20 VC 076 Y COMBINATOR WEEK Aaron Harris, Partner @ YC



In this episode of "The 20 Minute VC," host Harry Stebbings interviews Aaron Harris, a Y Combinator (YC) partner and former co-founder of Tutorspree. Harris shares his journey from finance to entrepreneurship, highlighting the significance of controlling one's destiny and the impact of technology in education. He delves into YC's hands-off approach, emphasizing the importance of founders being the primary decision-makers of their companies. Harris explains that YC's structure during its three-month program includes influential guest speaker dinners and targeted office hours for addressing specific challenges. The conversation also touches on the role of mentorship, the criticality of product-market fit, and sustainable growth metrics. Harris underscores that startups should focus on building a successful company rather than prioritizing fundraising. Looking ahead, he expresses excitement about funding innovative ventures in fintech, particularly in the property and casualty insurance space. Throughout the interview, the value of having great co-founders and maintaining a laser focus on product and user interaction is reiterated as key to startup success.

Summary Notes

Introduction to Y Combinator (YC) and Aaron Harris

  • Y Combinator is the world's most famous accelerator.
  • Aaron Harris is a partner at Y Combinator and hosts the Startup School podcast.
  • Aaron co-founded Sequoia-backed Tutorspree, which was funded by Y Combinator in 2011.
  • Before Tutorspree, Aaron worked at Bridgewater Associates in product and operations for an analytics group.

You are listening to the 20 minutes VC and today we return to the magic of YC following our amazing interview with Kirsty Nathu, CFO y Combinator, for our very special feature week featuring the world's most famous accelerator. And today we bring you Aaron Harris, partner at YC and also newly one of my favorite podcast hosts with his brilliant new show, Startup School for all startup lovers.

This quote introduces Y Combinator as a highly regarded accelerator and Aaron Harris as a key figure within the organization and the startup community.

Aaron Harris's Background and Transition into Entrepreneurship

  • Aaron initially aimed to be the CEO of a major bank.
  • He worked in finance for a short period before moving to a hedge fund.
  • Aaron's interest in technology and education led him to co-found Tutorspree.
  • The idea for Tutorspree originated from a conversation with a friend.
  • Tutorspree was accepted into Y Combinator in Winter 2011.
  • After Tutorspree was impacted by a Google algorithm change, Aaron joined YC full-time.

Sure. You know, when I left college, I had a pretty good idea of what I wanted to be, and that was eventually being the CEO of Citibank or something like that. Okay. And so I went into finance, actually, and I was a banker for all of eleven months wow. Yeah.

Aaron shares his initial career aspirations and his brief stint in finance, demonstrating the shift from his original career path to entrepreneurship.

We met our co founder Ryan, just around then. The three of us applied to YC. We got into y combinator for the winter of eleven, started building the business. We raised money from Sequoia, among others, and built the business for, I think, two and a half years, until we ran smack into an algorithm change at Google, and we were reliant on search engine optimization, and it sort of killed our vision of what the business could be.

This quote details the founding of Tutorspree, its acceptance into Y Combinator, and the challenges faced due to changes in Google's algorithm that affected the business.

Role at Y Combinator and Interaction with Founders

  • Aaron's involvement varies per startup.
  • YC has a hands-off approach, treating founders as adults who run their businesses.
  • YC structure includes Tuesday night dinners with guest speakers like Mark Zuckerberg or Brian Chesky.
  • Office hours are set up for one-on-one discussions between partners and startups.
  • Group office hours are also conducted.

I think it's different startup by startup in terms of how much involvement we have, but there's a pretty basic framework for how we interact at Y combinator. We have a pretty hands off approach in a lot of ways to our companies. Our opinion and our perspective, I guess, is that the startups are adults, the founders are adults, it's their business.

Aaron explains YC's philosophy of giving founders autonomy while providing a framework for support and resources, emphasizing the belief in the founders' abilities to manage their companies.

