13 Startup Ideas | Y Combinator

identifying pain in sheep</a>.) \nElizabeth Iorns, Science Exchange S11\nSmart Bathroom \nHealthcare in the U.S. is a $3.2 trillion industry. Individuals take care of most of their health needs in the bathroom (bms, urine, teeth, hygiene, et cetera). All this data is literally flushed down the drain. Big opportunity to install a virtual doctor’s office in everyone’s bathroom, collecting data and providing feedback to help people reduce cost on health and wellness while achieving much better outcomes. New types of sensors and great data analysis and UX is needed to make the smart bathrooms a reality. \nBreck Yunits, NudgePad S09\nAccounts Receivables as a Service \nIt can be a huge pain to get enterprises to pay their vendors, even after contracts are signed. It’s one of those business inefficiencies that they’re not inclined to fix because there’s little downside to them paying late. Handing it off to a “collections agency” seems aggressive and most startups won’t do it, but I think something like an outsourced AR service that appears to be from the company but is actually a third party could be great. Potentially a mix of $/mo+% of revenue or $/mo depending at different tiers depending on how many transactions. \nYuri Sagalov, AeroFS S10/Y Combinator\nBaby Bidet \nA semi-automatic baby bidet where you could sit them over the sink and clean out the yuck simply and without having to touch it. Could work well as a kickstarter. \nJeffrey Engler, Wright Electric W17\nSecuritized Assets on the Blockchain \nI would be working on making it easier to securitize and create a market for unique assets on the blockchain. There are many types of new securities and types of assets being created, not only tokens but anything else that can be bought or sold. In theory you could sell those on the blockchain currently, but you’d have to spin up and create your own blockchain in its entirety. It seems like that’s something you should be able to do as a service; I have some asset and I’d like a blockchain for it, and I’ll pay a monthly fee. I’d build that if I had time. \nAusten Allred, Lambda School S17\nRenewable Energy from Engineered Microbes \nMicrobes are outstandingly powerful and have the potential to be engineered to do almost anything. If I had more time, I would love to look more into the idea of engineering a bacteria that could efficiently convert a renewable resource into a usable fuel. Obviously, many microbes already exist that can do this, and so I would like to do more research into why this is not an option in common practice yet, and what strategies could be developed to make it possible here and now. Is the problem that the fuels they are making are incompatible with our current infrastructure (e.g. the microbes make ethanol, and most cars run on gas)? Or is the problem that bugs that can make usable fuel do so inefficiently, and thus need to be engineered to produce sufficient quantities in a cost-effective manner and/or on a reasonable time scale? In short, what problem(s) need to be solved to utilize microbes as fuel sources? \nZack Abbott, Z-Biotics Fellowship\nAdwords for Outdoor and Transit Advertising \nBillboards are still sold manually by sales teams. You literally cannot buy a billboard online. If people could buy them as easily as you buy an Adwords ad, maybe many more small companies would. \nJared Friedman, Scribd S06/Y Combinator\nDesign on Demand \nUpload a photo of furniture of a piece of home decor, and select between “find” or “match” options. The “find” option would bring up very similar options and let you sort by price point and delivery time, so you could find the Crate and Barrel knock off of that designer table you saw in a magazine. The “match” option would recommends items that go well stylistically with that item. All of that instantly delivered through an app or website. \nKathryn Minshew, The Muse W12\nLow-Friction Lending Library \nMost people end up accumulating dozens or hundreds of items that they only need a few times a year. In my case these are things like camping equipment, a soldering iron, an electric drill, paper cutter, etc. — but everybody has their own unique list. I’d much rather not have to keep track of all this infrequently-used inventory and instead rent it on demand, especially since I have limited storage space. Lending libraries for this type of stuff exist but are too high-friction to be popular today — it’s substantially easier to just buy something on Amazon than rent it from a local depot. I think with automated inventory management and (potentially) sidewalk delivery bots the cost and friction can be brought low enough to turn this into a popular and defensible subscription business. \nKyle Corbitt, Y Combinator\nMake Technology Relatable and Accessible \nTechnology is advancing at a rapid pace and it can be overwhelming and scary for people that don’t understand the underlying principles or have a safe place to ask questions and be taught. Think about how frustrated you get trying to explain to your grandfather why Facebook isn’t working when the Wi-Fi isn’t connected and what wi-fi is or browsers are. This is most pronounced with seniors but applies also to lots of people that don’t work in tech. It is only getting worse with topics like AI and cryptocurrency. Build a service that makes technology accessible and not scary for older or non tech savvy people. We need a text/call and software based solution with really great people on the other end who don’t judge, but explain concepts simply — someone who will help and doesn’t make anyone feel dumb. Ultimately the goal would be to make people of all types more technologically conversant while build ing a membership and/or e-commerce business model. \nAvni Patel Thompson, Poppy W16\nBuyer’s Remorse Insurance \nMoney back guarantee for art buyers: Buying fine art has a steep learning curve. Firstly, galleries are very uninviting. Then, when you get inside, the sales process is super unclear. A final barrier is that art is very arbitrarily priced, and as a new buyer it’s hard to know if you will get buyer’s remorse and feel like you overpaid for something. To overcome this, offer insurance that galleries can offer to buy art back from the purchaser if the purchaser is unsatisfied. Lowered risk for buyers => Increased spend, and you take some of that increased revenue. \nJustin Kan, Justin.TV/Twitch W07\nSocial Network for Children \nThis is a super tough nut to crack. You have to be cool and offer a safe and private environment for kids to communicate with each other while enabling trusted adults to peer in/interact, etc… The company that can build something that is used and useful for all parties can build something of great value throughout a person’s entire life. \nHolly Liu, Kabam/Y Combinator\nModern Firefighting \nClimate change is already having real consequences on our society, and this year has been one of the worst years for wildfire in history, leaving entire neighborhoods flattened. Fire fighting and the tools we use to fight fires haven’t changed much in 100 years. Sprinklers were a big innovation for homes, but forest fires are often spotted and fought in the same way we did many decades ago. With the arrival of autonomous drones, industrial drones, better sensors and better prediction we should be able do a better job saving our forests, cities and firefighters. \nGustaf Alstromer, Y Combinator\n","comment_id":"1101201","feature_image":null,"featured":false,"visibility":"public","email_recipient_filter":"none","created_at":"2017-11-16T00:59:57.000-08:00","updated_at":"2021-10-20T12:21:32.000-07:00","published_at":"2017-11-16T00:59:57.000-08:00","custom_excerpt":null,"codeinjection_head":null,"codeinjection_foot":null,"custom_template":null,"canonical_url":null,"authors":[{"id":"61fe29e3c7139e0001a710a5","name":"Kyle Corbitt","slug":"kyle-corbitt","profile_image":"/blog/content/images/2022/02/kyle.jpg","cover_image":null,"bio":"Kyle Corbitt is a software developer at Y Combinator. He spends most of his time creating software to support our founders as they build their businesses. Before joining YC he ran his own startup.","website":null,"location":null,"facebook":null,"twitter":null,"meta_title":null,"meta_description":null,"url":"https://ghost.prod.ycinside.com/author/kyle-corbitt/"}],"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":"61fe29e3c7139e0001a710a5","name":"Kyle Corbitt","slug":"kyle-corbitt","profile_image":"https://ghost.prod.ycinside.com/content/images/2022/02/kyle.jpg","cover_image":null,"bio":"Kyle Corbitt is a software developer at Y Combinator. He spends most of his time creating software to support our founders as they build their businesses. Before joining YC he ran his own startup.","website":null,"location":null,"facebook":null,"twitter":null,"meta_title":null,"meta_description":null,"url":"https://ghost.prod.ycinside.com/author/kyle-corbitt/"},"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/13-startup-ideas/","excerpt":"Hey, my name is Kyle Corbitt and I’m a software developer at Y Combinator. I\nspend most of my time creating software to support our founders as they build\ntheir businesses. Before joining YC I ran my own startup.