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Lollipuff's Y Combinator Experience

By Bebefuzz

Fashion companies are notoriously secretive, including fashion startups. We've decided that we want Lollipuff to be different -- we want to bring you (our users) along for the ride. We've already shared the story of Lollipuff's creation. Now we'd like to share the next chapter in Lollipuff's story: how we applied to Y Combinator (the world's premier startup accelerator), got accepted, and our experiences during and immediately after.

Why are we writing this?

All of the Lollipuff co-founders came from technology backgrounds where cooperation and openness are the norm. We were kind of shocked and perplexed when we found out that fashion companies (including startups) are notoriously secretive -- and yet fashion communities are so open and supportive. So we decided early on that Lollipuff would try to be a more open company, at least to the extent possible in such a competitive landscape. What does that mean? Basically... we want to bring our users along for the ride and (hopefully) motivate you to follow your dream jobs too.

We've been pretty open about how Lollipuff first got started: Fei's love of Herve Leger, her Herve blog, readers' frustration with fakes on eBay, the blog becoming a pseudo-auction site, and finally, the creation of Lollipuff to fight the battle against all counterfeit designer goods.

You won't find any creation myths or men claiming visceral experiences in their wife's closets at Lollipuff. ;-) Simply put, people were getting scammed and wanted our help... so we quit our "normal" jobs to oblige. Fei, our CEO and lead blogger, continues to share our journey on Lollipuff's blog.

Well, we are ready to share the next chapter in the Lollipuff story: our Y Combinator experience.

 

Applying to Y Combinator

Unless you're an entrepreneur or hacker-type, you've probably never heard of Y Combinator...

Y Combinator (aka, YC) is the world's preeminent startup accelerator. Led by Paul Graham, YC is well known in entrepreneurship circles for its startup community (Hacker News) and household-name alumni such as Reddit, DropBox, AirBnB, Heroku, and Disqus. Twice a year entrepreneurs vie for a spot in the current Y Combinator batch (of ~50 companies) and to join the ranks of the 564 other YC-backed companies. And with good reason: the average valuation of a YC company is $22.4 Million.**

** Though that average number is skewed by a few select multi-$Billion startups like DropBox and AirBnb.

There were a whole bunch of good reasons for Lollipuff (or any early-stage startup) to consider YC:

  • Quality Advisors: Y Combinator is led by Silicon Valley veterans -- high-tech folks who helped actually build major internet sites, like the precursor to Yahoo Stores and Gmail. Their advice is invaluable, and they also help with all those other pesky business functions like legal advice and accounting.

  • Motivation: Ostensibly, Y Combinator is only a 3-month program (though you can continue to meet with the advisors indefinitely). It's the perfect opportunity to stay heads-down and focus on building your product. During the 3 months, they have weekly dinners (with a prestigious guest speaker) where you get to catch up with all the other startups in your batch and show off what you've accomplished during the week.

  • Credibility: Y Combinator carries weight, particularly in Silicon Valley. For a company based on trust (like Lollipuff), backing from YC is a nice vote of confidence.

  • Network: There are over 500 YC startups to date. This is an incredibly close-knit network of founders (including some big-name companies). It's really nice to have such a quality support network.

  • Growth: Y Combinator invests a small, token amount in your company. More importantly, the 3-month program culminates in "Demo Day" -- a chance to present your company to hundreds of investors so that you can raise money and grow the company quicker. YC is really beneficial during the fundraising process: getting introductions, meetings, and favorable valuations.

  • Familiarity: Lollipuff's founders had followed Y Combinator (and HackerNews) for quite some time. YC was a known quantity to us... a reputable organization rather than some nebulous incubator (there are a lot of bad ones out there!).

So we decided to apply to Y Combinator's Winter 2013 batch. I mean... it couldn't hurt. If nothing else, we knew it would force us to start thinking about the "right things" for the company.

 

Our Y Combinator Application

We're not going to say too much about the application process itself -- for that, you should check out this recent VentureBeat article by Lollipuff's very own, Travis Deyle: How to Write a winning Y Combinator application.

However, it is worth noting that Y Combinator is incredibly competitive. Its admission rate is lower than the most tip-top universities, like Harvard and MIT. To help other women pursue their startup dreams, we've decided to publish our Y Combinator application.

The application consists of a written Q&A (approximately 20 questions) and a 1-2 minute video. We've shared both below with very minimal redactions for privacy and for the occasional piece of confidential information.

