Discover more from YC Founder Stories
When to take VC, the newest types of businesses, and 0 to 1 accelerators: Neil Thanedar (Labdoor, YCW15)
Welcome to the second episode/edition of YC Founder Stories. I started this experiment curious to learn from the best founders who went to YC and take this opportunity to narrate their stories.
The Format: The interview is divided into two parts: 1) Q&A 2) BONUS CONTENT. I’m still experimenting, so bear with me as I iterate. Let’s get started.
Today’s guest is Neil Thanedar from Labdoor (YC W15), a marketplace where consumers research, find, and buy the best supplements.
Neil’s previous companies include Avomeen (acq. 2016) and Air to All (501(c)3 nonprofit). He is currently the founder and solo GP at Utopic Ventures (pre-seed VC fund backing biotech startups led by scientist CEOs).
Labdoor is a marketplace where consumers research, find, and buy the best supplements. To verify the purity and potency of these products, Labdoor first buys and tests actual dietary supplement samples: • We send each product to an FDA-registered laboratory for a detailed chemical analysis. • Our scientists then collect the laboratory results and use internal algorithms to translate this data into simple grades and rankings for consumers. • Find a product you love? Click "buy it now" to activate in-app purchases.
Read on to learn more about Neil Thanedar’s YC application and journey!
What is your startup idea?
Labdoor is an independent alternative to the FDA. The story behind it is that I ran a testing lab for a few years in Ann Arbor, Michigan called Avomeen. We tested pharmaceuticals, supplements, and cosmetics for the companies that manufactured them, making sure they were working as they should.
What always bothered me is that there was no independent lab that did this testing for the public. There's no people's lab that goes and tests vitamins and supplements every day and actually figures out which ones are good and which ones are bad.
So when I was in a startup competition for Avomeen, I got to talk to Mark Cuban for about 30 minutes and one of the things that he asked was if there was a way to do this testing at scale for consumers and is there value there? So he put that idea in my head.
A few months later, I had the idea for Labdoor, found a few co-founders that I'd met during this process. and we started building the company. And so in 2012, Labdoor.com was formed.
We had the first hundred products in about nine months, where we did purity and accuracy testing. Over time, it built up into grades and rankings and reviews of all these products. Now there's a whole marketplace where you can buy the products from many different sites and now Labdoor certifications on products.
So not just in the US, but in India and Brazil and all over the world, you'll actually find protein powders that have a Labdoor seal of approval on them. That’s Labdoor’s end goal: we want to make sure that anywhere you’re buying these products, you can use Labdoor as a trusted sign of whether or not a product is safe and effective.
When did you get into YC?
We were in YC for the Winter 2015 class, which took place from January to March of 2015. We’d gotten in a couple months earlier in November 2014.
What are the key elements to focus on when applying to YC?
I think YC has so many applicants, especially even now. I'm hearing it's 20,000 plus applicants per batch for 250 spots.
So it's always important to be very concise with your writing, with your speaking, but it's even more so important in YC because that application might only be read for one or two or three minutes where someone is skimming it very quickly. You want to get to your point as quickly as possible. Same thing in a YC interview, since it's only 10 minutes and it's often very rapid fire questions.
What I recommend to people is that one word answers are great, five second answers are okay, but, you don't want to be rambling for more than 30 seconds.
Share your YC interview experience in 1-2 sentences.
YC is an incredible boost in terms of competitiveness and pushing you to get to a higher level. It’s close to our version of being drafted in the NBA or a professional sports league.
Today, there are 500 companies every year. Back in my time, it was 200 companies a year. It's a very small batch of people. And this netowork becomes almost like an alumni network and a lifetime society that you're part of.
The really exciting part is that it's been eight years since my time at YC and all of us are still very active at YC reunions and alumni events. We’re always talking to each other and to companies in each batch and guiding them through all their fundraising and scaling processes. It's just an amazing process and an amazing system.
Did you pivot your idea during or after YC?
The core mission of the idea of Labdoor has always stayed very firm. We want to make it easier for people to make smart, healthy decisions. The way we do that is through testing the products available in the market. We're the only people who routinely test these products and give all this data out for free.
That mission and vision stayed very, very strict. The business model changed a lot over time. We tested content subscriptions and B2B models since this data would be useful for nutritionists, doctors, and even finance professionals.
