1Mby1M Virtual Accelerator Investor Forum: With Geoff Ralston, President of Y Combinator (Part 4)

Sramana Mitra: Exactly. Our spectrum is broader. Yours is specifically the ones that who will get funding.

Geoff Ralston: Forgive me, but I disagree, Sramana. You’re broader than the batch, but YC is broader than that. When I first wanted to start a company in the ‘80s, none of this content was available. Now, there’s so much freely available content and programs that help you take the first step.

Sramana Mitra: That’s the most important thing. I have another couple of nuances that we are seeing. There’s bootstrapping with services. Very good companies are coming out of this mode of entrepreneurship. Oracle was founded in this mode. Alteryx is one of my favorite case studies. I met Dean Stoecker in 2013. He told me this incredible story. They’ve gone public since.

Many of these companies eventually raise money, but bootstrapping with services for enterprise software is a very effective way of getting close to customers, identifying problems before turning a services project into a product. We see this in droves. We’ve supported this all along. Do you like this genre? Do you have pushback against it?

Geoff Ralston: It’s not a main line of growth for an enterprise product because what you end up doing is building a very specific product for a very specific company. They tend to be very demanding. It’s different from creating a general product that you can sell everywhere. There’s an enormous amount of venture money available for B2B enterprise businesses, now more than ever.

However, every entrepreneur has to find their path and go after their dream. The right way to do that is to get consulting fees and service fees from a company that is willing to pay you to build software. That could be a fantastic path if you have no other path. I think you should exhaust your possibilities first and then take that possibility if nothing else is available. It is absolutely true that Sramana and I can point to cases where bootstrapping with services have turned into independent successful companies. It’s a little unusual for that to be the case, but it’s not impossible.

Sramana Mitra: The customer intimacy aspect is something that I like a lot. Customers are giving lots of input. That input is valuable to figure out how to scope the product, especially enterprise software. 

Geoff Ralston: You probably know that our motto is, “Make something people want.” We go a little deeper when we talk to our batches. There are two things you should be doing right now. You should write code and talk to customers. You determine if whatever you are building is creating value. You find the product-market fit and you do that on a regular basis throughout the lifetime of a company.

Sramana Mitra: The last of these creative bootstrapping techniques I want to discuss is bootstrapping by piggybacking. There are a bunch of PaaS platforms out there. Great companies like Veeva, Vlocity, MapAnything were based on the original Salesforce platform. Not having to build the whole stack saves you a lot of money. This is something that people like Peter Gassner understood very early. Rene Bonvanie was running Salesforce incubator. I remember he invited me to come in and gave me a whole tour. This is something we see more. How do you view this?

Geoff Ralston: I think it’s terrific. I don’t think there’s anything new here except for the availability of platforms. Think about it. Every entrepreneur builds their company on the infrastructure that’s available. In the beginning, it was the web. Maybe, it was Google using AdWords to get traffic to your site. Maybe it was Zynga if you’re building a game platform. 

This segment is part 4 in the series : 1Mby1M Virtual Accelerator Investor Forum: With Geoff Ralston, President of Y Combinator
1 2 3 4 5