Demo Day</a> and <a href=https://www.ycombinator.com/"https://www.ycombinator.com/library/4A-a-guide-to-seed-fundraising/">fundraising — and that founders’ singular goal in applying to YC and completing our program is to increase their probability of executing a successful fundraise.\nIt is true that companies that complete YC’s core program have an easier time raising money from angel investors and venture capitalists. It is also certainly correct that raising capital is extremely important to early-stage startup companies as they finance their product development and the growth they plan and hope for.\nBut this begs an important question: why is it that YC companies have a better chance of fundraising success? Is it because YC is an effective filter: choosing only the best founders and companies? That is certainly one reason. However, there is more to this answer and it is fundamental to what we do. By joining YC, by going through our program, working with our <a href=https://www.ycombinator.com/"https://www.ycombinator.com/library/4D-yc-s-essential-startup-advice/">group partners</a>, and by becoming part of the YC community, each startup undergoes a subtle transformation into a company more likely to succeed. This is the real secret to YC’s success.\nWe are far more than a ticket to raising capital. We aim to change each YC company into a better version of itself — into a startup which has a better chance of surviving the bitter battle where only the fittest and best-adapted companies survive. The comparison of a startup ecosystem to the biological version is, of course, not a new one. We often extend the analogy and speak to a startup’s DNA — referring to the core company features which lead to success or failure.\nRecently, I’ve realized that thanks to advances in biology there is now a way we can extend this analogy even further to better describe what YC does. Thanks to innovations from Nobel Prize winners <a href=https://www.ycombinator.com/"https://www.nobelprize.org/prizes/chemistry/2020/press-release//">Emmanuelle Charpentier and Jennifer Doudna</a>, biology now has an effective gene editing technique called CRISPR. And YC is <a href=https://www.ycombinator.com/"https://en.wikipedia.org/wiki/CRISPR/">CRISPR for startups.\nStartup founders with epic potential join YC. Their startups come in with their own DNA and we modify it, edit it, CRISPRize it, if you will, to include key <a href=https://www.ycombinator.com/"https://en.wikipedia.org/wiki/Allele/">alleles that make success most likely. What alleles?\n<ul>\n<li>Product-Market Fit: How to think about customers and find the right way to deliver them value.</li>\n<li>Growth and Sales: How to economically and intelligently grow a customer base.</li>\n<li>Company Building: How to create the durable, long term infrastructure of a company. Especially, how to find and hire the right talent.</li>\n<li>Fundraising: How to best execute a strategy to raise the right amount of capital, at the right time from the right investors.</li>\n<li>Health: How to stay sane and strong while building a startup.</li>\n<li>Focus: How to move quickly while staying intensely focused on the goal.</li>\n<li>Leadership: How to believe enough in a startup that a founder can persuade others to join in the battle and to stay through the inevitable ups and downs.</li>\n<li>Ambition: This is perhaps the least understood, but most important effect of being a YC founder and part of the YC community. We aim to instill the belief that anyone, no matter where they come from or who they are, can change the world and create the next epic startup success.</li>\n</ul>\n<img src=https://www.ycombinator.com/"/blog/content/images/wordpress/2021/06/yc-crispr-02.png/" alt=\"YC is CRISPR For Startups\" />\nToday, founders from around the world join YC. While most are very early in their startup journey, our goal is that by the end of the batch every one of them finds their trajectory transformed to give them the best chance to survive and thrive. YC’s “gene editing” doesn’t end there. We continue to work with founders as they build their companies, helping them <a href=https://www.ycombinator.com/"https://www.workatastartup.com//">recruit, raise a <a href=https://www.ycombinator.com/"https://www.ycombinator.com/library/14-series-a-guide/">Series A</a>, and <a href=https://www.ycombinator.com/"https://www.ycombinator.com/growth-program/">grow.