Over time and by talking to YC and the market, we started getting deeper into this idea that the content should be free and that we should monetize in other ways through a marketplace and through certifications.
It was actually Tim Ferriss very early on who tweeted a couple of times about Labdoor and it really spiked our growth. But then when people asked whether he really liked Labdoor or not, he said that the paywall was hard to navigate.
So right around YC, we did the pivot into adding the marketplace. Going into Demo Day, the marketplace was really growing quickly and that was what helped us raise our seed and Series A a year later.
How did YC help you go from 0 to 1 to N?
YC is really good at that messy middle between 1 to N. You have to have some version of product market fit, even if there's levels to product market fit. YC really specializes in getting you to the first 100,000 users or first $1M in revenue.
Essentially, you've already gone from 0 to 1. And now you use YC to go from 1 to N because YC is excellent at fundraising. It's excellent at kind of building your network and helping you publicize your company and yourself so that you are more likely to get meetings.
If you cold outreach someone, you’re much more likely to be answered if you're a YC founder. That value really compounds over time.
YC does accept people who are 0 to 1, but I still think that there is room for an accelerator or VC fund to go and focus entirely on the 0 to 1 space and do more of that work. YC has gone later stage now, which means the 0 to 1 accelerator space is open again.
Share a “do things that don’t scale” story in your startup journey.
Once we started publishing, we did category by category. Our first big category was protein and we wanted to publicize on social media. Reddit was a big one where people were already debating on the best protein powders. It was exciting because we actually had a definitive answer. Everyone else is about user reviews or personal anecdotes, but our ratings were scientifically tested and rated.
However, if we or someone else tried to post a link to Labdoor, the first few comments thought it was a scam or that companies must have paid us off. And what we did that didn't scale was just sit there and answer every single Reddit. We told them who we were, our testing methods, the company’s mission, and we asked them to ask us more questions.
People would question specific parts of the algorithm or specific parts of our business model and we just kept answering them until they had no more questions, just like a press conference. We did the same thing with customer service emails. I personally answered every single customer service email for the first few years, so I could gather data on what people were thinking and to build up into a better understanding of our market.
How did you get your first 1000 users?
We were a 2.5 year old company by the time we got into YC and 1M+ people had used Labdoor by then.
The first 1000 users came in through Reddit and through blogs. I would blog early on every week and write about the different problems with the industry. I kept pushing the places on social media where people were already debating or talking about this issue.
The really first big spike that we got was through the New York Times, which was tens of thousands of users. We had been emailing reporters with our data and our numbers, which led to interviews and features.
So our first spike was Reddit, then the New York Times, then Tim Ferriss tweeting about us.
Share 3 tips for founders who are trying to get into YC.
1. Apply as frequently as possible: People get really caught up on having a perfect idea, a perfect co-founder, or any other perfect thing. But YC is getting much more flexible on the co-founder situation and they’ve always been flexible on the idea.
2. Be very concise and precise with the application and the interview: If you're optimizing for word count, optimize for the minimum word count, not the maximum. This is the difference between college essays and YC essays. They're the exact opposite in that way. Just be very precise with your answers.
3. Think through the most ambitious thing you could be doing: YC will force you to think beyond your $10M idea and convert it into a $1B idea, so you can do some of that pre-work by trying to figure out ahead of time what's the most ambitious thing that you could be doing.
BONUS CONTENT: Deep insights, more tactical advice, and an open discussion.
In the last 8 years since you left YC, what are your observations on how YC picks founders?
I think they're going more late stage now with a lot of their founders. Since it’s so competitive and the amount of 500K is so high, the founders are more later stage than early-stage founders. YC is now almost more of a finishing school or a 1 to N accelerator than an incubator.
The 0 to 1 accelerator is different than a 1 to N accelerator. YC is really honed into a zone where they're excellent at 1 to N. The data still says that half the companies that they take have only an idea or are going 0 to 1. So I think they still believe in the concept of 0 to 1 being a part of the accelerator, but I would love to see an accelerator focused entirely on the 0 to 1 phase.
How are you building a 0 to 1 incubator at Utopic?
Yeah, so I wrote about this in a blog post titled Founder Accelerator. What you need to go from 0 to 1 isn’t just fast first checks, but also the community of people who are like all going 0 to 1 at the same time. You need great partners who love helping founders at that stage.
