You don’t have to have millions of dollars or the best team possible to launch a winning startup. What you do need to have, however, is passion according to Sam Altman in an interview he gave with at Startup Grind 2015 When an entrepreneur has a project he feels passionate about, he’ll be much more likely to succeed than someone who simply launches a startup for the sake of launching one.
Incredibly Altman says that YC has yet to miss picking a unicorn company in their application process. “We track this obsessively through. We have custom software that just tracks this. There are a few companies that are doing pretty well but we have not yet missed a billion dollar company.” Altman adds that, “The thing that makes me sad is I’m sure there’s someone that we would have funded that we didn’t, that had we funded, would have been a multi billion dollar company. Probably many of those. There are a lot of companies that we fund that if we didn’t fund them, they just would never have happened.”
He goes on to say that the application volume is now so high that there are bound to be some big successes in the future they miss that just haven’t hit yet.
As president of Y Combinator, Altman has seen his fair share of startups. Passion, he’s found, is a common denominator in all the successes he sees. It’s important that people fully understand why they’re starting before they open for business. He believes it’s important that entrepreneurs take the time to fully develop an idea in project mode before declaring it a company.
Focus on Growth
While forming popular lodging reservation site Airbnb, the company’s founders drew graphs of their goals. From week to week, they set a goal of growing ten percent and hung copies of the graph all around as a reminder. Altman has found that startups who focus on gradual growth tend to place themselves in a position to succeed.
“Very ambitious startups often take a long time to work—or sometimes they take a very long time to look ambitious,” Altman says. Citing Reddit and Facebook as examples, he adds, “I think it’s important to allow something like that to happen.”
Raising Capital
The obvious prevailing problem among startups is capital. Altman feels in recent years that businesses assume they must have millions of dollars in funding to be considered a real startup. When Y Combinator first started, Altman noticed startups took pride in being able to operate with a small amount of capital. He believes it is still an incredible win if a startup can operate on a small amount of capital and build their own products. Giving Due as an example.
“Generally you want to raise capital either when you have to or when it’s really easy,” Altman says. “If the company desperately needs money and they can’t figure out any other way, then they need to raise money. Or if someone’s offering you easy money on good terms, you should take it because you can use it for good things.”
The Best Founders
One of the ways Y Combinator has been able to identify the truly great entrepreneurs by how quickly they execute their ideas. The best founders generally accomplished a large number of tasks between meetings with Combinator, while mediocre founders tend to always have excuses for their sluggish progress.
One thing that sets Y Combinator apart from other investors is they focus exclusively on entrepreneurs. Funding great companies is important, but Altman finds that investing in founders is extremely important. Through supporting startups and innovation, Y Combinator believes it can drive continuing improvements in the country’s economic infrastructure.
Fund People
While it’s hard to predict what will be successful several years down the road, Y Combinator has found a formula that works. They do this by putting their support behind the smartest, most determined people they can find with the clearest vision, regardless of whether they know for certain the idea will be the next big thing. Y Combinator tries to fund companies working in markets with long-term outlooks, but they’ve found that isn’t always easy to get right.
“We are the most successful when we fund things that other people don’t yet think are going to be a really big deal but two years later become a big deal,” Altman says. “And it’s really hard to predict that.”
Competition for participation in Y Combinator may be fierce, but the company is always looking for the next great idea. Whether a startup participates in an accelerator or not, Altman has valuable advice that can help them increase their chances of success.