At YC, we’ve seen every mode of success and failure with the thousands of companies we have funded over the years. We deploy that knowledge each batch to give YC companies every advantage we can. However, in the end, the secret to success of any startup lies squarely with the founders — their vision and their execution. We simply help those founders find the very best versions of themselves.\n","comment_id":"1104843","feature_image":null,"featured":false,"visibility":"public","email_recipient_filter":"none","created_at":"2021-06-25T02:11:22.000-07:00","updated_at":"2021-10-20T10:51:57.000-07:00","published_at":"2021-06-25T02:11:22.000-07:00","custom_excerpt":null,"codeinjection_head":null,"codeinjection_foot":null,"custom_template":null,"canonical_url":null,"authors":[{"id":"61fe29e3c7139e0001a71092","name":"Geoff Ralston","slug":"geoff-ralston","profile_image":"/blog/content/images/2022/02/geoff.jpg","cover_image":null,"bio":"Geoff Ralston is the former President of Y Combinator and has been with YC since 2011. Prior to YC, he built one of the first web mail services, RocketMail which became Yahoo Mail in 1997.","website":null,"location":null,"facebook":null,"twitter":null,"meta_title":null,"meta_description":null,"url":"https://ghost.prod.ycinside.com/author/geoff-ralston/"}],"tags":[{"id":"61fe29efc7139e0001a7116d","name":"Essay","slug":"essay","description":null,"feature_image":null,"visibility":"public","og_image":null,"og_title":null,"og_description":null,"twitter_image":null,"twitter_title":null,"twitter_description":null,"meta_title":null,"meta_description":null,"codeinjection_head":null,"codeinjection_foot":null,"canonical_url":null,"accent_color":null,"url":"https://ghost.prod.ycinside.com/tag/essay/"}],"primary_author":{"id":"61fe29e3c7139e0001a71092","name":"Geoff Ralston","slug":"geoff-ralston","profile_image":"https://ghost.prod.ycinside.com/content/images/2022/02/geoff.jpg","cover_image":null,"bio":"Geoff Ralston is the former President of Y Combinator and has been with YC since 2011. Prior to YC, he built one of the first web mail services, RocketMail which became Yahoo Mail in 1997.","website":null,"location":null,"facebook":null,"twitter":null,"meta_title":null,"meta_description":null,"url":"https://ghost.prod.ycinside.com/author/geoff-ralston/"},"primary_tag":{"id":"61fe29efc7139e0001a7116d","name":"Essay","slug":"essay","description":null,"feature_image":null,"visibility":"public","og_image":null,"og_title":null,"og_description":null,"twitter_image":null,"twitter_title":null,"twitter_description":null,"meta_title":null,"meta_description":null,"codeinjection_head":null,"codeinjection_foot":null,"canonical_url":null,"accent_color":null,"url":"https://ghost.prod.ycinside.com/tag/essay/"},"url":"https://ghost.prod.ycinside.com/yc-is-crispr-for-startups/","excerpt":"Last week, we launched our Summer 2021 batch here at Y Combinator, the 33rd\nbatch since our founding in 2005. We are now funding hundreds of companies each\nbatch, and I’ve been reflecting on how we work with those companies during the\nbatch and afterward, as they build their business.\n\nOver the years, I’ve found that there is a common misapprehension about what we\ndo at Y Combinator. People often believe that YC’s raison d’etre is Demo Day\n[https://www.ycombinator.com/demoday] and fundraising\n[h","reading_time":3,"access":true,"og_image":null,"og_title":null,"og_description":null,"twitter_image":null,"twitter_title":null,"twitter_description":null,"meta_title":null,"meta_description":null,"email_subject":null,"frontmatter":null,"feature_image_alt":null,"feature_image_caption":null},"mentions":[],"related_posts":[{"id":"61fe29f1c7139e0001a71c05","uuid":"87b3fb9b-77f0-41e7-90d1-5e045f4e4ffc","title":"Monzo Makes Money Work For Everyone","slug":"monzo-makes-money-work-for-everyone","html":"Scaling a startup is hard. Scaling a startup bank is even harder. Scaling a consumer-focused financial platform—that is also now the primary bank account for millions of UK consumers—in the midst of a once in a century pandemic is close to impossible.In April 2020, British banking startup Monzo’s revenue fell by almost 50%. But the company will end 2021 with revenues close to 2x its pre-pandemic peak, in spite of continued low interest rates, reduced travel, and depressed pandemic spending.This did not happen by magic. Monzo’s culture of customer obsession allowed it to use the crisis to thoughtfully build a beloved consumer and SMB product that has changed personal finance in the UK. In 2022 and beyond, Monzo’s revenues are likely to further accelerate as they benefit from cross border-travel, increased EU interchange rates, and new products.Banking is a ubiquitous but hard to crack industry. In the United Kingdom alone, there are 73 million personal accounts and four million business accounts, through which customers make more than 40 billion payments per year and hold £1.5 trillion in deposits. Over 96% of UK adults already have a bank account. When Monzo launched in 2015, the big six banks in the UK had more than 85% market share.<a href=https://www.ycombinator.com/"https://blog.ycombinator.com/monzo-makes-money-work-for-everyone/#footnote1\">1</a>But ubiquity and lack of switching doesn’t necessarily mean customer happiness. In fact, the net promoter score (NPS, a measurement of customer loyalty) of banking in the UK is a very low 18.<a href=https://www.ycombinator.com/"https://blog.ycombinator.com/monzo-makes-money-work-for-everyone/#footnote2\">2</a> Incumbent banks miss the mark in two crucial areas:<ol><li>The banking experience has not evolved to match modern consumer expectations. Banks still rely on physical branches and don’t give users the ease of use, feedback, and visibility consumers have come to expect.</li><li>Bank business models are not aligned with customer interests. Banks do not incentivize better money habits. Their profit models rely on upselling and non-transparent fees that typically penalize the most vulnerable customers. The average personal account in the UK has £150 to £220 in fees per year, many of which are hidden.</li></ol>In 2015, Monzo founders Tom Blomfield, Jonas Templestein, Gary Dolman, Jason Bates, and Paul Rippon launched a digital finance platform with the slogan “Make Money Work For Everyone.” The first iteration of the Monzo account was a simple prepaid card that allowed UK customers to open an account online and for free, receive real-time spending notifications, and budget their finances.Today, Monzo is a full-fledged financial platform that offers customers:<ul><li>A best-in-class spending account with a modern user experience, real-time payment notifications, and low fees</li><li>Money management features such as spend trends, transaction categorization, and monthly spend summaries</li><li>Social features to pay your friends (e.g., Venmo) or split the bill (e.g., Splitwise)</li><li>Virtual account creation and controls (e.g., pay bills from a specific virtual account)</li><li>Access to capital through overdrafts and Monzo credit products</li><li>Access to savings accounts through marketplace partners</li><li>Premium accounts with additional software tooling and perks</li></ul>In just five years, Monzo has reached impressive density and scale in the UK with minimal marketing spend. Monzo now has over five million customers, 55% of whom are active weekly. Of those that are active, over 40% are using Monzo as their main account with this number steadily increasing in each customer cohort. TS Anil (CEO) and Sujata Bhatia (COO) joined Monzo in 2020 to further improve operational excellence in risk management, lending, regulatory and compliance. When they joined, Monzo was generating $69M in revenues (in April 2020). In the 18 months since the pandemic began, revenues have scaled to more than $200M and deposits have grown to $4B+.In this post, we will walk through what drove Monzo’s early success, how it has come to dominate the UK market, and the company’s opportunity to change the landscape of global financial services with its beloved brand.<figure class=\"kg-card kg-image-card\"><img src=https://www.ycombinator.com/"https://ghost.prod.ycinside.com/content/images/2021/12/monzo-01-1.jpg/" class=\"kg-image\" alt loading=\"lazy\" width=\"1950\" height=\"1070\" srcset=\"https://ghost.prod.ycinside.com/content/images/size/w600/2021/12/monzo-01-1.jpg 600w, https://ghost.prod.ycinside.com/content/images/size/w1000/2021/12/monzo-01-1.jpg 1000w, https://ghost.prod.ycinside.com/content/images/size/w1600/2021/12/monzo-01-1.jpg 1600w, https://ghost.prod.ycinside.com/content/images/2021/12/monzo-01-1.jpg 1950w\" sizes=\"(min-width: 720px) 720px\"></figure><h2 id=\"early-success-foundations-built-on-product-and-community\">Early success: Foundations built on product and community</h2>Outperforming incumbents with modern experience and digital infrastructure Monzo believed that it could solve a major concern that incumbents couldn’t: Traditional banking infrastructure does not support the convenience and modern experience that customers have come to expect in the digital age.Monzo attacked incumbent models by creating an entirely app-based experience where customers could open a checking account from their phone for free. Monzo had the insight that customers should be able to do everything from the app. This includes storing money, sending and receiving payments, paying friends, budgeting their finances, and accessing capital via overdrafts and buy-now-pay-later (BNPL). With a Monzo account, customers do not need peer-to-peer payments apps like Cash App or Venmo, spend management tools like Mint, or BNPL services like Affirm or Klarna. Monzo provides all these services in a single easy-to-use interface. Eventually, this will extend into wealth generation tools to help customers grow their finances. Monzo’s vision is to become an all-in-one app where customers can do everything they need to from a single place.Monzo also cracked world-class customer support via in-app chat. Customers can send messages and receive a response quickly, regardless of the time or day. While a seemingly obvious insight, this has been an enduring differentiator. Traditional banks can’t do this because (1) their service models are tied to individual branches and (2) they rely on legacy monolith and mainframe tech infrastructure that makes daily/weekly product deployment cycles impossible. At launch, Monzo was able to offer features not offered by competitors, like real-time notifications on spending, simple personal-finance management software, and the option to freeze your card. This immediately made it a 10x better product and service.Monzo has also been able to move faster than incumbents because of its forward-looking approach to building banking infrastructure. Instead of a massive code base with limited deployment flexibility, Monzo built with scale in mind and used a microservices-driven architecture. Microservices breaks up an application’s code base into independent services that talk to one another through APIs. This allows engineering teams to deploy code more frequently because deployment only impacts the microservice they are working on. In comparison, most incumbents were pushing updates on a quarterly or annual basis. This simple decision enabled Monzo to quickly launch spend categories, round up transactions, pots (sub accounts), trends (where you can see all your accounts in one place), and other first-of-its-kind features. Traditional banks have not been able to keep pace. It took UK banks three years to launch card freezing, a feature that Monzo launched on day 1 with a team of only a few engineers.Even incumbents’ attempts to launch subsidiary brands with separate apps have not been successful. RBS launched “Bo” in November 2019 as an attempt to compete with Monzo, only to shut the product down six months later after it acquired only 11,000 customers. This is because it is not as simple as launching a new app. In order to catch up to Monzo, an incumbent would have to (1) completely change their service model to match a branchless experience, (2) invest in a consumer rebrand to mimic Monzo’s community and trust-driven approach, and (3) overhaul its banking infrastructure stack.Since launch, Monzo has maintained an NPS of greater than 70, which is miles ahead of the industry standard and in line with the world’s best consumer brands. On top of this, Monzo’s tech infrastructure is much cheaper to operate than its competitors. Monzo spends £2 per active user per year to run its infrastructure, which is 10x lower than incumbents’ costs.<a href=https://www.ycombinator.com/"https://blog.ycombinator.com/monzo-makes-money-work-for-everyone/#footnote3\">3</a> In an industry where incumbents earn £400 revenue per user per year from consumer customers and £700 per user per year from SMBs, this is a meaningful advantage.<a href=https://www.ycombinator.com/"https://blog.ycombinator.com/monzo-makes-money-work-for-everyone/#footnote4\">4</a> With a 10x lower cost structure, Monzo has easily taken market share away from incumbents whose economics are reliant on customer-unfriendly fees.<figure class=\"kg-card kg-image-card\"><img src=https://www.ycombinator.com/"https://blog.ycombinator.com/wp-content/uploads/2021/12/ZZ_1_sUI.jpeg/" class=\"kg-image\" alt loading=\"lazy\"></figure>Building a community-centric product focused on transparency and authenticity From the early days, Monzo chose to build the company alongside their customers. NPS scores suggested that UK consumers were, at best, apathetic about their bank. When Monzo launched its pilot product in October 2015, they invited their 500 alpha users to attend events hosted by the founding team, instead of just having them download the app. The purpose of these events was to establish a community of passionate adopters and communicate how different Monzo could be from traditional banks. Monzo even invited customers to invest in the company, offering special benefits and investor cards. Monzo also hosted community hackathons where early adopters could build on top of Monzo’s API. Some of these user-generated ideas made their way into the main product, like one that rounds up spare change. Monzo’s crowdfunding campaigns raised over £35 million (which was critical at the time as being a bank requires having upfront capital) and generated best-in-class engagement from the very beginning.