I wouldn't bet against the underlying trend (keiretsu collectives of innovative, smaller companies outcompeting traditional corporations), but Y Combinator is the wrong posterchild for this movement, for a couple of reasons:
1. Y Combinator's success criteria for its startups involves a liquidity event - there's no mention of a company staying privately owned and profitable as being a successful outcome (http://ycombinator.com/about.html). This is unsurpising given that pg himself exited to Yahoo
2. To date, YC liquidity events have all been sales to medium-to-large companies (http://yclist.com/). There may be a couple of big IPOs on the horizon, which is great, but the general trend is for Y Combinator-funded startups to be acquired by big corporations, which boosts those large companies' competitiveness and innovation capability
So I would certainly say that Y Combinator's structure is unusual and admirable - but de facto it acts much more like a pilot fish for traditional corporations (creating some kind of new, syncretic innovation model for them), rather than as a replacement for them.
Do I think a r/evolution of the Y Combinator model could replace the traditional corporation? Certainly, but this will be done by "slowcubators" rather than by traditional incubators. A slowcubator looks like this:
1. No expectation of a liquidity event in the child companies. It's expected instead for the child companies to become self-sustaining, profitable businesses a la GitHub or Plenty of Fish
2. Significant shared tech IP - this is something a Y Combinator can't do, because shared tech IP makes it impossible to acquire a startup. But it makes huge sense for a slowcubator, because a) acquisitions are the exception, not the norm, and b) there are huge cost savings to be made by sharing tech IP across properties (think private PAAS, Chef recipes, AdWords automation tools etc). Joltid is the posterchild of shared tech IP driving multiple successful startups
3. Staff incentives which are not structured around focusing 100% on one product until it exits or dies, but instead encourage staff to rotate within the slowcubator's companies to where they are currently needed most. It's great that the Django creator can answer a YCfounder's questions over some beer and pizza, but in a slowcubator he would be hands-on helping multiple products to be as good as they can be (as DHH does at 37signals)
In the same way that the startup acquisitions of the past decade shaped the incubator model that we see today (and is exemplified by YC), I fully expect the bootstrapped successes that we are seeing today to give rise to a wave of slowcubators - the best of which will indeed rival (if not replace) the big corporation.
the general trend is for Y Combinator-funded startups to be acquired by big corporations
This is the mistake. It's the general trend only by number of companies, not by valuation or number of people. Measured by valuation, the majority of our portfolio is not interested in being acquired.
So does that mean that you've done a survey of all the companies in your portfolio, and classified them by whether they are interested in IPO or acquisition (or no liquidity event at all)? And then have you attached a current valuation to each of these companies - what's that valuation based on in the absence of a liquidity event?
Can you share the % splits? Would be a really interesting (and yet still anonymous) snapshot of the portfolio companies' intents in the aggregate...
Plus those large companies have a major challenge of not only trying to keep those innovative employees that they acquire, but to keep those employees innovating within a very different environment. There is a serious lack of managers in the world that can pull this off.
The moment the golden handcuffs are off, there will be flight back to creating a startup in most instances. This means that the big companies can only remain competitive by throwing money at the problem.
You mean the flight to startups from Google or the ability to maintain a big company that supports innovate? Google appears to embody both situations near as I can tell.
Some areas/departments areas are great and keep innovating and others lose people once the golden handcuffs are off.
1. Y Combinator's success criteria for its startups involves a liquidity event - there's no mention of a company staying privately owned and profitable as being a successful outcome (http://ycombinator.com/about.html). This is unsurpising given that pg himself exited to Yahoo
2. To date, YC liquidity events have all been sales to medium-to-large companies (http://yclist.com/). There may be a couple of big IPOs on the horizon, which is great, but the general trend is for Y Combinator-funded startups to be acquired by big corporations, which boosts those large companies' competitiveness and innovation capability
So I would certainly say that Y Combinator's structure is unusual and admirable - but de facto it acts much more like a pilot fish for traditional corporations (creating some kind of new, syncretic innovation model for them), rather than as a replacement for them.
Do I think a r/evolution of the Y Combinator model could replace the traditional corporation? Certainly, but this will be done by "slowcubators" rather than by traditional incubators. A slowcubator looks like this:
1. No expectation of a liquidity event in the child companies. It's expected instead for the child companies to become self-sustaining, profitable businesses a la GitHub or Plenty of Fish
2. Significant shared tech IP - this is something a Y Combinator can't do, because shared tech IP makes it impossible to acquire a startup. But it makes huge sense for a slowcubator, because a) acquisitions are the exception, not the norm, and b) there are huge cost savings to be made by sharing tech IP across properties (think private PAAS, Chef recipes, AdWords automation tools etc). Joltid is the posterchild of shared tech IP driving multiple successful startups
3. Staff incentives which are not structured around focusing 100% on one product until it exits or dies, but instead encourage staff to rotate within the slowcubator's companies to where they are currently needed most. It's great that the Django creator can answer a YCfounder's questions over some beer and pizza, but in a slowcubator he would be hands-on helping multiple products to be as good as they can be (as DHH does at 37signals)
In the same way that the startup acquisitions of the past decade shaped the incubator model that we see today (and is exemplified by YC), I fully expect the bootstrapped successes that we are seeing today to give rise to a wave of slowcubators - the best of which will indeed rival (if not replace) the big corporation.