20 VC 032 Inside Y Combinator with Nicolas Michaelsen, Founder @ AirHelp

In episode 32 of the 20 minutes VC, host Harry Stebings is joined by Nicholas Michaelson, founder of Airhelp and Y Combinator alum, to delve into the intricacies of Y Combinator's startup ecosystem. Michaelson shares his entrepreneurial journey, from starting marketing agencies to co-founding Airhelp after experiencing the arduous process of claiming compensation for flight disruptions. He discusses the importance of being concise and clear in Y Combinator applications, the rigorous interview process, and how their acceptance into the program provided a significant valuation boost and a powerful network. Michaelson emphasizes the value of setting short-term goals and the ongoing support from the Y Combinator community. Looking forward, he envisions Airhelp evolving into a comprehensive platform for air travel assistance, aiming to improve customer satisfaction amidst the industry's cost-cutting trends.

• Harry Stebbings introduces episode 32 of the 20 minutes VC.
• Nicholas Michaelson, founder at Airhelp and Y Combinator alum, is the guest.
• The episode will cover an insider's perspective on Y Combinator, including admissions, interviews, and the value it adds to startups.

Harry Stebbings: "Now, I'm so excited to bring you today the insider's perspective on all things Y Combinator."

The quote highlights the focus of the episode on providing listeners with an in-depth look at Y Combinator from someone who has experienced it firsthand.

• Nicholas has a background in marketing and has started marketing agencies and tech startups.
• He has experience with the ups and downs of entrepreneurship, including financial losses and gains.
• Airhelp was started due to personal experiences with flight delays and cancellations.

Nicholas Michaelson: "So my background is within the marketing space. I have started marketing agencies in the past and also tech startups."

The quote provides insight into Nicholas's professional background and his entrepreneurial journey prior to founding Airhelp.

• Airhelp was founded after Nicholas and his co-founder Henry faced frequent flight disruptions.
• They discovered consumer protection laws that require airlines to compensate passengers for delays, cancellations, or overbookings.
• The process of claiming compensation was difficult, involving outdated methods and often leading to rejections without proper explanations.

Nicholas Michaelson: "And we got to the point where we're thinking, or we were know there must be something that protects us as consumers."

The quote explains the motivation behind starting Airhelp—finding a solution to a common problem faced by travelers.

• Airhelp started with a simple landing page to gather data rather than assumptions.
• The company gained traction after appearing on a consumer rights show in Denmark, leading to 3,000 site visits overnight.
• Nicholas and his team spent two months understanding consumer pain points and airline processes before building the system.

Nicholas Michaelson: "So we built this very simple landing page. Threw that up."

The quote describes the initial steps taken to validate the Airhelp concept and the importance of building a product based on actual consumer demand and data.

• Nicholas acknowledges Y Combinator's significant influence in the tech industry over the last decade.
• The decision to join Y Combinator was influenced by its reputation and the lack of consideration for more local incubators.

Nicholas Michaelson: "So I think to be honest, Y Combinator in the last decade or so has just been such a big, massive force in the tech industry."

The quote explains why Y Combinator was the chosen incubator for Airhelp, emphasizing its prominence and impact in the startup world.

• Entrepreneurs from Denmark viewed Y Combinator as the "holy grail."
• They applied without high expectations but for the experience and potential bucket list achievement.
• Received an invitation for an interview and traveled to Mountain View to meet Paul Graham and Jessica Livingston.

So for us, it was definitely like the holy grail. We were entrepreneurs from Denmark and thought, to be honest, that it was kind of a long shot. But we said to ourselves, well, at least it's going to be a good experience for us, just like writing up this application. And then if not, then we could check it off the bucket list. And we applied and they ended up inviting us for an interview. And so we flew to Mountain View to interview with Paul, Graham and Jessica.

This quote emphasizes the high regard the entrepreneurs had for Y Combinator and their pragmatic approach to the application process, viewing it as a valuable experience regardless of the outcome.

• Clarity and conciseness are crucial in the Y Combinator application.
• Applicants must explain their business simply and understandably.
• Industry jargon and abbreviations should be avoided to ensure clarity for a general audience.