<figure class=\"kg-card kg-image-card\"><img src=https://www.ycombinator.com/"https://blog.ycombinator.com/wp-content/uploads/2021/12/monzo-03-hackathon-1.jpg/" class=\"kg-image\" alt loading=\"lazy\"></figure>Monzo also believed a policy of total transparency would crucially define the company as community-oriented. From its very early days, Monzo defaulted to transparency regardless of how it portrayed the company. An early example was its approach to technical hiccups. Whenever there was an app or card outage, the company published <a href=https://www.ycombinator.com/"https://community.monzo.com/t/resolved-current-account-payments-may-fail-major-outage-27-10-2017/26296/93/">deep dives</a> on the problems and what they did to fix them.As Monzo has scaled to become the leading neobank in the UK, it has continued to mindfully launch features with an emphasis on treating customers fairly and having a positive social impact. Our five favorite examples are outlined below:(1) Gambling block: One of the features that best highlights Monzo’s commitment to better money management is <a href=https://www.ycombinator.com/"https://monzo.com/i/gambling-block/">Gambling Block</a>, a feature where customers can disable transactions tagged as gambling. This feature might seem counterintuitive for banks traditionally incentivized to maximize monthly spend and revenue. But Monzo’s employees enthusiastically believed Gambling Block advanced the company’s customer-centric vision by encouraging better spending habits. The feature was actually devised by a small team of Monzonauts during “Monzo Time,” a monthly event during which employees can work on anything important to them. As of February 2021, Gambling Block was being used by 275,000 customers and was blocking nearly 600,000 transactions per month.(2) Tone of voice guide: In 2017, Monzo published a <a href=https://www.ycombinator.com/"https://monzo.com/tone-of-voice//">Tone of Voice</a> guide to maintain its clear, concise, positive voice as it scaled. This includes everything from Monzo’s terms and conditions, which have the required <a href=https://www.ycombinator.com/"https://monzo.com/blog/2018/07/02/the-monzo-mission/">reading age of 11</a>, to the way customer support agents communicate with customers.(3) Proactive transparency: Like all banks, Monzo has visibility into customer spending. Unlike all banks, Monzo uses this visibility to go above and beyond in proactively supporting users. In 2018, Monzo’s financial crime and security team noticed a concentrated number of fraudulent Ticketmaster transactions and immediately updated its systems to block suspicious transactions, alerted relevant parties, and <a href=https://www.ycombinator.com/"https://twitter.com/dan_graf/status/986979971905310720/">proactively replaced</a> customers’ cards. Two months after receiving information from Monzo, <a href=https://www.ycombinator.com/"https://monzo.com/blog/2018/06/28/ticketmaster-breach/">Ticketmaster announced the breach</a> that compromised card details.(4) Fair-use fees and customer-friendly lending: In 2020, Monzo introduced <a href=https://www.ycombinator.com/"https://monzo.com/blog/withdrawal-and-card-delivery-fees/">fair-use fees</a> for customers who used certain features above normal levels and created higher levels of free allowances for customers who used Monzo as their main account. The new fees impacted fewer than 30% of Monzo customers and were well-received by the community. Another example of Monzo’s customer-centric approach is <a href=https://www.ycombinator.com/"https://monzo.com/flex//">Monzo Flex</a>, which is a better way to pay later. Instead of just launching another BNPL product, Monzo asked customers what they liked and disliked about existing lending products. Customers told them they didn’t want to have to reapply every purchase, they wanted flexible payment terms, and they wanted ubiquitous acceptance. Monzo Flex solves these problems by checking for affordability and letting users spread the cost across any purchase with flexible payment terms.(5) Internal inclusion goals: Monzo’s company operating system was also designed with transparency, fairness, and authenticity. The company publishes <a href=https://www.ycombinator.com/"https://monzo.com/blog/our-2020-diversity-and-inclusion-report/">an annual report</a> of its progress on diversity and is on track to reach a <a href=https://www.ycombinator.com/"https://monzo.com/blog/gender-pay-gap-update-april-2020-and-april-2021/">0% gender pay gap</a>. Women make up 40% of their executive team and board. This focus on building an inclusive company operating system is one of the many reasons why Monzo is consistently rated the <a href=https://www.ycombinator.com/"https://www.linkedin.com/pulse/linkedin-top-startups-2021-15-uk-companies-rise-linkedin-news-uk//">number one UK startup</a> on LinkedIn.In 2019, Monzo was recognized by <a href=https://www.ycombinator.com/"https://monzo.com/blog/monzo-is-the-uks-most-recommended-brand/">YouGov as not just the most-recommended bank but consumer brand, and in 2020 it was rated the number-one bank for service quality per the <a href=https://www.ycombinator.com/"https://monzo.com/blog/2020/08/17/were-the-best-bank-for-overall-service-quality-and-online-and-mobile-banking/">Competition and Markets Authority</a>. Monzo’s efforts to build a customer centric brand and their focus on building a best-in-class consumer product helped the company scale from 500 to 500,000 users less than 24 months after initial Alpha launch and less than 6 months after launching full bank accounts.<h2 id=\"scaling-monzo-growing-to-5m-users-and-100k-businesses-in-5-years\">Scaling Monzo: Growing to 5M+ users and 100K businesses in 5 years</h2>Monzo’s second chapter has been even more impressive. Since launching in the UK five years ago, Monzo has scaled to 5.3 million users, or more than 10% of the adult population. In an incredibly short amount of time, Monzo has managed to turn a good product into a highly competitive platform with a significant market share. And they did it by spending only £20M on marketing in one year, or <£20 per customer. In the years since, they’ve spent £0 on marketing.Scaling the customer base efficiently and effectively Monzo used its early enthusiastic community to drive new customer growth. In designing its cards, Monzo chose an eye-catching hot coral color. The card became a conversation piece, as curious bystanders asked Monzo customers about it, which would naturally result in new signups. Monzo then built social features to supercharge word-of-mouth growth. It launched <a href=https://www.ycombinator.com/"https://monzo.com/blog/2016/10/17/wonderful-surprises/">Golden Tickets</a> that customers could give to their friends to skip the waitlist, peer-to-peer payments, and contact list sharing between friends. These social features accelerated user growth to 5% week-over-week and helped Monzo scale to over one million users with effectively zero marketing spend in a sector where customers typically cost <a href=https://www.ycombinator.com/"https://www.which.co.uk/news/2021/08/nationwide-launches-125-switching-bonus-is-it-worth-it//">£100–150 to acquire. Today, the average user has 30 friends on Monzo and 83% of active customers enable P2P payments within their first year. Like “Venmo me” in the US, “Monzo me” has become a fixture in the UK vernacular.<figure class=\"kg-card kg-image-card\"><img src=https://www.ycombinator.com/"https://blog.ycombinator.com/wp-content/uploads/2021/12/monzo-04-p2p.jpg/" class=\"kg-image\" alt loading=\"lazy\"></figure>Monzo also expanded its product from a spending account to full-fledged bank account and financial control center. In its first few years, Monzo added basic banking features such as overdrafts, cash deposits, and direct debits to reach feature parity with traditional banking. In the past 18 months, Monzo revamped personal loans and launched premium subscription accounts with software features and perks such as third-party spend and savings tracking, virtual cards, custom categories, credit tracking, exclusive merchant discounts, and insurance. Today, Monzo isn’t just a complete bank replacement; it’s the best consumer banking experience in the world.<figure class=\"kg-card kg-image-card\"><img src=https://www.ycombinator.com/"https://blog.ycombinator.com/wp-content/uploads/2021/12/monzo-05-consumer-banking.jpg/" class=\"kg-image\" alt loading=\"lazy\"></figure>Monzo has successfully scaled its customer support and banking infrastructure alongside its user base. There is an entire product team dedicated to building software for customer support agents to surface customer information in seconds and maintain a consistent customer voice across every interaction. This is an enduring advantage over peers that rely on third-party software or automated support systems.Monzo has also scaled its internal banking infrastructure. When it first launched, Monzo partnered with third-party payment processors to get to market quickly. Over time, Monzo migrated to internal systems and now has the lowest downtime in the entire banking industry (incumbents and startups). With these backend improvements, Monzo has been able to grow from a tiny startup to a major banking platform while maintaining a 70 NPS. In 2021, over 40% of active customers were using Monzo as their main account, up more than 10 percentage points from 2020.<figure class=\"kg-card kg-image-card\"><img src=https://www.ycombinator.com/"https://blog.ycombinator.com/wp-content/uploads/2021/12/monzo-06-account-usage.jpg/" class=\"kg-image\" alt loading=\"lazy\"></figure>A natural transition to business banking As Monzo’s consumer brand scaled, the team saw an opportunity to launch a banking product for small and medium businesses (SMBs) in the UK. The average business has 6x more deposits than the average consumer customer and Monzo already had more than 250,000 customers that owned a small business. Legacy banks were not meeting SMB needs, with the average business using 10 to 15 different financial products because SMB accounts were designed solely as transaction accounts. To solve this, Monzo launched business banking as a spending account with added software features such as invoicing, tax budgets, multi-user access, and accounting integrations. Since their SMB launch in April 2020, Monzo has organically scaled to over 100,000 businesses, outpacing every competitor. It took their closest competitor two years and significant marketing spend to reach the same scale.Looking ahead, the company has an opportunity to serve larger businesses as well, by building financial operations tooling such as payables/receivables software and international payment capabilities. At scale, Monzo will be also uniquely positioned to enable seamless interactions between business customers and personal customers, similar to how Square does in the US.<figure class=\"kg-card kg-image-card\"><img src=https://www.ycombinator.com/"https://blog.ycombinator.com/wp-content/uploads/2021/12/monzo-07-business-banking.jpg/" class=\"kg-image\" alt loading=\"lazy\"></figure><h2 id=\"monzo%E2%80%99s-opportunity-a-leading-consumer-and-business-finance-platform\">Monzo’s opportunity: A leading consumer and business finance platform</h2>The success of Monzo’s first five years will naturally lead to continued expansion within and outside of the UK. We think these are the most exciting opportunities for Monzo to disrupt the global banking landscape:(1) Using great software to drive deep value for customers: Monzo is able to maintain customer-friendly fee structures and policies simply by cutting significant infrastructure operating costs. Their subscription banking product, which offers virtual cards, third-party account connections, and advanced budgeting features in exchange for a flat fee is fundamentally disruptive to incumbents. Today, Monzo’s long-term retention of premium customers outperforms incumbent financial services and is more inline with best-in-class consumer subscription companies like Calm, Netflix, and Spotify. Incumbents do not have the engineering talent or infrastructure to compete.(2) Leveraging its two-sided network to build unique customer experiences: Because of its single-country focus, Monzo has been able to achieve deep reach among both consumer and SMB banking customers in the UK. The company now serves 10% of UK consumers, has 50%+ of UK neobank market share, and has 100,000 SMB customers. The company is in a unique position to build a consumer-to-business payment network in the UK, and has started to lay the foundation with products to <a href=https://www.ycombinator.com/"https://monzo.com/blog/2021/10/12/getting-paid-with-monzo-business/">help businesses get paid</a> and <a href=https://www.ycombinator.com/"https://monzo.com/flex//">Monzo Flex</a>.With Monzo’s business payments product, SMBs can collect payments via credit card and bank transfers, historically a huge pain point. Instead of sending invoices via email, businesses can send a Monzo payment link to customers. Early data shows high repeat usage, with the experience being meaningfully better when both the SMB and customer are Monzo users. As its two-sided network scales, more money will stay entirely within the Monzo ecosystem, resulting in better economics and experiences for both the company and its customers.<figure class=\"kg-card kg-image-card\"><img src=https://www.ycombinator.com/"https://blog.ycombinator.com/wp-content/uploads/2021/12/monzo-08-business-payment-tools.jpg/" class=\"kg-image\" alt loading=\"lazy\"></figure><a href=https://www.ycombinator.com/"https://monzo.com/flex//">Monzo Flex</a> is another product that benefits both consumers and businesses. Flex lets users finance purchases over £30 across multiple installments. Monzo’s natural visibility into users’ spending and financial health enables it to create a product that is better for consumers than traditional BNPL options. First, Monzo finances any transaction (offline or online) regardless of merchant partnership. Second, Monzo leverages its banking relationship to run affordability checks on users. This means Monzo will not approve Flex purchases for customers likely to end up in an endless cycle of debt. Traditional BNPL players can’t do this because it threatens their business model of prioritizing spend and merchant conversion. Over time, Monzo can even leverage its scale in the UK to sign partnerships with merchants to reduce costs for consumers. Flex could also disrupt the credit card market, as users use their virtual Flex cards instead of credit cards to finance payments. While early, the company has seen incredible demand for Flex only a few months after launch.<figure class=\"kg-card kg-image-card\"><img src=https://www.ycombinator.com/"https://blog.ycombinator.com/wp-content/uploads/2021/12/monzo-09-flex.jpg/" class=\"kg-image\" alt loading=\"lazy\"></figure>(3) Launching new financial tools: The UK banking market remains fairly disaggregated. A customer might use Monzo for banking, eToro for crypto, Freetrade for equities, and Atom for a mortgage. Monzo will continue to expand its offerings through both its own products and third-party partnerships (where Monzo acts as the front end or distribution engine). As one example, Monzo launched a savings marketplace for customers to earn additional returns two years ago. This product scaled to ~£1.5B in deposits and ~15% penetration of its customer base during a period of near-0% interest rates, creating value for both customers (by offering them higher returns) and deposit partners (who would otherwise have to pay large acquisition costs). Over time, Monzo will have increased opportunities to create new experiences for users in investing, crypto (e.g., staking, buying/selling), savings, and lending.