Often times, when an entrepreneur begins his or her journey, he or she, has little idea as to how to showcase ideas and venture in a better manner, to possible investors. Most of the entrepreneurs fear getting into that space, are confused and not to say the least, find themselves in a catch 22 situation, where they do not know how to put their business on papers and at the same time manage to keep it simple enough for an investor to fathom!
In today’s post, Pixr8 presents the excerpts of an interview between the extraordinary entrepreneurs Nicolas Michaelsen who is the Founder’ CMO at AirHelp, a Start-up that offers grievance redressal and refunds to airline passengers, should they have one due to their flights; and Harry Stebbings, who is the Founder and Host of the famous online podcasting company “TheTwentyMinuteVC”, which is the only online podcasting company that is concentrated on the VC industry and provides valuable insights through videos that are not more than 20 minutes in duration.
In this Q&A session, Nicolas gives insights on the journey of entrepreneurs who make it to Y Combinator. He talks candidly about their admissions process, their infamous interviews and the guidance and tutoring that most Startups get while they are at YC. He also talks about how the incubator affects the valuations of a Start-up and last but not the least the key lessons that he learnt during his stay at YC.
For all you budding entrepreneurs out there, today’s post would touch upon topics like How did Nicolas start AirHelp? When was the time he felt ready to approach Y Combinator? And Whether he approached other incubators as well? Of course, we also pull the curtains down on what the admissions process at YC is like? And What is the documentation one would require to get selected at YC? We delve deeper into finding out the structure of their interview process and the kind of questions asked; not to forget How many eyes does one need to be accepted there?
We also delve deep to understand the tutoring system at YC, Who were Nicolas’ tutors at YC? How was his typical day while he was there? Nicolas also shares his key learnings while he was at YC, how that impacted his company’s valuation and what are his upcoming plans for AirHelp; things that concern most entrepreneurs in the Start-up ecosystem!
Read on… Harry Stebbings (HS) Podcast with Nicolas Michaelsen (NM)
Harry Stebbings (HS): Hello and welcome to episode 32 of the 20 minute VC with your host Harry Stebbings. Now I am so excited to bring you today the insider’s perspective on all things Y Combinator! Yes, that includes the admissions, the interview, a typical day in the life of Y Combinator’s start up, What Y Combinator does to the value of your Startup and who better to reveal all than Y Combinator Alumni Nicholas Michaelsen, Founder at AirHelp and part of the Wins 2014 batch 2. So without further ado, ladies and gentlemen it’s Nicholas Michaelsen.
HS: Nicholas welcome to 20 minutes VC; it’s an absolute pleasure to have you on the show!
Nicolas Michaelsen (NM): Thank you! Thanks for having me.
HS: Let’s start by hearing a little about yourself and your background and the beginnings of AirHelp.
NM: Yeah sure! So my background is within the marketing space, I have started marketing agencies in the past and also tech Startups. So I have had my share of losing money and gaining experience. Essentially the way that AirHelp got started was because myself and my co-founder Henry were travelling quite a lot and you know we were like any other traveller always experiencing delayed and cancelled flights and we got to the point where I was thinking, or we were thinking that there must be something that protects us as consumers. So we did some research and we found word is lost that obligate the airlines to pay you up to 600 Euros if your flight is delayed, cancelled or overbooked.
NM: So we tried claiming this money ourselves and just found the process was completely horrible. Some airlines only accept the facts on Friday between 2 and 4, you had to go through links and links and links and sometimes you would just end up on a dead link and you couldn’t even submit a claim; and then when you had actually submitted the claim then you had to follow up, so you had to call them, you had to write them and then there was a high likelihood that they would just reject you saying that it was an act of god or something else, or not even give you an answer.
HS: Which is very annoying, after all the hard work you’ve put in?
NM: Oh yes! So this was a process that would take a couple of weeks and maybe months, just to even get that rejection so we thought to ourselves, we can maybe automate this if we were to get data on all flights to the world, so that we can streamline this whole process and make it easy for people to assert their legal right essentially. And that was the background for the idea. We then launched a very simple landing page, we had kinda sketched up how we wanted to build the backend of it but we wanted to build it on data instead of assumptions so we built this very simple landing page threw that up.
HS: How did you put that up? Did you do on any product on beta list type sites or did you just start it up?
