If you want to start a company, you’re not alone. Aspiring entrepreneurs filed 5.5 million applications for new businesses in the U.S. last year — a record high.
Though only 55% of small businesses make it past the five-year mark, the 1.5% to 2% of startups accepted into Y Combinator may have a different outlook.
YC is a three-month program that helps startups get off the ground. It gives select startups a $500,000 overall investment in exchange for a stake in the company.
Since its founding in 2005, YC has invested in more than 5,000 companies with a combined value of $600 billion. Thirty-nine percent of companies that go through YC have raised a Series A or at least one significant round of external funding.
Reddit, Airbnb and Instacart all had their start at YC.
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YC has a free online Startup School available to help educate future founders. Though the course is available on YouTube, taking it through the company site allows viewers to access a “Co-founder Matching” platform, which could help them find a co-founder.
YC’s Startup School answered five key questions for me — and the answers may also be useful for first-time entrepreneurs. The course addressed everything from finding the right idea to building a product.
Here are the questions posed and the answers I learned from the course.
Should I launch a startup with no experience?
The first question that potential founders might ask themselves is: Am I cut out to run a startup?
In the course, YC group partner Harj Taggar explains that the most important character trait of a successful founder isn’t where they went to school or how confident they appear to be. Taggar instead says that the most important quality for success in startup founders is resilience.
Building a company can be intensely personal, and founders will likely have to endure rejection from users or potential investors. Resilience can exist independently of a founder’s motivations or reasons for launching a startup.
Taggar says something that might reassure first-time founders: It’s okay to start a company for the money.
“I actually think it’s fine to start a startup to become rich,” Taggar says. “Startups are one of the few ways to make life-changing amounts of money in a relatively short period of time. If the desire to make money gets you started, then great. Go for it.”
It’s also fine to start a company without any prior experience to try to get a sense of what it will be like. “Actually doing a startup is the only way to know for sure if you’ll enjoy it,” Taggar says.
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How do I find a winning startup idea?
In answering this question, YC group partner Jared Friedman studied where the founders of the top 100 YC companies, including Dropbox, DoorDash and Stripe, got their ideas.
He says that the best way to get startup ideas “is to just notice them organically.”
At least 70% of the top 100 YC companies found their ideas this way instead of sitting down and trying to force a startup idea. “The problem is that when people sit down and try to think of startup ideas, they tend to think of bad ones,” Friedman says.
To come up with a good organic idea, Friedman recommends becoming an expert on a valuable topic, working at a startup and building interesting things with programming.
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Is it important to have a co-founder?
Building a startup without a co-founder can make the journey “twice as hard,” says former YC visiting partner and current chief product officer of Memora Health Divya Bhat.
Both Bhat and YC head of product Catheryn Li recommend having a co-founder or someone there from the beginning to help build a company. Co-founder teams have a productivity advantage — startups have to move fast, and having help can be a bonus.
According to Bhat and Li, co-founders also benefit from moral support, which can be useful if times get tough.
The co-founder advantage is more than just theoretical — Li says that empirical evidence supports it, too. “Most successful companies have been started by more than one founder,” Li says.
Related: 7 Traits to Look For in a Co-Founder
How do I build a product?
The MVP, or minimum viable product, is often “ridiculously simple,” according to YC group partner Michael Seibel.
“This is the first thing you can give to the very first set of users you want to target to see if you can deliver any value at all to them,” Seibel says.
The question of how to find your first users shouldn’t be an issue if you’re trying to solve a problem with your company that affects even one person — that person would be the user.
The MVP doesn’t have to be perfect or have the full functionality that you envision. The goal is to launch it quickly, get your first set of customers and get feedback from them.
Seibel points out that Airbnb’s MVP, its first landing page, did not process payments or offer a map view. The person who built the website and wrote all of the code was working part-time.
“Everyone tells these kinds of magical stories about how everything was perfect from the beginning,” Seibel says. “Airbnb. Not perfect from the beginning.”
Related: Airbnb Reveals Major Changes to Platform for Hosts, Guests
How does fundraising work?
YC group partner Brad Flora debunks common startup fundraising myths — the first being that fundraising is glamorous and high-pressure, like on Shark Tank.
The reality, according to Flora, is that fundraising looks less like a TV show and more like a coffee chat.
“Actual fundraising is just a bunch of one-on-one meetings on Zoom, over and over again, while you try to collect checks and convince investors,” Flora says.
Related: A 29-Year-Old CEO Quit Microsoft To Build His Startup — And Just Scored A Deal on Shark Tank
You also don’t have to raise money before starting a company. Fundraising can come after a minimum viable product.
Flora recommended building a first version of the product first, getting some users and then raising money. Founders can build a website, create software and find early users more widely and cheaply than ever, according to Flora — so they should.
“Investors want to jump on trains that are in motion,” he says.
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