1Mby1M Virtual Accelerator Investor Forum: With Geoff Ralston, President of Y Combinator (Part 3)

Sramana Mitra: At 1Mby1M, we are in the pre-Series A zone. We don’t care if it’s at napkin stage. We work with that entire spectrum of pre-seed, pre series A. Typically, investors have steered clear from companies that operate in this mode. This category uses virtual company architecture extensively. What are you seeing? What is your perspective on this category?

Geoff Ralston: I’m not 100% sure how you’re defining the category. Let me talk about bootstrapping.

Sramana Mitra: Specifically, bootstrapping with a paycheck. They’re keeping their jobs, starting a company on the side, and starting to validate and getting quite a bit further before quitting their jobs. They have a validated business before quitting their jobs.

1Mby1M Virtual Accelerator Investor Forum: With Geoff Ralston, President of Y Combinator (Part 2)

Sramana Mitra: Let me try to unpack what you said. COVID has been a gamechanger. Until COVID, you wanted people to come and be in Silicon Valley for the three-month program. What is your current perspective on geography? Can they be from anywhere?

Geoff Ralston: It is certainly true that the pandemic left us with few choices. The end of winter 2020 batch was entirely virtual. Our Demo Day had to be entirely virtual. It was impossible, in 2020, to bring a whole bunch of folks together. Our summer 2020 batch was entirely virtual. We completely rebuilt our summer 2020 Demo Day as an entirely virtual program. That’s also true for the next batches.

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

Geoff Ralston is President of Y Combinator. We had a terrific discussion on what we each are seeing in the startup ecosystem.

Sramana Mitra: Geoff has been involved with Y Combinator right from the beginning. Why don’t we take a look back on the evolution of Silicon Valley and Y Combinator.

1Mby1M Virtual Accelerator Investor Forum: With Warren Weiss, Managing Partner at WestWave Capital (Part 5)

Sramana Mitra: That was surprising to me when we started working on Fullcast. That tells me that there are many industry segments. Fullcast.io is selling to cutting-edge SaaS companies and finding white spaces. If you look at manufacturing and logistics and other industry segments that are not as advanced, there are a ton of workflow white spaces. Eventually, you introduce AI. There is just bread-and-butter workflow automation still wide open. 

Warren Weiss: It’s amazing. The more transparent the data on who’s doing what in your company and how customers buy, there’re more opportunities to understand both business processes to make things more efficient. 

1Mby1M Virtual Accelerator Investor Forum: With Warren Weiss, Managing Partner at WestWave Capital (Part 4)

Sramana Mitra: All these areas that we are talking about are talent war scenarios. They are highly-specialized areas. There’s not an abundance of people who have great expertise. That’s another driver for these acquisition scenarios. The larger companies are also trying to hire talent. One of the ways they hire talent is by acquiring smaller companies. That also creates a conducive environment for these smaller exits. 

Warren Weiss: The whole workforce has been massively disrupted by the pandemic. It’s brought to light new issues about how people want to work and where they can work from. The distributed nature in which you engage, hire, onboard, and train has become much more strategic. We have made a couple of investments in the HR-related space.

1Mby1M Virtual Accelerator Investor Forum: With Warren Weiss, Managing Partner at WestWave Capital (Part 3)

Sramana Mitra: We have very aggressively developed a whole track within our program. We have a big education effort. We are scaling that with some very interesting partnerships including with Udemy. The theme that we have developed around this topic is Bootstrapping to Exit.

By bootstrapping, I don’t only mean companies that are working without outside capital. They are also companies that are working in a capital-efficient way. It’s the same philosophy that you do things very capital-efficiently and get to certain milestones without making the exit price too high. You’ve answered one of the questions that I had in my original talking points around chasing unicorns. 

1Mby1M Virtual Accelerator Investor Forum: With Warren Weiss, Managing Partner at WestWave Capital (Part 2)

Sramana Mitra: You started off by saying that you’ve already had seven exits within three years. Talk to me a little bit more about the exit. What are the circumstances of these? That’s unusual for a small micro-VC to have seven exits within a three-year period.

Warren Weiss: One of the areas that we’re in is security. Larger enterprise security companies are hungry for growth. They’re looking for acquisitions that could be tuck-ins. That represents 30% IRR. We really focus on funding great engineering teams – people who know how to build world-class products.

1Mby1M Virtual Accelerator Investor Forum: With Warren Weiss, Managing Partner at WestWave Capital (Part 1)

Warren Weiss is Managing Partner at WestWave Capital. We had a terrific discussion on small exits as seen by a seasoned investor.

Sramana Mitra: Warren is very well-known in the industry as “Bunny Weiss”. That’s his nickname. I’ve known him for a very long time. He was a General Partner at Foundation Capital for many years. Our families go back a long time. My husband and Bunny worked together under Steve Jobs. More recently, Bunny has started his own fund. He has also recently invested in one of the 1Mby1M companies.