NM: You know to be honest, so this was beginning of 2013, so this was before any product hunts and all that so we just put it up and then we got into a consumer rights show in Denmark, and that meant that overnight we had 3000 people come to our site asking whether or not we could help them! And then we actually started building the products on the back of that so we went two months calling out all the airlines and figuring out the processes, figuring out what the pain points for these consumers were and then we got our CTO Greg on board, and built the system on the product on the back of that.
HS: And at what point did you realise that Y Combinator was the place to go for you? And did you consider any more local incubators?
NM: I think to be honest, Y Combinator in the last decade or so has just been such a big massive force in the tech industry and if you start a Startup you’ve obviously heard of a Y Combinator, so for us it was definitely like the Holy Grail. You know we were entrepreneurs from Denmark and thought, to be honest it was kind of a long shot but we said to ourselves well, at least it’s gonna be a good experience for us writing up this application; and if not then we could check it off the bucket list. And we applied and they ended up inviting us for an interview and so we flew to Mountain View to interview with Paul Grave and Jessica and that was a couple of weeks after we had submitted the application, so it went really fast!
HS: On the application itself what do you have to have ready, are there any financial forecast, product roadmaps? What do you need in terms of documentation?
NM: I think the most important thing is just that you are very clear and very precise on what you are doing. You should be the expert on whatever you are building so you should be able to in a very very simple way explain, what it is that you are doing. As an example, AirHelp – we help you get money-back from airlines when they screw up your flight. That’s something that’s really simple and something everybody can understand; and I think every year when there are applications to YC, where I get a lot of applicants asking me to give feedback on their applications and what I see most of the time is that it’s just one big document of industry lingo and abbreviations and the first thing I say is, “Don’t assume that they know whatever your industry is like. You need to make it so that your grandmother would be able to understand what it is that you do!”
HS: So keep it simple?
NM: Keep it simple, keep it concise. You don’t have to go into this very muddy detail about how it is structured and everything, even though, of course it is very thick based in nature, but it’s just more important that you are able to communicate what is it that you’re doing and why? And then also why you’re gonna be the ones who are going to be able to succeed with this. That’s probably the best advice you can give.
HS: You did briefly touch on the interview yourself at obviously an infamous event in the techtator. What was yours like? And how’re the interviews structured?
NM: They are structured that you have 3 to 4 of the partners that sit with you in a room and you have about ten minutes where you talk about your idea and they ask questions. So they will literally bombard you with questions because they want to make sure that what you wrote in the application is actually also the truth, so they have the most fine-tuned bullshit detectors out there) to be honest (Laughs). So I think, again it’s just important that you are yourself and if you have an idea, what you are building and why, then it shouldn’t be a hard thing. It should actually be more of a good conversation where they give you feedback as well; and whether or not you get in just use that interview as the best source of feedback you can get from some really really smart people that can give you an idea on how to do things.
HS: And do they ask you any general questions or is it all very specific? Like do they ask you about yourself or about your personal lives, or is it very much industry specific?
NM: It’s more about again, its ten minutes and of course it will drill down in to some of the more technical aspects. But its more stuff like, so what are you working on? Why should users try you? Why are you better than everybody else? What’s the most impressive thing you’ve done in the past? So they want to understand why you as a team will be able to succeed, where others might not.
HS: And am I right in saying that only one of the four members needs to vote yes for you to be accepted?
NM: They have two sets of voting right? You have one, which is the partners that are there in the room and then you also have the alumni that can refer you basically. As alumni, you can say that this company, I expect them to be in the top ten or I give them an interview because they are a really really good team and whatever. So it’s a combination of different things but at the end of the day it’s up to the partners that interview you because they are the ones that will get that deeper understanding of who you are and what you building.
HS: Absolutely, and then you are an exception to Y Combinator as you were, well first that, how did that feel being accepted?
NM: That was huge you know, again, especially being a European entrepreneur, being accepted in to Silicon Valley in that way was exceptionally ecstatic.
HS: Well the world’s biggest tech accelerator!
NM: Oh yeah, yes and it gives you the seal of approval that will affect you for many years to come. We jokingly refer to it as better than a Stanford MBA!
HS: Yeah, absolutely and then you really moved to Stanford well to YC?
NM: Umm Hmm…
HS: And how does it work from there? Do you live there? Do you have to run house from the campus?
NM: Yeah, so they will give you a small set of money that you can live for a while, you are essentially going through YC but you have to find your own accommodation. It’s not structured as many of the other accelerators where you have a co-working space. The Only time you’re at YC is essentially for the Tuesday night dinners and then if you have office hours with one of the partners.