\n\nWhen I was in high school, I sometimes got the frustrating feeling that all of\nthe good startup ideas had been taken before I had a chance to work on them\nmyself. As I’ve gotten a bit older and gained more experience, I’ve found that\nvaluable startup ideas aren’t actually a scarce reso","reading_time":6,"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":"61fe29f1c7139e0001a717f9","uuid":"5afbbacc-c7ec-400f-a48d-c45b59d13c23","title":"A Guide to Seed Fundraising","slug":"this-brief-guide-is-a-summary-of-what-startup-founders-need-to-know-about-raising-the-seed-funds-critical-to-getting-their-company-off-the-ground","html":" \nContents:\n<div class=\"half left\">\n<ul>\n<li>\n <a href=https://www.ycombinator.com/"http://www.themacro.com/articles/2016/01/how-to-raise-a-seed-round/#part1\">Why Raise Money</a>\n </li>\n<li>\n <a href=https://www.ycombinator.com/"http://www.themacro.com/articles/2016/01/how-to-raise-a-seed-round/#part2\">When to Raise Money</a>\n </li>\n<li>\n <a href=https://www.ycombinator.com/"http://www.themacro.com/articles/2016/01/how-to-raise-a-seed-round/#part3\">How Much to Raise?</a>\n </li>\n<li>\n <a href=https://www.ycombinator.com/"http://www.themacro.com/articles/2016/01/how-to-raise-a-seed-round/#part4\">Financing Options</a>\n </li>\n<li>\n <a href=https://www.ycombinator.com/"http://www.themacro.com/articles/2016/01/how-to-raise-a-seed-round/#part5\">Convertible Debt</a>\n </li>\n<li>\n <a href=https://www.ycombinator.com/"http://www.themacro.com/articles/2016/01/how-to-raise-a-seed-round/#part6\">Safe</a>\n </li>\n<li>\n <a href=https://www.ycombinator.com/"http://www.themacro.com/articles/2016/01/how-to-raise-a-seed-round/#part7\">Equity</a>\n </li>\n<li>\n <a href=https://www.ycombinator.com/"http://www.themacro.com/articles/2016/01/how-to-raise-a-seed-round/#part7-2\">Valuation</a>\n </li>\n<li>\n <a href=https://www.ycombinator.com/"http://www.themacro.com/articles/2016/01/how-to-raise-a-seed-round/#part8\">Investors</a>\n </li>\n</ul>\n</div>\n<div class=\"half right\">\n<ul>\n<li>\n <a href=https://www.ycombinator.com/"http://www.themacro.com/articles/2016/01/how-to-raise-a-seed-round/#part9\">Crowdfunding</a>\n </li>\n<li>\n <a href=https://www.ycombinator.com/"http://www.themacro.com/articles/2016/01/how-to-raise-a-seed-round/#part10\">Meeting Investors</a>\n </li>\n<li>\n <a href=https://www.ycombinator.com/"http://www.themacro.com/articles/2016/01/how-to-raise-a-seed-round/#part11\">Closing the Deal</a>\n </li>\n<li>\n <a href=https://www.ycombinator.com/"http://www.themacro.com/articles/2016/01/how-to-raise-a-seed-round/#part11-2\">Negotiations</a>\n </li>\n<li>\n <a href=https://www.ycombinator.com/"http://www.themacro.com/articles/2016/01/how-to-raise-a-seed-round/#part12\">Documents You Need</a>\n </li>\n<li>\n <a href=https://www.ycombinator.com/"http://www.themacro.com/articles/2016/01/how-to-raise-a-seed-round/#part13\">Next</a>\n </li>\n<li>\n <a href=https://www.ycombinator.com/"http://www.themacro.com/articles/2016/01/how-to-raise-a-seed-round/#part14\">Appendix</a>\n </li>\n<li>\n <a href=https://www.ycombinator.com/"http://www.themacro.com/articles/2016/01/how-to-raise-a-seed-round/#part15\">Glossary</a>\n </li>\n<li>\n <a href=https://www.ycombinator.com/"http://www.themacro.com/articles/2016/01/how-to-raise-a-seed-round/#part16\">Sources</a>\n </li>\n</ul>\n</div>\n<h4>Introduction</h4>\nStartup companies need to purchase equipment, rent offices, and hire staff. More importantly, they need to grow. In almost every case they will require outside capital to do these things.\nThe initial capital raised by a company is typically called “seed” capital. This brief guide is a summary of what startup founders need to know about raising the seed funds critical to getting their company off the ground.\nThis is not intended to be a complete guide to fundraising. It includes only the basic knowledge most founders will need. The information comes from my experiences working at startups, investing in startups, and advising startups at Y Combinator and Imagine K12. YC partners naturally gain a lot of fundraising experience and YC founder Paul Graham (PG) has written extensively on the topic <a href=https://www.ycombinator.com/"http://www.themacro.com/articles/2016/01/how-to-raise-a-seed-round/#e1\">1</a>, <a href=https://www.ycombinator.com/"http://www.themacro.com/articles/2016/01/how-to-raise-a-seed-round/#e2\">2</a>, <a href=https://www.ycombinator.com/"http://www.themacro.com/articles/2016/01/how-to-raise-a-seed-round/#e3\">3</a>, <a href=https://www.ycombinator.com/"http://www.themacro.com/articles/2016/01/how-to-raise-a-seed-round/#e4\">4</a>. His essays cover in more detail much of what is contained in this guide and are highly recommended reading.\n<h4>Why Raise Money?</h4>\nWithout startup funding the vast majority of startups will die. The amount of money needed to take a startup to profitability is usually well beyond the ability of founders and their friends and family to finance. A startup here means a company that is built to grow fast <a href=https://www.ycombinator.com/"http://www.themacro.com/articles/2016/01/how-to-raise-a-seed-round/#e12\">12</a>. High growth companies almost always need to burn capital to sustain their growth prior to achieving profitability. A few startup companies do successfully bootstrap (self-fund) themselves, but they are the exception. Of course, there are lots of great companies that aren’t startups. Managing capital needs for such companies is not covered herein.\nCash not only allows startups to live and grow, a war chest is also almost always a competitive advantage in all ways that matter: hiring key staff, public relations, marketing, and sales. Thus, most startups will almost certainly want to raise money. The good news is that there are lots of investors hoping to give the right startup money. The bad news is, “Fundraising is brutal” <a href=https://www.ycombinator.com/"http://www.themacro.com/articles/2016/01/how-to-raise-a-seed-round/#e1\">1</a>. The process of raising that money is often long, arduous, complex, and ego deflating. Nevertheless, it is a path almost all companies and founders must walk, but when is the time right to raise? \n<h4>When to Raise Money</h4>\nInvestors write checks when the idea they hear is compelling, when they are persuaded that the team of founders can realize its vision, and that the opportunity described is real and sufficiently large. When founders are ready to tell this story, they can raise money. And usually when you can raise money, you should.\nFor some founders it is enough to have a story and a reputation. However, for most it will require an idea, a product, and some amount of customer adoption, a.k.a. traction. Luckily, the software development ecosystem today is such that a sophisticated web or mobile product can be built and delivered in a remarkably short period of time at very low cost. Even hardware can be rapidly prototyped and tested.\nBut investors also need persuading. Usually a product they can see, use, or touch will not be enough. They will want to know that there is product market fit and that the product is experiencing actual growth.\nTherefore, founders should raise money when they have figured out what the market opportunity is and who the customer is, and when they have delivered a product that matches their needs and is being adopted at an interestingly rapid rate. How rapid is interesting? This depends, but a rate of 10% per week for several weeks is impressive. And to raise money founders need to impress. For founders who can convince investors without these things, congratulations. For everyone else, work on your product and talk to your users.\n<h4>How Much to Raise?