide hydrogen and energy storage
  • Tangerine Network Devices: Home energy display and control

Transportation Category Finalists

  • AAA Fleets: Turnkey electric vehicles and solar charging systems for fleets
  • E-Chargers: Plug-in hybrid charging station
  • ElectraDrive: Gas to electric drivetrain auto conversion
  • Electric Drive Research: Plug-in/gas hybrid 2 person, 3 wheel sports car
  • ElectronVault, Inc.: More efficient traction battery for hybrids
  • Enhanced Vehicle Acoustics: Flexible engine sound generator for quiet cars
  • FuelMotion: Series hybrid conversions for the developing world
  • Goose Networks: Hosted dynamic scheduler for carpools/vanpools
  • Philo Fuel: GPS-based audiovisual cues to help drivers optimize fuel efficiency

Based upon these short snippets alone, I think I will have my eyes on BottleStone, 1ARC Energy, and ElectronVault.  These all play on existing market demands (countertops, batteries, hybrid vehicles) and don’t require the kind of massive market shifts needed to make ideas like Energy Empowered or IEM Applications viable businesses.

Reflecting on the Launch of Hilltop Consultants

5 May

Mini Hilltop Consultants LogoI was recently asked to contribute to a guidebook for new student members of Hilltop Consultants, a student nonprofit consulting organization that I started while I was at Georgetown University. I thought it would be appropriate to also post my thoughts here:

Starting Hilltop Consultants was an exciting part of my university experience at Georgetown. I had heard of other student nonprofit consulting organizations on other campuses, and was surprised to see that none existed in Washington, DC. Given the plethora of nonprofit organizations based in the area, the potential client base was huge. My peers, other undergraduates at the McDonough School of Business, were an ambitious bunch who were eager to find ways to gain real-world experience early on in their university careers. These same ambitions had led many to join The Corp and the Georgetown University Alumni and Student Federal Credit Union, and I saw no reason why their energies couldn’t also be directed toward nonprofit consulting projects.

After returning from a semester abroad, in January 2004 I began working on the plan in earnest. A group of three other students answered my calls for assistance to start a new student business organization. We drafted a mission, vision, and business plan, applied for recognition as an official student organization, and recruited the first leadership board for Hilltop. By April of 2004, Hilltop Consultants was a reality. By the time I graduated in May 2005, we had served four clients over the course of two semesters, and hosted the first ever business strategy case competition at Georgetown University, the Business Strategy Challenge.

As a member of Georgetown’s case competition team, I had experienced first-hand the excitement of student case competitions, and saw a great opportunity to expand Hilltop Consultants’ activities into that area. By choosing a local nonprofit organization as the subject of the case study, we were able to further build upon Hilltop’s mission of both serving the DC nonprofit community and enhancing Georgetown students’ opportunities to learn about business by advising the managers of local organizations as they struggled to tackle real-world business challenges. Our first Business Strategy Challenge, in April 2005, focused on the obstacles facing the United Way as it adapted to a fundraising environment in which donors demanded greater transparency about how their donations were being put to use.

After graduating from Georgetown, I spent three years as a management strategy consultant for the Monitor Group. I was lucky to not only gain experience serving many impressive businesses in the United States and abroad, but also served several nonprofit organization. It was incredibly stimulating to work in a place where I was constantly surrounded by a group of people with such incredible intellectual horsepower.

Consulting is a valuable first-step out of an undergraduate education not only for business students, but students from all academic paths. It provides a strong analytical foundation which is valuable to employers in nearly all reaches of the economy. It also provides opportunities to build presentation skills and enhance a person’s professionalism as he or she is put into meetings with more and more senior clients. Finally, it provides excellent opportunities to explore a variety of industries and practice areas (e.g. marketing, finance, operations) to see where your passion lies.

I hope that Hilltop Consultants not only helps students find a way to contribute to the nonprofit community through a higher impact investment of their time than might otherwise be possible, but that it allows students to “test the waters” of a career in consulting. The long hours, the often grueling travel schedule, and your status as “advisor” rather than “decision maker” mean that consulting certainly isn’t the perfect career for everyone. As a first dive into the professional world, however, I can think of few better options available to a recent Georgetown graduate.