Every Tuesday night we have a dinner where we have a guest speaker and people like Mark Zuckerberg or Brian Cheske, really inspirational founders who have done really cool things and grown small startups and been successful. And so that's dinner. And that's pretty much the only required part of the calendar.

This quote describes one of the key structured interactions at YC: the weekly dinners with successful founders as guest speakers, which is a source of inspiration and learning for current YC startups.

Peer Problem-Solving Sessions

  • Partners from YC sit with a small group of companies to work through problems.
  • Companies learn from each other and often solve each other's problems.

"There two partners will sit down with a small group of companies and sort of work through some problems with them together, so that they can kind of learn at the same time from each other, because it turns out they can solve each other's problems quite often."

This quote explains the collaborative approach YC adopts, where companies benefit from mutual problem-solving, leveraging collective knowledge and experience.

Value of Y Combinator (YC)

  • The biggest value of YC may be the dinners, mentorship, capital, or something else.
  • Speaker C inquires about the core value that influences companies to choose YC.

"So what do you think is the biggest value out of YC? Is it these dinners? Is it the incredible mentorship that's on offer? Is it the pure capital? What is it? Do you think that's the real controller in the decision to choose YC?"

Speaker C is asking about the primary factor that makes YC attractive to startups, suggesting several possible benefits.

The "Magic Dust" of YC

  • Speaker B humorously refers to "pixie dust" as a metaphor for YC's secret to success.
  • The true "magic" lies in the simplicity of YC's philosophy and the focus on long-term vision beyond daily startup challenges.

"I think it's the pixie dust we sprinkle on all the companies when they get know."

Speaker B uses humor to deflect the question about YC's secret, implying that it's not a tangible thing like "pixie dust."

"It's a closely guarded secret. It's a very specialized mind."

Speaker B continues the metaphor, suggesting that YC's success formula is unique and not openly shared.

"It's a really important question. It's a really interesting question, and it's probably one I think about a lot, because it doesn't really necessarily make sense in a lot of ways in terms of how our process has worked as many times as it has."

Speaker B acknowledges the complexity behind YC's success and the thought process involved in understanding it.

Philosophy of Focus and Growth

  • YC's approach is about helping companies focus on their core identity and potential for growth.
  • The process involves seeing beyond the immediate challenges of running a startup.

"And I think part of the reason it works is because of the fact that it's fairly simple and it's not one size fits all, but it's more of a philosophy of having the companies figure out how to really focus on the thing that they are and what they could be and see beyond sort of the day to day challenges of running a startup, and the day to day ups and downs, which are crazy."

Speaker B explains that YC's effectiveness stems from its straightforward philosophy, which encourages startups to focus on their essence and future potential.

Maintaining Objectivity and Founder Autonomy

  • YC tries to be objective and not overly prescriptive, respecting that it's the founders' company.
  • Providing new perspectives without dictating specific actions is key.

"It's very rare that I give very, very specific, you have to do this thing, because that rarely happens, that the answer is so black and white."

Speaker B emphasizes that YC avoids giving overly specific directives, understanding that solutions are rarely straightforward.

The Forcing Function of YC's Program

  • The three-month YC program allows founders to prioritize and focus exclusively on their product and users.
  • It serves as an excuse to avoid distractions and concentrate on what's essential for growth.

"The three months of YC itself is such a great time for founders to be able to push off everything else. It's this great excuse to focus."

Speaker B describes the YC program as an intensive period that enables founders to eliminate distractions and concentrate on their startups.

Mentorship and Advice for Founders

  • The challenge of finding and working with mentors varies case by case.
  • Founders should integrate advice with their knowledge to make their decisions.
  • Avoiding analysis paralysis and being proactive in testing advice is crucial.

"Yeah, I think mentorship is a really challenging thing both to find and to decide how to work with best."

Speaker B acknowledges the difficulties associated with finding and effectively utilizing mentorship.

"Advice is just advice. Right. It's just someone who has some understanding of your company, your situation, offering their best guess at a solution or at a path forward."

Speaker B clarifies that advice should be regarded as a suggestion, not an absolute directive.

