Why apply to Y Combinator, and what are Y Combinator alternatives?
As an early-stage B2B SaaS founder, one of your most important functions is to find opportunities for growth in the form of educational resources, fundraising options, and accelerator programs. You may have come across Y Combinator, or YC, in your research. It’s a huge name in the startup space – maybe even the name.
But what is YC, what’s so great about it, and what do you need to know before you apply? Today, we’ll break down the key elements of a strong YC application, next steps if you get accepted, and resources that can help if you don’t get accepted.
What is Y Combinator?
Y Combinator is an American venture capital firm and startup accelerator. Since 2005, Y Combinator has launched over 4000 technology companies with a unique combination of funding, mentorship, and community networking.
About Y Combinator
Y Combinator was started by Paul Graham, Jessica Livingston, Trevor Blackwell, and Robert Tappan Morris. Since their founding, Y Combinator’s roster of alumni has grown massively, including tech giants Twitch, Dropbox, Airbnb, Coinbase, Reddit, and more.
The Y Combinator ecosystem is valued at over $600 billion.
The Y Combinator model
Offering a unique model that combines funding with community, mentorships, and presentation opportunities, Y Combinator is incredibly competitive, accepting four cohorts per year with acceptance rates as low as 1.5%. Many applicants, including Dropbox founder Drew Houston, apply multiple times before being accepted.
Y Combinator’s mission is to empower a wider range of startups and founders to be successful, including founders of marginalized backgrounds and identities.
To quote Y Combinator’s founding principles, the organization “represents the union of two ideas that had not previously been combined: the application of mass production techniques to startup funding. Funding startups in batches is not only more efficient, but also better for founders.”
Benefits of Y Combinator
With a mass production approach to funding, Y Combinator offers a standard deal to all accepted applicants: $500,000 in exchange for 7% equity. $125,000 of the investment is converted into the fixed 7%, while the rest of the funding gets invested on an uncapped simple agreement for future equity (SAFE) with a most favored nation (MFN) provision.
Beyond financing, Y Combinator’s most unique offering is their support system and network. As part of a cohort, you are invited to join an ecosystem that includes founders, YC alumni, lawyers, mentors, and industry experts who are invested in making your business successful. With its bootcamp-like structure, your three-month period at YC will be intense, highly-structured, and incredibly fulfilling if you’re willing to put in the work.
YC structure
Accepted startups are split into four groups, and then smaller subsections, allowing for an intimate feel and the building of close relationships with your advisors and fellow startup founders. You’ll meet in small groups for discussion, as well as have one-on-one office hours with industry experts.
You’ll gain access to Bookface, a networking platform that allows you to claim expertise in your areas of specialty, as well as look up other YC attendees or alumni who excel in skills and fields that you may need advice in. Other benefits include alumni talks, public launch support, meetups, and Demo Day, which is an opportunity to present your company to a select audience of investors and press.
YC offers continued support as companies navigate funding, contracts, and alumni events.
Drawbacks to Y Combinator
YC isn’t for everyone. Not all founders will benefit from such a structured program, and not every company is a great fit for the VC model. If YC isn’t for you, you can still benefit from the library of resources that they publish, so you can take advantage of the collective wisdom and experience that the organization has amassed over the last two decades.
Applying to Y Combinator
Every year, thousands of incredible startups get rejection letters from Y Combinator. Over 10,000 startups apply for every cohort, with many of them getting multiple rejections before getting accepted. A strong application consists of several distinct sections that demonstrate:
- A large enough problem that your product solves.
- Extraordinary founder qualities and vision.
- A proven market and audience who care about your business.
- Excellent timing within the market.
- A strong recommendation from an alum on the program.
- A willingness to try again when rejected.
Y Combinator application elements
In order to prepare a strong application, start with self-reflection. What does your company bring to the world that no other company can offer? What are your unique strengths as a founder, and why are you the perfect person to bring this product into the future? Here’s what you’ll need as you build out your application.
- A concise product description.
Convey what your product does in grounded, focused language. Avoid overarching statements about the state of the industry. Be specific and clear, and keep it short. This part of your application should grab a reader’s attention and tell them exactly what your product offers.
- Who are the founders?
Y Combinator is an incredible accelerator, but it’s not a fit for everyone. Do your research on YC alumni to get a sense of what various founders got out of the program. Do they seem to have similar values and goals? Then YC might be a great fit!