HS: And they’ve Tuesday night dinners so they’re with the other members of YC that term?
NM: Yeah so that’s the whole batch coming together, so you start off the day with having office hours with your batch and you have different groups in each batch, where you have, I think it was like 5-6 companies and then you sit in sort of a round table and you present your numbers; and then you get feedback from the partners that are your tutors for the probation of YC. I think one of the biggest take outs I really got from YC is having of course, the bigger strategic vision in place, but really really trying to go into week-by-week growth rates, so every week you would present your numbers and you would say well, these are my KPIs. Then you would go in and say well, this week we accomplished so and so and so, these are our growth rates, these are the things that are challenging right now but just having that you know that weekly thing..
HS: A much closer look at it
NM: Yeah, yeah like I see this all the time where some entrepreneur says I want to grow this into a billion dollar company and my question is you know what’s your numbers going to be like next week? Because that’s really what you can factor in, these really really small gradual steps, that takes you along the way that will eventually give you that up unto the right hockey stick exponential growth.
HS: And talking about the tutoring at YC, you are assigned tutors on your arrival?
NM: Yeah so, in our group we had Kevin Hale from Wufoo, Paul Buchheit who built Gmail. We had Terra who is the CFO at Y Combinator and every group has their own set of tutors that will follow you through the whole process of the three months.
HS: And what was it like learning from such industry experts from the stage that you were being, you know and observe a very smooth start up?
NM: That was amazing you know! (Laughs) At that time we were building our email scanner and that was built on Gmail, so we wanted to say if you had had a flight in the last two years we would be able to capture that and say ok this is actually an eligible flight; and being able to build that with the guidance of the guy who built Gmail is of course a pretty amazing experience.
HS: And how much contact time did you have with them?
NM: YC is structured in a way where it’s very much like the input you get is also the output that you’re gonna get. So they are not gonna say that well, we need to meet with you five times a week and you need to come in. It’s very much up to you to structure it and, also again coming back to the fact that it’s not a co-working space. You get to build your own culture but again having this space where you come in and show your progress and talk to other like-minded people about your ideas.
HS: I have a second more with you. Do you mind if we get into a quick fire round?
NM: Yea, for sure!
HS: So what do you think the impact is of YC on start-up valuations?
NM: Massive! While we were going through, it was a number that was floating around like 2 to 3x of the standard valuation! So definitely it has a huge impact on your valuation because everyone has been pre-bedded so vigorously, investors know that if you are accepted into Y Combinator then you know what the hell you are doing.
HS: Your most valuable takeaway from YC?
NM: I would say that its two things, one, it’s the short term goals that was really a big eye opener for me; and two is definitely the alumni and the network that we got out of Y Combinator.
HS: Cos the alumni and the network, you help each other once you’ve proceeded through? Don’t you? It’s an interconnected kind of relationship while you’re there?
NM: Yeah exactly, it’s a very strong community and the way it works is essentially, if you have a challenge then you can send it out into the community saying can you help me with this? Can you give an intro to this or this guy and then people from the YC community will then respond, and say hey dude, this and this and this, these are our experiences so on and so forth. So it is really invaluable, it’s really one of the biggest kinds of takeaway from the YC also.
HS: And do you wish you’d done anything different at YC? Be it taking advantage of more people, made more connections, do you think you’d done anything differently?
NM: To be honest No! You know, those two months are very overwhelming in a very positive way. And I think the best way you can do it is just make sure that you stay on track, that you grow and just get the best of it!
HS: What is the hardest part?
NM: The hardest part, again it comes a bit back to this thing about having these weekly goals that you need to accomplish and it’s not like they’re gonna say well, you missed this week and we flunk you! It’s sort of this very positive social pressure to be able to show those numbers and you want to achieve something every week!
HS: And then finally let’s talk about the future of AirHelp, what are your plans for the next five years? Where do you see it going?
NM: We are moving into a space, where we want to be able to help you whenever anything goes wrong on your air travels. It’s becoming more of a platform where we, based on the data we have, we can be able to help you the second something goes wrong. That’s where we’re really headed and the air travel industry has just for so many years been a race to the bottom, so airlines have been neglecting their passengers and we see that we’ve come up with a model where the airlines can have happier customers and customers can actually get help when something goes wrong!
HS: Fantastic! And Nicholas thank you so much coming on the show, it’s been an absolute pleasure having you
NM: You’re welcome!