Y Combinator Question 24: Whose Business Is Going to Go Out of Business Without Using You?
This Y Combinator question challenges startups to think critically about the indispensable value of their product or service. It aims to uncover businesses or industries for whom the startup’s solution could be seen as not just beneficial, but vital for survival.
Part of the series:
Y Combinator: 40 Questions and 40 Answers
Y Combinator: 40 Questions and 40 Answers
1. Why Y Combinator Asks This Question
Y Combinator wants to understand the existential value of your product: Is it merely nice to have, or is it essential? This question assesses whether your solution addresses a problem so critical that potential customers would face significant business risks or failure without it.Demonstrating that your product or service is crucial can significantly enhance its perceived value and attract serious investment.
2. How to Answer the Question
Identify specific sectors or types of businesses that face critical challenges directly addressed by your product. Explain how these challenges, if unresolved, could threaten the viability of these businesses.Detail how your solution effectively resolves these critical issues, potentially saving these businesses from severe outcomes like significant financial loss or operational failure.
For example, if your startup offers advanced cybersecurity protection tailored for small financial institutions, explain how rising cyber threats could put these businesses at risk of catastrophic data breaches and compliance penalties that might threaten their survival.
3. How NOT to Answer the Question
Avoid overstating the indispensability of your product or being melodramatic about the consequences of not using it.Stay factual and backed by data or case studies where possible. Avoid being too narrow unless you can substantiate the claim that specific businesses genuinely depend on your solution to avoid failure.
4. An Example, Based on a Tech Startup
Consider a tech startup, DataShield, that provides compliance management software tailored for small healthcare providers. Here’s how they might answer the question:- Critical Business Need: “Small healthcare providers are increasingly subject to stringent data privacy regulations like HIPAA. Without a robust mechanism to manage and safeguard patient data, these providers risk severe penalties, loss of license, or even closure due to non-compliance.”
- Solution’s Impact: “DataShield’s compliance software automates the protection and monitoring of patient data, ensuring that these small providers can meet compliance demands effortlessly and affordably. Without this tool, many small practices would struggle to maintain operations while staying compliant with evolving regulations.”
Y Combinator examine the essential nature of startups’ products, seeking to determine if they solve such critical problems that potential customers view them as vital for their survival and success.