Kat Manalac of Y Combinator
[From Japan to the World, we offer the $1B company challenge] Interview with Y Combinator’s Partner, Kat Manalac
[Bay Area Investor Series] This time, we interviewed Kat Manalac who is a partner at Y Combinator, a world class accelerator that brought about DropBox and AirBnb. Talking about how YC became an excellent accelerator and their rigorous selection process, Kat Manalac gives valuable advice for Japanese startups that are challenged to join YC.
The YC community is thought to be for the next 100 years.
Interrogator (I): For those startups that are outside of the US, what sort of advantages do they have if they join YC?
Kat Manalac (K): There are a few points to mention. First of all, YC is a very efficient means for startups to expand their businesses from overseas to the US. Actually, there are many teams that are participating from outside the US. One example is Memebox from Korea, who participated in the last batch. Although they are originally from Korea, they did well and grew. In order to enter the American market, they chose to participate in YC. After that, they were able to receive a lot of support from us and were able to expand their business well. In the past, we were able to help bring about great products like Dropbox, Reddit, AirBnb, and others. I don’t think that other accelerators can offer that kind of knowledge sharing.
Secondly, one attractive point is that for startups abroad we offer access to top class investors in America. A lot of VCs from America follow the investments of startups abroad. After three months of a rigorous program, during the final Demo Day, about 450-500 investors gather and this makes it very efficient to approach investors. Without the connections of YC, I think it would be very rare for teams abroad to have those kinds of relationships.
Lastly, ClearTax, which was a team based in India, had also joined the last batch. They were originally focusing on the domestic market in India but suddenly they had plans of expanding to the US which were originally not there. This kind of startup case is something that, in our policy, we support proactively. We give universal advice on growth and fundraising, how to make a product that people want, creating your vision, anything related to coding, and any other problems that startups all over the world have in common.
I: What kind of teams do you support during the duration of YC’s program?
K: Within the YC program, we establish office hours for each group. For two weeks, groups meet about 5-6 times with partners that provide mentoring. It’s a chance for other teams to share what they have learned with others and for other companies to provide feedback as well. At the same time, one valuable part is that startups are also able to check the business process of others and think of solution strategies for processes. Aside from the office hours, there are one-on-one office hours that are also allotted. You can reserve office hours up to 9 times. Each team can take the opportunity of sharing their thoughts on the most suitable solutions with the partners.
To sum everything up, every Tuesday, we all have a dinner with the startups participating in the batch. This kind of opportunity to meet up with people is quite valuable for the startups. The process of startups can be quite lonely. This means that since we don’t share our office, people who visit the Bay Area come from different places like from their own apartments or offices. Developing your startup can get really lonely. Because of that, the Tuesday evening meetups at the YC office become a really important chance for everyone to meet. In that place, we are able to share the progress that our companies are making, ask and hear things off the record from well-known speakers, and also get a chance to mix and mingle with everyone. Outside, we go to a safe place where we’re not allowed to Tweet (laughing). You get to hear about the real stories of how all startups are progressing. Above getting something beneficial for you, you are able to hear advice that you can put into practice. For example, you can hear straight from Facebook’s Mark Zuckerberg, Indiegogo’s Founder, or Twitter’s founder the stories of how it was like to put up their startups in the early days.
Also, we hold monthly workshops on topics that we select. We select from more niche topics like PR, growth, or hiring. For example for B2Bs, we talk about companies shifting to hardware and the special permits needed.
And one more program that we’re running is for alumni of our program to have strong relationships where they help each other out. This is where people have a chance to talk directly with those who participated in past batches and who have done relatively well. There were actually teams who were mentored by the founder of Stripe. These people usually walk along the same paths and so they are able to get concrete advice.
I: What’s the difference between YC and other accelerators?
K: YC is the first ever accelerator that was formed. In 2005, before anyone did anything, we tried out the accelerator model and steadily over 10 years we became more well-received. At Cambridge, Paul Graham and Jessica Livingston carried out the first batch and from that time, amazing startups were created. Startups like Reddit, YC’s current representative Sam, who created Loopt, Justin TV, and Twitch’s founder, Justin Kan. The first people who began startups become a wonderful community. I don’t think that other accelerators would have this kind of cooperative network from its alumni. Until today, there have been more than 700 companies and 1400 people who have become founders. One unique aspect is that everyone is able to work successfully with each other. Whether it be a problem of connecting with the outside or having problems with the SEO, all generations are able to have a connection with everyone and say “I can help you!” It’s not our partners who are our weapons but rather it is this community that really becomes our strength.
Usually, since it hasn’t been 10 years since its establishment, the community is still young. For this community, we cannot think of things in a short time frame. YC is a community that thinks in terms of a 100 years. We made it much like how universities are where there’s a community that is built.
The most important thing is your team.
I: In order to be selected as a participating team for YC, what requirements are you looking for? Is it the team, traction, or ideas?
