In a couple week's time, the teams YC has invited will be flying out to Palo Alto for a quick, shotgun style interview that they'll base their funding decisions on.
If you've been lucky enough to get invited, here's a bit of advice on what to expect and how to get through it successfully.
What to expect
You only have 10 minutes, which is a surprisingly short amount of time to discuss your business. You won't have any powerpoints or presentations, but you should have a demo. You'll start off, talk for about 15 seconds, and instantly get bombarded by questions for the next 9 minutes and 45 seconds. It's easy to get off-track, so you'll need to answer the questions quickly while trying to steer the discussion on-topic. Don't be surprised if multiple simultaneous conversations end up breaking out (at one point during our interview, I think I was having 2 simultaneous conversations -- one with PG and one with Trevor, while Chris and Dan were having a separate discussion with Jessica).
What you want to accomplish
You have ten minutes to convince the group that:
(a) Your idea is pretty good (it doesn't have to be take-over-the-world good, but it can't be bad -- that reflects negatively on your judgement).
(b) You're smart, and are otherwise equipped to accomplish your goal.
(c) You can get shit done.
Preparing for the interview
Experiences vary, but our demo was a crucial part of our interview. It's very helpful keeping the discussion on topic, lets the team visualize your product, and, most importantly, proves that you can actually build what you say you can.
Having an idea is pretty easy, but actually being able to put it together with the right parts -- easy to use, decent design, smart UI choices, functioning feature set -- in a short amount of time is what will be the difference between your product launching or not. Not all launched products are successful, but all unlaunched products fail, so proving that you can get your product finished and out the door is important.
Code frantically to get some kind of working demo done before the interview. Two weeks should be more than enough to get something basic done. If you can't, or your demo is going to look like hell, I wouldn't bother showing it.
If you couldn't already tell, memorizing some kind of presentation isn't going to work too well. Sticking stubbornly to your guns is also not advisable. As others have mentioned, you want to strike a balance between being open to suggestion, and defending your opinions -- just be sure to defend the right ones.
Having said that, be sure you know your market in and out. You better know who your competitors are ("We don't have any" is not an acceptable answer), the history of the market (What previous companies were similar? Were they successful? If so, how did the exit? If not, how are you going to do better?), how you are realistically going to make money (for a 3 person company, at least $30,000/month), and a very good technical understanding of how you are going to get all this done. The YC application is a great place to start to look for questions to prepare for the interview.
Before the interview
Relax. Put on some music to get yourself pumped up on the drive over. Try not to be nervous (even though everybody is, to some extent). Investors make a lot of decisions based on their excitement, so get excited about your idea! It'll rub off on them. Get there a few minutes early to hang out with some of the YC Alumni. You can also practice your pitch, and get some quick last minute feedback.
After the interview
You'll get a call that Sunday with the news. Don't freak out if it's late (ours was almost 2 hours later than they said it would be, and I was nursing some serious stomach ulcers at that point).
If things are still the way they were, you'll only have one variable: what your valuation is going to be. Decide ahead of time what is the lowest valuation you'd accept (if there even is one you wouldn't), so that you are prepared to give an instant answer to PG when he calls.
After the call, take a few shots, call everybody you know and enjoy yourself! Then get ready to work your ass off and eat ramen for 3 months.
Note: If there are any Penn State groups interviewing this session, be sure to shoot me an email! I'd love to get together over a few drinks and hear about your idea.