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What Happens After Y Combinator: The Marathon After The Sprint

Startup founders obsess about “winning” Demo Day. But even the winners will struggle to build sustainable businesses.

What Happens After Y Combinator: The Marathon After The Sprint
[Photo: FPG, Getty Images]

As she cleans out the hacker house where she and her employees have spent the past three months, Liz Wessel is experiencing a bit of an emotional whiplash. “We’re going back to our normal life,” Wessel tells me earlier this week, eyeing a mostly boxed-up living room in Los Altos, California, that served as the temporary headquarters of Wessel’s company Campus Job. The recruiting startup, which Wessel cofounded last year, was one of 114 companies taking part in the current Y Combinator batch, which I’ve been following over the past three months.

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Getting into YC made Wessel lucky, but it also meant that if she wanted to distinguish herself from her peers, she’d have to grow revenue by at least 10% per week while demonstrating that Campus Job’s product, which helps companies hire college students for on-campus jobs, was capable of attracting a much larger audience. And so Wessel pushed herself to “grow the hell out of this company,” as she told me in February. She, her cofounder J.J. Fliegelman, and their six-person team uprooted their lives in New York to live together for three months in the Bay Area, working more or less around the clock. A typical day started at 8 a.m. and ended 18 hours later, at 2 a.m. the following day.

J.J. Fliegelman, Co-Founder and CTO of Campus Job

The push for growth worked spectacularly well. By last week’s Demo Day, when she pitched the company to a room full of investors, entrepreneurs, and journalists, Campus Job was adding 10,000 or so students per week and had attracted 1,300 employers, including Starbucks and Uber, as well as numerous YC alums. Revenue has doubled for each of the past three months. Wessel won’t comment on questions of fundraising–the default response for any smart YC founder hoping to generate a little FOMO–but Mattermark, the Silicon Valley data firm that tracks private companies and venture capital deals, ranked Campus Job as the top company in the batch, making a funding round seem like a foregone conclusion.

Even so, Wessel knows that the frantic style of growth she pursued as part of YC–or “doing things that don’t scale,” as YC cofounder Paul Graham has put it–can’t take the company much farther. Her employees can only call on so many clients in a given day, and they also have to return to their normal lives–apartments, social lives, significant others. And so Wessel is now in hiring mode–the aim is to bring on nine more employees over the coming months–while looking for a real office back in New York. “We’re reaching out to everyone we know to try to get them on our team,” she says. “We have to keep up this crazy growth rate even though we’re not all living in a house together.”

Wessel is upbeat, but even today, even with the triumphant Demo Day performance behind her, and the likelihood of millions of dollars in venture capital funding in front of her, she faces an uphill battle. Even YC’s brightest stars often struggle to transition from the frantic growth sprint to the marathon that follows. “There’s this hangover effect,” says Jessica Mah, the founder of inDinero, which graduated YC in 2010. “Most of us are first-time entrepreneurs. We don’t know what we’re doing. Our confidence exceeds our abilities. It’s almost inevitable that we’re going to fail.”

Five years ago, Mah was like Wessel–the star of her batch, and a prime example of YC’s ability to turn ambitious, young hackers into formidable entrepreneurs capable of extracting large sums of money from seasoned venture capitalists. “There would have been no inDinero without YC,” says Mah. “We had no investor contacts, and 50% of our early customers came from YC.” By Demo Day, in September 2010, inDinero, which at the time offered bookkeeping software for small businesses and the self-employed, boasted fast growth rates and a CEO who was a media darling. Graham talked up the then 20-year-old Mah to anyone who’d listen, and inDinero’s $1.2 million seed-funding round was covered breathlessly by TechCrunch, who called Mah “the closest we’ve got to a female Mark Zuckerberg.”

Mah found the aura that Y Combinator helped create around her company useful for fundraising and getting press. It was also intoxicating. “I was strong-arming early investors into putting money in,” she recalls. “I was cocky. I was arrogant.” Within a year, she’d burned through nearly a million dollars with almost no revenue to show for it. Though inDinero had lots of users, almost none of them opted for the paid version of her product, as investors pointed out to her when they refused to give Mah more cash to keep the company afloat. “Suddenly it was October,” says Mah, “and we were fucked.”

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And yet Mah didn’t give up. “YC puts this pressure on you,” she says. “Don’t give up. Be a cockroach. Just figure it out.” She laid off most of her employees and begged her parents to pay the rent in the apartment she shared with cofounder Andy Su, which now doubled as their office. Desperate for revenue of any kind, Su and Mah abandoned the old freemium software business, and began offering outsourced accounting services to companies. Mah took the Internal Revenue Service’s enrolled agent test, which made her a certified tax preparer, and then called every entrepreneur she knew.

She suffered, both financially and emotionally. In 2012, her salary was just $2,860 and she found herself looking for guidance by studying the careers of child stars like Lindsay Lohan, who’d shown immense potential and then flamed out. She avoided traditional startup haunts in San Francisco’s SoMa neighborhood, and stayed away from Silicon Valley blogs, not wanting to hear about others’ success. “I definitely felt a lot of feelings,” says Mah.

Eventually, Mah gave up on hypergrowth and simply settled for sustainability, which in the end was what she needed. Today inDinero has more than 1,000 customers who pay an average of $10,000 per year, and recently raised $7 million from investors on the strength of that new model. Mah may not be a wunderkind anymore, but she’s still only 24.

Wessel, for her part, has been doing her best not to allow her early success to go to her head. “Our mentality was that Demo Day was just another day in the company’s life cycle,” she tells me, adding that lately she’s been trying to think more in terms of the company’s next 10 years rather than its next month. She’d like to expand her product offerings beyond on-campus jobs to include post-college recruiting, and, of course, to sign up thousands more employers. “It’s exciting,” she tells me. “But there’s way more pressure.”

A few minutes after we get off the phone, Wessel emails me a picture of the empty house. “I guess the nostalgia is creeping up,” she adds.

Next Week: The anatomy of a seed-funding round. This is part 13 in a series.

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