Is Y Combinator worth it?

Back in late 2016, I started Armory in my garage (pictured above) with my two co-founders. We also applied to Y Combinator. I often have founders ask me if YC is worth it right around now, during YC application season.

The short answer is Yes, you should at least apply to see if you get in. The longer answer is It depends a lot more on you than YC (kind of like asking "is exercise worth it?"). Armory participated in the Winter 2017 batch, as well as the Fall 2019 Growth program.

YC is not just one thing. It's a series of people, experiences and resources that scale with your company as it grows. Here's a detailed look into what's been valuable, and what you can do to get full value from YC:

Optimizing our initial W17 YC  batch experience:

• YC's biggest initial benefit is that it creates intense focus in a short period of time, and at the end of the program, YC has nailed product-market-fit to help you pick up a good sized initial investment via Demo Day. If you hit it hard, you won't have any problem raising money. That alone is very valuable in the early stages of a startup's life, and it's a self-reinforcing cycle: The more initial traction you have, the more investment you can quickly pick up (and vice versa).
• We secured several million dollars in SAFE notes in the span of a couple of days after demo day – and we could have picked up more if we'd wanted to. More on that below. It helps to be organized because you'll have to prioritize and manage a lot of investor interest in a short period of time.

I'd recommend using a Trello board like the one below to manage investor interest (you can make a copy of it here). This board is also valuable for future rounds; I used a variation of it for Armory's Series A and B as well (that's a whole other blog post; LMK if you'd like me to write it).

• If you decide to apply to YC, the #1 piece of advice I can provide is Show, Don't Tell. The more you can show YC that you've already got early traction, the more likely it is that your application will be accepted for an interview, and that you'll get in (or at least invited back for a 2nd interview.) And it's good practice to focus on getting early, external validation, because that's what you'll be doing non-stop once you get into YC. Nicolae has a good breakdown here of the 5% to 6% weekly growth that you should be targeting. The YC batch experience is an intense experience where you identify your top growth metric, focus on optimizing it, measure your results, and then do whatever it takes to unblock that growth. Rinse and repeat each week with all the founders around you doing the same thing.  
• You're more likely to be accepted if you are not a solo founder. I personally like the "hacker and hustler" combo for the fastest growth iterations & unblocking. If you're afraid of getting strong external signals of validation for an MVP product, you won't do well in YC. One of my favorite sayings is perfectionists are imperfect with their time. And time is in short supply, with the Demo Day clock looming from the very first day of the program. A few other very appropriate sayings: Build the right thing fast, instead of the wrong thing right, and There's always one more thing you can do [to increase growth]. And after that, there's one more thing. I find that often, people are their own enemies when it comes to the headspace you need to be in to be a successful YC founder. Don't doubt yourself. Believe in your ability to create value. And don't be shy about being relentless in pursuing that external validation to prove it.

Below is Armory's Demo Day video from 2017. I've blurred out some of our early customer names, but other than that, it's the full video. This is the first time it's been shown publicly. We spent the YC batch program getting our first customers to sign contracts (the "hustler" piece) while we built out the first version of Armory's platform (the "hacker" piece), which is built using an open source continuous software delivery project called Spinnaker. By the time Demo Day rolled around, we had multiple paid customer commitments and could articulate a long-term vision for Armory (which has remained largely unchanged since our early days in the garage – that's also a whole other blog post!). I've heard people say there's $100 Billion worth of VC funds in the room for YC Demo Day. I can believe that, and I wouldn't be surprised if it's well over that.

• Other things we did well: YC has guest speakers come speak once weekly at dinner during the program, and there are really valuable nuggets of wisdom shared during those dinners. For example, Lyle Fong, the founding CEO of Lithium, gave a talk at a dinner about how he had to educate CMOs on the kind of social media platform Lithium was, so he made a maturity model diagram. That sparked Armory's creation of this "Stages of Software Delivery" diagram, which we've used extensively to help Global 2,000 enterprises understand what their future pain points will be as they adopt the cloud, as well as the benefits they can expect to garner.
• Things we could have done better: We've never utilized YC Office Hours as effectively as we could have. There are YC partners and domain experts that make themselves available to talk through challenges a business is having. I recommend leaning into that more than we did.

Optimizing YC's Growth Program (YCG F19):

In the fall of 2019, I participated in the "graduate" YC program, for YC companies that are scaling. I consider this program to be even more valuable than the initial YC batch experience. It's more intimate – our group was about 15 CEOs – and everyone is dealing with (or has just dealt with) the same types of issues. If the first YC batch experience is about figuring how to drive relentless early traction and growth, the YC growth program is about figuring out how to scale that growth, in every sense of the word – how to scale your functions, your executives, your culture, your size, yourself. And the vibe is entirely different: In the early YC batch days, you're just trying to make your startup become relevant and survive. But in the Growth program, it's clear that all the startups who have made it this far are solving a real problem for the world, and have a lot of growth in front of them. And the problems are much more abstract – more about how to align people and processes to scale the magic that's made the business get this far. I've made some incredible, true friendships from this group, and we continue to help each other via WhatsApp and meet on a regular basis.

• My #1 tip is to capture as much of the content as you can to share in permissioned ways with your executive team and managers. By the time you participate in this program, your company will have grown well beyond just the founders. Many of the great tips you'll hear will come from the dinners you attend, as well as how your fellow CEOs have managed similar issues. I highly recommend installing Otter.ai on your phone so you can ask the person sharing pro-tips if you can record it and make an auto-transcript to share with your execs. I did this a bunch during the program (Oleg, I'm looking at you, buddy!).

If you have the chance to do the YC Growth program, you should absolutely do it. (I'll invite the CEOs from our batch to leave more thoughts in the comments below).

The big thing to understand about YC before you join:

So yes, YC is very much worthwhile. What you get out of YC will very much be dependent on what you put into it. I haven't even mentioned the internal YC forum (cheekily called "BookFace") where several thousand YC alums serve as a resource for each other, as well as YC's Work at a Startup recruiting tool, the private VC resource rating directory, YC's Series A program, and other similar resources.  

Here's the main thing you need to understand before you apply: YC has a "standard deal" where they take a 7% stake in your company. YC also gets pro-rata rights in future funding rounds. If your company is really successful, you may find yourself in a position where you need to negotiate some of those pro-rata rights in order to make the round work (i.e., make enough room to accomodate new new investor demand). While YC will do its best to work with you based on your specific situation, you need to understand that you're signing up for a standard deal up-front, and that early seed-stage commitment may upset other investors. Other angel/seed/Series A investors can become unhappy when having to live on a cap table alongside YC.

Hope that helps! Feel free to ask any questions in the comments – and if you're also a YC alum, please share your pro-tips as well!