Data-driven tips for YC startup founders

Since Rebel Fund invests exclusively in seed-stage Y Combinator startups, the dozens of blog posts I’ve published over the years are focused mostly on how investors like us can improve their odds of investing in tomorrow’s YC unicorns. However, this post will take a different approach — I’ll share some data-driven tips that YC founders can follow to maximize their odds of success based on what we’ve learned over 5+ years building the world’s most sophisticated ML/AI algorithm for predicting YC startup success.

Tip #1 — Swing for the fences

Startup outcomes follow a very steep power law curve, such that ~6% of YC startups represent a whopping ~90% of the total valuation growth. The vast majority of startups enjoy no significant valuation growth at all, with a few big winners like Airbnb, Stripe, DoorDash, etc dwarfing even other decacorns ($10B+ valuations), which in turn dwarf even other unicorns ($1B+ valuations), which in turn dwarf the minicorns ($100M+ valuations).

Startup outcomes are relatively binary— either they’re a huge success or a failure. The implication is that founders should 1) pursue opportunities with massive upside potential rather than incremental gains, and 2) give it their all. The years after you start your first venture-backed startup will probably be the most consequential of your entire career.

Zoom image will be displayed

Tip #2 — Be patient

The median time for a YC startup to achieve an exit (acquisition or IPO) is about 3 years, but larger exits ($100M-$999M) take closer to 6 years, and unicorn exits ($1B+) typically take nearly a decade. Building a successful technology startup is a marathon, not a sprint.

You may see headlines about tech companies achieving ridiculous valuations ridiculously fast, but the reason they make headlines is they’re the exception rather than the rule. In the vast majority of cases, building a unicorn is a slow, painful, and unglamorous decade-long commitment.

Of course there are many exciting milestones along the way, but you should think of them as islands in a sea of hard work, relentless focus, and near-death experiences. If you don’t enjoy the journey of “building something people want” with its long hours and even longer odds, then you’ll never make it to the destination.

Zoom image will be displayed

Tip #3 — Start young

We found that the average YC unicorn founder had 8 years work experience when they started their YC startup. Assuming they got their first job after graduating college at ~22 years of age, that means they were ~30 years old. Plenty of founders had more or less than this average, and a surprising number were only a few years into their career — though few had over 15 years experience.

Building a startup takes a lot of time and energy, and risk, so it’s better to start early in your career. Clearly some real-world work experience helps, but the trick is to properly balance energy and wisdom. Anecdotally, we’ve noticed that the current generation of “AI first” startup founders are younger than the historical average, probably because advanced AI is so fresh that relevant industry experience isn’t really to be had.

Zoom image will be displayed

Tip #4 — Get co-founders

One of the many things we learned training our Rebel Theorem 4.0 ML/AI algorithm for predicting YC startup success is that the number of co-founders in a startup is positively correlated with successful outcomes. It’s not true in the absolute (you can have too many cooks in the kitchen) but partnering with another co-founder or two is a smart idea.

We’re working on a set of new algorithm features now that dissect exactly what characteristics of “co-founder fit” predict startup success, so I’ll have more to say on that soon. One thing we know for sure though is co-founder breakups are the #1 cause of early-stage startup failure. So at a minimum, make sure you know your co-founders well and you’re aligned in terms of long-term vision and values.

Zoom image will be displayed

Tip #5 — Go to a top (technical) university

Another thing we learned about YC unicorn founders is they often graduated from top-ranked universities with strong engineering programs (think Stanford or MIT).

There is a long tail of other universities represented amongst unicorn founders, so going to a top school really falls into the “helpful but not necessary” category, but having co-founders with strong technical and/or product backgrounds is vital based on our data.

Zoom image will be displayed

Tip #6 — Cultivate key co-founder personality traits

Our algorithm for predicting YC startup success is trained on inferred founder personality traits via a specialized AI model based on certain aspects of their online footprint. We’ve observed that certain key personality profiles are predictive of becoming a YC unicorn founder:

High Dominance — results-oriented, confident, and decisive founders, preferring to take control of situations, focus on achieving goals, and direct in their communication

High Conscientiousness — founders who place importance on accuracy, quality, and detailed work, with a strong sense of responsibility and a preference for working within established structures or guidelines

Low Influence — reserved when it comes to social interactions, preferring to work independently or in smaller groups, don’t actively seek to be the center of attention, and prefer to rely on facts and logic rather than charm

Low Steadiness — thrive in environments that are fast-paced and dynamic rather than stable or predictable, open to change and comfortable with a certain level of uncertainty, preferring variety over routine

Past a certain age you can’t really change your personality, but you can and should partner with co-founders who have these personality traits if you don’t yourself.

Zoom image will be displayed

Tip #7 — Move to Silicon Valley

Out of hundreds of YC founder and company characteristics we’ve found to be predictive of startup success via our algorithm training, simply whether or not the company is headquartered in San Francisco made the top 25! The vast majority of YC unicorns so far are based in the Bay Area.

There are many reasons for this which I’ll save for another post, but the data is clear — if you’re a founder, get your butt to Silicon Valley. A YC partner once described building a company in the Valley as “easy mode” and having built startups myself both inside and outside of the Valley, I can vouch for that.

Zoom image will be displayed

Tip #8 — Assure founder-product fit

You probably know the importance of product-market fit for startups, but our data shows that founder-product fit is just as important.

At Rebel, we analyzed several metrics related to founder-product fit (i.e., how well founders’ backgrounds align with the product they’re building) and discovered that while strong founder-product fit doesn’t necessarily predict success, a lack of founder-product fit is a strong predictor of failure.

It’s particularly dangerous when companies have poor founder-product fit around geography (i.e., founders don’t have backgrounds in the same geography of their target market), go-to market (i.e., founders don’t understand the startup’s go-to-market approach) and work experience (i.e., founders’ prior work experience isn’t relevant to the company’s product).

Zoom image will be displayed

Tip #9 — Don’t worry if you’re not “hot” at Demo Day

We analyzed whether companies that are “hot” at Demo Day ended up having better outcomes than their peers. The bottom line is while there is a decent positive correlation between the total amount of capital a company raises at Demo Day and their long-term valuation growth, more than 90% of a company’s outcome is explained by other factors.

For founders, this means while it’s generally a positive signal if investors get excited about your company at Demo Day, a lack of excitement is far from a death sentence — your eventual success or failure will overwhelmingly be determined by other factors.

Zoom image will be displayed