Y Combinator (YC) is a seed-stage startup accelerator which provides selected startups seed funding and works with them on their idea. The Center for Entrepreneurial Leadership (CEL) hosted an interactive session with Michael Seibel, a Managing Director at YC, and Dhruv Saxena, a YC alumnus, on January 23, 2021. Dhruv studied at BITS Pilani for two years before transferring to Purdue University to complete his bachelor’s degree. He is the founder of ShipBob, a privately held technology company that offers shipping solutions for e-commerce businesses. Michael co-founded Twitch and was the CEO for five years. He later became the CEO of Socialcam. After his time at these ventures, he became a part-time partner at YC. During the session, Michael debunked some myths about founding startups, while also asking Dhruv about his startup and YC experience.
Michael explained how running a startup had not been a popular career choice a decade ago. When he had co-founded justin.tv—later renamed to Twitch—it was unheard-of to start your own venture. However, it is a prevalent occupation nowadays. Dhruv added that he considered startups as a job opportunity only after hearing about one that had caused a stir in his city.
Responding to Michael’s question about why he applied to YC, Dhruv explained that the driving factor was a lack of funds. He went on to describe the multiple interview rounds, and how the first five minutes are crucial; most investors make up their minds within that time. Michael elucidated that YC looks for startups which show promise and a model that is not based on needless expenditure. This ensures that the company does not shut down after the first few years. He added that it is a misconception that startups need only an idea to become successful; proper financial management also plays a vital role.
The next topic of discussion was investors. Michael, drawing from his experience, commented that investors can make or break a company, but have minimal contribution to its daily functioning. A key aspect to impressing investors is selling your story and proving to them that your plan is executable, Dhruv opined. During the early years, it is vital to listen to your customers, and pay little heed to competitors. Both of them also debunked the myth that getting into YC guarantees success. However, they agreed that YC helps anchor the founder and focus on the fundamentals of the business while listening to customers.
There are two types of founders, according to Michael: those who ‘love the problem’ and will do anything to get to its solution, and those who ‘love their solution’ and will wait for the world to realise its merits. Dhruv added that there are some entrepreneurs who are stubborn about their vision, and some who look for validation and only care about getting the job done in an easy way.
Michael and Dhruv reiterated that the key elements to ensure a startup’s growth are uniqueness and the ability to overcome initial competition. It is imperative to make tough decisions when the need arises. Dhruv talked about the time ShipBob had come close to shutting down, and how he had been forced to begin layoffs. The decisions must be made keeping the startup in mind. Going against the norm is also justifiable, as Dhruv revealed in his rationale for not moving to California from Chicago—he knew the market in Chicago and had developed a customer base, which he would have to rebuild in California. Another controversial decision he took was focusing heavily on revenue and sales of the software product instead of the software, even though investors prefer companies that focus on their software.
The talk was followed by a brief Question-and-Answer session. The first audience question was about finding a co-founder, as YC advises companies to have one. Dhruv explained that it is important to have someone you trust as your co-founder. He admitted to having been lucky with his co-founder, who is a close friend with similar interests. He advised everyone to talk to smart people to keep learning and to surround themselves with people they trust implicitly. Responding to another question, Dhruv recommended that all aspiring entrepreneurs in the audience talk to customers about their passions. He had learnt that the key to better sales is getting to know your customers better.
The last enquiry was regarding the pricing model used by ShipBob. Michael pointed out that most startups keep low margins and try to make profits with volume. Dhruv opined that it is more beneficial to have low volume and high margins, since funding is a problem that can be tackled effectively by increasing revenue. He believes that keeping low margins is risky as it may not lead to profits if the required number of customers is not reached. Hence, he recommended keeping higher prices per order to not incur losses on every shipment.
To conclude the talk, Dhruv shared his vision of individual companies thriving and making the market more competitive. Michael then shared links to online resources that could be useful for aspiring entrepreneurs.
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