I was fortunate to be part of Y Combinator’s 2014 summer batch. With each following application cycle, I have been asked by friends and friends of friends to help with their application. I found myself saying the same thing in different ways so I thought I would do my best to try and provide some tips and ‘translate’ the application. I will explain the thought process behind each question and then provide an example answer.

I will use Thumbtack as a case study. They are not a YC company but I am big fan of marketplaces (and Thumbtack!). Also, hiring a professional for a service is a problem with which many of us are familiar. Please do not take any statements below as fact. Thumbtack is just my example.

I will also skip a few questions that do not need explaining (e.g., category, corporation, etc.)

I hope this helps.

Question: Describe your company in 50 characters or less.

Tips:

Do not use “X for Y.” Before you freakout and say that YC has always recommended this method, let me put you at ease with two of Sam’s most recent tweets.

"Very few of the best startups I have been involved with could describe themselves as "the X for Y".

"Also, this is an example of something I've changed my mind on--I used to think startups should strive to describe themselves this way."

X for Y triggers too many different responses. It contains two vectors with innumerable connotations and is a poor way to get your point across.

“Uber for Y.” Uber means different things to different people: a logistics network, a food delivery service, a courier service, a cab company. It could also imply that I will use something four times a day.

Keep it simple! “Press a button and a car comes to you in minutes.” That was 49 characters with the period and very few people will come away from that with radically different ideas. They may differ on its ultimate potential or possibilities but they will understand what your product does from day one. You need to survive day one to get to day two. To use PG’s example, there is no need to explain “your Microsoft” here, only your Basic Interpreter.

Example Answer:

Marketplace to hire professional service provider.

Character Count: 50 with the period :)

Question: What is your company going to make?

Tips:

Keep this answer simple and direct. You will not be accepted based solely on this answer but you might get thrown into a separate pile if you cannot clearly explain what your company is building. The act of communicating what you are building in a straightforward (i.e. simple and concise) way is one of the most underrated skills. This will come in handy in all aspects of running your business, from raising money to convincing potential employees to join your team to acquiring customers.

Example Answer:

We built a marketplace to find the best provider for home services in your area (e.g., plumber, painter, exterminator, etc.).
Thumbtack focuses exclusively on the introduction between the customer and the experienced professional. Finding the right contractor is the key pain point when hiring a contractor for your home. It is not, for example, paying them.
We solve this problem with our unique bidding system. A customer fills out a project-specific form and receives a project-specific quote from experienced professionals. We require professionals to pay for each bid they submit and show the customer the first 5.

Question: Please tell us about an interesting project, preferably outside of class or work, that two or more of you created together. Include urls if possible.

Tips:

This does not have to be software related. This question is meant to learn more about you as an individual.

Translation:

Does this team have experience working on something together? What are your hobbies? How do you choose to spend your time? Chris Dixon once said, “What the smartest people do on the weekend is what everyone else will do during the week in ten years.”

Example Answer:

We both lived far from college and flying home was super expensive. Some of our friends from other countries used localized airline sites (because they were in their native language) and we noticed they had cheaper flights! So we built a web app that saved us thousands of dollars on flights over the course of a few years by doing two things.

Checking each airlines localized sites and throwing our IP address to that location. Airlines change their prices based on the location of the potential customer.

Using our intended destination as a “connecting” airport. For example, sometimes flights that connect through Chicago are cheaper than direct flights to Chicago. You simply don’t fly on the second or third leg.

It was a fun hack that eventually got shut down. We learned how to work together and that showering is very important when working in close quarters.

Question: How long have the founders known one another and how did you meet? Have any of the founders not met in person?

Tips:

Be honest and personal! Getting to know someone via a questionnaire is difficult if you don’t meet YC halfway.

Example Answer:

We met sophomore year of college (6 years ago) in a Masterpieces of Western Philosophy class, a mandatory class at Columbia University. We started arguing about the existence of free will in the latter part of the class and our discussion continued to lunch. We’ve been best friends ever since and, in fact, the argument continues to this day.

Question: How far along are you?

