Y Combinator Question 9 + How Do We Get the First Indication This Thing Is Working?

This question from Y Combinator assesses a startup's understanding of key performance indicators (KPIs) and early success metrics. It explores how founders plan to measure initial effectiveness and validate their product or service in the market. Understanding and articulating these early indicators of success can demonstrate the startup's strategic insight and its readiness to adapt based on real-world data.

Frederik Van Lierde

May 06, 2024

Y Combinator Question 9 + How Do We Get the First Indication This Thing Is Working?

Part of the series:
Y Combinator: 40 Questions and 40 Answers

1. Why Y Combinator Asks This Question

Y Combinator, and investors generally, are interested in how quickly a startup can prove the viability of its idea. This question helps them determine whether the founders know what early success looks like and how they plan to measure it.

It’s about ensuring that the startup has concrete, practical plans for gauging early adoption, user engagement, or whatever other metrics signify that the product or service is meeting market needs effectively.

2. How to Answer the Question

Identify specific metrics or milestones that will indicate early success. These could be user engagement levels, customer acquisition rates, specific financial goals, or operational efficiencies, depending on the nature of your business.

Explain how these metrics align with your business objectives and how you will measure them. Be prepared to discuss tools, methods, or systems you have in place to track these indicators.

For example, if your startup offers a SaaS (Software as a Service) product for businesses, your early indicators of success might include subscription rates, active users, or customer feedback scores.

3. How NOT to Answer the Question

Avoid vague or non-specific answers that don’t offer measurable indicators. Steer clear of overly optimistic projections that lack grounding in realistic, achievable targets.

It’s important not to rely solely on anecdotal evidence or soft metrics without quantifiable data to back them up.

4. An Example, Based on a Tech Startup

Imagine a tech startup, EcoInsight, that develops an AI-driven tool to help manufacturers reduce energy consumption. Here’s how they might approach this question:

Early Indicators of Success: "The first indication that our AI tool is working will be a measurable 10% reduction in energy consumption for our pilot manufacturing clients within the first three months of deployment."
Measurement Strategy: "We have developed a dashboard that integrates with existing energy management systems to track real-time energy usage and savings directly attributable to our tool. This data, coupled with client feedback and operational adjustments, will serve as the primary indicators of our tool’s initial effectiveness."

Y Combinator digs into how startups plan to quickly show that their ideas work, focusing on tangible goals and clear measures of early success.