</h4>\nIdeally, you should raise as much money as you need to reach profitability, so that you’ll never have to raise money again. If you succeed in this, not only will you find it easier to raise money in the future, you’ll be able to survive without new funding if the funding environment gets tight. That said, certain kinds of startups will need a follow-on round, such as those building hardware. Their goal should be to raise as much money as needed to get to their next “fundable” milestone, which will usually be 12 to 18 months later.\nIn choosing how much to raise you are trading off several variables, including how much progress that amount of money will purchase, credibility with investors, and dilution. If you can manage to give up as little as 10% of your company in your seed round, that is wonderful, but most rounds will require up to 20% dilution and you should try to avoid more than 25%. In any event, the amount you are asking for must be tied to a believable plan. That plan will buy you the credibility necessary to persuade investors that their money will have a chance to grow. It is usually a good idea to create multiple plans assuming different amounts raised and to carefully articulate your belief that the company will be successful whether you raise the full or some lesser amount. The difference will be how fast you can grow.\nOne way to look at the optimal amount to raise in your first round is to decide how many months of operation you want to fund. A rule of thumb is that an engineer (the most common early employee for Silicon Valley startups) costs all-in about $15k per month. So, if you would like to be funded for 18 months of operations with an average of five engineers, then you will need about 15k x 5 x 18 = $1.35mm. What if you are planning to hire for other positions as well? Don’t worry about it! This is just an estimate and will be accurate enough for whatever mix you hire. And here you have a great answer to the question: “How much are you raising?” Simply answer that you are raising for N months (usually 12-18) and will thus need $X, where X will usually be between $500k and $1.5 million. As noted above, you should give multiple versions of N and a range for X, giving different possible growth scenarios based on how much you successfully raise.\nThere is enormous variation in the amount of money raised by companies. Here we are concerned with early raises, which usually range from a few hundreds of thousands of dollars up to two million dollars. Most first rounds seem to cluster around six hundred thousand dollars, but largely thanks to increased interest from investors in seed, these rounds have been increasing in size over the last several years. \n<h4>Financing Options</h4>\nStartup founders must understand the basic concepts behind venture financing. It would be nice if this was all very simple and could be explained in a single paragraph. Unfortunately, as with most legal matters, that’s not possible. Here is a very high level summary, but it is worth your time to read more about the details and pros and cons of various types of financing and, importantly, the key terms of such deals that you need to be aware of, from preferences to option pools. The articles below are a decent start.\n<ul>\n<li><a href=https://www.ycombinator.com/"http://venturehacks.com/articles/debt-or-equity/">Venture Hacks / Babk Nivi: Should I Raise Debt or Equity</a></li>\n<li><a href=https://www.ycombinator.com/"http://www.avc.com/a_vc/2011/07/financing-options-convertible-debt.html/">Fred Wilson: Financing Options</a></li>\n<li><a href=https://www.ycombinator.com/"https://bothsidesofthetable.com/the-truth-about-convertible-debt-at-startups-and-the-hidden-terms-you-didn-t-understand-9fccf6854dee#.z63i0cy5g\">Mark Suster on Convertible Debt</a></li>\n<li><a href=https://www.ycombinator.com/"https://ycombinator.wpengine.com/announcing-the-safe-a-replacement-for-convertible-notes/">Announcing the Safe</a></li>\n</ul>\nVenture financing usually takes place in “rounds,” which have traditionally had names and a specific order. First comes a seed round, then a Series A, then a Series B, then a Series C, and so on to acquisition or IPO. None of these rounds are required and, for example, sometimes companies will start with a Series A financing (almost always an “equity round” as defined below). Recall that we are focusing here exclusively on seed, that very first venture round.\nMost seed rounds, at least in Silicon Valley, are now structured as either convertible debt or simple agreements for future equity (safes) <a href=https://www.ycombinator.com/"http://www.themacro.com/articles/2016/01/how-to-raise-a-seed-round/#e17\">17</a>. Some early rounds are still done with equity, but in Silicon Valley they are now the exception.\n<h4>Convertible Debt</h4>\nConvertible debt is a loan an investor makes to a company using an instrument called a convertible note. That loan will have a principal amount (the amount of the investment), an interest rate (usually a minimum rate of 2% or so), and a maturity date (when the principal and interest must be repaid). The intention of this note is that it converts to equity (thus, “convertible”) when the company does an equity financing. These notes will also usually have a “Cap” or “Target Valuation” and / or a discount. A Cap is the maximum effective valuation that the owner of the note will pay, regardless of the valuation of the round in which the note converts. The effect of the cap is that convertible note investors usually pay a lower price per share compared to other investors in the equity round. Similarly, a discount defines a lower effective valuation via a percentage off the round valuation. Investors see these as their seed “premium” and both of these terms are negotiable. Convertible debt may be called at maturity, at which time it must be repaid with earned interest, although investors are often willing to extend the maturity dates on notes.\n<h4>Safe</h4>\nConvertible debt has been almost completely replaced by the safe at YC and Imagine K12. A safe acts like convertible debt without the interest rate, maturity, and repayment requirement. The negotiable terms of a safe will almost always be simply the amount, the cap, and the discount, if any. There is a bit more complexity to any convertible security, and much of that is driven by what happens when conversion occurs. I strongly encourage you to read the safe primer <a href=https://www.ycombinator.com/"http://www.themacro.com/articles/2016/01/how-to-raise-a-seed-round/#e18\">18</a>, which is available on <a href=https://www.ycombinator.com/"http://www.ycombinator.com/documents//">YC’s site</a>. The primer has several examples of what happens when a safe converts, which go a long way toward explaining how both convertible debt and safes work in practice.\n<h4>Equity</h4>\nAn equity round means setting a valuation for your company (generally, the cap on the safes or notes is considered as a company’s notional valuation, although notes and safes can also be uncapped) and thus a per-share price, and then issuing and selling new shares of the company to investors. This is always more complicated, expensive, and time consuming than a safe or convertible note and explains their popularity for early rounds. It is also why you will always want to hire a lawyer when planning to issue equity.\nTo understand what happens when new equity is issued, a simple example helps. Say you raise $1,000,000 on a $5,000,000 pre-money valuation. If you also have 10,000,000 shares outstanding then you are selling the shares at:\n<ol>\n<li>**$5,000,000 / 10,000,000 = 50 cents per share*** \nand you will thus sell…</li>\n<li>2,000,000 shares \nresulting in a new share total of…</li>\n<li>10,000,000 + 2,000,000 = 12,000,000 shares \nand a post-money valuation of…</li>\n<li>$0.50 * 12,000,000 = $6,000,000 \nand dilution of…</li>\n<li>2,000,000 / 12,000,000 = 16.7% \nNot 20%!</li>\n</ol>\nThere are several important components of an equity round with which you must become familiar when your company does a priced round, including equity incentive plans (option pools), liquidation preferences, anti-dilution rights, protective provisions, and more. These components are all negotiable, but it is usually the case that if you have agreed upon a valuation with your investors (next section), then you are not too far apart, and there is a deal to be done. I won’t say more about equity rounds, since they are so uncommon for seed rounds.\nOne final note: whatever form of financing you do, it is always best to use well-known financing documents like YC’s safe. These documents are well understood by the investor community, and have been drafted to be fair, yet founder friendly.