Tips:

Pretty self-explanatory. Include both raw numbers and percentages. Fight the urge to puff things up even a bit.

Example Answer:

We are currently in a private beta in San Francisco.

We launched 5 months ago and here are our key metrics:

650 completed projects (50% MoM growth)

150 Contractors Signed Up, 3200 potential customers

1900 bids (close-rate ~34% lifetime but increasing as network grows)

Question: What is your monthly growth rate?

Tips:

This is your opportunity to show that you understand your KPI and have a sense of which metrics matter most to your business. PG wrote, “Merely measuring something has an uncanny tendency to improve it.” Show YC you know what to measure.

Example Answer:

Potential Customers: 45% MoM

Contractors: 35% Mom

Completed Projects: 50% Mom

Close-rate: 9% MoM

We think the close-rate is the most important metric right now. It represents the liquidity of our marketplace. It is increasing as we grow, which is a sign that we are seeing strong network effects.

Question: Why did you pick this idea to work on? Do you have domain expertise in this area? How do you know people need what you’re making?

Tips:

This question, and the next question, are the two questions on which you should spend the most time.

Translation:

Why are you passionate about this idea? How do we know you won’t give up at the first sign of trouble? Are you willing to spend the next decade on this idea?
Why are you uniquely suited to solve this problem?
Have you validated this idea? Have you tested it out?

Example Answer:

1/2. I picked this idea to work on for two reasons.
First, My dad was a contractor for 43 years and I have experienced the problem of getting new clients first hand. Getting new jobs was hard. From the ages of 7–18, I was head of business development for his company☺, which meant hanging flyers on every single lamp post in town every Saturday for 11 years and responding to every single Craigslist request for a contractor. Each time he would have to give references and justify that he and his team could do the job. AND the majority of the customers didn’t know the right questions to ask to help us give a quote. Often times, they ended up just going with their friend’s plumber even though my dad was obviously better!

Second, finding a contractor is an absolute nightmare. For example, how do you trust a person contacting you on Craigslist, or the flyer on the street? Can you verify their references?

What questions do you ask them to receive an accurate quote?

When your toilet doesn’t work is it because it is: clogged? not flushing? flushing slowly? constantly flushing? fills slowly? overflowing? leaking pipes? unpleasant oder? wobbly handle? How is the building connected to water and sewage systems? Municipal? Well water? Septic? You get the point. It sucks.

3. People need what we are making. Every single person with a roof over their head needs what we are making. When a stranger enters your home, you need to make sure it is the right person. The introduction is everything and that is where we excel! (growth explained in other questions)

Question: What’s new about what you’re making? What substitutes do people resort to because it doesn’t exist yet (or they don’t know about it)?

Tips:

This is the time to explain your unique insight. What have you figured out that no one else has? And, most importantly, what is it replacing? This is one of the most important questions on the application.

The first question is there to assess the novelty of your idea. What is the value that your company will add?

The second question is there to assess the marginal benefit of your idea. Is it 10x better than alternatives? It must be 10x better. Note that a substitute does not have to a company or product. It could simply be a time consuming or inefficient process.

For example, Snapchat enabled people to send disappearing pictures (the new). People had to either resort to trusting the recipient entirely (even if simply an ugly selfie) or not send the picture (the substitute). Evidently, neither option was sufficient.

Example Answer:

Currently, people looking to hire an experienced professional are powerless. We change that. By creating a system in which multiple experienced professionals bid for a job, we provide a transparent and efficient market for home services.

Before we existed (or for those who haven’t heard of us yet), people had to resort to archaic means of finding a professional. They could either search through Craigslist and hope for the best or call friends and use who they had used — with a limited sense of what the market has to offer.

We also provide an incredible customer acquisition channel for our contractors. It isn’t just that customers have trouble finding great contractors but contractors have trouble acquiring new customers. We help grow their business.

Thumbtack is quite the matchmaker.

Question: Who are your competitors, and who might become competitors? Who do you fear most?