-Mitchell Fox

Founder and President, Hilltop Consultants, 2004 – 2005
Consultant, The Monitor Group, 2005 – 2008

Putting it Together: The Credit Crunch, A Weak Dollar, and Entrepreneurship

27 Aug

Dow Jones Down 56 pts, Aug 27I am writing today in response to an Open Thread on GigaOM.

The credit crisis will have an important impact on entrepreneurs, but must also be considered in the context of a weakening dollar and the risk of an economic downturn. The likely affects are three-fold:

  1. “Exits” through acquisition by an established industry player or private equity buyout will be less likely
  2. Consumer dollars may shift away from startup businesses whose products look a lot more like “luxuries” than day-to-day essentials
  3. Top qualified job candidates and new entrepreneurs may delay their entry into the market until conditions improve

Exits: If acquisitions become more challenging, startups will be pushed toward IPOs as the most viable exit strategy. Unfortunately, with an overall economic downturn in sight, investors are also less likely to be seeking high risk small-cap startup IPOs.

Overall, if entrepreneurs and venture capitalists cannot exit on their investments, the engine that powers Silicon Valley could slow down (note: I deliberately refrain from using “grind to a halt”). At first, if VCs are flush with cash to invest, they will continue to do so. As the burden of their growing portfolio grows, however, investing would slow.

Consumers: With home values dropping or plateauing in many markets, consumers will be cutting back on spending on luxury goods. And yes, Premium Membership at Flickr counts as a luxury good. The same goes for a weak dollar. Imported goods like electronics and gourmet foods, which become more expensive as the exchange rate weakens, could easily force consumers to shift spending away from new web toys.

While it is true that many web 2.0 businesses rely on advertising money more than actual consumer spending, it is important to remember that advertising is also linked to consumer behavior. In hard times, advertising dollars shrink.

Top Talent: If exits are hard to come by, it means that one of the great attractions (mind you, not only) of working at a startup, the chance for a big payday after a few years of work, is much less likely. Without that big carrot to lure in the brightest minds, the best job candidates may stray to other businesses with more secure, lucrative paydays like investment banking, consulting, and jobs in “industry.”

If recruiting the right people to fill important roles becomes difficult, growth at startups could slow, further depressing the situation in places in Silicon Valley.

At Least One Silver Lining: It would be inappropriate to conclude a post like this without an explanation of at least one of the potential benefits of the current credit crisis and economic situation.

This is starting to look like a good market for buyers. It will be possible for businesses to acquire other companies and consumer to buy houses at more reasonable prices, assuming they have the cash necessary to afford them. While this won’t be the case for all buyers, those which are well prepared will find the situation to be quite favorable.

As the saying goes, “buy low, sell high.” Sometime in the near future, conditions might be just right to make that home purchase you’ve been waiting on.

What do you think are the other potential upsides?

My Previous Posts on these topics:

Consulting, VC, or a Startup? Best Career for an "Entrepreneur in Waiting?"

19 Aug

Entrepreneur in WaitingI am a part of the great swath of young professionals around the world who might be best described as “entrepreneurs in waiting.” We are people who aspire to one day start our own business, or partner up to create one.

We have in common the desire to be prepared to seize a new business opportunity when it comes our way, but many of us are currently working in other careers, waiting for the right moment to make our move. Jared Smith, a friend, former colleague, and junior partner at PICS (Pacific Industrial Contractor Screening) calls this “waiting for your pitch” — holding out for that great idea you can hit out of the ballpark.

Where, then, is the best place for me to wait for my pitch and optimize my chances of not only receiving the most pitches, but also knowing when I should swing and having the skill to hit the ball? How do I maximize my chances of meeting the right people, while also gaining the skills and experience that will make me an attractive business partner? What career will provide the most inspiration to dream up the big business idea I want to build my career upon?

The answer, obviously, depends very much upon the type of entrepreneur you want to be. Are you a developer or a business guy? How much do you have to lose if you leave your current career and mess up? I am writing today with the business-minded entrepreneur in mind; one who already has a good job and does not want to join just any startup, but the right one. I am, essentially, writing about myself.

