Paul Graham, co-founder of Mountain View's Y Combinator, gave this advice to budding entrepreneurs at the seed funding organization's Startup School at Stanford. He then went on, with Y Combinator partner Harj Taggar, to interview the entrepreneurs behind four embryonic startups.
The first startup aimed to help programmers measure and track users of websites and mobile apps by making it easier to interact with analytics programs like Mixpanel and KISSmetrics. Graham had a hard time seeing the value-add for this startup, especially as the entrepreneur had difficulty explaining what he was really doing. This pitch sounded more like a feature to existing services than a truly new business. The risk here is that Mixpanel improves its usability and provides interfaces to other analytics programs like KISSmetrics and Google Analytics, thereby threatening the startup.
The next startup wanted to store health records in the cloud. The company favored the approach of Lawrence Weed who, in 1967 at the University of Vermont, developed problem-oriented medical records that reflect medical practice rather than widely used source-oriented records that use, for example, lab test data. Health records are a notoriously difficult domain. Even Google is discontinuing Google Health after Jan. 1. Graham was skeptical a startup could change standard medical practice. He urged the company to listen and re-listen to the private practice physicians who were testing the software.
Two women with computer science degrees from Stanford proposed an event registration app for Facebook. They proposed walking tour companies and small businesses offering experiences as initial customers. Graham gave the impression that it was a waste of a Stanford degree to make such a simple application.
"It's better to do something that's hard if you are capable of doing hard things," he told the entrepreneurs. Graham also said he thought that the business development and user interface would be difficult, but that's precisely what Facebook enables. Note that Eventbrite, a popular web-based registration system, was co-founded by Stanford and Oxford graduate Kevin Hartz. A valid critique of this business was, "How would the business make money?" A business model like Eventbrite's could work well by taking a transaction fee on paid events.
The final startup wanted to set up a dating site for matchmakers. It would enable matchmakers to introduce and schedule dates for friends. In cultures where matchmakers play a prominent role, this could be interesting, not just for lovebirds but also for bringing together potential business partners. I'm skeptical, for unless you have many couples you plan to introduce, an email or text introduction with calendar might suffice. If you are in the business of matchmaking, many packages and scripts let you manage your own dating service.
Y Combinator has provided seed funding and venture coaching for over 200 startup companies. Many are in cloud and mobile software.
Currently Y Combinator is selecting companies to interview in mid-November for the biannual funding round.
Chris Steiner, whose company Aisle50 was funded in the last round by Y Combinator, gives loyalty card users special grocery deals, like Groupon for food. The first customer is Lowes Foods around North Carolina, but Aisle50 expects to sign up California grocery stores before long. As Chris says, "Nobody chooses Y Combinator. They choose you."
Cardpool, another Y Combinator investment, enables people to resell gift cards. Blackhawk Network, a Safeway subsidiary, recently acquired it.
Paul Graham's Startup School interview is hosted by Justin.tv, a video-streaming company funded by Y Combinator. It can be found at tinyurl.com/AngelaHey.