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What Happens At Y Combinator

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Re: What Happens At Y Combinator

#61

Post by adbachman »

andjones wrote: post #57

How exportable is YCombinator? Much of YCombinator depends on people being in the same geography. I understand that to be the reason why founders are required to move to Mountain View. Do you think it would be possible to start YCombinator prime elsewhere in the country? If we put together many of the same factors, angels, infrastructure, good mentors, could this be replicated, albeit on a smaller scale?

He's written about this in the past. "Can You Buy a Silicon Valley? Maybe." http://paulgraham.com/maybe.html and "How to Be Silicon Valley" http://paulgraham.com/siliconvalley.html. He trends towards, "go to them", though: http://paulgraham.com/startuphubs.html

It comes down to people, money, and time. Exporting Silicon Valley might be the wrong approach. Another place must have its own culture and value system in order to survive and those qualities can't be borrowed.

Boulder, Boston, Austin, and to some extent NYC and a few other east coast (of the US) cities (my heart belongs to Baltimore) have burgeoning scenes, but each is different than SV. Where they don't try to simply mimic, I think they're more likely to find success.

Re: What Happens At Y Combinator

#62

Post by sbowles »

pg wrote: post #27
robg wrote: post #14

Earlier quoted context omitted.

Besides music labels, are there other industries you try to steer startups away from, either through not accepting them or through nudging them in other directions? I'm looking specifically at medical applications, but I imagine there are others too.

No others are quite as bad. We'd be dubious about startups building stuff for the government, for example, because there is such a horrible mismatch between startup culture and government culture. But we'd still fund a startup building stuff for the government if they weren't naive about what selling to the government would entail.

I get the concern about inciting the wrath of music labels. However, can you elaborate on your comment in footnote 5? Is there an unofficial policy of avoiding music startups, or just an extra special sanity check? What if the startup pre-clears (or is in the process of clearing) licensed use of label catalogs before the program?

Re: What Happens At Y Combinator

#63

Post by InclinedPlane »

sbowles wrote: post #62
pg wrote: post #27

Earlier quoted context omitted.

No others are quite as bad. We'd be dubious about startups building stuff for the government, for example, because there is such a horrible mismatch between startup culture and government culture. But we'd still fund a startup building stuff for the government if they weren't naive about what selling to the government would entail.

I get the concern about inciting the wrath of music labels. However, can you elaborate on your comment in footnote 5? Is there an unofficial policy of avoiding music startups, or just an extra special sanity check? What if the startup pre-clears (or is in the process of clearing) licensed use of label catalogs before the program?

The copyright problems related to music labels are nothing compared to the legal shenanigans of the contracts between labels and groups. They are horrific. The closest analogies would be share cropping or indentured servitude, though at least there is an out if the band fails.

The way a lot of record labels work is that they will give a band a cash advance. The band uses that advance to pay for living expenses. They are also forced to use it for various costs such as studio time, recording, producing a music video, etc. The band earns a percentage of the gross revenue for album sales (say 7%), the label earns a larger percentage. The band pays back their advance using their share of the earnings. Stop me if it seems like there's something a bit off about this arrangement.

Sending a fledgling startup company to work amidst that hell is not a smart move. Even billionaire multi-platinum bands have trouble.

Re: What Happens At Y Combinator

#64

Post by shykes »

guelo wrote: post #56

The main insight I took from this was the quip about "investing in YC-funded startups is safe in the same way buying name-brand products is". Like many people I sometimes feel ripped off when I pay 50% more for that box of Kellogs cereal or whatever. I imagine the same feeling might be the motivation behind AngelGate.

There's a difference: YC's brand is not based purely on marketing. It's based on the success rate of past YC companies, which is objectively higher than average.

From an angel's point of view, YC is a deal refinery. Raw deals come in. High-quality, refined deals come out. Many investors will gladly pay a premium for those, because much of the early risk has been taken out: do the founders get along? Do they crack under pressure? Can they ship something? Can they adapt to changing circonstances?

YC figured out a repeatable, streamlined formula for a process which was previously a black art. They industrialized the gut feeling. And they deserve every bit of recognition they got for it.

Re: What Happens At Y Combinator

#65

Post by anamax »

andjones wrote: post #57

How exportable is YCombinator? Much of YCombinator depends on people being in the same geography. I understand that to be the reason why founders are required to move to Mountain View. Do you think it would be possible to start YCombinator prime elsewhere in the country? If we put together many of the same factors, angels, infrastructure, good mentors, could this be replicated, albeit on a smaller scale?

> If we put together many of the same factors, angels, infrastructure, good mentors, could this be replicated, albeit on a smaller scale?

