Q: Why Did Quora Join Y Combinator? A: It Was Almost Free

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Why We Can’t Forget About Dre

Quora has plenty to learn from Y Combinator but it’s not giving up the traditional 7% equity share to join the accelerator. Quora CEO Adam D’Angelo tells me “YC invested an amount that was similar to their standard $120k. They invested as part of the Tiger round.” That $80 million round valued Quora at $900 million, so the startup only traded away approximately 0.013%.

Because YC is only contributing $120,000 at the $900 million valuation, its upside is limited, and the cash is a drop in the bucket for Quora. D’Angelo explains “It’s a pretty minor thing. We let YC put in a little bit of money. We’re not trying to pretend to be a small company. We just wanted to be part of the network.”

This matches the official answer from D’Angelo on why Quora is joining YC that he posted…on Quora:

“There are a bunch of reasons why it’s valuable for Quora to be a YC company:

  • We’ll have Sam and all the other partners to help us.
  • We get to be part of the YC community / alumni network of founders.
  • We get access to all the resources of YC.

We were raising money anyway, so there was no overhead in letting YC participate. And independent of the benefits to Quora, I think it will be fun personally to participate in some of the YC events. I hope my perspective can help some of the other companies.”

That alumni network could prove fruitful to Quora, as it might provide a leg up when courting failed YC startups to become talent acquisitions.

Quora won’t have some special team doing the whole intensive program, D’Angelo tells me. YC is designed for founders, and after Quora’s other co-founder Charlie Cheever stepped back from the company in 2012, Adam’s the only one left. “It’ll be me” the CEO says. “I’m not necessarily going to do all the things” because they don’t apply since Quora is a late-stage company, not a new one. Y Combinator President Sam Altman gave me a few more details, saying “Adam will come to dinners, events, etc.”

What Could Quora Learn From YC?

Wikipedia is a household name. Quora is not. Y Combinator’s growth scientists could help it bridge the gap.

Quora has been cagey about its stats since forever, only talking in relative growth and vanity metrics rather than absolute user counts. For example, Quora says it grew 3X in all metrics from May 2012 to May 2013, and hit 500,000 topics in April 2014. This makes it tough to know exactly how popular it is, but the general consensus hovers around “known amongst Silicon Valley intellectuals” and “just not big enough”.

Quora exec Marc Bodnick did tell me last month that public measurement services “significantly underestimate” Quora, and “are off by a factor of 5X to 15X.” An average of (sometimes inaccurate) comScore and Compete numbers for February multiplied out would put Quora somewhere between Quora’s web traffic could be somewhere between 5.5 million and 16.5 million monthly users, plus the 40 percent of its users it’s said are on mobile.

That doesn’t seem too shabby, except Quora mission “To grow and share the world’s knowledge” targets everyone, yet it’s far from ubiquitous. Plus, Quora was founded by well-regarded Facebook execs and has $141 million in funding including an $80 million Series C raised last month .

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As we’ve seen with Twitter’s battered share price, investors are demanding total user growth. Monetization potential aside, it’s having enough people to push that business to that matters right now. It’s quite possible that Quora touts its other stats because it has highly engaged users reading, writing, and answering but just not enough of them to look impressive in a world where Facebook has 1.28 billion users.

Meanwhile, Quora needs to find some way to make money, as  D’Angelo told me last month that me “We specifically want to stay independent for the long-term.” Without acquisition potential to rescue it, Quora must climb monetization mountain.

20140511-142040.jpgRight now, though, Quora makes basically no money. It shows no ads. Yet since people come to the site to learn something specific, Quora could monetize through demand fulfillment keyword search ads that leverage purchase intent. That’s one reason why D’Angelo tells me “it’s very likely that we will have an ad-based revenue model. We’ll experiment but I think that’s the most likely outcome.”

So Quora needs to grow and get monetization rolling. Fortunately, those are things Y Combinator teaches best. D’Angelo tells me “If they ‘re helpful with those things for other companies, I wouldn’t be surprised if they were helpful for us.”

If you’ve ever been to a YC Demo Day (I’ve seen around five), you’ll remember two staples of many presentations. “We’re growing X% week over week…and we’re profitable!”

YC specializes in helping young startups craft a compelling service with product-market fit that can grow rapidly and get somebody to pay for it.

By the end of the session, we might see Quora playing with different product and growth tricks, and strategizing for its first ad tests. However, D’Angelo notes “We’re not going to be monetizing over the time period of this YC batch. Down the line when we do monetize, we’ll get advice from all our investor including YC.” 

While Quora’s subject question-and-answer service provides a ton of value if you dig into it, it’s not as intuitive and familiar as object knowledge bases like Wikipedia that piggyback off the classic Encyclopedia style. Quora has come a long way with the addition of full-text search, but it hasn’t found the secret sauce to convince the average person its app is essential resource to frequently check. The guidance from YC’s expert partners, and the rigors of the program could help whip Quora into shape.

How Does This Change YC?

Even though YC is getting a much smaller cut of Quora, the deal makes plenty of sense. The YC President’s post about Quora joining in is quite vague, but a source tells us “Altman wants a piece of every billion dollar co, every unicorn.” Quora only needs to grow a little more to join the billion dollar valuation club.

While typically YC has to bet on baby startups with a high likelihood of failure, Quora has already had a degree of success. Plus, many believe the subjective knowledge space is sure to be important in the long-run, and Quora is far and away the front-runner. A quick tour of the nonsense and trolling on Yahoo Answers confirms that.

Though this is the latest stage company to start the YC program, the accelerator does have experience advising these businesses. Just look at Stripe, Dropbox, and Airbnb. They were fledgling startups upon entering YC, but still have access to its mentor. Altman tells me “Later stage cos need different things.  But we help later stage cos all the time–we have lots of late stage companies in the portfolio that we funded many years ago, and we help out companies out as long as they want help.”

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Altman calls the arrangement with Quora an experiment, and a source tells me it won’t be YC’s only one. The incubator is also said to be admitting some very slow-burn startups working on hard technical problems over the long-term. That’s different than the fast-to-market startups YC is more accustomed to.

When I asked Altman about this tip, he confirmed it, saying “Yes, that’s true. My hope is that the YC model will work well for these companies. The mistake that a lot of hard tech companies make is biting off too big of a chunk for a first project. So we’ll help them find good intermediate goals and make progress towards those.  Startups run on momentum, and so it’s good to have early wins.”

With the international expansion of its Startup School event and this next batch being one of its biggest, YC is attempting to scale up without diluting its value-add. Now as it reaches to encompass a wider range of late-stage and hard-tech startups in its 10-week regimen, it will also have the challenge of scaling sideways.