Y Combinator is the world’s most successful startup incubator. YC has produced over 60 companies worth 1 Billion + and over 260 worth more than 150 Million. One of the ways YC is able to repeatedly produce successful startups is the insight they have on what it takes to build a successful startup. In today’s post, I will break down the top 5 hacks YC use to produce billion dollar companies.
This has nearly become cliche advice from YC’s founder, Paul Graham but it’s still true to this day. The basic premise of the idea is to concentrate on what can get you from 0 - 1, then 0 - 100, then 100 - 1000 etc. You shouldn't replicate the marketing activities that Airbnb do now, but you should do what they did in the beginning.
For instance, when Airbnb was first launched, the founders offered to "professionally" photograph the homes and apartments of their initial users to enhance the appeal of their listings to potential renters. They then personally took these photographs. As a result, the quality of listings on their platform improved, leading to better conversion rates, and engaging conversations with their customers. Although this approach was not scalable, it was crucial for understanding how to develop a thriving marketplace.
What small things could you do to recruit your first user that a big company could never dream of?
When building a SaaS you can often become overwhelmed by the number of features you “need” to implement. YC partner Paul Buchheit consistently advises searching for the 90/10 solution in such situations. This involves finding a method that achieves 90% of the desired outcome with just 10% of the effort, work, or time. Almost always, a 90/10 solution exists if you look hard enough. Crucially, a 90% solution that addresses a real customer problem and is available immediately is far more valuable than a perfect 100% solution that takes a long time to implement.
This allows you to grow faster and find product market fit. Every growth hack should be about finding PMF, then you can start properly scaling.
Sam Altman frequently emphasizes the importance of pursuing the more ambitious path when founders face a choice between multiple directions for their company. He notes that it's surprisingly common for founders to shy away from challenging decisions, opting instead for "fake work" – tasks that are more enjoyable but less critical to the company's success
When building and launching your SaaS only two things matter, coding and talking to users. YC advises following this cycle: launch a product, gather user feedback, and iterate based on that feedback.
When building your own SaaS you want to constantly focus on one core feature and validate if it solves a real problem. Don’t get distracted by adding useless features or doing “fake work”.
IF you can dominate the small market. It is much better to have 100 people who love your product than 1000 people who think it’s ok.
In other words, recruiting 10 customers who have a burning problem is much better than 1000 customers who have a passing annoyance. It is easy to make mistakes when choosing your customers so sometimes it’s also critical for startups to let some customers go. It’s not uncommon for certain customers to cost way more than they provide in either revenue or learning.
For example, Justin.tv/Twitch only became a breakout success when they focused their efforts toward video game broadcasters and away from people trying to stream copywritten content. Check out Michael Seibel’s 'Users that don’t’ scale.
Startup founders often feel compelled to expand their offerings, but the most effective strategy is usually to do less and excel at it. For instance, founders might be drawn to securing big deals with large companies, believing these to validate their startups. Yet, these deals rarely benefit small startups; they're expensive, time-consuming, and frequently fail. Geoff Ralston highlights in "Startup Priorities" that one of the biggest challenges in startups is deciding what to focus on, given the endless possibilities of tasks to undertake.
It's crucial for startups to identify one or two key metrics early on to measure their success and base their decisions primarily on how activities will influence these metrics.
A practical example of this is Instagram’s early days. Initially, it started as Burbn, a location-based social network packed with features. The founders then noticed that the photo-sharing feature was the most used and loved aspect. Responding to this insight, they stripped away all other features to focus solely on photo-sharing, which led to the streamlined and highly successful app, Instagram. This pivot demonstrates the power of focusing on core strengths and critical user feedback over expanding features indiscriminately.
If you found this interesting, signup to my newsletter for weekly insights every sundat moring: https://jackmitchell.beehiiv.com/
1. Do things that don’t scale
This has nearly become cliche advice from YC’s founder, Paul Graham but it’s still true to this day. The basic premise of the idea is to concentrate on what can get you from 0 - 1, then 0 - 100, then 100 - 1000 etc. You shouldn't replicate the marketing activities that Airbnb do now, but you should do what they did in the beginning.
For instance, when Airbnb was first launched, the founders offered to "professionally" photograph the homes and apartments of their initial users to enhance the appeal of their listings to potential renters. They then personally took these photographs. As a result, the quality of listings on their platform improved, leading to better conversion rates, and engaging conversations with their customers. Although this approach was not scalable, it was crucial for understanding how to develop a thriving marketplace.
What small things could you do to recruit your first user that a big company could never dream of?
2. The 90/10 Solution
When building a SaaS you can often become overwhelmed by the number of features you “need” to implement. YC partner Paul Buchheit consistently advises searching for the 90/10 solution in such situations. This involves finding a method that achieves 90% of the desired outcome with just 10% of the effort, work, or time. Almost always, a 90/10 solution exists if you look hard enough. Crucially, a 90% solution that addresses a real customer problem and is available immediately is far more valuable than a perfect 100% solution that takes a long time to implement.
This allows you to grow faster and find product market fit. Every growth hack should be about finding PMF, then you can start properly scaling.
3. Don’t do fake work
Sam Altman frequently emphasizes the importance of pursuing the more ambitious path when founders face a choice between multiple directions for their company. He notes that it's surprisingly common for founders to shy away from challenging decisions, opting instead for "fake work" – tasks that are more enjoyable but less critical to the company's success
When building and launching your SaaS only two things matter, coding and talking to users. YC advises following this cycle: launch a product, gather user feedback, and iterate based on that feedback.
When building your own SaaS you want to constantly focus on one core feature and validate if it solves a real problem. Don’t get distracted by adding useless features or doing “fake work”.
4. Small markets > big markets
IF you can dominate the small market. It is much better to have 100 people who love your product than 1000 people who think it’s ok.
In other words, recruiting 10 customers who have a burning problem is much better than 1000 customers who have a passing annoyance. It is easy to make mistakes when choosing your customers so sometimes it’s also critical for startups to let some customers go. It’s not uncommon for certain customers to cost way more than they provide in either revenue or learning.
For example, Justin.tv/Twitch only became a breakout success when they focused their efforts toward video game broadcasters and away from people trying to stream copywritten content. Check out Michael Seibel’s 'Users that don’t’ scale.
5. Focus on one key metric
Startup founders often feel compelled to expand their offerings, but the most effective strategy is usually to do less and excel at it. For instance, founders might be drawn to securing big deals with large companies, believing these to validate their startups. Yet, these deals rarely benefit small startups; they're expensive, time-consuming, and frequently fail. Geoff Ralston highlights in "Startup Priorities" that one of the biggest challenges in startups is deciding what to focus on, given the endless possibilities of tasks to undertake.
It's crucial for startups to identify one or two key metrics early on to measure their success and base their decisions primarily on how activities will influence these metrics.
A practical example of this is Instagram’s early days. Initially, it started as Burbn, a location-based social network packed with features. The founders then noticed that the photo-sharing feature was the most used and loved aspect. Responding to this insight, they stripped away all other features to focus solely on photo-sharing, which led to the streamlined and highly successful app, Instagram. This pivot demonstrates the power of focusing on core strengths and critical user feedback over expanding features indiscriminately.
If you found this interesting, signup to my newsletter for weekly insights every sundat moring: https://jackmitchell.beehiiv.com/