So I think the most important thing is just that you're very clear and very concise on what you're doing. You should be the expert on whatever you're building.

Nicholas Michaelson highlights the importance of being able to articulate the business concept in a straightforward and expert manner, which is essential for the application.

• The ability to communicate the business idea and its value is more important than delving into complex details.
• The focus should be on why the idea is compelling and why the team is capable of succeeding.

You don't have to go into this very muddy detail about how it is structured and everything like that. Even though it is, of course, very tech based in nature, it's more important that you are able to communicate what it is that you're doing and why, and then also why you are the ones who are going to be able to succeed with this.

Nicholas Michaelson advises that the communication of the business idea's core value and the team's potential to succeed is more important than complex technical details in the application.

• Y Combinator interviews are structured with 3-4 partners and last about 10 minutes.
• Questions are aimed at verifying the application's authenticity and understanding the team's capabilities.
• The interview serves as an opportunity for valuable feedback, regardless of the outcome.

So they're structured that you have three to four of the partners that sit with you in a room, and then you have about ten minutes where you talk about your idea and they ask questions.

Nicholas Michaelson describes the intense and brief nature of the Y Combinator interview, emphasizing the partners' focus on assessing the team's understanding and commitment to their idea.

• Interviews are concise, focusing on the product, the user value proposition, the team's advantages, and past achievements.
• Questions are designed to gauge the team's potential for success in the industry.

So it's more about. Again, it's ten minutes. Of course, they will drill down into some of the more technical aspects, but it's more stuff like, so what are you working on? Why should users try you? Why are you better than everybody else? What's the most impressive thing you've done in the past?

Nicholas Michaelson explains that the interview questions are aimed at understanding the product's unique value, the team's competitive edge, and their track record, which are key indicators of potential success.

• The interview involves a two-tier voting system, including both partners and alumni.
• A positive vote from either group can lead to acceptance into Y Combinator.

So you have two sets of voting, right? You have one, which is the partners that are in the room, and then you also have the alumni that can refer you.

Nicholas Michaelson reveals the dual voting mechanism for acceptance into Y Combinator, involving both partners present during the interview and alumni references, indicating multiple avenues for approval.

• Y Combinator's acceptance is highly influential, especially for European entrepreneurs.
• Acceptance into YC provides a significant seal of approval that carries weight for many years.
• Being accepted into YC is humorously compared to being better than a Stanford MBA.

That was know again especially being a european entrepreneur and being accepted know Silicon Valley in that way was the world's biggest. Oh yeah, yeah. And it just, it gives you a seal of approval that will affect you for many years to come. We jokingly refer to it as better than a Stanford MBA.

This quote emphasizes the prestige and long-term benefits associated with being accepted into Y Combinator, highlighting its impact on an entrepreneur's career and its comparison to a renowned academic qualification.

• YC provides a small amount of funding for living expenses, but participants must find their own accommodation.
• The structure of YC is different from other accelerators, with no co-working space provided.
• Participants attend Tuesday night dinners and office hours with partners.

Yeah. So they will give you a small set of money that you can live for essentially while you're going to YC, but you have to find your own accommodation.

This quote explains the logistical aspect of the YC program, where participants receive financial support but are responsible for their own living arrangements.

• Office hours are conducted with a group of 5-6 companies from the batch.
• Companies present their numbers and receive feedback from YC partners who act as tutors.
• The focus is on week-by-week growth rates and maintaining accountability for KPIs.

So you start off the day with having office hours with your batch. So you have different groups in each batch where you have, I think it was like five, six companies. And then you sit sort of a roundtable and you present your numbers and then you get feedback from the partners that are your tutors for the duration of YC.

The quote describes the structure of office hours at YC, where companies share their progress and challenges with partners and receive guidance, emphasizing the collaborative and supportive environment.

• Entrepreneurs are encouraged to focus on immediate, actionable metrics rather than distant goals.
• Weekly updates on growth rates and KPIs are essential for tracking progress and achieving exponential growth.

