In Theory

When we first founded Comprehend in early 2010, I didn’t consider applying to Y Combinator, even though I was very familiar with YC, Founders at Work, and Paul Graham’s essays. I thought YC only invested in social/local/mobile companies and wouldn’t be interested in, or be helpful to, a startup that sold to life sciences companies, where metrics like ‘viral coefficient’ and ‘daily uniques’ are meaningless and sales cycles can last months.

However, we ended up applying anyway, at the encouragement of a friend, on the reasoning that we had nothing to lose. In retrospect, this was a great decision because YC has been amazing for learning about startups, fundraising, company building and more. Nowadays, I highly recommend YC to anybody starting a company, including enterprise, even those targeting non-traditional markets. If you’re starting a technology startup, they will be immensely helpful.

There’s a lot of articles written about tactics for applying to YC, so I won’t address that here. Instead, I wanted to share the areas where YC has been the most helpful to us as an enterprise startup, both during the program and in the 3+ years since they invested.

Honest feedback

The #1 most helpful aspect of working with YC is that the partners are smart, objective, and direct. Combine this with their breadth of experience, and you have a completely unique and invaluable perspective. Where else can pre-seed companies find mentors who have seen hundreds of companies grow from just founders to being worth millions or even billions of dollars, but also have an interest in you and are willing to tell you what they really think?

The YC partners are remarkably accessible, and their blunt advice is incredibly helpful and often right, or at least thought-provoking. Even 3+ years after finishing the program, I still go to them for extremely relevant advice on topics ranging from hiring, customers, partnerships, fundraising, marketing, and more.

Investors

YC is amazing at introducing their companies to great, value-add investors. Having smart, knowledgeable investors is helpful for all startups, but particularly necessary for enterprise, where startups are fighting a constant battle for legitimacy and leverage with well-established companies. It’s a huge advantage to have strong investors in your corner who can help you avoid common pitfalls and vouch for you with customers.

YC can’t make other angels and VCs invest in you, but they can get you the meetings. YC has helped connect us to many top-tier investors, including our eventual Series A lead, Sequoia Capital.

In addition to helping their companies find the right investors, YC also helps them avoid the wrong ones. Not all angel investors are helpful, and some have a tendency to play games with entrepreneurs. These games can be demoralizing and time-consuming to the inexperienced founder. By remaining objective and bringing their depth of perspective, the YC partners (and alumni) help younger companies avoid getting caught up in these problems before they get out of hand.

Incredible alumni network

The alumni network has deep enterprise expertise in most industries, technologies, business models, and more. If you need an introduction to a specific company or person, or have questions about pretty much anything, there are alumni who are able and willing to help. We’ve received extensive advice on pricing, positioning, security, fundraising, and more.

There are also regular alumni events on specific topics, moderated by YC partners with panelists from other YC companies. These events cover tons of topics, including enterprise-specific ones that are extremely informative and relevant.

Help when needed most

While the YC partners are always helpful, the thing that’s really notable is that they stand by their companies when needed most. When we were running out of money and decided to extend our seed round, they were supportive. When we returned money to an early customer because it wasn’t a good fit, they understood. They know that building a company is a slog, and when things appeared to be falling apart (which tends to be all the time for young startups), they have the insights and advice to get the companies through.

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I highly recommend YC to any company that has the opportunity to take investment from them, including enterprise startups tackling non-traditional industries. The reason is simple: When you’re looking to build a real company, you need to bring on investors who will help you grow and this is where YC excels.

YC has been amazingly helpful for us, and I would highly recommend applying if you’re considering it.

When you first start a company, nobody knows or cares about what you're doing. 

Everything is harder when you don’t have initial traction. Potential investors, customers and partners all want to see the the external validation of other investors, customers and partners, but how do you get started when you don’t have any of those?

There are lots of tactics for addressing these areas, but one in particular is very powerful and very underused: advisors. Advisors don't invest. Instead, you give them a small number of shares in return for their help. In exchange for a small piece of your company, they can provide advice, introductions, insights, and more.

What do advisors do?

Ideally, an advisor is someone who has been successful at what you're looking to do. If you're targeting enterprise sales, find somebody who knows enterprise sales. If you're targeting mobile gaming, find somebody who has built a mobile gaming company. It's likely worthwhile to bring on several, one who knows sales, another who's been a successful entrepreneur, another who knows your vertical, etc.

The role of advisors is two-fold. First, they are people who can guide you, and who can give you informed advice. People who can answer questions, even dumb ones at times, and help you refine your goals and strategies with the benefit of their experience. 

Second, advisors are people who know you and can vouch for you, which can help bridge the external validation gap that early startups face. Advisors can introduce you to potential investors, help you build relationships with customers, or help you recruit important hires. In each case, your advisors can speak meaningful on your behalf because they’ve spent time with you and know your company.

Key things to remember.

There are several things that are very important to remember for making advisor relationships work:

• Advisors are busy - Your advisors are likely extremely busy people, so you want to be very respectful of their time. Only reach out when you have specific issues to discuss. Try to stick to email over phone where possible. If it’s something important or detailed that requires a phone call, don't feel bad about reaching out, but stick to the expectations you set at the beginning of the relationship, like one hour or less a month.
  