Lollipuff's YC Application: Video

The cameo appearance by our cat (bebefuzz) really adds to the video quality, yes? ;)

 

Lollipuff's YC Application: Q&A

Please read this before adding anything to this doc: http://ycombinator.com/howtoapply.html

=================================================================
Y Combinator Funding Application (Winter 2013)
Application deadline: 8 pm PST on October 30, 2012.

Please try to answer each question in less than 120 words.

We look at online demos only for the most promising applications, so don't skimp on the application because you're relying on a good demo.

Though we don't make any formal promise about secrecy, we will try to avoid disclosing your plans to potential competitors.

If you're about to answer a question by saying you can't tell us because the answer is classified or controversial, please tell us instead about an instance that isn't.

We recommend you save regularly by clicking on the update button at the bottom of this page. Otherwise you may lose work if we restart the server.
=================================================================
Your YC username:

beambot

Company name:

Lollipuff

Company url, if any:

Lollipuff.com

Phone number(s):

(redacted)

Please enter the url of a 1 minute unlisted (not private) YouTube video introducing the founders.

http://youtu.be/yO8ctjbiIzM

YC usernames of all founders, including you, beambot, separated by spaces. (That's usernames, not given names: "bksmith," not "Bob Smith." If there are 3 founders, there should be 3 tokens in this answer.)

beambot, bebefuzz, dmohs

YC usernames of all founders, including you, beambot, who will live in the Bay Area January through March if we fund you. (Again, that's usernames, not given names.)

beambot, bebefuzz, dmohs

What is your company going to make?

Lollipuff is an online auction site dedicated exclusively to *authentic* designer clothing and accessories.

Our site uses unique safety precautions and processes that result in buyer and seller confidence. For instance, we developed a unique technique (patent in the works) to verify item’s authenticity and the seller’s physical possession of it. This technique is used in conjunction with humans.

If this application is a response to a YC RFS, which one?

No.

For each founder, please list: YC username; name; age; year of graduation, school, degree and subject for each degree; email address; personal url, github url, facebook id, twitter id; employer and title (if any) at last job before this startup. Put unfinished degrees in parens. List the main contact first. Separate founders with blank lines. Put an asterisk before the name of anyone not able to move to the Bay Area.

beambot; Travis Deyle; 29; 2011, Ph.D., Georgia Tech, Robotics -- 2008, M.S., Georgia Tech, Electrical Eng -- 2005, B.S. x 2, University of Nebraska, 4 majors: Electrical Eng., Comp Eng, Comp Sci, Math; (redacted); travisdeyle.com and hizook.com; beambot; Travis.Deyle; Hizook; Duke University -- NSF / CRA “Computing Innovation” (CI) Postdoc Fellow.

bebefuzz; Fei Deyle; 28; 2006, Iowa State University, B.S. in Electrical Engineering; (redacted); (redacted) and HerveLegerObsessed.com; nil; Fei Deyle; HerveObsessed; Efacec ACS -- Automation Sales Director for the Southeast United States

dmohs; David Mohs; 32; 2004, M.S., University of Idaho, Computer Science; (redacted); nil, nil, nil, nil; Google, Inc. -- Software Engineer

Please tell us in one or two sentences about the most impressive thing other than this startup that each founder has built or achieved.

Travis (beambot): During my PhD I designed, constructed, and/or programmed three human-scale mobile robots (EL-E, Cody, and the PR-2) and was an early contributor to the open-source Robot Operating System (ROS). I pulled off an autonomous, sensor-driven robot demo on live TV (CNN) -- a rare (and gutsy!) move in the robotics world.

Fei (bebefuzz): According to power industry veterans, I was the youngest ever regional sales director in the power automation industry -- doubly impressive as a woman (rare!) in a male-dominated industry.

David (dmohs): I am passionate about writing software that makes its users' lives better. At Sandia National Laboratories, I took over an ailing project to help counterintelligence personnel protect classified information. Working closely with these users, I built a new version of the existing application from scratch which was much more responsive and easier to use than anything they had seen previously. At the end of the project, the users were happier, more productive, and had become advocates for good software design.

Please tell us about the time you, beambot, most successfully hacked some (non-computer) system to your advantage.

Travis (beambot): I got 5 professors to sign off on my dissertation. Seriously, it was the most difficult part of a PhD. It took 6 months just to get them in a room together.

Fei (bebefuzz): In grade school, I made money by selling rosewater and chives door to door, and (redacted, sorry).

David (dmohs): In high school, I received a ticket for not stopping at a stop sign before the intersection. I took pictures from various distances and proved to the judge, mathematically, that it would have been impossible to stop earlier than I did. The ticket was thrown out.