Tips:

Do not shy away from your competitors. This question is not meant for you to say, “We have no competitors. We have found an untapped billion dollar market.” This is an opportunity for you to show that you understand the competitive landscape and how you differentiate. Show you have immersed yourself in the industry and know it better than anyone else — that is what will help you crush them!

A competitor isn’t always someone doing the exact same thing. A competitor is simply an alternative from the consumer’s perspective. While Facebook competed with other Social Networks, Airbnb competed with the hotel industry and Amazon competed with Borders. Understanding the alternatives, and why your solution is 10x better, is crucial to acquiring customers.

In this question, show you know your stuff. Again, do not shy away from your competitors but rather analyze the heck out of them and be honest with your fears…it is the only way to overcome them!

Example Answer:

We have a lot of competitors: Amazon, Google, Angie’s List, Handy, RedBeacon, HomeAdvisor.

We fear Amazon and RedBeacon.

We fear Amazon because it has almost unlimited resources. They do not need to profit from this arm of their business. We do.

We fear RedBeacon because they are focusing on the exact same market but with a different model. They take a commission from the contractor when they ‘win’ a job.

Most importantly, no one is mainstream. The winner has yet to be determined in this fragmented and inefficient market. Ultimately, assuming each player executes, the winner will be the model that scales in the most cost-effective way. We believe the winning model is one that charges for a bid (similar to an advertisement) and not one that takes a percentage of the sale. Contractors understand paying for a lead, they have trouble with the idea of a broker or an agent.

Question: What do you understand about your business that other companies in it just don’t get?

Tips:

This question builds on “What is new about what you’re making?” In that question, you explain the what. In this question, explain the why.

For example, Snapchat’s what is disappearing pictures but the why might be fear of judgement (immediate and 10 years later). Evan Speigal puts it very succinctly when he says, "I’m the result of everything I’ve ever done, but I’m not really the accumulation of all that stuff."

The why is why your product resonates with users. Explain this here.

Example Answer:

It is all about the introduction! There has been a recent trend in marketplaces to handle the entire transaction life cycle. From introducing the two parties, to handling the communication during the interaction, to facilitating payment. For some marketplaces (e.g., Uber & Airbnb), this makes sense. Enabling payments to occur seamlessly solves a pain point in the interaction and adds significant value.

However, in our case, this is not the main pain point and not where we can add the most value. When people hire a painter, the pain point they experience is not paying them $3,000 after they have completed the job.

People have been paying painters without too much trouble for years. BUT, finding that painter is an utter nightmare and that is where we come in. By focusing exclusively on introducing the contractor and the customer, all of our energy is spent solving the largest problem, while others are focused on the entire life-cycle.

Question: How do or will you make money? How much could you make?

Tips:

This question, more than any other, is not about giving the ‘right’ answer but about showing how you think. Show you know your market, make reasonable assumptions, and extrapolate from there. Do NOT calculate your potential revenue with a Top-Down approach. Saying you only need to get 1/10 of a percent of a trillion dollar market is ridiculous. It ignores the process. The process of getting the first customer, then the second, then the third and so on. This is what YC wants to see.

Use the Bottom-Up approach (example below).

Example Answer:

We make money by charging contractors to bid for potential customers. It replaces a portion of their advertising budget. Rather than hanging a flyer on a lamppost, posting on Craigslist, or taking an ad out on Yelp, they know they have AT MINIMUM a 1/5 chance of acquiring the customer. When the job is between $250 and $3000, spending between $5–25 to get the job is money well spent.

Our ultimate goal is to replace our contractor’s entire advertising budget. We want to be how they acquire new customers. Currently, our contractors spend ~$2000/month on advertisements (~10% of gross revenue). They spend money on door hangers, refrigerator magnets, post cards, yellowpages, and more recently FB and Google ads (of which most contractors have only a minimal grasp).

Approximately 1/1000 people in the United States is a plumber (note, Thumbtack is far more than plumbers). If we assume that a major metropolitan area (e.g., San Francisco) has a stronger concentration of plumbers (1/300), then we can estimate there are 2800 plumbers in San Francisco.

