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How Y Combinator Started (ycombinator.com)
542 points by llambda on March 15, 2012 | hide | past | favorite | 98 comments



So doing the winter batch in California seemed like one of those rare cases where the self-indulgent choice and the ambitious one were the same.

There is nothing more heavenly, more sublime than that rare situation in life in which the self-indulgent choice and the ambitious choice align. There's a keen insight to be had there.

Unfortunately, those moments are very rare.

For instance, at least, in terms of my personal temperament and disposition, I have found that I most enjoy life, from a "human" perspective, in places that are terrible places to do business, and may, in fact, have very dysfunctional local economies, high amount of corruption, etc. I'm the kind of person that has the most fun in the colour of Greece, Italy, southern Spain, Portugal, Argentina, etc. I can appreciate the comparative orderliness and clockwork of Teutonic and Anglo-American civilisation, but it doesn't make me happy, and yet I need that whole universe in order to sustain my livelihood in any practical sense. But everything else about it doesn't make me very happy.

I wish there were some way to reconcile those two. I haven't found any place that has an optimal intersection of cowbell on the one hand, and practicality on the other. Maybe it exists, but I haven't found it. However, my natural sense is that there is a inherent, perennial tension between the two.

That's why that particular phrase really got me. I wish dearly for such a Shangri-la.


That's the reason I actually moved in NYC. For a French 20 something, it's a great city to live in, it's not too far from Europe and the tech scene is booming. My next stop will probably be Brazil. I've travelled over 45 countries and Brazil seems to have that unique combination of "human" perspective, a work culture and a growing tech ecosystem. You should give it a try :)


I'm also a French 20-something, currently calling the San Francisco Bay Area home— my next stop will probably be Berlin or Amsterdam.

What a great age we live in!


I'm a French-Canadian 20-something. You guys should give a try to China or Hong Kong. (see previous comment)


Acho também que o Brasil seria ótimo! :)


Chile seems like it's doing well lately.

Other than that, set yourself up so you can live somewhere you like and work remotely.

Also, Italy is very different from north to south. The north is still not a great place to do business, but it's a lot better than the south.


Yeah, but settling in Chile when Buenos Aires is right there is like setting up shop in Yonkers or Jersey City, the lights of NYC taunting you from across the river. :-)


To tell the truth northern Italy alone is one of the most developed, wealthy and productive areas in Europe. The industrial density is extremely high and diversified.


the colour of Greece, Italy, southern Spain, Portugal, Argentina, etc. I can appreciate the comparative orderliness and clockwork of Teutonic and Anglo-American civilisation, but it doesn't make me happy, and yet I need that whole universe in order to sustain my livelihood in any practical sense

Maybe try Hong Kong? I haven't lived there but it seems colourful (in the Asian rather than Southern European sense) and yet still has the British history.


I was about to suggest the same. I currently live there (and Shenzhen) and it is indeed colorful. I just wish there was a stronger startup culture. The entrepreneurship culture is definitely there but for low-risk, traditional business. I personally prefer Shenzhen to Hong Kong although it is difficult to function in English.


I know some people that try to build kind of YC for emerging markets so maybe time for Hong Kong will come.


Sounds like a good idea for China. However, I wouldn't call Hong Kong an emerging market given it has a highly developed economy and is ranked 5th country in terms of GDP (PPP) per capita (above the US, according to the IMF).


For you people who talk about bouncing around working abroad, what do you do? Are you running your own company or freelancing? Or just moving to another country and then looking for work?

I'd love to work abroad but I don't really see how to go about it.


In my case, running my consultancy (call it freelancing if you like). But the work can pretty much be done from anywhere that has reliable connectivity, though this is a privilege whose existence I have hitherto ignored.


Barcelona, Catalonia, Spain

Ticino, Switzerland

Slovenia


Yes, Barcelona has great tech/online sector. + you have Andorra only 2 hours drive which is a tax heaven :)


Croatia


Wait, Croatia has a well-functioning local economy and little corruption?

Well, that went fast!


Touché! ;)

And actually, corruption is not really much of a concern right now, it's more of radical incompetence on all levels. At this point, no amount of bribery will help you go smoother.


That phrase struck me too, and I couldn't agree more with the geographical tradeoffs that usually hold true.

I guess quitting the 9-5 to work on startups might qualify - there's always sacrifices though :)


Um... how about Berkeley? It's mostly a terrible place to do business, has a dysfunctional local economy, but is part of Greater Silicon Valley despite its weirdness.


Try Tel-Aviv.


Berlin?


Berlin makes a lot of noise about its startup culture, but it's vanishingly small. The winters are absolutely horrible. Also, the city is full of Germans.

(I've lived here for four years.)


Madison, Wisconsin


I work here in Madtown :-), but I'm not sure that I would describe it as a start-up hub. Sure, there's the university and that has lots of energy, but tech start-ups? I'm curious what you see that I don't.

(Perhaps it's because I only work here and live an hour out of town, that I don't see it.)


"If we'd had enough time to do what we wanted, Y Combinator would have been in Berkeley."

As a co-founder of Berkeley based company from YC S11 batch. