Kirsty Nathoo, CFO and partner at Y Combinator has heard every possible excuse for why startup founders don’t apply to Y Combinator’s funding cycles. They all sing the tune of, “I’ve heard that Y Combinator accepts only x,” with x being anything from a demographic to the stage of a startup. Some startups don’t apply because they think they have too much funding to apply, and then others don’t apply because they don’t think they have enough. For every “too much” of something that prevents a startup from applying, there’s another startup who doesn’t apply for having “not enough” of the same thing. And to everyone who says or thinks this, Y Combinator wants you to know something: You’re wrong. Here’s the right statement: Y Combinator accepts only talented startups, regardless of the stage or any detail about the startup’s founders. There’s a misconception that YC accepts only twenty-something male Stanford graduates, but that’s all it is – a misconception.
Nathoo, herself, is the perfect example of how talent is all you need to get access to YC’s resources. She started as the in-house accountant when Y Combinator wasn’t even on the map. Having been accepted to the Winter program in 2008, Nathoo’s husband, Amir, had to move from the United Kingdom to Silicon Valley. After graduating from the accelerator, he felt that moving to Mountain View would be a smart move. At the time, YC was looking for an in-house accountant. Because Kirsty was working at PwC as the UK equivalent of a CPA, she already had a considerable amount of experience with tech and startups. It only made sense for YC founders Paul Graham and Jessica Livingston to ask Kirsty to join the team. She wasn’t being asked to be the in-house accountant for the largest and best startup accelerator in the world; she was asked to be the in-house accountant of a startup that wanted to help other startups.
YC felt like a small family business at the time – it wasn’t what it is today.
Today, Nathoo’s CFO and partner position matches YC’s high caliber in the startup industry.
Not only has YC come a long way in its applicants and programs in terms of diversity, but it has also grown from 4 initial partners to 17 partners – 4 of whom are women. That may seem like slim pickings, but check the numbers; it’s not. YC has always done events open to anyone interested in starting startups, but they wanted something that could speak to women who were in the field or thinking about joining.
Y Combinator started holding an annual Female Founders Conference in 2013 to dispel the myths that prevent women from living up to their entrepreneurial potential. There is so much negative press about the whole startup world – that it is a male-dominated industry, and that it’s too hard for women to get by. Naturally, this kind of talk is intimidating.
The Female Founders Conference gives attendees more information about why launching and running a startup is a definite possibility for anyone by bringing in female alumni of YC funding cycles.
To anyone who wants to go into the startup industry, here are the key points from Kirsty Nathoo and fellow YC Partner Carolynn Levy’s lecture on How to Start a Startup:
Always, always, incorporate your business in the state of Delaware. Incorporating your business in Delaware is a no-brainer, and not doing so could potentially cost you hundreds of thousands of dollars in legal fees.
Move on and keep focusing on what you need to do. Keep it simple. Keep it organized.
Kristy Nathoo, Partner at Y Combinator
Resist the urge to give a disproportionate amount of stock to early players. “If the expectation at your startup is that each Founder is in it one hundred percent, for the long haul, then everything that happened before the formation of the company shouldn’t matter.” At the same time, be mindful of equity allocation.
Value is more than the initial capital received or the basic idea of the company; “value is created when the whole Founder team works together to execute on an idea.”
Be on top of your legal game. “The main things here are sign the paperwork, sign the Stock Purchase Agreements, sign the 83(b) Election, and make sure that you actually have proof that you sent that in.”
Vest. Vesting prevents the founders, or founder if you’re solo, from bailing on the company and keeping full ownership. In other words, vesting is insurance to the other co-founders and investors that they won’t be screwed over down the road.
Don’t set the price of your company. YC will take in a company at any stage – whether the price or valuation of the company hasn’t been set (seed stage) or it has (Series A or Series B). Nathoo recommends not setting the price because it’s more efficient to getting money and moving forward.
Accredited investors – not your uncle or neighbor – know what they’re doing and the risks associated with it. Only add an investor to your board if you believe that will add value to your company.
You don’t have to end up like Eduardo Saverin. “Pro-rata rights are a way to avoid dilution.”
“Surprising as this may sound, one of the hallmarks of a really effective founder is how well he or she handles employee terminations.”
Even if you don’t go down the startup accelerator or VC path, know that a lot of running any startup relies on following the rules and taking it seriously.
If you are a woman, a person of color or LGBTIA+ identified and are a part of a start-up company, this is the competition for you. The SoGal Global Pitch Competition is being hosted in over 25 cities and will culminate in a final contest in Silicon Valley as well as a "3-day immersive educational bootcamp." This could be an unprecedented opportunity for you, your business and for the future of entrepreneurial diversification.
We all know how important diversity is for the world and for any business entity. But the statistics need to catch up with these ideals, because diversity isn't just a moral imperative it can also have an impact on the success and efficiency of a business. So if the ethics isn't enough to get you interested, maybe these statistics will.
- Companies in the top quartile for ethnic and racial diversity are 35% more likely to have above-average financial returns
- Companies in the top quartile for gender diversity are 15% more likely to have above-average financial returns
- Bottom quartile companies (in both gender and racial diversity) are less likely to achieve even average returns
- In senior executive teams in the US for every 10% increase in racial and ethnic diversity EBIT (earnings before interest and tax) rose 0.8%
Despite the fact that diversity is good for business, funding as a woman or a minority is incredibly challenging, but this competition could be someone's game-changing opportunity.
SoGal is a global education and empowerment platform focused on diverse investors and entrepreneurs. Their mission is "to close the diversity gap in entrepreneurship and venture capital." A tall order, given that 2.2% of VC funding went to women in 2018. Compounding the gender gap with race shows an even poorer picture: in the past decade only 0.1% (yes, that is a decimal) of funding was allocated to black women.
It is a straight up fact that companies with higher levels of diversity perform better, so why is it so hard for diverse start-ups to get funded? Oh right, racism, sexism, homophobia, implicit biases, inequality, classism... the list goes on, but thankfully that's where SoGal comes in! According to Kelley Elizabeth Henry, director of SoGal, "We're done waiting for these statistics to change; we're taking action to point investment capital toward these diverse-led startups. [...] We will change the future of entrepreneurship."
To enter this competition all you have to do is be a part of a pre-Series A startup (raised less than $3M) and have at least one "woman or diverse" founder. After you apply to pitch, you'll have to be able to make it to one of the "regional round location," which range from the more typical options of New York and Los Angeles to global locations such as Nairobi or Bangalore. And, if you're really playing to win, you better earmark February 28 to March 1 of next year, because that's when the top teams will be in San Francisco duking it out to the very end. And by "duking it out," I mean participating in "curated educational programming," talking to press and getting "facetime in front of top-tier investors." Though not everyone can win, the experience in itself looks to be well-worth the time it takes to fill out an application form and huff it to the nearest large city for the first round.