\n<h4>Valuation: What is my company worth?</h4>\nYou are two hackers with an idea, a few months of hacking’s worth of software, and several thousand users. What is your company worth? It should be obvious that no formula will give you an answer. There can only be the most notional sort of justification for any value at all. So, how do you set a value when talking to a potential investor? Why do some companies seem to be worth $20mm and some $4mm? Because investors were convinced that was what they were (or will be in the near future) worth. It is that simple. Therefore, it is best to let the market set your price and to find an investor to set the price or cap. The more investor interest your company generates, the higher your value will trend.\nStill, it can be difficult in some circumstances to find an investor to tell you what you are worth. In this case you can choose a valuation, usually by looking at comparable companies who have valuations. Please remember that the important thing in choosing your valuation is not to over-optimize. The objective is to find a valuation with which you are comfortable, that will allow you to raise the amount you need to achieve your goals with acceptable dilution, and that investors will find reasonable and attractive enough to write you a check. Seed valuations tend to range from $2mm-$10mm, but keep in mind that the goal is not to achieve the best valuation, nor does a high valuation increase your likelihood of success.\n<h4>Investors: Angels & Venture Capitalists</h4>\nThe difference between an angel and a VC is that angels are amateurs and VCs are pros. VCs invest other people’s money and angels invest their own on their own terms. Although some angels are quite rigorous and act very much like the pros, for the most part they are much more like hobbyists. Their decision making process is usually much faster–they can make the call all on their own–and there is almost always a much larger component of emotion that goes into that decision.\nVCs will usually require more time, more meetings, and will have multiple partners involved in the final decision. And remember, VCs see LOTS of deals and invest in very few, so you will have to stand out from a crowd.\nThe ecosystem for seed (early) financing is far more complex now than it was even five years ago. There are many new VC firms, sometimes called “super-angels,” or “micro-VC’s”, which explicitly target brand new, very early stage companies. There are also several traditional VCs that will invest in seed rounds. And there are a large number of independent angels who will invest anywhere from $25k to $100k or more in individual companies. New fundraising options seem to arrive every year, for example, <a href=https://www.ycombinator.com/"https://angel.co/syndicates/">AngelList Syndicates</a> in which angels pool their resources and follow a single lead angel.\nHow does one meet and encourage the interest of investors? If you are about to present at a demo day, you are going to meet lots of investors. There are few such opportunities to meet a concentrated and motivated group of seed investors. Besides a demo day, by far the best way to meet a venture capitalist or an angel is via a warm introduction. Angels will also often introduce interesting companies to their own networks. Otherwise, find someone in your network to make an introduction to an angel or VC. If you have no other options, do research on VCs and angels and send as many as you can a brief, but compelling summary of your business and opportunity (see <a href=https://www.ycombinator.com/"http://www.themacro.com/articles/2016/01/how-to-raise-a-seed-round/#part12\">Documents You Need</a> below).\n<h4>Crowdfunding</h4>\nThere are a growing number of new vehicles to raise money, such as <a href=https://www.ycombinator.com/"https://angel.co//">AngelList, <a href=https://www.ycombinator.com/"http://www.themacro.com/articles/2016/01/how-to-raise-a-seed-round//">Kickstarter, <a href=https://www.ycombinator.com/"http://www.themacro.com/articles/2016/01/how-to-raise-a-seed-round//">FundersClub, and <a href=https://www.ycombinator.com/"http://www.themacro.com/articles/2016/01/how-to-raise-a-seed-round//">Wefunder. These crowdfunding sites can be used to launch a product, run a pre-sales campaign, or find venture funding. In exceptional cases, founders have used these sites as their dominant fundraising source, or as clear evidence of demand. They usually are used to fill in rounds that are largely complete or, at times, to reanimate a round that is having difficulty getting off the ground. The ecosystem around investing is changing rapidly, but when and how to use these new sources of funds will usually be determined by your success raising through more traditional means.\n<h4>Meeting Investors</h4>\nIf you are meeting investors at an investor day, remember that your goal is not to close–it is to get the next meeting. Investors will seldom choose to commit the first day they hear your pitch, regardless of how brilliant it is. So book lots of meetings. Keep in mind that the hardest part is to get the first money in the company. In other words, meet as many investors as possible but focus on those most likely to close. Always optimize for getting money soonest (in other words, be greedy) <a href=https://www.ycombinator.com/"http://www.themacro.com/articles/2016/01/how-to-raise-a-seed-round/#e2\">2</a>.\nThere are a few simple rules to follow when preparing to meet with investors. First, make sure you know your audience–do research on what they like to invest in and try to figure out why. Second, simplify your pitch to the essential–why this is a great product (demos are almost a requirement nowadays), why you are precisely the right team to build it, and why together you should all dream about creating the next gigantic company. Next make sure you listen carefully to what the investor has to say. If you can get the investor to talk more than you, your probability of a deal skyrockets. In the same vein, do what you can to connect with the investor. This is one of the main reasons to do research. An investment in a company is a long term commitment and most investors see lots of deals. Unless they like you and feel connected to your outcome, they will most certainly not write a check.\nWho you are and how well you tell your story are most important when trying to convince investors to write that check. Investors are looking for compelling founders who have a believable dream and as much evidence as possible documenting the reality of that dream. Find a style that works for you, and then work as hard as necessary to get the pitch perfect. Pitching is difficult and often unnatural for founders, especially technical founders who are more comfortable in front of a screen than a crowd. But anyone will improve with practice, and there is no substitute for an extraordinary amount of practice. Incidentally, this is true whether you are preparing for a demo day or an investor meeting.\nDuring your meeting, try to strike a balance between confidence and humility. Never cross over into arrogance, avoid defensiveness, but also don’t be a pushover. Be open to intelligent counterpoints, but stand up for what you believe and whether or not you persuade the investor just then, you’ll have made a good impression and will probably get another shot.\nLastly, make sure you don’t leave an investor meeting without an attempted close or at very minimum absolute clarity on next steps. Do not just walk out leaving things ambiguous. \n<h4>Negotiating and Closing the Deal</h4>\nA seed investment can usually be closed rapidly. As noted above, it is an advantage to use standard documents with consistent terms, such as YC’s safe. Negotiation, and often there is none at all, can then proceed on one or two variables, such as the valuation/cap and possibly a discount.\nDeals have momentum and there is no recipe towards building momentum behind your deal other than by telling a great story, persistence, and legwork. You may have to meet with dozens of investors before you get that close. But to get started you just need to convince <a href=https://www.ycombinator.com/"http://www.themacro.com/articles/2016/01/how-to-raise-a-seed-round/#e5\">5</a> one of them. Once the first money is in, each subsequent close will get faster and easier <a href=https://www.ycombinator.com/"http://www.themacro.com/articles/2016/01/how-to-raise-a-seed-round/#e6\">6</a>.