Yeah, I see this all the time where some entrepreneur says I want to grow this into a billion-dollar company. And then my question is what's your number is going to be next week, because that's really what you can affect.

This quote highlights the importance of short-term, measurable objectives in the entrepreneurial journey, suggesting that consistent, incremental progress is key to long-term success.

• Each group at YC is assigned a set of tutors who are industry experts.
• Tutors provide guidance throughout the three-month program.
• Learning from the creators of influential products like Gmail can be a transformative experience for startups.

Yeah. So in our group we had Kevin Hale from Wufu, Paul Bukhites who built Gmail. We had Tara, who is, you could call her CFO of Y Combinator. And every group has their own set of tutors that will follow you through the whole process of the three months.

The quote outlines the caliber of tutors involved in YC and their role in mentoring the participants, indicating the level of expertise and support provided to startups during the program.

• The amount of guidance received from YC tutors is proportional to the effort and engagement of the startup.
• Startups are expected to be proactive in seeking input and leveraging the resources available.

So YC is structured in a way where it's very much the input you get is also the output you're going to get. So they're not going to

This incomplete quote suggests that the value derived from YC's tutoring is contingent on the startup's active participation and utilization of the expertise offered by the tutors.

• Y Combinator (YC) significantly increases startup valuations.
• Accepted startups are typically valued at two to three times the standard valuation.
• The rigorous pre-vetting process at YC assures investors of the startups' potential and competence.

"Massive. While we were going through, there was a number that was floating around like it's like two to three x of the standard valuation."

This quote emphasizes the substantial impact that Y Combinator has on the valuation of startups that participate in its program, with valuations often tripling as a result of the YC endorsement.

• Short-term goals were an important learning aspect.
• The YC alumni network is invaluable for ongoing support and connections.

"I would say it's two things. One is the short term goals. That was really a big eye opener for me. And then two is definitely the alumni and the network that we got out of Y combinator."

Nicholas Michaelson identifies the focus on short-term goals and the strong alumni network as the most significant benefits from his Y Combinator experience, highlighting the practical and community support aspects of the program.

• YC alumni form a strong community that offers assistance and introductions.
• Community members share experiences and provide advice to address challenges faced by fellow alumni.

"Yeah, exactly. It's a very strong community and the way it works, essentially, if you have anything, you have a challenge, then you can send it out into the community saying, can you help me with this?"

Nicholas Michaelson describes the YC alumni network as a supportive community where members actively help each other overcome challenges, illustrating the collaborative spirit fostered by Y Combinator.

• The three-month YC program is described as overwhelmingly positive.
• There is no desire to have done anything differently, with the focus on growth and making the most of the experience.

"To be honest, no. Those three months are very overwhelming in a very positive way. And I think the best you can do is just make sure that you stay on track, that you grow and just get the best of it."

Nicholas Michaelson reflects on his YC experience with satisfaction, suggesting that fully engaging with the program's growth-focused activities is the best approach, rather than having regrets or wishing for different actions.

• Weekly goals create a positive social pressure to achieve results.
• The hardest part is maintaining the pace to meet these goals.

"The hardest part, again, it comes a bit back to this thing about having these weekly goals that you need to accomplish."

Nicholas Michaelson acknowledges that keeping up with the weekly goals is challenging but also recognizes the positive motivation that comes from this structure, which drives startups to consistently show progress.

• Plans to evolve into a platform that provides immediate assistance for any issues during air travel.
• Aims to improve the air travel industry by offering a model where airlines can have happier customers.

"We're moving into a space where we want to be able to help you whenever anything goes wrong on your air travels."

Nicholas Michaelson outlines the future direction for AirHelp, intending to create a more responsive platform for travelers and improve customer satisfaction within the airline industry.

• Host Harry Stebbings thanks Nicholas Michaelson for his participation.
• Reminder to subscribe and leave a review for the podcast.

"Fantastic. And Nicholas, thank you so much for coming on the show. It's been an absolute pleasure having you."

Harry Stebbings concludes the interview by expressing gratitude to Nicholas Michaelson for sharing his insights, and encourages listeners to engage with the podcast through subscriptions and reviews.