So I'm trying to figure out what the different categories are where that could be very helpful. I think right now it's particularly underrated in science and biotech. As Paul Graham said, hackers can be great CEOs. I think there's an entirely similar train where you can help scientists be CEOs and prove that scientists can be great CEOs.
First check for scientists-CEOs is something that I've been thinking about for many years and written about for many years. By solving the problem of how do we get more scientists to be CEOs, start more companies and solve more of these problems, we start a cycle where scientists continue to solve more problems.
You mentioned that YC dinners are very special. What makes them so unique?
So the whole idea is that every Tuesday there is a dinner that every founder is supposed in the batch is supposed to attend. Before the dinner, you would meet your small group of founders for office hours. So you made a whole day out of it.
The best part was the off the record conversations. It's based on the original idea that Paul Graham had when there were eight founders in 2005 in the first batch.
It creates a family aspect. It’s really about how we’re all in this together. Every week there's a speaker, either one of the old founders or another famous founder, telling us their real stories about building their companies.
These stories about old co-founders or lawsuits or something else almost only come out in those YC dinners. You need that because I think otherwise founders feel like they’re the only person that's dealing with this challenge, when really startup challenges are very universal and it's just a matter of perseverance. Hearing other people having solved it and having survived gives you some strength.
What was the hardest experience you had while building Labdoor?
The first time I really felt the struggle was because we'd raised our first $100K from Rock Health. We moved to Chinatown in San Francisco and all four of us co-founders found the cheapest place we could find in San Francisco.
It was really bad. The environment was super hostile and the bathrooms were in the hall, but it was walking distance to the office and we were all working nonstop. All of us were barely sleeping and just going back to it the next day.
After six months in San Francisco of doing that,we ran out of cash and had to raise our next round and we'd gone through Demo Day. We had theoretically hundreds of thousands of dollars in commitments from our investors coming forward, but we had zero money in the bank.
I remember that every two weeks, we would get checks and we would create checks, and I wouldn't cash mine. For months to make the runway go a little bit longer, I would just keep my check because I would cash it later theoretically. I just had a stack of rising checks because I thought to myself that as soon as we got this next round closed, I would pay myself.
That was definitely a really rough period. There were others, but that was the first one.
Who was your support system during this time?
So my dad and I have a very close relationship. We’d started a business together, I helped him through all of his politics when he made the shift to politics. I think that I get a lot of my perseverance and drive from my dad, for sure. He has this equanimity, where things can be very good or very bad and he's just very, very stoic about it.
I'm a very easily excitable person and so I like that and I feed off of that energy but I think I've tried to balance that with the stoicism of my dad. In any 10 year period, there will be very great things that you won't expect or very bad things that you won't expect. You just don't get too high or low with the ups and downs. You just keep going.
I know you have some exciting news at Labdoor. Mind sharing it with us?
Yes, so I can't share all the details yet, but we're in the very late stages of an acquisition.
We've been working on this company for over 11 years. It's been just a really exciting last few years, actually. So we had this long process where we raised $7 million in seed in Series A over the first five to six years of our business. And then we really hit a wall in going from Series A to Series B.
We basically had a choice: get profitable or die and we got profitable. The last few years have been increasingly exciting as the business starts getting more cash flow and has started to be more independent.
We were able to do one community round a couple of years ago, but other than that, we have been completely self-funded. We've gotten a few offers from people who wanted to buy Labdoor. Right now, we had an opportunity where we can sell the majority of the company, keep some equity for ourselves on the up, and really zoom out and think about what's next.
Do you think founders need to go through venture capital or is indie hacking or bootstrapping a better way to go?
I think there are two types of companies. Multi-billion dollar companies probably should still take VC. It's extremely rare to become a billion-dollar company with zero VC raised. A few people have done it, but there's no extra prize for becoming a billion dollars with no VC funding. You don't get an extra gold star. If you need the money, take the money. And so I definitely think that multi-billion dollar companies should take VC.
Then there's these <$10M companies that should bootstrap all the way. But I think the challenge comes for the middle class of startups and I think for them, there needs to be a new funding structure because these companies might get to double digit, triple digit million dollars in exits.
Maybe they're not a $1B company, but they're very successful and these can be excellent outcomes for the founders. My dad ran a business like this. We built one together after he lost his first one. You can get to tens of millions of dollars of revenue almost bootstrapped.
