What Instacart taught us: Don't be a dreamer, be a creator

YC S12 company Instacart is well on its way to being one of the iconic companies of our times. How it started has been covered before: Instacart founder Apoorva Mehta hacked his way into YC by sending me a six pack of beer. It was a cold and refreshing pack of 21st Amendment's Back in Black, as pictured above. Apoorva sent it over using his own service two months after the deadline for applications at YC. The hack wasn't the thing that mattered, really, though. What mattered is what Apoorva had already built something amazing. 

I had already seen dozens of startups say they were going to do grocery delivery. But we had never actually seen someone build an app with thousands of products in it, with a few real drivers using the app to deliver real groceries every day. I downloaded the app that afternoon and was blown away at how much had already been done. That was absolutely remarkable. Everyone else was dreaming. Apoorva created it. And then everyone wanted it. 

That's the key lesson here. Don't be a dreamer. Manifest that dream. Build it. Write the code. Spin up the service. Hire. Create.

Living in a paperwork-less future

"Once you're living in the future in some respect, the way to notice startup ideas is to look for things that seem to be missing” —Paul Graham

"The future is already here — it's just not very evenly distributed." – William Gibson

Imagine: it is the near future. A mortgage application is a one-tap action on your smartphone. So is renewal of your driver’s license with the DMV. Paying your last parking ticket is a just one tap too. A car loan? A visa application? Life insurance? Car insurance? An estate plan? All a few taps. 

The promise of this has been a long time in the making. The next 20 years is not going to be like the last 20 years, however. Now's the time. Why? Because of a number of overwhelming new platform forces: 

Smartphone adoption — Late adopter industries are being unlocked because now far more people on the planet can have an always-on, cheap, ubiquitous computer. Android devices are $150 with no contract, today. A cheap tablet or smartphone can replace kiosks, point of sale devices, and PC’s on desks. You'd be crazy to say construction would be an industry where you grow a software business even 5 years ago, but that's exactly what Plangrid is doing bringing blueprints online. 

Digital signing — HelloSign is at the forefront of this. Instacart recently used the HelloSign API to be able to onboard their contract delivery workers far faster than ever. If you can sign legal documents instantly, you bring the friction of getting business down to nearly zero. 

Payments systems — StripeCrowdtilt OpenBalanced and WePay are at the forefront of this. It’s never been easier for a startup to stand on the shoulders of these giants and be able to do real transactions instantly. Coinbase does the same allowing anyone to receive payment using bitcoin, unlocking worldwide commerce with a universal currency. These things just didn’t exist even a few years ago. 

Legacy API's — Any system must work with all legacy systems. They’re getting filled in by both platform API services like Lob, Twilio, Plivo, and HelloFax. Not everything in the stack has to live in the future. 

Anti-fraud — Services like Sift Science are bringing world-class machine learning and anti-fraud technologies to every site and service. Online verification and personal data room services are coming online that will let people do large transactions with people they just met. Airbnb was able to use Facebook and Twitter data to verify people and make them more human, such that you could do business with them. LendUp is doing the same for payday lending, adding more data to the antiquated to the scammy world of payday lending. 

Killing paper-based purchase orders, application forms, approval queues and replacing them with all-digital direct-to-consumer experiences is happening right now, and in every walk of life. 

In the 1980's, Walmart started using IT to start working directly with manufacturers and cut waste out of their supply chain. Today, the company represents 2% of annual US GDP. That same thing is finally coming to all the other industries, and they're being brought to the world by small teams of talented founders building on the fundamental platforms mentioned above. 

New services are better, cheaper, and faster. As a result, these new businesses will be built shockingly fast. It’s not twilight for young startups trying to make something great. It is dawn. 

One exception to the "solve your own problem" approach to startup ideas

I got an email from a founder recently who wanted to help create software so that you could find other cofounders. It's a common idea that is so frequently attempted that I usually try to dissuade people from working on it. This is what I wrote him: 

It is usually the right thing to create something you yourself would use. Finding cofounders is a common problem that founders face, but it is probably a special case exception to the guideline. There probably aren't enough people who want to do startups, and you won't be able to make enough money from those startups to actually support your business. 

I would suggest that you work more on things that a lot of people in your world can use. If you could pick anything, the ones that are most valuable tend to come from there. 

There are probably specific aspects of your local economy and markets that you know about that nobody else knows about. Make software to solve those problems. For instance, I've met founders in the past who have backgrounds in the an unsexy business like textiles, or manufacturing. They end up making marketplaces or management software that make those kinds of operations a lot more efficient, and they're the only ones who can do it because it is rare for someone who knows how to code who also understands all the ins-and-outs of that particular industry and use case. 

You can think of this being true for any economic activity: banking, real estate, retail, wholesale, shipping, food, entertainment, transportation. There is an infinite amount of software just waiting to be written, around use cases that people actually want and care desperately about. That's what you should focus on. 
This is an unusually ripe time for people to make software that touches late adopter industries like the ones mentioned above. 

It's not enough to be focused on your own needs. This is why empathy is so important as a founder. You really do need to focus on the needs of others. That's the path to creating something people want. 

The outrage that shouldn't be: Oculus Rift pre-orderers aren't angry that they didn't get equity. That's not how it works.

People are up in arms about the Oculus Rift selling to Facebook — some like the normally reasonable and insightful Barry Ritholtz are livid that people paid to the tune of $2.4M in presales and aren't sharing in the equity returns

I bought an early Oculus Rift developer kit as a part of the Kickstarter. I paid $300 for it and it was worth every penny. I had no expectation of equity from it, because the product was cool and something I wanted. It's the wrong thing to criticize Oculus Rift for the simple reason that hardware crowdfunding has unlocked a whole new world of things that could be built if only you could prove people want it.