Attaining Mentors

  • Founders should not hesitate to reach out to potential mentors via email.
  • Persistence and asking good questions can build strong mentor relationships.
  • Mentors appreciate seeing progress and feeling impactful.

"I think the only way to decide whether or not a mentor is good for you or not is to actually meet them and talk to them and spend some time with them."

Speaker B advises that personal interaction is the best way to evaluate a potential mentor's fit.

"Sending an email, what if it doesn't get responded to? Okay, your email didn't get responded to. What if someone says no? Okay, they don't say no. No is just a start of a conversation."

Speaker B encourages founders to overcome the fear of rejection and view a "no" as an opportunity to engage further.

"I find that people who just keep asking good questions or who iterate and get better over time, those are the ones who end up forming great relationships with mentors because I think the mentors start to see progress and feel like they're doing something good."

Speaker B highlights the importance of persistence and improvement in cultivating mentor relationships, as mentors value contributing to tangible progress.

YC's Opinion on Feedback and Testing Audiences

  • YC believes the stage of the company determines the approach to feedback and testing.
  • Startups should initially do unscalable things, like getting feedback from a small user base they know personally.
  • Detailed feedback from early users is crucial to understand the product and customer needs.
  • Success stories like Instagram and Facebook grew rapidly and unexpectedly, highlighting the unpredictability of social products.
  • For paid products, it's essential to understand early paying customers' needs and interactions.

"A company needs to start out doing unscalable things, which means getting 510 2100 users. And you might know them all personally, or you should know them personally by the time you're done with that phase of your business, because it's only from a small base that you're going to really learn what it is that your product is and what people want."

This quote emphasizes the importance of startups beginning with a small, well-known user base to gather meaningful feedback and learn about their product and market fit.

YC's Requirements on Growth

  • Growth is not the goal but a result of the right product and market fit.
  • YC suggests growth goals are relevant once the product starts working.
  • A startup-scale growth is usually faster than 1% a week.
  • Achieving startup-scale growth is a sign of product-market fit and is necessary for a startup's success.

"The answer is that growth isn't the goal. And I think this is something that people sometimes get a little backwards. Growth is the result of having the right product and the right market right."

This quote clarifies that growth should be a byproduct of a well-suited product for the market, not an end in itself.

Post-YC Support and Communication

  • YC maintains communication with startups even after the program ends.
  • The level of communication varies based on the company's needs and maturity.
  • Some companies may require frequent contact post-YC, while others may reach a point where they seldom need support.

"Absolutely. You know, there are startups that went through YC years ago that I'm still very much in touch with and see regularly."

The quote indicates that YC's support for startups extends beyond the duration of the program, with ongoing relationships and communication.

Managing Valuations Post-YC

  • YC does not focus on maintaining specific valuation levels.
  • The goal is to help startups lay the foundation for long-term business success.
  • Fundraising goals and valuations are ultimately determined by the market when startups engage with investors.

"I don't think we expressly think about, hey, we want to keep this valuation level or that valuation level."

This quote suggests that YC's focus is not on controlling valuation levels but rather on ensuring startups are positioned for sustainable growth and success.

Tips for Startups Entering Fundraising

  • Startups should optimize for building a successful company, not for the highest valuation or most money.
  • The key is to raise enough money to grow the company effectively.
  • Minimizing time spent fundraising allows more time for building the company.
  • Time is a startup's most limited resource, not money.

"Well, one of the things I tell people is make sure you're optimizing for the right things, and the right thing is not the highest price or the most money."

The quote advises startups to prioritize the right objectives during fundraising, focusing on the resources needed to build a successful company rather than chasing the highest valuation.

Y Combinator's Approach to Funding and Growth

  • Y Combinator (YC) is not focused on raising funding for itself but on the evolution of its community and alumni base.
  • The future of YC is centered on the types of companies they fund and how they support them.
  • Over the past years, YC has expanded the variety of companies it funds, including ventures in aerospace, nuclear power, and biotech.
  • The expansion is expected to continue as software cycles penetrate new industries.

