If you’ve ever wanted to apply to Y Combinator, here’s some inside information on how the iconic accelerator selects companies from someone who knows best: Garry Tan, president and CEO of Y Combinator.
The Economic Club of Washington, DC hosted Tan Wednesday for an in-person interview with General Catalyst Board Member Teresa Carlson.
It’s widely known that Y Combinator accepts less than 1% of the applications it receives — the latest batch was whittled down from 27,000 applications, Tan said. Cohorts these days tend to be around 250 companies. So Carlson wanted to know, among other things, what is the “secret sauce,” if you will, to getting accepted to Y Combinator?
First, it might be one of the few places where you don’t need to know anyone to get in, Tan said. Anyone can go to the website, apply and submit a one-minute video. YC’s 14 partners read the applications to figure out a few things: Who is the applicant’s potential customer, and what have the founders built in the past? The top candidates then answer a few questions from the partners.
“So many venture capitalists have meetings, every week, and they say, ‘no, no, no, no,’ and then maybe a few times a year they say, ‘yes,'” Tan said. “YC is turning it around.”
One of the things YC looks for are founders who can create a market, that they see a technology that no one has envisioned yet, he said.
Tan used Coinbase’s Brian Armstrong as an example of someone who created a market. When Tan first met Armstrong, he was still working as an anti-fraud engineer at Airbnb. Armstrong had read it Satoshi Nakamoto white paperand he had an idea.
“He said, ‘Nobody believes this yet, but I do, and I want to work on software that manifests this crazy idea that you could have a sovereign cryptocurrency,'” Tan said. “This was a very fringe idea at the time. moment, but that’s what we’re looking for – something fringe.”
He went on to explain that the “fringe” is a new technology “that technical people are obsessed with” and one that continues to “touch all of society.”
After YC partners interviewed and accepted Armstrong into the program, Tan recalls working with him every week. And during those conversations, he realized that if there was something like Coinbase, “it would be really big.” Then came the discussion of how to make it.
“The cool thing about what he did was that it was really hard to even get Bitcoins,” Tan said. “I personally experienced it. These marginal things can basically turn into something really big.”
He also said Armstrong was an example of another thing YC partners look for in candidates: “He was a first-principles thinker.” By this Tan meant that Armstrong not only believed what no one else believed yet, but began to figure out what the necessary things were to build, whether it was software or distribution, to create this thing that no one else saw. It’s not enough to just recognize a new thing, you have to understand some of the steps to building it and have a plan to confirm that what you’ve built solves the problem you originally set out to solve, Tan said.
YC went through a round of interviews last week, and Tan said all the founders it chose to fund “came with some new discovery that they had discovered by interacting with the technology itself.”
“Like sitting at a workbench and realizing, ‘Hey, you know there’s a robotics manufacturer that’s making a humanoid robot now for $16,000. It arrives at my office on Monday and we will try to be the first to commercialize it,” said Tan. “This is an example of a first-principles knowledge of a very interesting area.”