\nOnce an investor says that they are in, you are almost done. This is where you should rapidly close using a handshake protocol <a href=https://www.ycombinator.com/"http://www.themacro.com/articles/2016/01/how-to-raise-a-seed-round/#e19\">19</a>. If you fail at negotiating from this point on, it is probably your fault.\n<h4>Negotiations</h4>\nWhen you enter into a negotiation with a VC or an angel, remember that they are usually more experienced at it than you are, so it is almost always better not to try to negotiate in real-time. Take requests away with you, and get help from YC or Imagine K12 partners, advisors, or legal counsel. But also remember that although certain requested terms can be egregious, the majority of things credible VCs and angels will ask for tend to be reasonable. Do not hesitate to ask them to explain precisely what they are asking for and why. If the negotiation is around valuation (or cap) there are, naturally, plenty of considerations, e.g. other deals you have already closed. However, it is important to remember that the valuation you choose at this early round will seldom matter to the success or failure of the company. Get the best deal you can get–but get the deal! Finally, once you get to yes, don’t wait around. Get the investor’s signature and cash as soon as possible. One reason safes are popular is because the closing mechanics are as simple as signing a document and then transferring funds. Once an investor has decided to invest, it should take no longer than a few minutes to exchange signed documents online (for example via <a href=https://www.ycombinator.com/"https://www.clerky.com//">Clerky or <a href=https://www.ycombinator.com/"https://ironclad.ai//">Ironclad) and execute a wire or send a check.\n<h4>Documents You Need</h4>\nDo not spend too much time developing diligence documents for a seed round. If an investor is asking for too much due diligence or financials, they are almost certainly someone to avoid. You will probably want an executive summary and a slide deck you can walk investors through and, potentially, leave behind so VCs can show to other partners.\nThe executive summary should be one or two pages (one is better) and should include vision, product, team (location, contact info), traction, market size, and minimum financials (revenue, if any, and fundraising prior and current).\nGenerally make sure the slide deck is a coherent leave-behind. Graphics, charts, screenshots are more powerful than lots of words. Consider it a framework around which you will hang a more detailed version of your story. There is no fixed format or order, but the following parts are usually present. Create the pitch that matches you, how you present, and how you want to represent your company. Also note that like the executive summary, there are lots of similar templates online if you don’t like this one.\n<ol>\n<li>Your company / Logo / Tag Line</li>\n<li>Your Vision – Your most expansive take on why your new company exists.</li>\n<li>The Problem – What are you solving for the customer–where is their pain?</li>\n<li>The Customer – Who are they and perhaps how will you reach them?</li>\n<li>The Solution – What you have created and why now is the right time.</li>\n<li>The (huge) Market you are addressing – Total Available Market (TAM) >$1B if possible. Include the most persuasive evidence you have that this is real.</li>\n<li>Market Landscape – including competition, macro trends, etc. Is there any insight you have that others do not?</li>\n<li>Current Traction – list key stats / plans for scaling and future customer acquisition.</li>\n<li>Business model – how users translate to revenue. Actuals, plans, hopes.</li>\n<li>Team – who you are, where you come from and why you have what it takes to succeed. Pics and bios okay. Specify roles.</li>\n<li>Summary – 3-5 key takeaways (market size, key product insight, traction)</li>\n<li>Fundraising – Include what you have already raised and what you are planning to raise now. Any financial projections may go here as well. You can optionally include a summary product roadmap (6 quarters max) indicating what an investment buys.</li>\n</ol>\n<h4>Next</h4>\nIt is worth pointing out that startup investing is rapidly evolving and it is likely that certain elements of this guide will at some point become obsolete, so make sure to check for updates or future posts. There is now an extraordinary amount of information available on raising venture money. Several sources are referenced and more are listed at the end of this document.\nFundraising is a necessary, and sometimes painful task most startups must periodically endure. A founder’s goal should always be to raise as quickly as possible and this guide will hopefully help founders successfully raise their first round of venture financing. Often that will seem like a nearly impossible task and when it is complete, it will feel as though you have climbed a very steep mountain. But you have been distracted by the brutality of fundraising and once you turn your attention back to the future you will realize it was only a small foothill on the real climb in front of you. It is time to get back to work building your company.\nMany thanks to those whose knowledge or work have contributed to this document. Of course, any errors are all mine. Please send any comments or questions to <a href=https://www.ycombinator.com/"mailto:geoff@yahoo.com\">geoff@yahoo.com</a>.\n<a id=\"email-bottom\" href=https://www.ycombinator.com/"http://eepurl.com/cbJZnj/">Sign up for weekly recaps of The Macro</a>.\n<div id=\"part14\" class=\"endnotes\">\n<h2 class=\"donthyphenate\">\n Appendix \n </h2>\n<h4>\n Fundraising Rules to Follow \n </h4>\n<ul>\n<li>\n Get fundraising over as soon as possible, and get back to building your product and company, but also…\n </li>\n<li>\n Don’t stop raising money too soon. If fundraising is difficult, keep fighting and stay alive.\n </li>\n<li>\n When raising, be “greedy”: breadth-first search weighted by expected value <a href=https://www.ycombinator.com/"http://www.themacro.com/articles/2016/01/how-to-raise-a-seed-round/#e2\">2</a>. This means talk to as many people as you can, prioritizing the ones that are likely to close.\n </li>\n<li>\n Once someone says yes, don’t delay. Get docs signed and the money in the bank as soon as possible.\n </li>\n<li>\n Always hustle for leads. If you are the hottest deal of the hour, that’s great, but everyone else needs to work like crazy to get angels and other venture investors interested.\n </li>\n<li>\n Never screw anyone over. Hold yourself and others on your team to the highest ethical standards. The Valley is a very small place, and a bad reputation is difficult to repair. Play it straight and you will never regret it. You’ll feel better for it, too.\n </li>\n<li>\n Investors have a lot of different ways to say no. The hardest thing for an entrepreneur is understanding when they are being turned down and being okay with it. PG likes to say, “If the soda is empty, stop making that awful sucking sound with the straw.” But remember that they might be a “yes” another time, so part on the best possible terms.\n </li>\n<li>\n Develop a style that fits you and your company.\n </li>\n<li>\n Stay organized. Co-founders should split tasks where possible. If necessary, use software like Asana to keep track of deals.\n </li>\n<li>\n Have a thick skin but strike the right balance between confidence and humility. And never be arrogant.\n </li>\n</ul>\n<h4>\n What Not to Do While Communicating with Investors \n </h4>\n\n DON’T…\n \n<ul>\n<li>\n Be dishonest in any way\n </li>\n<li>\n Be arrogant or unfriendly\n </li>\n<li>\n Be overly aggressive\n </li>\n<li>\n Seem indecisive – although it is okay to say you don’t know yet.\n </li>\n<li>\n Talk so much they cannot get a word in edgewise\n </li>\n<li>\n Be slow to follow-up or close a deal\n </li>\n<li>\n Break an agreement, verbal or written\n </li>\n<li>\n Create detailed financials\n </li>\n<li>\n Use ridiculous / silly market size numbers without clear justification\n </li>\n<li>\n Claim you know something that you don’t or be afraid to say you don’t know\n </li>\n<li>\n Spend time on the obvious\n </li>\n<li>\n Get caught up in unimportant minutiae – don’t let the meeting get away from you\n </li>\n<li>\n Ask for an NDA\n </li>\n<li>\n Try to play investors off each other when you are not a fundraising ninja\n </li>\n<li>\n Try to negotiate in real-time\n </li>\n<li>\n Over-optimize your valuation or worry too much about dilution\n </li>\n<li>\n Take a “No” personally\n </li>\n</ul>\n</div>\n<div id=\"part15\" class=\"endnotes\">\n<h2 class=\"donthyphenate\">\n A Brief Glossary of Key Terms \n </h2>\n\n The term you are looking for is not here? Disagree with the definition? Go to <a href=https://www.ycombinator.com/"http://www.investopedia.com//">Investopedia for a more authoritative source.