"I don't think about steps for YC in terms of us raising funding again. It's just not really how we think about what YC becomes." "I think when we think about the future of YC, we think about what kind of companies we're funding and what we're doing for those companies and how we're helping those companies and how the wider community of YC and our alumni base is evolving and growing and getting better."

The quotes emphasize that YC's primary concern is not about raising funds for itself but rather the growth and support of its community and the diverse range of companies it backs. The focus is on nurturing startups and expanding into new industries.

Personal Favorites and Influences

  • Speaker B's favorite book is "The Diving Bell and the Butterfly" due to its powerful narrative on overcoming physical limitations.
  • The book is a testament to the power of the mind and finding meaning in life despite severe challenges.

"I'd say my favorite book is the diving Bell and the butterfly, which is just an incredibly beautiful story about how someone, Jean Dominique Baube, who was the editor, French L, who had a massive stroke and he suffered locked in syndrome, how he was still able to enjoy life and communicate with the world and find meaning even under the most severe physical limitations."

The quote explains why "The Diving Bell and the Butterfly" is Speaker B's favorite book, highlighting the inspirational story of Jean-Dominique Bauby, who found ways to enjoy life and communicate despite being physically incapacitated.

Advice for Startups

  • The most critical piece of advice for a startup founder is to get great co-founders.
  • Having great co-founders is seen as a significant takeaway from working at YC.

"Get great co founders." "The importance of great co founders."

These quotes underscore the critical role that having strong co-founders plays in the success of a startup, reflecting Speaker B's experience at YC.

Y Combinator Podcast

  • YC's podcast aims to reach more founders and companies regularly.
  • The podcast emerged from a collaboration with Sirius and is an extension of the content from startup school.
  • The podcast and radio show are part of YC's experimentation with different content distribution methods.

"We're always experimenting with different ways to reach more founders and more companies on a more regular basis."

The quote highlights YC's commitment to innovation in content delivery, aiming to engage with a broader audience of founders and companies through various platforms, including podcasts.

Technology and App Usage

  • Speaker B's most used apps are Chrome, Inbox, and Outlook.

"Chrome and inbox. And outlook."

This quote lists the apps that Speaker B frequently uses, indicating a focus on internet browsing and email communication.

YC's Future Challenges

  • YC's biggest challenge is continuing to fund great companies and find great founders.
  • As startups continue to infiltrate more industries, YC must ensure they are identifying and supporting the best ventures.

"Figuring out how to continue to fund great companies and find great founders."

The quote addresses the ongoing challenge for YC to maintain its ability to discover and invest in promising startups across various industries.

Excitement in Investment Opportunities

  • Speaker B is particularly excited about funding innovative companies in the property and casualty insurance space.
  • They believe there is a lack of innovation in this sector, except in customer acquisition.

"That I'm really excited about. Funding is an innovative or many innovative companies in the property and casualty insurance space."

The quote reveals Speaker B's enthusiasm for bringing innovation to the property and casualty insurance industry, identifying it as an area ripe for disruption.

Overhyped Sectors

  • Speaker B is cautious about labeling any sector as overhyped but suggests that photo sharing might be slightly overhyped.

"Overhyped? I don't know that anything is particularly overhyped. Maybe photo sharing might be a little overhyped."

This quote reflects a hesitancy to declare any sector as excessively hyped but acknowledges that photo sharing has potentially reached a saturation point.

Acknowledgements and Resources

  • Appreciation is expressed for Speaker B's participation in the show.
  • Listeners are encouraged to check out YC's podcast and Startup School Radio on iTunes.
  • The twentyminutevc.com blog is mentioned as a resource for items discussed in the episode.
  • Angel Insights, a sister show on iTunes about angel investing, is promoted.
  • Legal support for startups is recommended through Vidar Law with a mention of partner Chris.

"Thanks so much for having me. Harry, real pleasure joining you." "A huge hand to Aaron for giving up his time to be on the show today."

These quotes conclude the episode with gratitude for Speaker B's contribution and provide listeners with additional resources to explore topics related to startups and investing.

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