Please tell us about an interesting project, preferably outside of class or work, that two or more of you created together. Include urls if possible.

Fei (bebefuzz) and Travis (beambot): In Jan 2010, Travis and Fei set up a blog (HerveLegerObsessed.com). Fei worked on the blog (part-time outside of work) for ~2 years. It morphed into a pseudo-auction site that resulted in over $60,000 worth of transactions (not including affiliate or ad revenue) -- which inspired this company!

How long have the founders known one another and how did you meet? Have any of the founders not met in person?

Travis (beambot) & Fei (bebefuzz): We met in AP Chemistry in high school. We’ve known each other for 12 years, been a couple for 11, and married for 3.

Travis (beambot) & Dave (dmohs): We’ve been close friends since we both worked at Sandia National Labs (Livermore, CA) in 2005. Travis introduced Dave to LISP; he caught the bug and left for ITA Software in Boston.

Why did you pick this idea to work on? Do you have domain expertise in this area? How do you know people need what you're making?

Fei is a respected authentication expert for several brands.** Her blog morphed into a pseudo-auction site for authentic Herve Leger clothes (a single brand!). It attracted a healthy community of bidders (buyers) and sellers, completed more than 200 successful transactions (>$60,000), and (redacted). However, the current site represents a single (small!) brand, there’s a 1.5-2.0 month wait list, and everything is done by hand (inputting items, email communications, and Excel tracking) -- yet sellers are clamoring to get on the list and keep asking us to add more brands!

** She has provided third-party testimony in eBay and PayPal disputes and is a well known authentication expert in the online forum communities.

What's new about what you're making? What substitutes do people resort to because it doesn't exist yet (or they don't know about it)?

Our auction site emphasizes authenticity and safer selling and buying of designer items. We have a unique technique (patent in the works) to help verify an item’s authenticity and the seller’s physical possession of it. This dramatically reduces scams for both buyers and sellers.

Current online auctions only rely on a feedback system. This is not adequate, especially when (for some brands) over half of all items sold are fake! (Most buyers are not expert authenticators.)

(redacted)

Who are your competitors, and who might become competitors? Who do you fear most?

eBay, Bonanza, HipSwap, ThreadFlip

We fear eBay the most. However, Ebay is built around a broad, general audience. Our authentication process isn’t necessary for the bulk of their listings (eg. sub-$100 items). Our site targets eBay’s underserved luxury good niche -- starting with women’s designer clothes.

What do you understand about your business that other companies in it just don't get?

Buying and selling luxury goods online is very unique -- security, trust, and risk mitigation are tantamount. The process requires more care than a “general online auction listing.” EBay suffers from numerous issues: counterfeit items, inaccurate descriptions, insufficient photo evidence, photos culled from the net, reused photos from old listings, etc. These frequently lead to PayPal disputes -- which negatively impact everyone involved. Our system solves all of these problems. Of the 200 transactions on the test blog, we had fewer than 1% result in disputes (one out of 200!). Our system easily resolved this dispute: it provided the photographic (and temporal) evidence of the item’s pre-sale condition, expert testimony about its authenticity, and a baseline for comparison with the buyer’s received item. Collectively, these things make our process safer and more comfortable for all parties.

How do or will you make money? How much could you make? (We realize you can't know precisely, but give your best estimate.)

We charge a 7% commission on each sale. To start, Lollipuff will represent just 3 brands. Extrapolating Ebay’s completed listings for these three brands, there is more $77 Million in annual transactions ($5 Million revenue based on our commission). Ebay is undeserving of this niche. Many users refuse to use Ebay or other online sites for high-end items (ie. relying on consignment stores instead). In fact, we have several Ebay “power sellers” asking to use our services!

We plan to introduce additional designers / brands as we grow. Additional revenue will be generated by affiliates (eg. for brands not currently represented.) (redacted)

If you've already started working on it, how long have you been working and how many lines of code (if applicable) have you written?

The proof of concept evolved from a blog (HerveLegerObsessed.com), which was started in January 2011. The new effort (automated, multiple designers, own brand) started in late-June 2012.

Our Django application has ~5 kloc python (application code), ~1 kloc javascript, and ~3 kloc HTML / CSS. We also rely heavily on several third-party open source libraries.

How far along are you? Do you have a beta yet? If not, when will you? Are you launched? If so, how many users do you have? Do you have revenue? If so, how much? If you're launched, what is your monthly growth rate (in users or revenue or both)?