\n \n<ul>\n<li>\n Angel Investor – A (usually) wealthy private investor in startup companies.\n </li>\n<li>\n Cap / Target Valuation – The maximum effective valuation for an investor in a convertible note.\n </li>\n<li>\n Convertible Note – This is a debt instrument that will convert into stock; usually preferred stock but sometimes common stock.\n </li>\n<li>\n Common Stock – Capital stock typically issued to founders and employees, having the fewest, or no, rights, privileges and preferences.\n </li>\n<li>\n Dilution – The percentage an ownership share is decreased via the issuance of new shares.\n </li>\n<li>\n Discount – A percentage discount from the pre-money valuation to give safe or note holders an effectively lower price.\n </li>\n<li>\n Equity Round – A financing round in which the investor purchases equity (stock) in the company.\n </li>\n<li>\n Fully Diluted Shares – The total number of issued and outstanding shares of capital stock in the company, including outstanding warrants, option grants and other convertible securities.\n </li>\n<li>\n IPO – Initial Public Offering – the first sale of stock by a private company to the public.\n </li>\n<li>\n Lead Investor – Usually the first and largest investor in a round who brings others into the round.\n </li>\n<li>\n Liquidation Preference – A legal provision in a company’s charter that allows stockholders with preferred stock to get their money out of a company before the holders of common stock in the event of an exit.\n </li>\n<li>\n Maturity Date – The date at which a promissory note becomes due (or at which it will automatically convert to stock in the case of a convertible note)\n </li>\n<li>\n Equity Incentive Plan / Option Pool – The shares allocated and set aside for grants to employees and consultants.\n </li>\n<li>\n Preferred Stock – Capital stock issued in a company that have specific rights, privileges and preferences compared to the common stock. Convertible into common stock, either automatically (e.g., in an IPO) or at the option of the preferred stockholder (e.g., an acquisition).\n </li>\n<li>\n Pre-money Valuation – The value of a company prior to when investor money is added.\n </li>\n<li>\n Pro-rata rights (aka pre-emptive rights) – Contractual rights that allow the holder to maintain their percentage ownership in subsequent financing rounds.\n </li>\n<li>\n Protective Provisions – Provisions in a company’s charter that give exclusive voting rights to holders of preferred stock. For example, the approval of these stockholders, voting separately from other stockholders, may be required for an acquisition.\n </li>\n<li>\n Safe – Simple Agreement for Future Equity – Y Combinator’s replacement for convertible debt.\n </li>\n<li>\n TAM – Total Available Market. In pitches, this is the estimated total revenue available for the product(s) you are selling.\n </li>\n<li>\n Venture Capitalist – A professional investor in companies, investing limited partners’ funds.\n </li>\n</ul>\n</div>\n<div id=\"part16\" class=\"endnotes\">\n<h2 class=\"donthyphenate\">\n Sources \n </h2>\n<ol>\n<li>\n <a href=https://www.ycombinator.com/"http://www.paulgraham.com/fundraising.html/">A Fundraising Survival Guide</a>, Paul Graham Techniques for surviving and succeeding at fundraising\n </li>\n<li>\n <a href=https://www.ycombinator.com/"http://paulgraham.com/fr.html/">How To Raise Money</a>, Paul Graham Detailed thoughts on fundraising. A must read.\n </li>\n<li>\n <a href=https://www.ycombinator.com/"http://paulgraham.com/equity.html/">The Equity Equation</a>, Paul Graham How to decide if you should accept an offer from an investor\n </li>\n<li>\n <a href=https://www.ycombinator.com/"http://paulgraham.com/future.html/">The Future of Startup Funding</a>, Paul Graham How startup funding is evolving\n </li>\n<li>\n <a href=https://www.ycombinator.com/"http://paulgraham.com/convince.html/">How to Convince Investors</a>, Paul Graham How to convince investors to invest in you\n </li>\n<li>\n <a href=https://www.ycombinator.com/"http://paulgraham.com/herd.html/">Investor Herd Dynamics</a>, Paul Graham How investors think about investing in early stage companies\n </li>\n<li>\n <a href=https://www.ycombinator.com/"http://www.amazon.com/Venture-Deals-Smarter-Lawyer-Capitalist/dp/1118443616/">“Venture Deals”</a>, Feld and Mendelson Essential elements of a venture deal (book)\n </li>\n<li>\n <a href=https://www.ycombinator.com/"http://www.khanacademy.org/finance-economics/venture-capital-and-capital-markets/v/raising-money-for-a-startup/">Raising Money for a Startup</a>, Sal Khan Startup Fundraising from Sal Khan\n </li>\n<li>\n <a href=https://www.ycombinator.com/"http://venturehacks.com/articles/debt-or-equity/">Venture Hacks: Debt or Equity,</a> Babak Nivi Discussion on debt vs. equity\n </li>\n<li>\n <a href=https://www.ycombinator.com/"http://venturehacks.com/articles/first-time/">Venture Hacks: First Time</a>, Babak Nivi Advice for first time fundraisers.\n </li>\n<li>\n <a href=https://www.ycombinator.com/"http://www.avc.com/a_vc/2011/07/how-much-money-to-raise.html/">How Much Money To Raise</a>, Fred Wilson Advice on how much money to raise.\n </li>\n<li>\n <a href=https://www.ycombinator.com/"http://www.paulgraham.com/growth.html/">“Startup = Growth”</a>, Paul Graham Description of a startup.\n </li>\n<li>\n <a href=https://www.ycombinator.com/"http://venturehacks.com/articles/debt-or-equity/">Venture Hacks / Babk Nivi: Should I Raise Debt or Equity</a> Discussion of whether raising debt or equity is the best answer.\n </li>\n<li>\n <a href=https://www.ycombinator.com/"http://www.avc.com/a_vc/2011/07/financing-options-convertible-debt.html/">Fred Wilson: Financing Options</a> Another discussion of debt vs. equity\n </li>\n<li>\n <a href=https://www.ycombinator.com/"http://www.bothsidesofthetable.com/2012/09/05/the-truth-about-convertible-debt-at-startups-and-the-hidden-terms-you-didnt-understand//">Mark Suster on Convertible Debt</a> An analysis of problems with convertible debt\n </li>\n<li>\n <a href=https://www.ycombinator.com/"https://www.clerky.com/transaction_templates/24/">Clerky Guide</a> Clerky docs and guides. A great place to start.\n </li>\n<li>\n <a href=https://www.ycombinator.com/"https://ycombinator.wpengine.com/announcing-the-safe-a-replacement-for-convertible-notes/">Announcing the Safe</a>, Paul Graham The simple agreement for future equity. A replacement for convertible notes.\n </li>\n<li>\n <a href=https://www.ycombinator.com/"http://www.ycombinator.com/documents//">The Safe Primer</a>, Carolynn Levy Lots of detailed information on the safe and examples as to how it works in various cases.\n </li>\n<li>\n <a href=https://www.ycombinator.com/"https://www.ycombinator.com/handshake//">The Handshake Deal Protocol</a>, Paul Graham A standard protocol to help ensure that verbal commitments turn into transactions.\n </li>\n</ol>\n</div>\n","comment_id":"1097662","feature_image":null,"featured":false,"visibility":"public","email_recipient_filter":"none","created_at":"2016-01-07T09:54:44.000-08:00","updated_at":"2021-10-20T13:39:35.000-07:00","published_at":"2016-01-07T09:54:44.000-08:00","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":"61fe29efc7139e0001a7115e","name":"Fundraising","slug":"fundraising","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/fundraising/"},{"id":"61fe29efc7139e0001a71169","name":"Seed","slug":"seed","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/seed/"},{"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/"}],"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":"61fe29efc7139e0001a7115e","name":"Fundraising","slug":"fundraising","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/fundraising/"},"url":"https://ghost.prod.ycinside.com/this-brief-guide-is-a-summary-of-what-startup-founders-need-to-know-about-raising-the-seed-funds-critical-to-getting-their-company-off-the-ground/","excerpt":" ","reading_time":20,"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":"61fe29f1c7139e0001a7180a","uuid":"569cde80-2815-4314-a88d-91c90348bcd8","title":"Hardware, Less Hard","slug":"hardware-less-hard","html":"How can hardware startups compete in the software-centric startup world?