The crowdfunding campaign Oculus Rift ran proved people wanted it. We see this over and over again — if you can create a new class of consumer behavior (Uber, Google, etc) then you can create a valuable company.

Articles like this are sensational in that they sometimes incite misguided lawmakers to regulate. But in this case, crowdfunding is creating new economic activity, and any new regulation would actively squelch that — and kill viable new products and companies in the process.

Last Minute Advice for YC Applicants, Updated for 2014

In 2009 I wrote a blog post here about advice for startups applying for YC. Little did I know years later I'd become a partner at Y Combinator and have the chance to shape hundreds of new startups since then. 

I thought I'd refresh that article since five years is a long time. Here are my six tips for applicants, updated for 2014.

1) YC is a multiplier for companies, both early and late. 

The most common question I get from teams is wondering whether they are too early for YC, or too late. I think YC can help any company prior to Series A. 

YC teams span the gamut. Some people are just out of college and might only have an early prototype. Others might have already raised a seed round and have real revenue and employees. Some of the YC companies who have done the best (e.g. Crowdtilt, Thalmic Labs) came into YC having already raised seed rounds. They do so well during YC that they have gone on to raise competitive Series A and subsequent rounds of funding right out of demo day. It turns out to be a multiplier on success. 

On the other hand there are teams that are just super early. That's OK too. If this is your first money you're seeking, realize that this is unlike a summer program or getting an internship. You're committing yourself to building a serious business, and you're telling your investors that you're going to do what it takes to returning their money plus a healthy return. It's not a grant. We do startups because we want to create massive value, reward ourselves and reward the people who help us create that value. 

2) Solve a hair on fire problem, or do it right

Great hackers get caught up in technology, but technology doesn't create value in and of itself. Technology is only useful for solving people's problems. 

One of the first pieces of startup advice I remember coming across was Paul Buchheit talking about startup ideas. Successful ones fall in one of two categories:

  • They either solve a hair on fire problem that has never been solved before
  • OR they solve a problem that has other solutions, but they do it so much better that they are "done right."
If you're a hair on fire problem, you have to clearly state how bad that problem is. How do you know the problem exists? Who has it? How specifically have you solved it? When you're doing something new like solving a brand new hair on fire problem, it's an uphill battle just to let people know you exist. We want to know that you are capable of even getting people to know you exist. 

On the flip side, if you're focused on a more crowded space and you're trying to do it right, then you've got to be a lot more clear about how your solution is unique and different. It's not OK to do exactly the same thing. Help us understand what you have figured out that nobody else has. It's so important, this is actually one of the questions on the application. 

If you're new, focus on explaining what you are. If you're not new, focus on explaining how you're different. If you're neither of these types, you're doing it wrong.

3) Have a capable team

The ideal startup team involves really two major roles — builder, and hustler. I used to say it took three roles (designer, engineer, hustler), but in practice I've seen enough evidence to the contrary that I have changed my mind. In reality, I think designer / engineer can be abstracted to builder. Some enterprise software companies don't need a ton of design. All tech startups need tech cofounders though. 

I've seen teams of hustlers fail because they can't create any product on their own. I've seen teams of pure builders (amazing designer / engineers) that fail because they can't put the product in the hands of users. In the end, you need both. Your cofounding team needs these things, and if you don't have them yet, you should go find your most talented and trusted friends who have those skills and get them to come join you. 

You need these skills because they're the basics for success. It doesn't have to be one person specifically for one role or the other. It's just important that people are capable of those things.  Be realistic with yourself about what you and your teammates are good at. You are getting married to your cofounders -- you're essentially getting out onto a life raft in the ocean with them, and you're going to need to work with them (and well) to survive.

Doing a startup without a kickass team who can really clean up on each of the three skills is going to war without guns, ammo, training, or all of the above. 

4) Write well

In the past five years, this has become more and more obvious to me as the examples pile up. The best startups are incredibly good at writing and communicating in as few words as possible. Being concise and clear matters. PG taught me years ago: If a founder can't express their ideas clearly to others, then the simplest and likeliest explanation is actually that the idea is not particularly clear to them either. 

PG's essays are an indication of what you should be striving to do in your application. You should read these essays now if you haven't already. Everything you write should be crisp, articulate, and to the point. 

One way to do this is to actually write every last idea down. Write copiously. Brainstorm to get it all. Then edit. Connect similar concepts and put them next to each other. Edit mercilessly until there is not a single word you could remove without losing significant meaning. 

One common pitfall that plagues practically everyone is the urge to sound professional. Don't do that. Just use normal plain English that you would use to explain things to normal human beings who have no special background. It's a mistake to try to sound corporate, or professional, or like a press release. Those are all among the worst ways to communicate in the history of language. What you say should communicate, not get in the way.

Simple rule of thumb: Does the writing sound like something you would say to a friend? If not, rewrite. 

5) Get a little help from your friends

You've got mentors, right? Get as many trustworthy and intelligent eyeballs on your written application as you can. This goes for any application for anything, really. More eyeballs will always help you flesh out your concepts, spot weak links and strengthen your case.

Email founders of YC companies, or founders of any company, to get feedback. We're here to help -- someone helped us.

6) What are you going to do if you don't get in?

You've got to keep working on the startup no matter what. Realize that you don't need anyone to give you a permission slip to create your own startup.

The application deadline for Summer 2014 is March 28. Apply now.

Good luck to all the applicants, and I hope to see you at interviews.