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Can The Y Combinator Idea Turn Into A Movement?

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Re: Can The Y Combinator Idea Turn Into A Movement?

#11

Post by ChaitanyaSai »

Prrometheus wrote: post #8
ChaitanyaSai wrote: post #3

Will proliferating seed companies start looking like micro sub-prime mortgage traders? They operate on the similar assumptions: pooling small, high-risk investments hoping that these individual bets are unrelated, thus driving down the variance when bundled together. This is probably only true for the seed company that gets to cherry pick first, which seems to be YC as of now. Assuming an initial chance of success of…

>Will proliferating seed companies start looking like micro sub-prime mortgage traders? I question the analogy. Seed funding might become a fad investment, but it will surely be less volatile than the subprime mortgage sector. Subprime mortgage originators and buyers backed their assets (the mortgages) by a large amount of debt. So, if their assumptions were only a small bit off (say defaults were 5.0% instead of 4.0…

You are right. I don't mean to say they run the risk of bankruptcy. The amounts invested are only in the millions here (seed companies). However, the rationale that led a lot of risk assessors to view the bundling and securitization process of sub-prime loans as meaningful is what I find to be parallel.

You are also right that VCs and their investors are sensible as of now. It boggles the mind that highly leveraged companies would buy and hold on to high-risk bets.

Re: Can The Y Combinator Idea Turn Into A Movement?

#12

Post by dennykmiu »

ojbyrne wrote: post #5

I would tend to agree that YC cookie-cutter clones are probably not going to succeed, but there are probably niches that are underserved. One that immediately comes to mind, just from the various discussions here, is the "I want to found a company, but I'm not in the US, and there's no such thing as a company founder visa."

There has been lots of discussions on what YC is and how to emulate YC. I don't think these discussions are wrong or misguided. I just think they are missing an important point which is that we are in the midst of a great generational change of consumer pattern (both for hard goods and for information). And the only way to catch this wave is if you are part of this wave. Being an older entrepreneur (much older than the typical YC'er), I speak for myself when I say that I can only be a spectator and watch everything at awe. But it would be very difficult for me to lead any startup opportunities that exploit this change (at least not by myself).

So I think the key to success for YC is not the incubation aspect nor the micro-loan aspect (both of which exist outside of YC). I think the key here is that the YC'er are encouraged to view themselves as the ultimate "surrogate" customers, that they should lead the charge and they have the right to because they are both technologists (i.e, hackers) and representative of their generation.

Re: Can The Y Combinator Idea Turn Into A Movement?

#13

Post by wumi »

ojbyrne wrote: post #5

I would tend to agree that YC cookie-cutter clones are probably not going to succeed, but there are probably niches that are underserved. One that immediately comes to mind, just from the various discussions here, is the "I want to found a company, but I'm not in the US, and there's no such thing as a company founder visa."

"I would tend to agree that YC cookie-cutter clones are probably not going to succeed."

In reference to the web 2.0 genre, or hashed out in other models as well? The cost of starting a company is falling in other sectors as well...

Re: Can The Y Combinator Idea Turn Into A Movement?

#14

Post by ericb »

ojbyrne wrote: post #5

I would tend to agree that YC cookie-cutter clones are probably not going to succeed, but there are probably niches that are underserved. One that immediately comes to mind, just from the various discussions here, is the "I want to found a company, but I'm not in the US, and there's no such thing as a company founder visa."

One reason Y Clone-ators may fail is lack of imagination. YC was not handed their recipe from the heavens. If these clones had any creativity, they'd be modifying the recipe to see if their ideas could make it better.

For example, why not a 4 month boot camp preceded by a 1 month crash course in business, presentation skills, etc. I'm not saying this is a better implementation, only that if the clones thought for themselves, they'd be doing more interesting things, which would tell me they were smarter and actually people I'd want to learn from. I'm afraid to take creative advice from someone whose big innovation is copying YC. I think YC's model is better, and it may be a good thing for it to spread, but none of the clones I peeked at have impressed me much so far.

Re: Can The Y Combinator Idea Turn Into A Movement?

#15

Post by pchristensen »

ChaitanyaSai wrote: post #3

Will proliferating seed companies start looking like micro sub-prime mortgage traders? They operate on the similar assumptions: pooling small, high-risk investments hoping that these individual bets are unrelated, thus driving down the variance when bundled together. This is probably only true for the seed company that gets to cherry pick first, which seems to be YC as of now. Assuming an initial chance of success of…

I like the math but don't love the analogy. In the subprime mortgage market, you're managing failure (how few of our lenders will default) whereas in YC/VC, they're managing for a few big successes. The downside is uncapped for subprime, the upside is uncapped for YC/VC.

Re: Can The Y Combinator Idea Turn Into A Movement?

#17

Post by attack »

Prrometheus wrote: post #9
sabat wrote: post #6

The hard part is not gathering the money, but knowing who to back. That's why there are not a million successful Y-Combinators. OTOH it is probably possible to figure out how PG and company are judging the people and ideas, and duplicate the methodology. The world doesn't need a bunch of bad YC clones, but it sure could use a few more good ones. :-)

Paul Graham backs companies that fit into the Paul Graham philosophy. This probably causes YCombinator to miss the majority of possibly profitable investments. I am not criticizing YC here, they are only looking for a few dozen startups each year so it is fine if they miss most of the good ones. However, there is room for several YC clones, perhaps run by other successful founders, that invest with a different worldv…

If there is not room for a far bigger number of YC clones or angels similarly then this entire method of growing companies is doomed.

Re: Can The Y Combinator Idea Turn Into A Movement?

#18

Post by bokonist »

ericb wrote: post #14
ojbyrne wrote: post #5

I would tend to agree that YC cookie-cutter clones are probably not going to succeed, but there are probably niches that are underserved. One that immediately comes to mind, just from the various discussions here, is the "I want to found a company, but I'm not in the US, and there's no such thing as a company founder visa."

One reason Y Clone-ators may fail is lack of imagination. YC was not handed their recipe from the heavens. If these clones had any creativity, they'd be modifying the recipe to see if their ideas could make it better. For example, why not a 4 month boot camp preceded by a 1 month crash course in business, presentation skills, etc. I'm not saying this is a better implementation, only that if the clones thought for the…

Even better would be a series of two week externships that would give hackers exposure to business problems.

Re: Can The Y Combinator Idea Turn Into A Movement?

#19

Post by bobp »

ojbyrne wrote: post #5

I would tend to agree that YC cookie-cutter clones are probably not going to succeed, but there are probably niches that are underserved. One that immediately comes to mind, just from the various discussions here, is the "I want to found a company, but I'm not in the US, and there's no such thing as a company founder visa."

In this kind of forum that encourages entrepreneurship even in the face of stiff competition I'm surprised that many people dismiss the notion that someone could make a better seed funding organization than YC.

There are many successful entrepreneurs in Silicon Valley and elsewhere who would be great startup advisors and inspiration leaders. If they decided to start YC clones I don't see why they couldn't attract great talent. They may even be more successful than YC at generating high returns on their investment. Luck plays a huge factor in startup success, after all...

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