\nWith iteration time measured in days rather than seconds, the burden of marginal costs, and often unexpected hurdles such as the <a href=https://www.ycombinator.com/"www.ewmfg.com/chinese-new-year//">impact of Chinese New Year, hardware companies face unique battles.\nBut during the Y Combinator program we expect our entrepreneurs creating physical things to move just as quickly as their digital-only friends. In fact, here is the (admittedly bold) hypothesis I shared with the Winter 2016 startups at our kickoff meeting: In the earliest stages, nothing involving hardware product creation should take more than 3 days longer than software.\nWe have more than 30 hardware startups in the current YC batch, breaking the <a href=https://www.ycombinator.com/"http://techcrunch.com/2015/08/19/hardware-at-the-speed-of-software//">record we set last batch by 50%. To help give them advice in meeting our expectations, 14 of my smartest friends provided support at YC’s first Hardware Mega Event. We began with an alumni panel of founders who successfully made and shipped things people want (and pay real money for.) Later, we had panels focused on specific topics such as industrial design.\nHere I’d like to share some of my favorite pieces of advice they shared:\nConsult Users, Not Consultants\n<a href=https://www.ycombinator.com/"http://www.pebble.com/">Pebble founder Eric Migicovsky holds the current Kickstarter crowdfunding <a href=https://www.ycombinator.com/"https://www.kickstarter.com/projects/597507018/pebble-time-awesome-smartwatch-no-compromises/rewards/">record, having sold $20,338,986 worth of Pebble Times in 30 days. We learned that he launched his first record-setting Kickstarter campaign without the help of any agencies: The original Pebble watch raised nearly <a href=https://www.ycombinator.com/"https://www.kickstarter.com/projects/597507018/pebble-e-paper-watch-for-iphone-and-android?ref=users\%22>$10.3 million</a>, with not a crowdfunding consultant to be found.\nEric said that selling small runs of units to early adopters and listening to their feedback taught him far more about what users actually wanted from their smartwatch than any consultant could. There’s no replacement for talking to your customers.\nGet The Word Out\nFounders nervous about the size of their mailing lists at launch should consider <a href=https://www.ycombinator.com/"http://www.bluesmart.com/">Bluesmart co-founder Diego Saez Gil’s hack. Bluesmart’s founders emailed everyone they had ever corresponded with, explaining that the project they’d poured blood sweat and tears into was launching soon. They asked friends to please check it out. Diego’s from Argentina, so he created Spanish and English versions of the message, to reach as many people as possible.\nThe $2,244,721 of connected carry-ons sold in their Indiegogo <a href=https://www.ycombinator.com/"https://www.indiegogo.com/projects/bluesmart-world-s-first-smart-connected-carry-on/">campaign should outweigh any slight breach of etiquette.\nBeauty Is Core\n<a href=https://www.ycombinator.com/"http://www.bellabeat.com/">Bellabeat co-founder Sandro Mur made mouths drop open with his suggestion to ship beta versions of connected products without electronics. Bellabeat garnered feedback by sending test users smart jewelry without the smarts — they were basically just beautiful shells. This focus on aesthetics has paid off: Bellabeat’s growing rapidly in the highly-competitive wearables market.\nGet Your Hands Dirty\n<a href=https://www.ycombinator.com/"http://www.doublerobotics.com/">Double Robotics’</a> David Cann provided B2B perspective and an interesting alternative path to finding a contract manufacturer overseas. His company satisfies the tight quality controls and sophisticated manufacturing techniques necessary to create their intricate telepresence robots by manufacturing all of their telepresence machines in Burlingame, CA.\nIt’s worked out well: Profitable and having just launched a majorly-improved version, they’ve never had to bother to raise a series A. Manufacturing locally may cost more upfront, but consider your product and your company’s needs: It could end up being worth it.\nDesign Isn’t An Afterthought\nDesigner <a href=https://www.ycombinator.com/"https://www.linkedin.com/in/dominika-blackappl-08796/">Dominika Blackappl</a> has worked on everything from iPods to Mars rovers, and she stressed that even at the industrial level, design isn’t just something you can bolt on as an afterthought. Impactful design isn’t just about how something looks, she said. It considers all the constraints upon a product, from manufacturing processes to user habits.\nSimilarly, industrial designer <a href=https://www.ycombinator.com/"http://www.josephmorin79.com//">Joe Morin</a> added perspective from working as a consulting designer after years at a big design firm. He cautioned against startups thinking a designer can produce work without guidance: Asking a designer to “just make it look good” is unlikely to produce useful results.\nPartners As Accelerants\nGreg Kress urged startups to use partners like his firm <a href=https://www.ycombinator.com/"http://radicand.com//">Radicand to make the most of their time during the crucial, high-impact early days of engineering a hardware product. Getting third-party help can speed up the building of prototypes and supplement core engineering staff, he said.\n<a href=https://www.ycombinator.com/"http://tempoautomation.com//">Tempo Automation</a> co-founder Jeff McAlvay pushed entrepreneurs to ditch their Arduinos and make the move to custom boards sooner rather than later. Tempo creates custom printed circuit boards (PCBs), taking designs from the form of an email attachment to a delivered unit within a week for a few hundred dollars.\nFactories Can Be Friends\n<a href=https://www.ycombinator.com/"https://www.dragoninnovation.com//">Dragon Innovation</a> founder Scott Miller is speeding up the process of scaling, getting startups into production at factories that have been vetted by his firm with visits and production runs. Dragon’s standard bill of materials and other tools help ensure you are speaking the same language as your production partners. In manufacturing (and life), communication is key.\nHardware-focused investor <a href=https://www.ycombinator.com/"http://www.yunqi.vc//">Yi Pin Ng</a> showed the incredible value a partner in-country (and often in-factory) can add. With quality assurance staff on the ground in China, Yi Pin’s helped several of our startups rapidly scale up to tens of thousands of units per month. By helping with finding factories, navigating incorporation, and hiring in-country staff, Yi and other local partners keep startups from reinventing the wheel every time they start to grow production.\nKeep Users Informed\nKickstarter’s <a href=https://www.ycombinator.com/"https://www.linkedin.com/in/julioterra/">Julio Terra</a> explained what Kickstarter backers look for from a campaign, stressing that regular updates to create a sense of involvement are of utmost importance. <a href=https://www.ycombinator.com/"https://www.linkedin.com/in/derekdukes/">Derek Dukes</a> of Amazon said that you should also encourage your early adopters to share with the wider world. Early customer reviews are key as a product transitions from niche pre-sale to mass-market retail, he said.\nLearn From Presales\n<a href=https://www.ycombinator.com/"http://www.tilt.com/">Tilt co-founder James Beshara talked about the burdens and benefits of a white-label Tilt campaign. James stressed the importance of launching with a pop; that the first 4 hours are typically the most important, and that the more PR budget going into those 4 hours the better on a critical day like launch day. With software, you can launch multiple times, but that’s not the case with a crowdfunding or pre-order launch.\n<a href=https://www.ycombinator.com/"http://www.indiegogo.com/">Indiegogo’s</a> Evan Cohen introduced pricing strategies for maximizing your crowdfunding campaign’s performance, stressing that your campaign should be a learning opportunity for finding an answer to one key question: What will users actually pay for your product?\nLuke Iseman specializes in hardware at Y Combinator. You can learn more about hardware at Y Combinator <a href=https://www.ycombinator.com/"http://www.ycombinator.com/hardware//">here. Ready to solder things people want? Apply <a href=https://www.ycombinator.com/"http://www.ycombinator.com/apply//">here.