The test blog is 1.5 years old. The blog has facilitated over 200 sales, with approximately 750 bidders/buyers/sellers. We have approximately 2000 people/email addresses who contacted us through the blog. If we launched, we estimate a conservative 500 accounts will be created almost immediately.

The new, automated website (Lollifpuff.com) will launch in late-October, 2012.

If you have an online demo, what's the url? (Please don't password protect it; just use an obscure url.)

No. The site is currently being migrated (from localhost development) to the cloud (Heroku + AWS).

[ NOTE: We added an update to our application on 11/02/2012 (after the hurricane Sandy deadline extension) with a link to a “live” development version of the site. We also created a sandbox account for the ycombinator partners to play around. We were keen to mention that the site was: (1) under active development and could be down for modifications at any time, (2) being used to get our PayPal deployment API permissions, and (3) might be sluggish due to Heroku spinning up a developer machine. However, we forgot to update this copy of our application. :-/ ]

How will you get users? If your idea is the type that faces a chicken-and-egg problem in the sense that it won't be attractive to users till it has a lot of users (e.g. a marketplace, a dating site, an ad network), how will you overcome that?

Based on user participation on the blog, we anticipate a few hundred users from the test site will immediately join Lollipuff -- they’re the ones who have been clamoring for a new, automated and expanded site (and currently endure a 2-month wait list).

Fei has an impressive personal collection of luxury women’s clothing in our first three brands (roughly $35,000 MSRP). She has agreed to sell a large portion of her personal collection to seed the new site. We also have budding relationships with “power sellers” on Ebay who have expressed an interest in using our site upon launch.

Existing relationships with fashion blogs, sites, and forums should also enhance our exposure.

If you're already incorporated, when were you? Who are the shareholders and what percent does each own? If you've had funding, how much, at what valuation(s)?

Currently a North Carolina LLC (redacted equity).

If you're not incorporated yet, please list the percent of the company you plan to give each founder, and anyone else you plan to give stock to. (This question is as much for you as us.)

Want to transition to C-Corp with (redacted equity).

If we fund you, which of the founders will commit to working exclusively (no school, no other jobs) on this project for the next year?

All of us!

For founders who can't, why not? What level of commitment are they willing to make?

N/A

Do any founders have other commitments between January and March 2013 inclusive?

All founders are willing to pursue Lollipuff exclusively for YC (and beyond!). Travis will leave his Duke University postdoc, and Dave will leave Google. Fei already quit her job in June 2012 to pursue Lollipuff full time.

Do any founders have commitments in the future (e.g. finishing college, going to grad school), and if so what?

No.

Where do you live now, and where would the company be based after YC?

We’re currently based in Durham, NC. Post-YC, we’re open (and inclined!) to relocate -- for example, to the Bay Area or Boston.

Are any of the founders covered by noncompetes or intellectual property agreements that overlap with your project? Will any be working as employees or consultants for anyone else?

Travis (beambot): I have been working at Lollipuff part-time (nights / weekends). My postdoc fellowship at Duke permits side work without IP restrictions. If we get accepted, I will resign from the fellowship and go full-time at Lollipuff. (No other employer / consulting.)

Fei (bebefuzz): I resigned from my job in late June to found Lollipuff, and I’ve been working on it exclusively since. (No other employer / consulting.)

Dave (dmohs): I currently work at Google (Boston offices). Pre-YC, I have not contributed to the project (code or otherwise). If we get accepted, I will leave Google to go full-time at Lollipuff. (No other employer / consulting.)

Was any of your code written by someone who is not one of your founders? If so, how can you safely use it? (Open source is ok of course.)

No. Aside from open-source libraries (GPL, BSD, or MIT), all of the code was written by Travis or Fei.

Are any of the following true? (a) You are the only founder. (b) You are a student who may return to school when the next term starts. (c) Half or more of your group can't move to the Bay Area. (d) One or more founders will keep their current jobs. (e) None of the founders are programmers.

No.

If you had any other ideas you considered applying with, please list them. One may be something we've been waiting for. Often when we fund people it's to do something they list here and not in the main application.

We didn’t have any other application ideas per se.

However... we do have ideas for auxiliary uses of our platform. Consignment shops (both online and off) often lack expertise in authenticating clients’ goods too. Using our authentication expertise, we could provide a service to such stores. The store could go through the authentication process in the same way as creating an auction listing. Instead of placing the item up for bid, we could generate a “certificate of authenticity” that could be displayed (and verified via a Lollipuff URL) to potential buyers. In this way, we become a trust service... much like the origins of “PayPal verified.”