(4) Expanding internationally: The company has spent the last 12 months laying the foundation for its US launch. Rather than copy-pasting its home features to new geographies, Monzo is taking the same user-first design and community approach that won it the dominant position in the UK market. Monzo is running US-based community events, publishing a <a href=https://www.ycombinator.com/"https://app.productstash.io/monzo-usa-public-roadmap/">public product roadmap</a>, and consistently adding new features. Monzo has already scaled the US product to 6,000 beta users and has 38,000 users on its waitlist. But unlike when it launched in the UK, Monzo now has five years of history and product work to leverage. This has enabled Monzo to launch features much faster in the US. Because of its strong foundation and country-specific product approach, Monzo is positioned to become a global financial platform and a major banking institution in every market it enters.<h2 id=\"conclusion-spend-save-and-manage-your-money-in-one-place\">Conclusion: Spend, save, and manage your money in one place</h2>Five years in, Monzo is just starting its second act. Monzo’s first act was to build the UK’s best consumer and SMB banking product. Their second act will be to make money work for truly everyone by scaling to a global audience. Over the next decade, the global market share of financial services will increasingly shift towards financial technology companies. We are already seeing signs of this shift within YC. Companies like Brex, Groww, Jeeves, Parker, and Point are capturing share from incumbents in their respective markets. Monzo will be one of the main beneficiaries of this shift, as it continues to compound its lead in the UK and drive growth in new markets.Thank you to Max Winston, the entire Monzo team, Mia Mabanta, and Chloe Gordon for reading multiple drafts of this essay, and to Zain Ali for designing the graphics.<hr>1 Financial Conduct Authority – Strategic Review of Retail Banking Business Models <a href=https://www.ycombinator.com/"https://blog.ycombinator.com/monzo-makes-money-work-for-everyone/#footnoteid1\">↩</a> 2 YC UK Survey on Consumer Banking – 2018 <a href=https://www.ycombinator.com/"https://blog.ycombinator.com/monzo-makes-money-work-for-everyone/#footnoteid2\">↩</a> 3 Data from Monzo <a href=https://www.ycombinator.com/"https://blog.ycombinator.com/monzo-makes-money-work-for-everyone/#footnoteid3\">↩</a> 4 Public Filings and FCA’s Retail Banking Market Investigation <a href=https://www.ycombinator.com/"https://blog.ycombinator.com/monzo-makes-money-work-for-everyone/#footnoteid4\">↩</a>","comment_id":"61ba442d495e820001cd7ac6","feature_image":"/blog/content/images/2021/12/monzo-01.jpg","featured":false,"visibility":"public","email_recipient_filter":"none","created_at":"2021-12-15T11:38:21.000-08:00","updated_at":"2022-01-29T19:00:42.000-08:00","published_at":"2021-12-08T11:39:00.000-08:00","custom_excerpt":"Scaling a startup is hard. Scaling a startup bank is even harder. Scaling a consumer-focused financial platform—that is also now the primary bank account for millions of UK consumers—in the midst of a once in a century pandemic is close to impossible.","codeinjection_head":null,"codeinjection_foot":null,"custom_template":null,"canonical_url":null,"authors":[{"id":"61fe29e3c7139e0001a710b2","name":"Nic Dardenne","slug":"nic-dardenne","profile_image":"/blog/content/images/2022/02/Nic.jpg","cover_image":null,"bio":"Nic is a principal at YC Continuity. Nic has helped support the teams at Brex, Convoy, Faire, Groww, Monzo, Rappi, Segment, Snapdocs, and Vouch. Before YC, Nic worked as an analyst at Morgan Stanley.","website":null,"location":null,"facebook":null,"twitter":null,"meta_title":null,"meta_description":null,"url":"https://ghost.prod.ycinside.com/author/nic-dardenne/"},{"id":"61fe29e3c7139e0001a7107b","name":"Anu Hariharan","slug":"anu-hariharan","profile_image":"/blog/content/images/2022/02/Anu.png","cover_image":null,"bio":"Anu is a Managing Director & Partner at YC Continuity. Previously, Anu was a Partner at a16z, where she worked actively with the management teams of companies including Airbnb, Instacart, and Medium.","website":null,"location":null,"facebook":null,"twitter":null,"meta_title":null,"meta_description":null,"url":"https://ghost.prod.ycinside.com/author/anu-hariharan/"}],"tags":[{"id":"61fe29efc7139e0001a7116d","name":"Essay","slug":"essay","description":null,"feature_image":null,"visibility":"public","og_image":null,"og_title":null,"og_description":null,"twitter_image":null,"twitter_title":null,"twitter_description":null,"meta_title":null,"meta_description":null,"codeinjection_head":null,"codeinjection_foot":null,"canonical_url":null,"accent_color":null,"url":"https://ghost.prod.ycinside.com/tag/essay/"},{"id":"61fe29efc7139e0001a71170","name":"Startups","slug":"startups","description":null,"feature_image":null,"visibility":"public","og_image":null,"og_title":null,"og_description":null,"twitter_image":null,"twitter_title":null,"twitter_description":null,"meta_title":null,"meta_description":null,"codeinjection_head":null,"codeinjection_foot":null,"canonical_url":null,"accent_color":null,"url":"https://ghost.prod.ycinside.com/tag/startups/"},{"id":"61fe29efc7139e0001a71182","name":"#ycc","slug":"hash-ycc","description":null,"feature_image":null,"visibility":"internal","og_image":null,"og_title":null,"og_description":null,"twitter_image":null,"twitter_title":null,"twitter_description":null,"meta_title":null,"meta_description":null,"codeinjection_head":null,"codeinjection_foot":null,"canonical_url":null,"accent_color":null,"url":"https://ghost.prod.ycinside.com/404/"},{"id":"61fe29efc7139e0001a71181","name":"YC Continuity","slug":"yc-continuity","description":null,"feature_image":null,"visibility":"public","og_image":null,"og_title":null,"og_description":null,"twitter_image":null,"twitter_title":null,"twitter_description":null,"meta_title":null,"meta_description":null,"codeinjection_head":null,"codeinjection_foot":null,"canonical_url":null,"accent_color":null,"url":"https://ghost.prod.ycinside.com/tag/yc-continuity/"},{"id":"61fe29efc7139e0001a711b6","name":"#4787","slug":"hash-4787","description":null,"feature_image":null,"visibility":"internal","og_image":null,"og_title":null,"og_description":null,"twitter_image":null,"twitter_title":null,"twitter_description":null,"meta_title":null,"meta_description":null,"codeinjection_head":null,"codeinjection_foot":null,"canonical_url":null,"accent_color":null,"url":"https://ghost.prod.ycinside.com/404/"}],"primary_author":{"id":"61fe29e3c7139e0001a710b2","name":"Nic Dardenne","slug":"nic-dardenne","profile_image":"https://ghost.prod.ycinside.com/content/images/2022/02/Nic.jpg","cover_image":null,"bio":"Nic is a principal at YC Continuity. Nic has helped support the teams at Brex, Convoy, Faire, Groww, Monzo, Rappi, Segment, Snapdocs, and Vouch. Before YC, Nic worked as an analyst at Morgan Stanley.","website":null,"location":null,"facebook":null,"twitter":null,"meta_title":null,"meta_description":null,"url":"https://ghost.prod.ycinside.com/author/nic-dardenne/"},"primary_tag":{"id":"61fe29efc7139e0001a7116d","name":"Essay","slug":"essay","description":null,"feature_image":null,"visibility":"public","og_image":null,"og_title":null,"og_description":null,"twitter_image":null,"twitter_title":null,"twitter_description":null,"meta_title":null,"meta_description":null,"codeinjection_head":null,"codeinjection_foot":null,"canonical_url":null,"accent_color":null,"url":"https://ghost.prod.ycinside.com/tag/essay/"},"url":"https://ghost.prod.ycinside.com/monzo-makes-money-work-for-everyone/","excerpt":"Scaling a startup is hard. Scaling a startup bank is even harder. Scaling a consumer-focused financial platform—that is also now the primary bank account for millions of UK consumers—in the midst of a once in a century pandemic is close to impossible.","reading_time":15,"access":true,"og_image":null,"og_title":null,"og_description":null,"twitter_image":null,"twitter_title":null,"twitter_description":null,"meta_title":null,"meta_description":null,"email_subject":null,"frontmatter":null,"feature_image_alt":null,"feature_image_caption":null},{"id":"61fe29f1c7139e0001a7191b","uuid":"395e6c97-7acc-49bb-9d6d-f833e439e99b","title":"What’s the Second Job of a Startup CEO?","slug":"the-second-job-of-a-startup-ceo","html":"Successful startups go through three broad phases as they scale, and a startup CEO’s job changes dramatically in each phase. A CEO’s first job is to build a product users love; the second job is to build a company to maximize the opportunity that the product has surfaced; and the third is to harvest the profits of the core business to invest in transformative new product ideas. This blog post describes how to become a great Phase 2 CEO by focusing on the highest leverage tasks that only the CEO can accomplish. As YC’s Continuity team, we’ve seen many Phase 1 CEOs transition successfully into Phase 2, and some who have not. The future of your startup depends on which kind you are.\nYour First Creation is a Product, Your Second Creation is a Company\nA CEO’s first job is to build a great product and find a small group of people who love it and use it enthusiastically.<a href=https://www.ycombinator.com/"#footnote1\">1</a> A Phase 1 startup CEO is the Doer-in-Chief. You must be deeply involved in both building the product (observing/interacting with users, writing code, designing product specs) and acquiring users/customers. Delegation should not be a word in your vocabulary. If you succeed, it’s because your deep involvement and unique vision give the company a perspective and drive that few others have. The other imperative for a Phase 1 CEO is to conserve money in order to extend the time to iterate and improve the product.\nMost startups fail because they are not able to create a product that users love enough to abandon existing alternatives. Success in this first phase means discovering more demand for your product than your small team can handle. When this happens, you have to shift your focus as CEO to building a company that can capture and maximize the demand that your product has surfaced. Company-building becomes the CEO’s primary job in a Phase 2 startup. The company you build is your second creation and will be your lasting legacy as a founder.\nAs a Phase 2 CEO, you need to transition from “Doer-in-Chief” to “Company-Builder-in-Chief.” This is how you scale as a CEO, and CEO scaling is the first step in company-building. For most founders, this is very difficult. When you’ve been a successful Doer-in-Chief, it’s hard to stop. It’s hard to stop coding, designing product specs, and interacting with customers on a daily basis. It’s hard to stop answering support tickets, doing all the product demos, and debugging the latest build. It’s even hard to delegate the random and sometimes menial tasks that you’ve accumulated over the years because they were “no one’s job.” But you have to stop doing all of these things so that you can safeguard your time for high leverage tasks that only CEOs can do.\nThis transition can cause confusion and even friction with your team, who can suddenly wonder what you are doing if you’re no longer committing code or why you’re suddenly delegating a bunch of menial tasks that you’d been doing for years. But once your startup reaches 20-30 people, you’ll have to spend more time leading (i.e., directing the activities of others). And since time is finite, the only way to lead more is do less. Without delegating, you simply won’t have time to focus on company-building and you’ll end up slowing everyone else down.\nIt may seem impossible at first, but you can eventually delegate day-to-day responsibility for everything you did in Phase 1, even Product. You obviously can’t drop everything overnight, but your job is to replace yourself by hiring people better than you into leadership positions. As David Rusenko, the co-founder and CEO of Weebly has said, “Often, the first time I find out about a product feature is reading about it on our blog. It shocks most founders to hear this, but I know I’ve done my job well because I’ve yet to see a feature that was built poorly. You should aspire to build a team that’s so good that you don’t have to be involved in the product details.”\nIn practice, Phase 2 usually begins when a startup has around 20-25 employees and ends when it reaches 400-500 employees. At the end of Phase 2, you’ll have a leadership team that you’ve “road tested” to the point that you can confidently delegate everything you did in Phase 1. Your direct reports should be experienced leaders who can perform at a high level with minimal involvement from you, provided that you have set direction well. You can then shift the burden of company building to your leadership team so that you can start working on Phase 3: taking profits from the core business and investing them in new, transformative products. As an example, Facebook built its senior management team in Phase 2 while running the business at roughly breakeven. In Phase 3, it began to generate huge profits in its core business thanks to more lucrative in-stream ads, so it could allocate significant resources towards Messenger as a separate product and buy Instagram, WhatsApp, and Oculus.\nThree Tasks That CEOs Can’t Delegate\nStated simply, your job as a Phase 2 startup CEO is to delegate everything you did in Phase 1 in order to create time to focus on three critical operational tasks that only the CEO can do <a href=https://www.ycombinator.com/"#footnote2\">2</a>:\n1. Hiring a Leadership Team and Making Sure They Work Well Together\nOnly the CEO can hire the company’s senior leadership team and make sure that they work well together. You can get help and feedback from others as you hire, but when you bring leaders like a VP of Engineering, VP of Sales, and CFO on board, the ultimate hiring decisions must be yours. You can’t hire by compromise, looking for someone who everyone around you likes. The choice has to be yours because the consequences are yours as well.\nRecruiting senior executives takes an extraordinary amount of time. If you are doing it for the first time, meet lots of people so that you can develop good judgment about the skills, experiences, and personality traits that you need. Patrick Collison, co-founder and CEO of Stripe, made it a point to meet with the “best-in-the-world” in each field so he could get a sense of what a great candidate looks like. Because executive hiring takes so much time, you should stage these hires rather than trying to hire everyone at once. Our recommendation is to hire a good executive search firm to help you run your first couple of searches. It will cost you an arm and a leg, but if it helps you hire the right person, it’s worth every penny.\nYC teaches founders to manage their startups using weekly milestones to ensure rapid iteration and progress. That’s great for a small company trying to find product-market fit, but it’s not the way to manage senior executives. You manage senior people to longer term outputs rather than week-to-week tasks. To do this well, you first have to set the right quarterly and annual milestones for the company and for each executive. It’s also your job to acclimate new executives to the culture of the company. As you build your senior team, expect to spend extra time with new executives individually and as a team on culture and teamwork. You should insist that new executives take the time to build relationships across the organization rather than pressuring them to come in and start changing things immediately.\nLearning how to evaluate the performance of senior executives is also a challenge, partly because your face-to-face interactions do not provide much of the information you need. You have to evaluate how well they are building their organizations, how productive and happy their employees are, and how well they are working with other teams and executives. You should expect that at least 25% of your leadership hires don’t work out. For most startup CEOs, it’s very difficult to fire their first executive, and most CEOs take too long to do it. But it’s better to act quickly and leave a void in the organization than to leave an ineffective senior executive in place for too long. The longer you leave an under-performing executive in place, the more credibility you lose with everyone else on your team.\nYour job is done when your entire leadership team has been hired, you’ve coached them to work well together, and they can operate at a high level with minimal involvement from you. Don’t be surprised if 50% of your time goes to hiring and managing your senior team; it’s time well spent.\n<div id=\"creating-purpose-and-alignment\">\n</div>\n2. Creating Purpose and Alignment\nThe second task that CEOs cannot delegate is creating purpose and alignment at the company. When your startup has less than 10 people who all sit together, you don’t need to work very hard to keep people aligned. Everyone can easily hear what’s going on, understand how their work fits into the broader goals, and have a say in every decision. Communication is simple and creating alignment is easy.\nBut when you start hiring more people, soon in different offices and from broader backgrounds and functions (e.g., sales, finance, etc.), creating alignment becomes a lot harder. Your team no longer sits within earshot. You aren’t able to interview or even meet everyone who joins the company. And you may not even able to attend employee onboarding sessions. As an example, there was an 18-month period at Twitter where the company was hiring 50 people per month in offices all around the world. There was no way the CEO or any one executive could meet everyone who was joining the company.\nAs a Phase 1 CEO, you are the lead rower on the boat. But in a Phase 2 startup, your job is no longer to row. Instead, it’s to define the purpose of the voyage, set the direction of the boat, and measure the pace and performance of a much larger number of rowers. In business speak, the CEO’s job is to define the Mission (purpose), Strategy (direction), and Metrics (pace and performance). These three elements provide the essential context that a growing company needs to be able to perform.\nOne of the best examples of “Mission-to-Metrics” alignment comes from a friend who visited the manufacturing floor at SpaceX. Seeing a SpaceX employee assembling a large part, he stopped to ask him, “What is your job at SpaceX?” He answered, “The mission of SpaceX is to colonize Mars. In order to colonize Mars, we need to build reusable rockets because it will otherwise be unaffordable for humans to travel to Mars and back. My job is to help design the steering system that enables our rockets to land back on earth. You’ll know if I’ve succeeded if our rockets land on our platform in the Atlantic after launch.” The employee could have simply said he was building a steering system for landing rockets. Instead, he recited the company’s entire “Mission-to-Metrics” framework. That is alignment.\nCan you define the Mission, Strategy, and Metrics for your startup in a way that’s clear, simple, and inspiring? Most Phase 2 CEOs can’t readily do this. And, when they sit down to define it, they find it harder than they thought. The diagram below captures the task at hand:\n<a href=https://www.ycombinator.com/"https://ycombinator.wpengine.com/wp-content/uploads/2016/11/Artboard-2white_wborder.png/"> $\"Mission-to-Metrics\"$ How To Start A Startup</a> and <a href=https://www.ycombinator.com/"http://www.paulgraham.com/ds.html/">Do Things That Don’t Scale</a>.<a href=https://www.ycombinator.com/"#footnoteid1\">↩</a>\n2 The focus of this essay is on a CEO’s operational responsibilities. There are certain non-operational responsibilities such as building/managing a Board, raising money, interacting with the press, etc., that are also part of a CEO’s job, especially when a startup is small. Generally speaking, the less time a Phase 2 CEO spends on these types of non-operational tasks, the better, because they come at the cost of running the company.<a href=https://www.ycombinator.com/"#footnoteid2\">↩</a>\nThanks to Daniel Yanisse, Patrick Collison, David Rusenko, Ben Holzman, Michael Seibel, Ed Catmull, Sam Altman, Leore Avidar, Tyler Bosmeny, and the YC Continuity team for reading drafts of this essay.\n","comment_id":"1096555","feature_image":"/blog/content/images/wordpress/2016/11/businessman-standing-in-office-looking-out-picture-id150220735__1024%C3%97768_.jpg","featured":false,"visibility":"public","email_recipient_filter":"none","created_at":"2016-11-29T00:00:11.000-08:00","updated_at":"2021-10-20T13:17:53.000-07:00","published_at":"2016-11-29T00:00:11.000-08:00","custom_excerpt":null,"codeinjection_head":null,"codeinjection_foot":null,"custom_template":null,"canonical_url":null,"authors":[{"id":"61fe29e3c7139e0001a71078","name":"Ali Rowghani","slug":"ali-rowghani","profile_image":"/blog/content/images/2022/02/Ali.jpg","cover_image":null,"bio":"Ali is Managing Director of YC Continuity, where he invests in & advises growth-stage startups. Ali directly contributed to the growth of 2 great companies — as CFO / COO at Twitter and COO at Pixar.","website":null,"location":null,"facebook":null,"twitter":null,"meta_title":null,"meta_description":null,"url":"https://ghost.prod.ycinside.com/author/ali-rowghani/"}],"tags":[{"id":"61fe29efc7139e0001a7114b","name":"CEO","slug":"ceo","description":null,"feature_image":null,"visibility":"public","og_image":null,"og_title":null,"og_description":null,"twitter_image":null,"twitter_title":null,"twitter_description":null,"meta_title":null,"meta_description":null,"codeinjection_head":null,"codeinjection_foot":null,"canonical_url":null,"accent_color":null,"url":"https://ghost.prod.ycinside.com/tag/ceo/"},{"id":"61fe29efc7139e0001a7114c","name":"Company Building","slug":"company-building","description":null,"feature_image":null,"visibility":"public","og_image":null,"og_title":null,"og_description":null,"twitter_image":null,"twitter_title":null,"twitter_description":null,"meta_title":null,"meta_description":null,"codeinjection_head":null,"codeinjection_foot":null,"canonical_url":null,"accent_color":null,"url":"https://ghost.prod.ycinside.com/tag/company-building/"},{"id":"61fe29efc7139e0001a7114d","name":"culture","slug":"culture","description":null,"feature_image":null,"visibility":"public","og_image":null,"og_title":null,"og_description":null,"twitter_image":null,"twitter_title":null,"twitter_description":null,"meta_title":null,"meta_description":null,"codeinjection_head":null,"codeinjection_foot":null,"canonical_url":null,"accent_color":null,"url":"https://ghost.prod.ycinside.com/tag/culture/"},{"id":"61fe29efc7139e0001a71155","name":"Growth","slug":"growth","description":null,"feature_image":null,"visibility":"public","og_image":null,"og_title":null,"og_description":null,"twitter_image":null,"twitter_title":null,"twitter_description":null,"meta_title":null,"meta_description":null,"codeinjection_head":null,"codeinjection_foot":null,"canonical_url":null,"accent_color":null,"url":"https://ghost.prod.ycinside.com/tag/growth/"},{"id":"61fe29efc7139e0001a71156","name":"Growth-Stage","slug":"growth-stage","description":null,"feature_image":null,"visibility":"public","og_image":null,"og_title":null,"og_description":null,"twitter_image":null,"twitter_title":null,"twitter_description":null,"meta_title":null,"meta_description":null,"codeinjection_head":null,"codeinjection_foot":null,"canonical_url":null,"accent_color":null,"url":"https://ghost.prod.ycinside.com/tag/growth-stage/"},{"id":"61fe29efc7139e0001a71174","name":"Advice","slug":"advice","description":null,"feature_image":null,"visibility":"public","og_image":null,"og_title":null,"og_description":null,"twitter_image":null,"twitter_title":null,"twitter_description":null,"meta_title":null,"meta_description":null,"codeinjection_head":null,"codeinjection_foot":null,"canonical_url":null,"accent_color":null,"url":"https://ghost.prod.ycinside.com/tag/advice/"},{"id":"61fe29efc7139e0001a7116d","name":"Essay","slug":"essay","description":null,"feature_image":null,"visibility":"public","og_image":null,"og_title":null,"og_description":null,"twitter_image":null,"twitter_title":null,"twitter_description":null,"meta_title":null,"meta_description":null,"codeinjection_head":null,"codeinjection_foot":null,"canonical_url":null,"accent_color":null,"url":"https://ghost.prod.ycinside.com/tag/essay/"},{"id":"61fe29efc7139e0001a71181","name":"YC Continuity","slug":"yc-continuity","description":null,"feature_image":null,"visibility":"public","og_image":null,"og_title":null,"og_description":null,"twitter_image":null,"twitter_title":null,"twitter_description":null,"meta_title":null,"meta_description":null,"codeinjection_head":null,"codeinjection_foot":null,"canonical_url":null,"accent_color":null,"url":"https://ghost.prod.ycinside.com/tag/yc-continuity/"},{"id":"61fe29efc7139e0001a71182","name":"#ycc","slug":"hash-ycc","description":null,"feature_image":null,"visibility":"internal","og_image":null,"og_title":null,"og_description":null,"twitter_image":null,"twitter_title":null,"twitter_description":null,"meta_title":null,"meta_description":null,"codeinjection_head":null,"codeinjection_foot":null,"canonical_url":null,"accent_color":null,"url":"https://ghost.prod.ycinside.com/404/"}],"primary_author":{"id":"61fe29e3c7139e0001a71078","name":"Ali Rowghani","slug":"ali-rowghani","profile_image":"https://ghost.prod.ycinside.com/content/images/2022/02/Ali.jpg","cover_image":null,"bio":"Ali is Managing Director of YC Continuity, where he invests in & advises growth-stage startups. Ali directly contributed to the growth of 2 great companies — as CFO / COO at Twitter and COO at Pixar.","website":null,"location":null,"facebook":null,"twitter":null,"meta_title":null,"meta_description":null,"url":"https://ghost.prod.ycinside.com/author/ali-rowghani/"},"primary_tag":{"id":"61fe29efc7139e0001a7114b","name":"CEO","slug":"ceo","description":null,"feature_image":null,"visibility":"public","og_image":null,"og_title":null,"og_description":null,"twitter_image":null,"twitter_title":null,"twitter_description":null,"meta_title":null,"meta_description":null,"codeinjection_head":null,"codeinjection_foot":null,"canonical_url":null,"accent_color":null,"url":"https://ghost.prod.ycinside.com/tag/ceo/"},"url":"https://ghost.prod.ycinside.com/the-second-job-of-a-startup-ceo/","excerpt":"Successful startups go through three broad phases as they scale, and a startupCEO’s job changes dramatically in each phase. A CEO’s first job is to build aproduct users love; the second job is to build a company to maximize theopportunity that the product has surfaced; and the third is to harvest theprofits of the core business to invest in transformative new product ideas.","reading_time":13,"access":true,"og_image":null,"og_title":null,"og_description":null,"twitter_image":null,"twitter_title":null,"twitter_description":null,"meta_title":null,"meta_description":null,"email_subject":null,"frontmatter":null,"feature_image_alt":null,"feature_image_caption":null},{"id":"61fe29f1c7139e0001a71b50","uuid":"48a359ec-9a9c-404e-b5b6-4a1e9e0a8144","title":"How to Manage a Board","slug":"how-to-manage-a-board","html":"With special contributions from Nic Dardenne\nOne of the most common questions we hear from founders is “How do I manage my board?” It’s something that provokes anxiety, because this is the first time the founder/CEO is subject to external supervision, and the board has powers that include the firing of the CEO and the senior management. It is natural to feel this way. So, in this post, I’m sharing the collective wisdom of the YC community to help guide founders on best practices in managing a board––including running board meetings and overcoming board issues. Where possible, I’ve included specific examples – drawn from YC companies and partners – of how companies have handled board issues.\nBut first, what’s the purpose of a board? The main role of a board is to help guide the company through major decisions, such as hiring and firing senior management; approving corporate actions (e.g. compensation, stock options, and budget); and offering guidance on strategic decisions that impact the business longer term. As a legal matter, every Delaware corporation must have a board once it starts operating. At the start, this consists of the founders and the board functions mostly just as the technical body for approving corporate actions that must follow certain formalities (e.g. option grants). When people refer to setting up a board, what they usually mean is the process of adding outside directors, after the company raises money. These may be investor directors or independent directors.\n<h3>A note on board composition</h3>\nIf you need to have a board, who should be on it? Since the answer depends so much on the particular company and industry, we won’t spend much time on board composition in this post, but the short answer is that the investors who lead your Series A and Series B rounds will typically join the board (later-stage growth stage investors don’t tend to ask for board seats).\nA smaller company will have 3-5 board seats and a public company board will have 7-9 seats. The composition tends to significantly change a few years before going public, beginning with recruiting independent board members. Later, as the company grows, specific topical expertise committees (e.g., audit and compensation) will also be formed.\nBut in terms of how to pick the right board members – for an early stage company – the #1 attribute you need is trust. And the only way you build trust is with time. We recommend getting to know partners at VC firms on your list at least 6 to 9 months before your fundraise. Mathilde Colin, the CEO of Front, shares her experience doing this <a href=https://www.ycombinator.com/"https://medium.com/@collinmathilde/front-series-a-deck-f2e2775a419b/">here.

Before you add new board members, you should have a sense of their strengths, their weaknesses, and whether you would want to work with them for 10+ years––that’s how long some of these boards may last, given the median time to IPO. So, how do you get to know who these people really are beyond spending time with them? One thing you can do is check references with founders that those investors have worked with – just as with recruiting any talent.\nInterestingly, many founders feel that this reference check and balance may be causing many VCs to be less transparent in terms of providing feedback with the founders they work with – since they’re afraid of getting bad feedback and losing their next investment opportunity – so a number of founders have started bringing on independents much sooner.\nIn their series B, Atrium founder Justin Kan added YC partner Michael Seibel––a former co-founder of his at Justin.tv. Similarly, the Brex founders (Henrique and Pedro) added TFG Founder/CEO Victor Lazarte, another founder from Brazil who has known them since the age of 16. The Faire founders (Max, Marcelo, and Daniele) added Brian Grassadonia, who leads Square Cash and was their former manager at Square. These are all examples of CEOs’ desire for deeply trusted independent board directors. Many of these relationships are likened to family relationships, where the family privately shares the kind of direct feedback no one else will. However this does not mean you add your friend to your board. You need someone you really trust, who is 100% independent, and has the ability to help both you and your team as you scale the company.\n<h2>Managing Your Board</h2>\nBelow, I’ve tried sharing our advice for managing your board – from how often to meet, to the materials you need – in order to ensure a useful and productive group discussion.\n<h3>Meeting Schedule</h3>\nAt the Series A stage, most meetings tend to be informal (like 1:1s), ranging anywhere from bi-weekly to even bi-monthly. By the time you reach the Series B stage, however, you should establish a regular meeting cadence: Every quarter, with all meetings scheduled a year in advance to ensure all board members can attend. Ideally, only in person!\n<h3>Agenda and length</h3>\nAs the CEO it is your job to set and own the agenda for the board meeting, which can last about 3 hours.\nBe careful not to treat board meetings as a status update meeting, but rather as a meeting where you can openly discuss strategic or tough topics. That’s why the best CEOs tend to allot only the first 45 mins for sharing highlights/lowlights and KPIs (Key Performance Indicators), and then use the rest of the time to deep dive on no more than 1-2 strategic topics.\nHere’s an example agenda from the last board meeting I attended for Gusto (a company that offers payroll, benefits and HR for Small and Medium Businesses)––shared with their permission of course!\n<ul>\n<li>Highlights / Lowlights (10 mins)</li>\n<li>Performance / KPIs (50 mins)</li>\n<li>Strategic topic 1: Gusto 3 Year Strategic Plan (45 mins)</li>\n<li>Strategic topic 2: Engineering Org – Current and Future (45 mins)</li>\n<li>Closed Session – 30 mins (e.g., Any board matters such as approvals, sensitive topics, and feedback)</li>\n</ul>\nWhat this shows is that the company spends no more than 1/3rd of the time on the state of the business, and then the majority of the time on the strategic issues that shape its future. I also recommend identifying and aligning on key KPIs with your board members early as it helps the company standardize reporting across board meetings. It also “trains” board members to efficiently process the most important ones quickly – focusing on the “why” (why did or didn’t you hit certain goals?) – so they can turn to more strategic matters.\nWhat really allows Gusto to pull off their strategic focus within their board meeting, however, happens outside the board meeting: (1) They do a lot of prep work on the areas where they’re seeking input. Ideally this is a topic you’re already discussing with your executive team so the materials can be leveraged for multiple discussions; and (2) They send out a pre-read version of their board deck at least a week in advance, collecting questions from each board member in a Google Doc three days before the meeting. The Gusto team then answers all those questions in the Google Doc by the morning of the board meeting, so the subsequent discussion inside the board meeting can focus on the two most strategic topics.\nGetting through the entire agenda effectively requires strict time management. Consider assigning formal time-keeping responsibilities to a rotating member in the room.\n<h3>Elements of a board deck</h3>\nThe board deck is just a tool for discussion, not an end in and of itself. For the principles of what goes into a board deck, Bryan Schrier from Sequoia has a great post <a href=https://www.ycombinator.com/"https://www.sequoiacap.com/article/preparing-a-board-deck//">here.