Maybe you need one funding round. Maybe you need a million dollar of seed capital and that's all you need to get to a $50 million exit or a $10 million exit. That's life changing for you as a founder.
And so I think more people should do that. Even a $100M exit could be ruined by raising $300M to get there, but a $100M exit where you raise $5M or $20M to get there could be a great exit for everyone.
It's possible that the best exit for you personally is like a $10M exit or a $2M, where you have 90%-100% of the business. Having met a lot of people in YC and a lot of founders who have exited at a lot of different values and people who have exited for $1M to $10M, often the people who are the happiest are people who exit for $1M to $3M dollars and are set for life.
The people who exit for $10M often are very stressed about starting a new business. People who exit for $100M or $1B are even more stressed about next steps. Your problems do not get easier and people do not get more fulfilled with the money.
A million dollars is a lot of freedom. And so I think if you're optimizing for quality of life, I think the middle class business might be the best thing for you and we're leaving a lot of great businesses on the table by people not taking those middle class shots.
For founders who are just getting started, does VC or bootstrapping help you scale better?
I think that there's very specific businesses that need VC funding. Labdoor has a specific business model with the way the platform works; first, we have to test the protein powders for months in advance. We're doing all this testing, we're doing all this analysis, we're creating a new category, writing reports on it. And then it gets released three months after we start doing the work and $100,000 spent on testing. Then we start collecting revenue on it.
The great thing is that every single day that website runs and people can search best protein powder. And every day when they click on those links, we're making money off of it. But then that's over many years. So three months of work will then pay off over multiple years. That's a classic business that VC is good for, becausewe need to spend money now so that over years, we'll have consistent revenue streams and there's no future costs associated with that revenue stream. VC is perfect for that.
But for almost anything else, if you don't have that kind of cashflow issue, then you probably don't need VC. If your cashflow is based on customers, where every time I sell a $5,000 or $10,000 customer, then I can hire one more person, that's a completely different type of business, and that probably doesn't need VC.
How did you make sure Labdoor was scalable as a company and how did you pitch it to investors?
I always told a really big story about Labdoor's mission. Even as a word, the company name comes from the idea of that the Labrador is the watchdog. So we're the watchdog for the world.
Also, Labdoor is open science. We're going to do what the FDA is not doing and we’re going to tell you how we do it. Right. So this big mission needs millions of dollars to get off the ground. I built a plan on what we would have done if we had a $25 million series B, what would we have done if we had a $100M+ in funding, etc.
We left a lot of strategies on the table because we weren't able to pay for it. But it was, I think, an experiment in doing as many things that don't scale and then hustling to raise money and then to spend it very quickly, trying to do as much work as we could.
We essentially centered ourselves around the process of telling the big story as much as possible.
What are the signals that a founder should pivot?
I think things are either easy or hard. I do get that a big part of startups is that everything is hard at the beginning and you have to do things that don't scale and you have to bootstrap it. But there is some magic in startups where things start feeling easy. Customers start coming in easily, organically, they find you themselves. That's the signal that things are working. Things are just consistently getting easier. If something is consistently getting harder, that's a bad sign.
Everything about startups is leverage. The whole point of building a platform or building a startup is that the hundredth customer is easier to get than the first customer. If the hundredth customer is harder to get than the first customer, then you're in either a bad business or a service business or you've hit the saturation of the market. The market's not big enough.
There's a bunch of reasons why it's wrong, but I think that simple feel that of seeing whether your product is getting easier or harder to sell over time is a really key signal on whether you're pivoting or staying.
Any last few thoughts that you wanna share before we wrap up?
I just would love to invite people to read my book, The World's Biggest Problems. I'm writing the whole book in public right now and I've got the entire table of contents done.
I'm editing the book in real time. I'm adding new chapters every month and about 30 of the 120 chapters are done. So I’m about a fourth of the way through the book. It's all free. So just check it out.
Thank you for sharing, Neil! Where can people find you?
Next week: Learn how Gonzalo Espinoza Graham from Double(YC W23) is going through the current YC process!
That’s it for today. I have some awesome founders lined up for the next episodes, and I can’t wait to bring them to your inbox.
Meanwhile, if you like this interview, please share it with your founder friends - nevertheless, grateful for your time 🙏🏼
Let me know your thoughts and suggestions in the comments below 👇🏼