"Remember, these startups are usually 2-3 people with little more than an idea. Generally speaking there are few other investors who will be willing to invest in them until they have some sort of code written or an initial product out the door."
That's not exactly true. I think majority of the startups were launched or had extensive prototypes before they joined YC.
This makes sense, because it filters out the people who are too lazy or not motivated enough to build an amazing product. (But it also filters out very smart and motivated people with awesome ideas who are too busy, as many smart people are.)
In any case, the risk that YC takes isn't quite as big as investing in two kids with a pipe dream. All of the founders seem to be carefully selected for their propensity towards success.
That's not exactly true. I think majority of the startups were launched or had extensive prototypes before they joined YC.
This makes sense, because it filters out the people who are too lazy or not motivated enough to build an amazing product. (But it also filters out very smart and motivated people with awesome ideas who are too busy, as many smart people are.)
In any case, the risk that YC takes isn't quite as big as investing in two kids with a pipe dream. All of the founders seem to be carefully selected for their propensity towards success.