This seems obvious, but is underrated: The structure of the board deck should align with the agenda of the meeting. For example, Gusto’s board decks are 30-50 pages long and typically have the following sections:\n<ul>\n<li>Highlights / Lowlights – 1 page</li>\n<li>Performance / KPIs – 15 to 20 pages</li>\n<li>Strategic topic 1: Gusto 3 Year Strategic Plan – 5 to 10 pages \n○ Options they considered \n○ Decision framework \n○ Product roadmap they plan to pursue \n○ Product areas they don’t plan to pursue \n○ Known vs. Unknown risks \n○ Initial assessment of economic value to the business \n○ Discussion on overall thinking and plan </li>\n<li>Strategic topic 2: Engineering Org – 5 to 10 pages \n○ Current Engineering Org \n○ Hiring Scale \n○ Future Engineering Org (18 months) \n○ Talent Assessment \n○ Talent Plan: Retention, Development and Recruitment Opportunities </li>\n<li>Closed Session (no slides)</li>\n<li>Appendix \n○ Health of the organization (10 slides): Hiring metrics by department, Close rates, and Employee Pulse Survey – Results</li>\n</ul>\n<h3>Behind the scenes preparation</h3>\nCompanies usually start planning a month in advance for the board meeting. In the case of Brex, the co-founders, CFO, and Chief of Staff align on the list of topics at least a month in advance and kick off a process to pull the materials together. The CFO leads the charge, working with executives across the company to align on inputs and topics for discussion.\nHere’s an example of a prep email sent by the Brex CFO to the team 28 days in advance of the board meeting, because obviously they are working on other things as well so they need that much time to prepare materials in between.\n<ul>\n<li>T-28 days: \n○ Founders/Chief of Staff: Identify the two strategic topics for discussion with the board \n○ Share with executive team to align on topics for discussion</li>\n<li>T-18 days \n○ Founders/CFO/Finance team:Outline topics and write/collect content to be covered \n○ Share draft deck with end of month close data with executive team</li>\n<li>T-11 days \n○ Execs comment/edit and provide feedback to Finance Team \n○ Finance Team finalizes the deck including formatting \n○ Final review if deck and backup data sent to founders and CFO </li>\n<li>T-7 days \n○ Review and final run of edits \n○ Distribute deck to Board of Directors (BoD)</li>\n<li>T-4 days \n○ BoD submits questions (particularly on KPIs)</li>\n<li>T-2 days \n○ Brex consolidates and answers all questions from BoD</li>\n<li>T-0 \n○ Set expectations upfront (which sections you want to spend the most time and where do you need more feedback)</li>\n</ul>\n<h3>Involving the executive team in board meetings</h3>\nPost-Series B, most companies will have an executive leadership team that helps the CEO scale and grow the company. Note, the general counsel and/or outside counsel can also be invited as part of this. It is important for at least one of the GC and/or outside counsel to attend all your board meetings to capture notes and discuss any sensitive issues that require attorney-client privilege.\nSince the board is tasked with scaling and governance, it is important for execs to get to know the board (and vice versa). There are two approaches here: (1) Ask your leadership team to attend the entire board meeting; or (2) Ask only those executives who have a section to present to the board join the meeting for a particular agenda item, for about 45 minutes.\nThe problem with the first approach of inviting all executives to the meeting is the board meeting can turn into a presentation vs. a discussion. It also becomes challenging for the founders and the CEO to discuss sensitive matters directly.\nThat’s why I prefer the latter approach, where specific execs join just for that agenda item (usually about 45 minutes). This approach achieves three things: a meatier discussion on the strategic issue at hand; the executives hear the board’s feedback directly; and more time at the end of the meeting for the CEO and the board to discuss other sensitive matters on their own.\nRemember: The board meeting is not about selling to your board members. Of course, you want to show off great work and celebrate milestones. But, your board is already bought in, and the highest leverage on their time – and yours! – is in helping you get to the next milestone.\n<h3>Monthly updates</h3>\nIn addition to quarterly in-person board meetings, it’s a good practice to send a 2-page monthly update email (sample <a href=https://www.ycombinator.com/"https://docs.google.com/document/d/1IVAGDTl1O0wQvubGx7Rl8hKpNtA7k_826yCVcZSmRIw/edit/">here) to the board at the beginning of every month. The email usually includes a summary of last month’s performance; a hiring update; a section outlining burning issues; and a section with specific asks for help.\nBrex always makes two specific asks in their monthly emails: potential introductions to business partners/customers, and help with key roles they are looking to fill. In their monthly investor update, GitLab will ask for introductions to specific individuals at companies who can be potential customers — they also applaud specific investors who have helped them in the past, putting pressure on the entire board to do the same.\nGetting into a good rhythm of sending monthly updates accomplishes three things: (1) Board members will go above and beyond to help you with your specific asks; (2) The board is better prepared for the in-person board meetings; and (3) It is a great way for you as the CEO to take a step back and reflect on the most important elements of your business and objectively measure how well you are doing as a company. Often writing vs. talking is more effective for showcasing your clarity of thought, and written narrative is more compelling in sharing ideas than bullet points and slides, as Jeff Bezos has argued <a href=https://www.ycombinator.com/"https://www.inc.com/carmine-gallo/jeff-bezos-bans-powerpoint-in-meetings-his-replacement-is-brilliant.html/">about memos</a>.\n<h3>Bonus: Letter to the board</h3>\nIn fact, some CEOs may even use the board meeting as an opportunity to take a step back and write a letter to the board. For example, Peter Reinhardt, CEO of Segment, writes a 3-5 page memo that focuses on highlights, lowlights, and areas where he would like to spend more time vs. where he’s spending time today. He prefers the written format vs. slides in the deck as it allows him to reflect on the quarter and articulate the company’s future. More importantly, he focuses on his own strengths and weaknesses and what he could be doing better as a CEO.\nFaire often uses the written memo format to discuss the strategic priorities during the board meeting. The memo sets the context for the discussion, articulates their decision framework, and explains why they are recommending a particular approach. They also write down all the uncertainties and blind spots they have when it comes to making that decision. Not only do these memos help the board prepare for the discussion, but they help the CEO create a record of the quality of their decision-making processes.\n<h2>Leveraging Your Board & Navigating Issues</h2>\nMost issues boil down to communication, which is why following the best practices outlined so far can help smooth the way. However, there are a lot of incremental opportunities CEOs may leave on the table when it comes to managing/leveraging their boards — as well as obstacles that come up from frictions or specific issues. I’ll share our collective advice on navigating these below.\n<h3>Mixed messages</h3>\nConflicting viewpoints are a good thing! The job of the board is to push you on your strategy and to ask questions that help you sharpen your thinking. As a CEO you should welcome conflicting opinions and should not feel pressure to get the board to come to a consensus decision.\nHowever, if the conflict reaches a point where it is hard to move the conversation forward, offer to take the conversation offline and set up 1:1’s or small group meetings to understand the conflicting views. After understanding conflicting viewpoints, use a decision-making framework (as an example see one below) to guide the discussion.\nA YC CEO recently shared how two board members had strong, directly conflicting opinions about the order in which they should pursue new products. The CEO took the discussion offline and came up with a decision-making framework (e.g. economic value, resources, cash needs, and competitive threat) to decide which path they were going to take. Coming up with the framework also made it quite clear which path was the right one for the company, and why. Sometimes the answer is not very clear but a framework is helpful when you decide to go against the board’s advice. Your board members will never be as close to the business to make that decision. While board members provide important input all CEOs should seriously consider, the CEO has the authority to make the best decision on behalf of the company. As long as you have a clear decision-making framework, your board members will understand when you disagree. Also with time if you are more right than wrong about your decisions, the board will be willing to disagree and commit to the path forward.\n<h3>Asking board members for help</h3>\nAs you get a better sense of the areas where different board members can be most helpful – whether it’s helping recruit execs, offering fundraising advice, or other areas – don’t hesitate to follow up directly with them outside of board meetings on those topics.\nMany CEOs seem to think it’s important to update every board member 1:1 on every topic. To which I say: NO! Not every board member needs to be in the loop on every topic or issue; it’s an ineffective use of everyone’s time, including yours. I also think it is a poor use of time to update every board member 1:1 before every board meeting. Unless there are sensitive topics that need to be discussed before hand, don’t waste time doing 1:1 calls with board members to get everyone on the same page. Allow your board members to challenge you and the team during the board meetings and encourage conflicting views to help flesh out your thinking.\n<h3>Balancing helpfulness vs control</h3>\nBe cautious of board members who are trying to make decisions for you. A board member’s job is to help you think through the issues by offering tools or decision frameworks––not to give you all the answers on how to run your business.\nIn fact, great board members will often refrain from stating opinions; instead, they ask questions to help flesh out a CEO’s thinking. My fellow board member at Brex, Micky Malka of Ribbit Capital, does this: Even if the CEO asks for his opinion on, say, “What should our typical credit loss rate be?”, Micky would respond with examples of 10 startups in Ribbit’s portfolio and their trajectory along credit loss rates; share pros and cons of each approach; yet refrain from giving one definitive answer. In doing so, he empowers the founders to make the decision.\n<h3>Problem (overbearing / unhelpful) board members</h3>\nAs mentioned earlier, backchannel checks are a great way to test for quality and helpfulness, so take the time to do this. But, if you still end up getting stuck with an unhelpful board member, the best way to handle this is to first meet 1:1 and share that feedback, constructively (not unlike running a feedback meeting with your peers or direct reports).\nBe sure to focus on the issue at hand – don’t make it personal and/or scattered – and share specific examples from past board meetings where their feedback was not helpful. If you have a good relationship with other members of the board, you can also work with them to understand how to raise the issue with the unhelpful board member.\nIn some cases, board members may step in and give feedback to fellow board members. But be careful about a board member who tries to work around the CEO. One YC company recently faced this – the board member started having direct meetings with senior management without the CEOs knowledge and jumped to conclusions without full context. This put the CEO in a really tough spot. The CEO used this as an opportunity to have 1:1 conversations with other board members, gather feedback, and directly approach the board member who was being disruptive. It took about 6 months to get the situation resolved and trust was re-established. The CEO worked with the rest of the board to set up a decision framework on when and how the board can intervene. Use every challenging situation as an opportunity to improve your existing processes.\n<h3>Removing board members</h3>\nThis one is really hard! The situation arises when a board member is destructive to the company – trying to meddle, micromanage, act like an operator running the company – and sometimes even leaking information to the press. If you have tried everything (such as talking to the board member directly) and are convinced that your board member is destructive to the company, then you have a couple of options. I suggest the following, either (1) Approach someone senior at the firm (where the board member works) and seek a replacement or (2) Add more board members (independent or via new investment rounds) who can be a sounding board and help address some of the issues.\nIf you pursue option (1), you will burn bridges with the board member and potentially the firm. If your company is not in good standing (i.e., metrics don’t look good, and potential doesn’t look great) then it will be hard to find a replacement. You will likely be stuck with your current board member. However, if your company is doing well then you have more negotiating leverage than you think. If your company is one of the best performing companies in the VC’s portfolio, the firm will work hard to find you the board member that you want.\nIf you pursue option (2), you can leverage other board members to push back when the unhelpful board member is giving advice that is not productive and could hurt the company. At the end of the day, you don’t have to listen to the board’s advice if you are convinced that it does more harm than good.\nThat said, as a founder and CEO you should work to understand the gravity of the situation. Board members have the right intent––their job and their incentives are aligned to set the company up for success. If all your board members are echoing the same feedback and you are not listening, then the problem is likely you. Some CEOs bring their executive coach to one or two board meetings to get feedback on board dynamics. This may also help calibrate your perception of the board members around the table. I have also seen a few CEOs seek bi-annual feedback from the entire board via the executive coach.\n<h2>Final Thoughts</h2>\nMany CEOs get nervous at the idea of board meetings. But they’re a good thing. They remind you that you are not alone. Your board of directors – when composed and managed well – is dedicated to your company’s success, which means they will challenge you to make better decisions but are on your side as long as you are being ethical and doing the right thing for the company. And of course, what is considered an effective board will evolve over time as the company matures. But, you can be intentional in building the right team of advisors up front, using the best practices outlined above. If knowing is half the battle, why not enlist the best help you can get?\nSpecial thanks to Justin Kan, Sonal Chokshi, Ali Rowghani, Daniel Gackle, Adora Cheung, Craig Cannon, Gusto, Brex, Convoy and Faire founders for reading multiple drafts of this essay. Thank you to numerous YC founders for sharing their perspectives on this topic.\n","comment_id":"1103771","feature_image":"/blog/content/images/2022/02/How-to-Manage-a-Board.png","featured":false,"visibility":"public","email_recipient_filter":"none","created_at":"2019-07-15T00:14:05.000-07:00","updated_at":"2022-02-01T15:54:17.000-08:00","published_at":"2019-07-15T00:14:05.000-07:00","custom_excerpt":null,"codeinjection_head":null,"codeinjection_foot":null,"custom_template":null,"canonical_url":null,"authors":[{"id":"61fe29e3c7139e0001a7107b","name":"Anu Hariharan","slug":"anu-hariharan","profile_image":"/blog/content/images/2022/02/Anu.png","cover_image":null,"bio":"Anu is a Managing Director & Partner at YC Continuity. Previously, Anu was a Partner at a16z, where she worked actively with the management teams of companies including Airbnb, Instacart, and Medium.","website":null,"location":null,"facebook":null,"twitter":null,"meta_title":null,"meta_description":null,"url":"https://ghost.prod.ycinside.com/author/anu-hariharan/"}],"tags":[{"id":"61fe29efc7139e0001a71174","name":"Advice","slug":"advice","description":null,"feature_image":null,"visibility":"public","og_image":null,"og_title":null,"og_description":null,"twitter_image":null,"twitter_title":null,"twitter_description":null,"meta_title":null,"meta_description":null,"codeinjection_head":null,"codeinjection_foot":null,"canonical_url":null,"accent_color":null,"url":"https://ghost.prod.ycinside.com/tag/advice/"},{"id":"61fe29efc7139e0001a7116d","name":"Essay","slug":"essay","description":null,"feature_image":null,"visibility":"public","og_image":null,"og_title":null,"og_description":null,"twitter_image":null,"twitter_title":null,"twitter_description":null,"meta_title":null,"meta_description":null,"codeinjection_head":null,"codeinjection_foot":null,"canonical_url":null,"accent_color":null,"url":"https://ghost.prod.ycinside.com/tag/essay/"},{"id":"61fe29efc7139e0001a71181","name":"YC Continuity","slug":"yc-continuity","description":null,"feature_image":null,"visibility":"public","og_image":null,"og_title":null,"og_description":null,"twitter_image":null,"twitter_title":null,"twitter_description":null,"meta_title":null,"meta_description":null,"codeinjection_head":null,"codeinjection_foot":null,"canonical_url":null,"accent_color":null,"url":"https://ghost.prod.ycinside.com/tag/yc-continuity/"},{"id":"61fe29efc7139e0001a71182","name":"#ycc","slug":"hash-ycc","description":null,"feature_image":null,"visibility":"internal","og_image":null,"og_title":null,"og_description":null,"twitter_image":null,"twitter_title":null,"twitter_description":null,"meta_title":null,"meta_description":null,"codeinjection_head":null,"codeinjection_foot":null,"canonical_url":null,"accent_color":null,"url":"https://ghost.prod.ycinside.com/404/"}],"primary_author":{"id":"61fe29e3c7139e0001a7107b","name":"Anu Hariharan","slug":"anu-hariharan","profile_image":"https://ghost.prod.ycinside.com/content/images/2022/02/Anu.png","cover_image":null,"bio":"Anu is a Managing Director & Partner at YC Continuity. Previously, Anu was a Partner at a16z, where she worked actively with the management teams of companies including Airbnb, Instacart, and Medium.","website":null,"location":null,"facebook":null,"twitter":null,"meta_title":null,"meta_description":null,"url":"https://ghost.prod.ycinside.com/author/anu-hariharan/"},"primary_tag":{"id":"61fe29efc7139e0001a71174","name":"Advice","slug":"advice","description":null,"feature_image":null,"visibility":"public","og_image":null,"og_title":null,"og_description":null,"twitter_image":null,"twitter_title":null,"twitter_description":null,"meta_title":null,"meta_description":null,"codeinjection_head":null,"codeinjection_foot":null,"canonical_url":null,"accent_color":null,"url":"https://ghost.prod.ycinside.com/tag/advice/"},"url":"https://ghost.prod.ycinside.com/how-to-manage-a-board/","excerpt":"With special contributions from Nic DardenneOne of the most common questions we hear from founders is “How do I manage myboard?” It’s something that provokes anxiety, because this is the first time thefounder/CEO is subject to external supervision, and the board has powers thatinclude the firing of the CEO and the senior management. It is natural to feelthis way.","reading_time":15,"access":true,"og_image":null,"og_title":null,"og_description":null,"twitter_image":null,"twitter_title":null,"twitter_description":null,"meta_title":null,"meta_description":null,"email_subject":null,"frontmatter":null,"feature_image_alt":null,"feature_image_caption":null}]},"url":"/blog/yc-is-crispr-for-startups","version":null,"rails_context":{"railsEnv":"production","inMailer":false,"i18nLocale":"en","i18nDefaultLocale":"en","href":"https://www.ycombinator.com/blog/yc-is-crispr-for-startups","location":"/blog/yc-is-crispr-for-startups","scheme":"https","host":"www.ycombinator.com","port":null,"pathname":"/blog/yc-is-crispr-for-startups","search":null,"httpAcceptLanguage":"en, *","applyBatchLong":"Winter 2024","applyBatchShort":"W2024","applyDeadlineShort":"October 13","ycdcRetroMode":true,"currentUser":null,"serverSide":true},"id":"ycdc_new/pages/BlogPage-react-component-8517ffed-f911-46e0-ad83-07698fad7e9d","server_side":true}" data-reactroot="">