The YC selection team wants to know that you’re a hard worker, driven, and have a vision. Startup success is rare, so YC wants to know that you have what it takes to bring your idea to the next level.
Be specific! Avoid blanket statements about your work ethic and commitment to projects. Use your application to tell your unique story of overcoming challenges and achieving extraordinary things. Don’t be shy – it can feel awkward to brag about your accomplishments, but your Y Combinator application is an opportunity to show the world what you’ve got.
- What makes your company unique?
There are millions of startups worldwide, and most of them fail. If you’re building a rideshare platform, you’ll need to be able to express how it’s different from Uber or Lyft. If you’re building a CLM platform, you need to know how it’s different from Conga or Docusign.
Knowing how to differentiate your product in the market not only shows that you can meet a unique niche of market need, but also primes you for stand-out marketing potential. To get accepted to Y Combinator, you need to be working on something unique.
- Prepare a video
Currently, Y Combinator doesn’t require an application video, but they accept them, and we highly recommend that you complete one. It gives the selection team a better sense of who you are, and it shows that you’re willing to go the extra mile to make a connection.
Take your time with the video and record with a quality camera, good lighting, and a neat, presentable wardrobe.
- Think outside the box
One of the application questions prompts you to share a time that you “most successfully hacked some (non-computer) system to your advantage.”
This is a great opportunity to show the selection team that you’re a flexible, creative thinker who loves putting theories to the test. How have you beat the system or altered it to benefit you? The fast-paced world of startups requires constant focus and nimbleness, and Y Combinator will want to see that you have those skills and have put them to work both in and out of your work.
Take advantage of past examples
There are many sample Y Combinator applications online – check out the 2007 Dropbox application here. You can also search for Y Combinator application videos on YouTube to get a sense of what a professional application video looks like. Do your research and look up applications from alumni companies.
Show the YC team who you really are
While research and a robust familiarity with past successful applications is key, it’s also important to ensure that your YC application reflects you and your company. Avoid copying a past application, and instead invest time into reflection and market research.
Y Combinator wants to see that your ideal will change the market landscape, and that your founder team is the exact team that can make an impact. While past applications are a great starting point, the most important aspect of your application will be your stand-out storytelling. Be yourself!
Is Y Combinator a good fit?
Y Combinator provides funding, mentorship, and a close-knit network that can support your company as it grows. Many of today’s giants are alumni of the program, and now work as mentors and resources for early-stage companies coming up through the YC program.
But with an extremely competitive application process and low acceptance rates, Y Combinator isn't a possibility for everyone. Additionally, certain companies simply aren’t a great fit for the program.
Moving forward without YC
If your company isn’t a good fit for Y Combinator, or you’ve applied multiple times without success, it doesn’t mean you’re at the end of the road.
Securing funding for your B2B SaaS company
If you’ve decided to move forward without Y Combinator, chances are you still need to secure financing that can help your company grow. Here’s what we’re seeing in the future of B2B SaaS funding:
Private Equity
Private equity funding trades funds for shares in a company that is not yet publicly traded. As a high-risk, high-reward investment, your investors can become strategic partners and offer mentorship. On the flip side, private equity dilutes ownership and control.
Venture Debt
Venture debt funding is typically available to high-growth companies with VC backing, and can be less dilutive than equity funding, but also comes with compliance costs, restrictive covenants, and strict repayment requirements.
Traditional Bank Loans
Traditional bank loans have a predictable structure and repayment schedule, and provide funding without dilution. Interest rates can be high, and funding can take time to secure, which can pose difficulties for fast-moving companies in the SaaS space.
Non-Dilutive Revenue-Based Financing (RBF)
Revenue-based financing provides funding based on your predicted ARR. In this model, the funding available to you scales alongside your growth, allowing you to access more funding as you invest in growth levers.
RBF is non-dilutive, allowing you to maintain full ownership of your company, and funding is typically available quite quickly through a proprietary underwriting process. Available without covenants or high interest fees, RBF can cover essential costs that help power growth.
Grow your B2B SaaS company with Capchase Grow
Capchase Grow is a non-dilutive revenue-based financing platform that allows you to power long-term, sustainable growth on your terms. Draw when you need to, and only pay for what you use. With funding available in as little as 48 hours, Capchase Grow can meet both your immediate and long-term funding needs, allowing you to invest where you need to.
It’s predictable, scalable, and transparent funding that allows you to focus on more important tasks, like bringing your vision to the next level.
Learn more about Capchase Grow and see how much financing you qualify for.