You need "enough" of all of the critical factors and then you have to overcome whatever penalty you incur from missing some of the "nice to haves". Considering the odds against success even with all of the stars aligned ....

Seriously - unless your customers care where you are, why are you so resistant to going to where the odds of success are highest?

It's okay to value things other than success, but you're competing with people who are focussed on success. How are you going to overcome that advantage?

Re: What Happens At Y Combinator

#66

Post by pg »

swombat wrote: post #54

If you were to start YC again, from scratch - i.e. if your brain was teleported into your body 5 years ago - what would you do differently? Would you start it directly in SV instead of Boston? Would you focus more on building the alumni network from day one? There must have been many mistakes along the way, while this article talks mostly about the successes. I'm curious what mistakes you made and avoided... maybe th…

Very interesting question. I would do it more emphatically, for one. The first couple batches we were pretty tentative, because we didn't know it was going to work.

It's painful to consider whether it would have been best to do YC in SV year round from the start. I loved alternating between the two places. I still miss living in Cambridge. And yet the founders in the Boston batches probably were getting short shrift. The startup community in Boston is so much smaller. We could never have organized something like Angel Day; there just aren't enough good angels. We wouldn't even have had enough alumni in Boston, because most of the successful ones used to move to the Valley.

You can figure out what we'd do differently by what we've changed. We give startups more money on average, but we don't give them any more for having more than 3 founders. Jessica now strongly encourages vesting, not to protect us, but to give startups a predefined way to deal with founders leaving. Interviews and Demo Day presentations are now much shorter, and I'd keep both short even if it weren't necessary for scale. We look more at the people and less at the idea when making funding decisions. We've added a bunch of protections against good groups falling through the cracks in applications. But we haven't changed that much structurally. We've made a lot of mistakes, but they've mostly been one-offs, like funding startups we shouldn't have, or not funding startups we should.

Re: What Happens At Y Combinator

#67

Post by yoden »

robg wrote: post #31
pg wrote: post #27

Earlier quoted context omitted.

No others are quite as bad. We'd be dubious about startups building stuff for the government, for example, because there is such a horrible mismatch between startup culture and government culture. But we'd still fund a startup building stuff for the government if they weren't naive about what selling to the government would entail.

Thanks and agreed. I'm surprised I haven't seen many (any?) medical applications from YC companies given the margins available over consumer applications. Do you think it is the uncertainty of the FDA regulations or just a space that Silicon Valley doesn't tend to mine as frequently? Make something patients want is particularly alluring to me.

I think it's mostly just not something typical YC applicants are interested... which is really weird, because health issues are going to be a huge concern in the western world for the next 50 years at least.

Part of it may be that you need medical connections to do the much of the work. We work directly with a ton of different doctors/hospitals (for a team of only ~15 devs), and still have issues with building the right things, 510k submissions, etc...

But yeah, medical applications are getting neglected by the startup community at the moment.

Re: What Happens At Y Combinator

#68

Post by noahth »

raminf wrote: post #52

I've always thought of YC as more of an incubator for young 20-somethings trying to get an idea off the ground. The impression has been fortified by the reported small amounts of 'seed' that is given out. I know a lot of people in older age brackets (30s-40s-50s) with a family and Silicon Valley mortgage who have great ideas and experience but wouldn't even consider approaching YC. My one suggestion is if you want to…

If this hypothetical person doesn't realize that he or she might need some savings to cover family expenses while devoting all or most of their time to a project that isn't generating revenue yet, I am skeptical of that person's ability to successfully start or run a business. Just me?

Additionally if someone is wary of losing their great consulting/contracting fees to start the startup, maybe starting a startup is not for them. Or maybe they just need to plan to minimize the risk that they will be taking. Either way, this is not YC's problem to fix, imo.

Re: What Happens At Y Combinator

#69

Post by pg »

zzleeper wrote: post #49
pg wrote: post #45

Earlier quoted context omitted.

There are certainly a lot of important and so far mostly unstudied phenomena there. How much of it you could talk about in conventionally publishable economics papers is another question, though.

I'm actually thinking about doing some work on this. Would you mind if I drop you an email at some point?

Sure; pg@ycombinator.com

Re: What Happens At Y Combinator

#70

Post by pg »

StavrosK wrote: post #53
pg wrote: post #32

Earlier quoted context omitted.

Maybe 15-20% do. And yes, we care a lot about that, and often help not only in advising but in recruiting.

Do you generally advise single-founder companies to add cofounders (it does have its benefits), or do you think single founders are fine if they pass the filter? I guess my question is, do you see single-founder companies as missing something (a cofounder), or does it depend on the founder?

Yes, usually, though we don't insist on it. I think most single founders would be better off with cofounders, but it's not worth taking someone mediocre just to have a cofounder.
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