YC is CRISPR for Startups

by Geoff Ralston6/25/2021

Last week, we launched our Summer 2021 batch here at Y Combinator, the 33rd batch since our founding in 2005. We are now funding hundreds of companies each batch, and I’ve been reflecting on how we work with those companies during the batch and afterward, as they build their business.

Over the years, I’ve found that there is a common misapprehension about what we do at Y Combinator. People often believe that YC’s raison d’etre is Demo Day and fundraising — and that founders’ singular goal in applying to YC and completing our program is to increase their probability of executing a successful fundraise.

It is true that companies that complete YC’s core program have an easier time raising money from angel investors and venture capitalists. It is also certainly correct that raising capital is extremely important to early-stage startup companies as they finance their product development and the growth they plan and hope for.

But this begs an important question: why is it that YC companies have a better chance of fundraising success? Is it because YC is an effective filter: choosing only the best founders and companies? That is certainly one reason. However, there is more to this answer and it is fundamental to what we do. By joining YC, by going through our program, working with our group partners, and by becoming part of the YC community, each startup undergoes a subtle transformation into a company more likely to succeed. This is the real secret to YC’s success.

We are far more than a ticket to raising capital. We aim to change each YC company into a better version of itself — into a startup which has a better chance of surviving the bitter battle where only the fittest and best-adapted companies survive. The comparison of a startup ecosystem to the biological version is, of course, not a new one. We often extend the analogy and speak to a startup’s DNA — referring to the core company features which lead to success or failure.

Recently, I’ve realized that thanks to advances in biology there is now a way we can extend this analogy even further to better describe what YC does. Thanks to innovations from Nobel Prize winners Emmanuelle Charpentier and Jennifer Doudna, biology now has an effective gene editing technique called CRISPR. And YC is CRISPR for startups.

Startup founders with epic potential join YC. Their startups come in with their own DNA and we modify it, edit it, CRISPRize it, if you will, to include key alleles that make success most likely. What alleles?

Product-Market Fit: How to think about customers and find the right way to deliver them value.
Growth and Sales: How to economically and intelligently grow a customer base.
Company Building: How to create the durable, long term infrastructure of a company. Especially, how to find and hire the right talent.
Fundraising: How to best execute a strategy to raise the right amount of capital, at the right time from the right investors.
Health: How to stay sane and strong while building a startup.
Focus: How to move quickly while staying intensely focused on the goal.
Leadership: How to believe enough in a startup that a founder can persuade others to join in the battle and to stay through the inevitable ups and downs.
Ambition: This is perhaps the least understood, but most important effect of being a YC founder and part of the YC community. We aim to instill the belief that anyone, no matter where they come from or who they are, can change the world and create the next epic startup success.

YC is CRISPR For Startups

Today, founders from around the world join YC. While most are very early in their startup journey, our goal is that by the end of the batch every one of them finds their trajectory transformed to give them the best chance to survive and thrive. YC’s “gene editing” doesn’t end there. We continue to work with founders as they build their companies, helping them recruit, raise a Series A, and grow.

Author

Geoff Ralston
Geoff Ralston is the former President of Y Combinator and has been with YC since 2011. Prior to YC, he built one of the first web mail services, RocketMail which became Yahoo Mail in 1997.