  
• You must give equity - It's important to have your advisors vested in your success. I've heard ranges from anywhere from 0.1% to 1%, depending on who it is and how helpful they'll be. If your advisor has founded several successful companies and is an expert in your target field, it'll be at the higher end. If you're not expecting anything other than the occasional reference, it'll be toward the lower end.
  
  
• Use an official advisor agreement - There are standard agreements floating around, which include an NDA, description of role, and more. Make sure you set this up formally.
  
  
• Set expectations - Make sure that you clearly convey expectations up front, including expectations about time commitment and ability to use their name on your website or marketing materials.
  
  
• Keep it limited - You don't want to bring too many advisors on. You won’t be able to use all of them effectively, and you’ll just end up giving away a larger piece of your company without getting more value. I would recommend no more than 5-6.
  
  
• Investment is better - Advisors don’t replace good investors. However, when that isn’t an option, bringing somebody onboard as an advisor is a great next option.

Getting Started

Be proactive and bold. Find out who has the expertise you need and reach out to them directly. They'll likely be flattered, and at least willing to discuss. Explain that you’re not looking for an extraordinary time commitment and that you’ll work within their schedules, but that you’re very interested in their advice and that you’d be extremely happy to have them officially become an advisor. In return, you’ll give them some equity and, of course, the chance to be part of an exciting new startup.

A big part of building a company is overcoming the inertia of starting from nothing by getting more and more people to care about your company and have a vested stake in its success. Jumpstarting the process with a few extremely helpful and formidable advisors at the beginning can go a long way!

My company, Comprehend Systems, was funded by YCombinator this past Winter 2011 funding cycle.  The experience has been great, and I wanted to share some thoughts in case you were thinking of applying.  

First of all, a little about Comprehend Systems.  We are creating enterprise reporting and visualization software which makes it possible for users to drill down in real time across multiple databases.  Our first product, Comprehend Clinical, is a reporting and visualization tool for clinical trial data.  It's an Enterprise Java application which our customers install on their own servers, although eventually we may offer hosting.  My co-founder and I have talked about starting a company together since we were in high school, and we pulled the trigger mid-2010.  Initially, we weren't even considering YC, because of misconceptions that they weren't interested in enterprise software.

In fact, they're interested in any tech-based startup.  We're focusing on enterprise software, and it's been extremely helpful. I'd recommend it to anybody who's creating any type of tech-based startup.  We have a much better understanding of how to go about creating a successful company.  Although we had read a lot about it, it was always a little amorphous. Being in YC really solidifies your understanding about how other startups succeeded (and failed), and we feel much more prepared than before.

If you've created a startup, or are thinking about creating a startup, I would absolutely apply.

Things to think about if you're considering applying (and demonstrate in your application):

• A business - While you don't need to have all the answers, you need to understand how your startup will become a viable business.  Fundamentally, you're creating a business and you need to understand that.  As YC says, "make something people want".
• Determination -  You need to be committed to your company. YC isn't necessary in order to make your startup successful.  If you think you need YC to succeed, then you won't (and shouldn't) be accepted.  You need to know that you can and will create this company.  In fact, if you have the right mindset, whether or not you're accepted into YC won't be an input into your company's success.
• Technical cofounders - One thing that's specific about YC is that they prefer technical founders.  Simply put, if you're creating a technical startup, it's helpful to have technical expertise.
• Co-founders - It helps if you and your cofounders know each other well.  Jud and I have been friends for 15 years. We learned to program together.  We have also always talked about starting a company, in high school it was a video game company (obviously) but more recently it had been enterprise software.
• Integrity/Friendliness - PG and team are working very hard to create a strong community, so it's helpful if you can demonstrate that you are the type of person they'd like included in the alumni network

Things not to worry about before applying:

• No public speaking experience - Don't worry if you don't have public speaking experience.  That's something that can be learned, as long as you have confidence in your product and your team.
• Age - It doesn't matter. In this batch, there are founders in their teens, and others in their 30s.  My cofounder and I are both 29.
• Company's current status - YC has funded established companies that have several years of revenue, and founders who haven't even thought of an idea yet.  
• Industry - They are not looking only for social network startups.  They're looking for solid founders, who are determined to make a successful technology startup.  This includes (but is not limited to) enterprise software, online assisted offline businesses, and more.  It's not just "web 2.0".
• Prior business experience - Again, as long as you have the confidence and determination, you can pick this up.  If you don't have prior business experience, it isn't a deal breaker.
• Hacker News history - If you don't have a lot of karma, who cares.  Focus on your startup instead.

Final thoughts

The one other things I wanted to mention is how impressed I've been with the team at YC.  I had been a long time reader of HackerNews and PG's essays before applying.  In fact, my HN account was exactly 1400 days at our first YC dinner. My unreasonably high expectations were actually surpassed by the quality of the mentorship from PG and team.  They truly care about entrepreneurship and helping founders, and it shows in everything they do.  

However, you don't need to live and breathe HN to do well.  By contrast, my cofounder knew little about Silicon Valley, Y Combinator, and Hacker News, and created a HN account only when I told him that he needed one.  Overall, the experience has been great and I would recommend it to anybody who is an entrepreneur.

Now, back to preparing for demo day next week.  However, I wanted to take a break to write this, because I'd love to have helped convince one extra person to apply for YC S11.

Good luck.