K: We put a lot of importance on the team. The reason behind that is during the early stages, we often hear that the founders become scattered or disorganized. At that point, we take a look at whether the founder has balance, whether the members are able to understand the importance of each other’s skills and talents, or if there is good communication. We also take a look at whether the team members have had experiences working together, how long they have known each other, and how much they understand each other. After that, we take a look at the team’s enthusiasm. Why they created this startup and would these people have problems over the next ten years of their lives? That’s something important. Running a startup is very challenging so if the team finds no meaning in what they are doing, it won’t be able to function.
In addition, the next step would be to create a strong story and that is where traction becomes essential. There is a lot of persuasive power in a product that can say they have thousands of users and are raising a said amount of capital. The fundamental idea that we share is : “To create a product that somebody wants”. To be certain, you don’t have to talk too much to potential users. You have to concentrate on how to make the first few users happy. As a result, you can create a persuasive story from that. A good team, a burning passion for certain issues, and a powerful story – should a startup have all of these things, we welcome them within our batch.
I: What’s the #1 most important thing during the first stage of the application process (document screening)?
K: What we have often heard from past founders is that the questions from the first stage of the application process is a good exercise. We ask things regarding the business, the team, and also things that you might have never thought of before. Not just about the vision but topics like how you plan on acquiring users, is the role of the founder clear, etc. There are at least 3 different partners who take a look at each application’s answers. There are different parts that we give different values in and so giving solid advice is quite difficult. Just answer honestly (laughing).
I: What’s one important thing that Japanese startups should know about to reach the end of the selection process?
K: Until today, each batch has received more than 3000 applications. The quality of the application has to be very high. From that number, about 340 companies are called for the final interview. Until the interview, each application is being reviewed so we have to really understand what these startups are doing and what they want to do. Aside from the demo that they give, we place a lot of importance on the way the team thinks inside, their communication, and whether or not they have a vision that can continue for 10-20 years. It’s also important that they are not fighting (laughing). They will be together in a small place for a long time so the atmosphere of the team is crucial. On the day of the interview, we ask very detailed questions about their growth rate, traction, solution plans and problems. Whether these are Japanese startups or not, these are the things that all startups get into.
I: What type of reference (recommendation) is required?
K: We require a reference from one of our alumni. There’s a higher likelihood that an application will pass YC if they have a comment from an alumni saying, “This is a wonderful team!” Up to now, the kind of reference that job-hunting normally requires is not that important.
From Japan to the World, we offer the $1B company challenge
I: For those startups that will participate, what level of English do you require?
K: If your level of English is able to explain well what you want to do, I don’t think there will be that big of a language problem. If there is someone in the team who can talk fluently in English, give a 2 minute 30 second presentation on Demo Day, and handle a meeting with investors, I don’t think there will be that much of a problem. For this batch, we have 17 people from France. They have an accent but they were able to manage well. If a strong team is more or less poor in speaking English, as long as there is one person in the team who can speak fluently in English then it shouldn’t be a problem. Although I don’t know the exact number for all the batches, until today we have had founders from more than 27 countries participate. We have an increasing number of founders who speak in their mother language rather than English. Also, from our batch now we have at least one who has born in Japan! Although, I think that he was brought up in the Bay Area.
I: A few days ago, YC’s main representative was changed from Paul to Sam. What kind of policy changes do you think will occur?
K: I don’t think anything will change on a foundational level. We were able to add a few new partners to adapt to the scale. For this current batch, we accepted 84-85 companies so we needed more hands. We revised the investment policy to have a system where 7% of 200,000 dollars worth of shares will be received. Previously we had a policy where more than $20K was required to be invested in the YC fund. That’s where most of the main changes are. In addition, Sam is well respected in the field of energy and biotech.
I: Will participating teams have an opportunity to get mentorship from Paul Graham (co-founder of Y Combinator)?
K: Yes, during the continuous office hours, teams will get mentoring from Paul Graham.
I: The startup school is expanding and starting to be developed in London and other countries outside the US. Is there any plan to hold an exhibition in Japan?
K: Of course we have plans of expanding. Although we don’t have any concrete plans as of now, we are thinking of expanding to Asia. Japan is definitely one of the front-running countries.
I: Can you give a message to challenge those Japanese startups in joining YC?
K: We are always searching for the next $1B dollar company. And not just in America. There is a high likelihood of them being in India or Japan as well. Even without the participation in YC and that connection, there is excellent talent across the globe and they are slowly going towards startups. Of course, if there is a selection program that we can do, we can support it fully. We look forward to teams from Japan that have great passion and who are up for the challenge!
Google, Wired Magazine, Reddit, and joined YC after Samsung. At YC her responsibilities include: talking with select candidates and organizing events like the Startup School, Hackathons, etc. She also covers events and creates online portfolios to introduce companies.
This article and picture is provided by TechWatch. Article is translated in English by TechShake with approval from TechWatch.