Please tell us something surprising or amusing that one of you has discovered. (The answer need not be related to your project.)

-- Scammers and fakers hate us. We helped uncover a scam ring (selling counterfeit designer clothes) that was honeypotting Google servers [1]. If we’re pissing off the scammers and fakers, we must be doing something right!
[1] http://www.hervelegerobsessed.com/blog/2011/07/31/google-adword-loophole-anyone-can-redirect-ad

-- Historically, Chanel bags have a stable rate of appreciation: 20% annually. This outperforms many stocks!

-- Approximately 70% of Herve Leger dresses sold on Ebay are fake.

-- Women think about fashion more than men think about sex [2]. (Travis & Dave: Seriously?!? Fei: Yep. Travis: Bummer.)
[2] http://www.huffingtonpost.com/2012/06/08/fashion-study-online-2012_n_1580663.html


The application is just the first step in the admissions process. After a first round of cuts, Y Combinator invites teams in for on-site interviews. That's a pretty long and involved story, so perhaps we'll leave that for another day.

 

During Y Combinator

The three months in Y Combinator were a whirlwind. (January through March, 2013)

One of the stipulations is that you must be located in the San Francisco Bay Area for the duration of the 3-month program. When we got accepted, Travis and I (Fei) were living in North Carolina. We placed all our possessions into long-term storage, packed a single carload of essentials, loaded up our 2 cats, and made a 3-day drive across the country. Meanwhile, David was in Boston. He gave notice at Google and flew out to a meet us at a temporary apartment complex in San Jose -- the only place that would give a short-term lease with two cats on short notice.

And then the real grind began.

To give you an idea, this is what our site looked like when the beta version first launched in mid-December 2012:

Lollipuff's homepage when first launched

Arg, it's painful to look at the first version (our "minimum viable product"). Needless to say, the site came a long way in those 3 months -- in look-and-feel, UI, automation, and number of users.

I wish I could regale you with exciting stories about those three months... but the fact is, we spent every waking moment working on Lollipuff. Y Combinator recommends that you only do three things during the 3 months: program (work on product), talk to users, and exercise. We took this advice to the extreme. We didn't leave our apartment except to get food and attend YC events. Our only respite were the occasional nighttime all-hands "planning" meetings in the apartment complex's hottub over drinks.

 

Demo Day

Y Combinator culminates in "Demo Day" -- a day where all the YC companies from the current batch get approximately 2 minutes to present their company to a massive room full of Silicon Valley's elite investors, followed by lots and lots of schmoozing. Here was Lollipuff's presentation:

Demo Day created a great atmosphere for fundraising. Like many of our batchmates, we probably went into it with a little naivete. Days before Demo Day, Paul Graham released the new "handshake deal protocol". So naturally we went into Demo Day with our hands all warmed up for some shakin'. Heh, getting investors to part with their money is not quite that easy, though the Demo Day atmosphere certainly helped grease the wheels.

We were so busy that day that we didn't really capture the moment... but here's a picture of the team wearing their Lollipuff shirts in the backstage prep room (before Fei went on stage). We're standing next to a portrait of Ron Conway, a Silicon Valley "super angel" investor.

Lollipuff's homepage with Ron Conway

Demo Day was a success for Lollipuff. For one, we were named one of TechCrunch's Top-7 startups of Demo Day. We could finally let out a collective sigh of relief and unwind a bit (though really, YC was just the beginning!). However, before all going out to celebrate...

I brought a bunch of Lollipuff's designer items to the event. After all the investors departed, a bunch of the female YC founders and I had a mini fashion party in the restroom while our male cofounders waited, anxious to head off to the after party. One of the ladies demanded to purchase one of the Herve dresses on the spot, even though it was really meant for listing on Lollipuff (sorry ladies, but you know how coveted these things are!).

 

Was it worth it?

The entire process was like a bootcamp for startups, and we learned a ton about startups, business, ourselves, our market, and where we're headed now. I think we all agree: it was one hell of an experience -- one we'd gladly do over again if given the opportunity.

Where are we now? We can't really elaborate on too many details... but let's just say: we're still hitting our growth targets and we've got some great expansion plans in the near future. Stay tuned! ;)

We're releasing this information in the hope that it will help inspire your startup dreams. If any of you lovely ladies are ever thinking about taking the plunge, let us know. We'll try to help in whatever way we can.

Tagged:  Other | Personal

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