Management Consulting [where I am today]:

Pros:

  • Build credible work experience and learn best practice
  • Develop important business skills in analysis, customer interaction, planning, and management
  • Cultivate a management mindset – consultants are trained to structure problems and think about how to grow businesses
  • Exceptionally diverse exposure to different industries and business problems, improving the chances of stumbling across new business ideas and innovative solutions to old business problems
  • Diverse exposure to different geographies and business environments, possibly giving insight into businesses which could be transplanted from one location to another
  • Relatively stable and low risk compensation [bonus based on a mix of personal and firm performance, not necessarily that of clients or a portfolio]

Cons:

  • Limited control over the industries, geographies, or business problems you face [i.e. You may be just as likely to be working for an “old economy” auto manufacturer in Detroit as a “new economy” biotechnology company in Silicon Valley]
  • Typically clients are fortune 500 businesses or governments, both of which operate very differently than startups, possibly limiting the applicability of some lessons learned
  • Limited networking opportunities with other entrepreneurs, for the same reason

Venture Capital:

Pros:

  • Exposure to diverse businesses and solutions within a narrow industry area (most firms focus on just two or three industries) – gain understanding of how different players are solving the same problems with different approaches
  • Gain an investor’s mindset, looking at businesses in terms of their relative ability to succeed, and understand a venture capitalist’s investment criteria
  • Network with entrepreneurs and venture capitalists, increasing the likelihood of running across a potential partner with a “big idea” you are excited about
  • Realistic possibility of moving from a position in VC to an operating role in a portfolio company
  • Relatively stable compensation, however bonus is tied to portfolio performance and forms a greater proportion of salary

Cons:

  • More time spent critiquing business models, management teams, and strategies than thinking about or learning first hand how to grow a business
  • Limited diversity of industries and geographies likely to be encountered
  • Limited opportunities to gain operating or management experience

Operating Role in a Startup:

Pros:

  • Network with other startup professionals in your industry niche and within your company, people who are likely to have very similar passions and might eventually make great business partners
  • Build deep knowledge of your industry, increasing the likelihood of identifying unmet needs which could be filled with a new product or service
  • Gain practical operating and management experience, improving your credibility as a potential partner
  • Understand the challenges faced by startups, and some common methods of overcoming them through personal experience
  • Spend part of your day worrying about how to keep things working (operating mindset) and part your day worrying about how to make them work better (growth mindset)

Cons:

  • Narrower networking opportunities – relatively less likely to meet potential partners in other industries or geographies, or think of solutions to problems that your company is not in the business of solving
  • Possibly reduced professional credibility if later attempting to rejoin the “corporate world”
  • More risky – compensation is highly correlated to business performance, which you may or may not have the ability to control

Of course, there are plethora options beyond consulting, VC, or working in a startup for any entrepreneur in waiting. I would love to know your thoughts. Are there other options which should be considered? Advantages and disadvantages of each that I have failed to consider?

An Exit Strategy is NOT a Business Strategy

17 Aug

Business Model GraphicBuilding on the comments I posted earlier today about the acquisition of Where I’ve Been, and partially motivated through comments on that post, I realize it is important to add two additional thoughts.

First, “Where I’ve Been” has managed to avoid one of the most challenging elements of business creation, which is to actually build a business model and strategy. That Ulliott was able to get $3 million for a business that had neither is surprising, impressive, and more than a little bit disturbing. Attempting to replicate his success in planning for an exit would be wise, but emulating Ulliott’s dismissal of the question of a business model would be foolish. He has passed on the question of how to monetize his application to a new owner, but the question will still have to be answered.  (Though TripAdvisor seems well positioned to answer it)

Second, in response to Tony and Jackson’s comments on the possibilities for SeedHive, this does, indeed, seem to be an area of possible unmet need. Could SeedHive help bridge the gap between developers with the skill to “build things” and the business folk with the ability to “sell things”? [Which is how I interpret Tony’s “build great teams to do great things”] It’s an interesting proposal and one to noodle on. At the most basic level, it would require that the site was able to attract both sides of that puzzle by being relevant to both. It would also need to do this better than the likes of PartnerUp, which I believe it could do through the integration of social networking and idea collaboration.