Currently, our contractors are providing ~10 quotes/month with an average of $10/quote (5% of their advertising budget). If we assume this rate is maintained, $100/month ($1200/year) for 30% of plumbers in San Francisco, that results in just over $1MM per year. This is exclusively from plumbers solely in San Francisco. Nevertheless, we believe this rate will increase as our close-rate increases, the network expands, and we are able to drive more business their way.

This number increases significantly when we include:

Other experienced professionals (painters, exterminators, electricians)

Additional cities (San Francisco only has ~850k people)

A larger slice in contractors advertising budget (we can do better than 5%)

We don’t know how large the market is but it is safe to say that the size ultimate size of the market is massive. It will not be an impediment to the success of Thumbtack.

Question: How will you get users? If your idea is the type that faces a chicken-and-egg problem in the sense that it won’t be attractive to users till it has a lot of users (e.g. a marketplace, a dating site, an ad network), how will you overcome that?

Tips:

This is the time to show how methodical you are about your business. Be specific. Emphasize the repeatable ways in which you have acquired users. 2500 users from ProductHunt, while awesome and a strong validation that people want what you’re building, is not as strong as acquiring 2500 users from a scalable source. YC wants to see that you have experimented, that you drilled, and after turning over every rock, have found a well.

Are you scraping Craigslist/Yelp and emailing/texting potential customers? How many do you email each day? What is the response rate? If your main source of new users is from advertisements, what channel? Why? What is the click through rate? How much are you paying per download/click? How does that compare to the estimated LTV of each customer (i.e., do the unit economics make sense?)? Or are your users coming from events, partnerships, blog, youtube, social media, or cold-call sales? Regardless, be specific and break it down.
This is an opportunity to open the kimono and show YC how your brain works. The best YC interview is ultimately a conversation where you open your brain to them and have a dialogue about your business. Think of the application as an extension of that dialogue.

Example Answer:

Thumbtack is a two-sided network, which means we face the chicken and egg problem. The challenge is to grow both sides of the marketplace at the right pace so that both sides are satisfied.

Supply Side: We solved the initial supply-side problem by building a strong single-player utility for contractors.

We knew that contractors’ primary source of new clients was Craigslist but it was incredibly difficult for them to manage. We built a tool that streamlined posting/re-posting and responding to potential inquiries. Each post included a “powered by Thumbtack” at the bottom.
As a result, contractors were able to receive value from Thumbtack from day one, even without the “demand” side of the marketplace. They “came for the utility” and have ultimately “stayed for the network.”

We found these contractors by scraping thousands of databases across the web to find the exact location of these professionals. We then created extremely targeted advertisements to get them to sign up.

123/150 (82%) of our contractors have used this tool prior to responding to a customer inquiry. Of the 123 that have used the tool 86 (70%) have submitted a quote within 3 weeks.

Demand Side: We have 3 main channels through which we acquire potential customers.

Craigslist posts (35%): they were extremely well formatted and redirected back to Thumbtack, which attracted many potential customers when they searched on Craigslist.
Direct Search (47%): We have manually created over 1000 unique forms for potential jobs (e.g. painter, plumber, air-condition repair). As a result, we appear extremely high in search results for most home-related services.
WOM (18%): Thumbtack is awesome and people tell their friends :)

Question: Please tell us something surprising or amusing that one of you has discovered.

Tips:

Keep it short and simple. To quote Aaron Harris, “If you’re not sure whether a joke will land…don’t tell it.”

Example Answer:

The way people play pick-up basketball is the way they approach life.

Question: What convinced you to apply to Y Combinator?

Tips:

Don’t write an answer that you think YC wants to hear. And don’t make this a tough question for you. Be honest. YC is probably the best bullshit detector I have ever come across.

Example Answer:

That’s a tough one. There are many obvious reasons: the network, funding, advice etc. But for me, it is a bit more simple than that. A few of my friends have participated and each one has said it was an inflection point in their life. I want that experience.
I trust them.

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Thanks to Cleo Abram, Henri Stern, Ryan Shea, and Amy Buechler for reading drafts of this.