Kevin Hale of Y Combinator tells you how to build a billion dollar business

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When Survey Monkey acquired the Florida-based online form maker Wufoo for $35 million, the angel investor in the company, Paul Bucheit, made a 29561% return on his investment. That’s an incomparable figure against the average of 676% return by a startup in the US. The 10-member team and the leader of Wufoo must have done something right to reach there. The founder of this Y Combinator-backed company, Kevin Hale, later on joined the startup incubator as a partner.

The man himself was in Seoul last week and shared the recipe of building a billion dollar business. There’s no secret sauce but definitely certain key elements and few processes to make the path easy.

Kevin Hale, Partner at Y Combinator

Over the years, Y Combinator has nurtured 1400 founders, including successes like Airbnb and Dropbox. As a partner at Y Combinator and a successful entrepreneur himself, Kevin knew the dos and don’ts to carve out one’s way to the billion dollar club.

Here are three most important things startups need to work on if they’re chasing the billion dollar dream:

  1. Clarity of idea: On the demo day of Y Combinator, 75 participating startups get only two min and 30 sec each to present. Only with a clear picture in mind about the business, a startup can present in that period effectively. This quality is built in the teams (founders) by the following exercises:Group office hours: Many startups (~10-20) are seated in a room where everyone tells about his/her startup. After this, people are asked about what the first startup does and similarly about others as well. It is obvious that if someone lacks clarity of his idea, it will be tough for him/her to make others understand and remember, and vice-versa. This exercise is repeated till everyone gets what everyone else does. This ensures that in the future, everyone, including the investors, users, employees, and shareholders, get the idea correctly.
  2. Weekly dinners: This gets entrepreneurs answer some of the most important questions about their startup like ‘What is it’, ‘How it works’, ‘Where/When/Who are going to be part of journey’, and ‘Why it will become big’. It’s crucial to lead with ‘What’ and not ‘Why’. Answers should be concise and conversational, and exclude any jargon or preamble.

Remember that a clear idea is the foundation for growth.

  1. Focus on numbers: These are not just any numbers but the Key Point Indicators (KPIs). Build stuff and talk to users. Also, focus on one of the KPIs and target a 10% weekly growth.An entrepreneur should also know the exact numbers to the following questions all the time:
  2. How much money do you have in bank?
  3. What is your revenue?
  4. How fast is the revenue growing?
  5. How much are you spending (the burn rate)?
  6. How much runway is left?

Once the number is known, then the focus can be shifted to work on how big it can get.

  1.  Big Vision: Only one thing can be predicted about an idea and for that it has to be taken to the extremes. Once tested, one can say if the path taken is right or an adjustment is required.Regular interactions with inspiring people (the success stories you look up to) teaches to dream big. The definition of big has to be ambitious and aspirational enough to change the way an industry is looked upon. For example, how Facebook has redefined the social media and the way brands look at customers, or what Airbnb did to the traveling and accommodations market.

Kevin signed off with the signature statement emphasizing on the power of saying no.

You have to say no many a times to get to a billion dollars.

Of the above three, how many have you got right?

 

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