Hey, my name is Kyle Corbitt and I’m a software developer at Y Combinator. I spend most of my time creating software to support our founders as they build their businesses. Before joining YC I ran my own startup.

When I was in high school, I sometimes got the frustrating feeling that all of the good startup ideas had been taken before I had a chance to work on them myself. As I’ve gotten a bit older and gained more experience, I’ve found that valuable startup ideas aren’t actually a scarce resource. In fact, they’re only becoming more abundant — as the world moves faster and more new businesses are created, more novel niches appear for profitable, productive companies.

With that in mind, we asked YC alumni and staff for startup ideas that they wish existed but aren’t currently working on.

Interested in pursuing one of these ideas? Please get in touch at kyle@ycombinator.com — I’d love to chat about your plans, and I may be able to put you in touch with the idea’s author or other good resources. Also, if you have your own great idea that you’d like to see in a future version of this list, let me know! If we see community interest we’re thinking about creating a larger repository for ideas like these.

[Edit: Since publishing, I’ve received hundreds of email responses. I’m so excited by the enthusiastic response — I think there’s really something worth building here! However, due to time constraints I won’t be able to continue responding to most of the emails I get or putting people in contact with the idea authors. If you want to reach out anyway, please include “13 Startups” in the subject line.]

AI for Communicating with Dogs
Use the immense amount of video footage captures of interactions with dogs to predict what behaviors will happen based on what the dog is doing i.e. predict that your dog is in pain, or hungry or thirsty etc. (Note: this might sound a little crazy but this has been done already for identifying pain in sheep.)
Elizabeth Iorns, Science Exchange S11

Smart Bathroom
Healthcare in the U.S. is a $3.2 trillion industry. Individuals take care of most of their health needs in the bathroom (bms, urine, teeth, hygiene, et cetera). All this data is literally flushed down the drain. Big opportunity to install a virtual doctor’s office in everyone’s bathroom, collecting data and providing feedback to help people reduce cost on health and wellness while achieving much better outcomes. New types of sensors and great data analysis and UX is needed to make the smart bathrooms a reality.
Breck Yunits, NudgePad S09

Accounts Receivables as a Service
It can be a huge pain to get enterprises to pay their vendors, even after contracts are signed. It’s one of those business inefficiencies that they’re not inclined to fix because there’s little downside to them paying late. Handing it off to a “collections agency” seems aggressive and most startups won’t do it, but I think something like an outsourced AR service that appears to be from the company but is actually a third party could be great. Potentially a mix of $/mo+% of revenue or $/mo depending at different tiers depending on how many transactions.
Yuri Sagalov, AeroFS S10/Y Combinator

Baby Bidet
A semi-automatic baby bidet where you could sit them over the sink and clean out the yuck simply and without having to touch it. Could work well as a kickstarter.
Jeffrey Engler, Wright Electric W17

Securitized Assets on the Blockchain
I would be working on making it easier to securitize and create a market for unique assets on the blockchain. There are many types of new securities and types of assets being created, not only tokens but anything else that can be bought or sold. In theory you could sell those on the blockchain currently, but you’d have to spin up and create your own blockchain in its entirety. It seems like that’s something you should be able to do as a service; I have some asset and I’d like a blockchain for it, and I’ll pay a monthly fee. I’d build that if I had time.
Austen Allred, Lambda School S17

Renewable Energy from Engineered Microbes
Microbes are outstandingly powerful and have the potential to be engineered to do almost anything. If I had more time, I would love to look more into the idea of engineering a bacteria that could efficiently convert a renewable resource into a usable fuel. Obviously, many microbes already exist that can do this, and so I would like to do more research into why this is not an option in common practice yet, and what strategies could be developed to make it possible here and now. Is the problem that the fuels they are making are incompatible with our current infrastructure (e.g. the microbes make ethanol, and most cars run on gas)? Or is the problem that bugs that can make usable fuel do so inefficiently, and thus need to be engineered to produce sufficient quantities in a cost-effective manner and/or on a reasonable time scale? In short, what problem(s) need to be solved to utilize microbes as fuel sources?
Zack Abbott, Z-Biotics Fellowship

Adwords for Outdoor and Transit Advertising
Billboards are still sold manually by sales teams. You literally cannot buy a billboard online. If people could buy them as easily as you buy an Adwords ad, maybe many more small companies would.
Jared Friedman, Scribd S06/Y Combinator

Design on Demand
Upload a photo of furniture of a piece of home decor, and select between “find” or “match” options. The “find” option would bring up very similar options and let you sort by price point and delivery time, so you could find the Crate and Barrel knock off of that designer table you saw in a magazine. The “match” option would recommends items that go well stylistically with that item. All of that instantly delivered through an app or website.
Kathryn Minshew, The Muse W12

Low-Friction Lending Library
Most people end up accumulating dozens or hundreds of items that they only need a few times a year. In my case these are things like camping equipment, a soldering iron, an electric drill, paper cutter, etc. — but everybody has their own unique list. I’d much rather not have to keep track of all this infrequently-used inventory and instead rent it on demand, especially since I have limited storage space. Lending libraries for this type of stuff exist but are too high-friction to be popular today — it’s substantially easier to just buy something on Amazon than rent it from a local depot. I think with automated inventory management and (potentially) sidewalk delivery bots the cost and friction can be brought low enough to turn this into a popular and defensible subscription business.
Kyle Corbitt, Y Combinator

Make Technology Relatable and Accessible
Technology is advancing at a rapid pace and it can be overwhelming and scary for people that don’t understand the underlying principles or have a safe place to ask questions and be taught. Think about how frustrated you get trying to explain to your grandfather why Facebook isn’t working when the Wi-Fi isn’t connected and what wi-fi is or browsers are. This is most pronounced with seniors but applies also to lots of people that don’t work in tech. It is only getting worse with topics like AI and cryptocurrency. Build a service that makes technology accessible and not scary for older or non tech savvy people. We need a text/call and software based solution with really great people on the other end who don’t judge, but explain concepts simply — someone who will help and doesn’t make anyone feel dumb. Ultimately the goal would be to make people of all types more technologically conversant while build ing a membership and/or e-commerce business model.
Avni Patel Thompson, Poppy W16

Buyer’s Remorse Insurance
Money back guarantee for art buyers: Buying fine art has a steep learning curve. Firstly, galleries are very uninviting. Then, when you get inside, the sales process is super unclear. A final barrier is that art is very arbitrarily priced, and as a new buyer it’s hard to know if you will get buyer’s remorse and feel like you overpaid for something. To overcome this, offer insurance that galleries can offer to buy art back from the purchaser if the purchaser is unsatisfied. Lowered risk for buyers => Increased spend, and you take some of that increased revenue.
Justin Kan, Justin.TV/Twitch W07

Social Network for Children
This is a super tough nut to crack. You have to be cool and offer a safe and private environment for kids to communicate with each other while enabling trusted adults to peer in/interact, etc… The company that can build something that is used and useful for all parties can build something of great value throughout a person’s entire life.
Holly Liu, Kabam/Y Combinator

Modern Firefighting
Climate change is already having real consequences on our society, and this year has been one of the worst years for wildfire in history, leaving entire neighborhoods flattened. Fire fighting and the tools we use to fight fires haven’t changed much in 100 years. Sprinklers were a big innovation for homes, but forest fires are often spotted and fought in the same way we did many decades ago. With the arrival of autonomous drones, industrial drones, better sensors and better prediction we should be able do a better job saving our forests, cities and firefighters.
Gustaf Alstromer, Y Combinator

Author

Kyle Corbitt