Investing Pre-YC

Being a new, inexperienced, and small investor, I really have to “take what the defense gives me.” Put another way, I am often forced to look in areas and stages where more professional investors wouldn’t go. Sometimes I ride along and go late, but lately, I’ve also been going early, and one of the things I try to do in these cases is see if the company has what it takes to get into Y Combinator in the next 3-6 months. Here, I help them prepare.

People may think of Y Combinator as a startup incubator, and in some cases it can be, but it’s really a startup selector and accelerator. And, over the past two years, it has quietly been moving upmarket, as well as growing in absolute size. This means on Demo Day you can see three companies in a row present, where one has zero revenue, one is making about $4k a month, and one is making $350k/month and growing. This distorts the Demo Day vibe a bit (and potentially puts less mature companies in a tough spot), but ultimately, the YC engine is about a huge, smart, network effect and growing. The best startups coming out of there are doing both, leveraging the network for advice and new customers and growing by any means necessary.

Which brings it back to me and Haystack. I love going to Demo Day but it’s also so big and fun and a firehose, it’s hard for me to make decisions so quickly. So, I meet a bunch of the companies earlier, like many others. So, I also try to meet people early who I think have a great idea and incredible drive and who could benefit from applying and getting into YC. I have a company in the current batch I did this with, and while it was a bumpy road, it worked out and the founders are loving the experience.

A final note: I do not have any special ties with YC to help with applications, and this approach doesn’t work all the time (I’m 2 for 3), but I do think it’s an opportunity to find founders who have already started something that’s beginning to work, and a big idea — if they’re thinking about something big, if they’re leveraging their limited resources, and if they’re focused on how to grow, it’s a fair shot to get into YC. Getting into YC doesn’t mean the company will be successful, of course — but the network, peer & time pressure, and focus on growth gives an early company a great chance to get to the next key milestones.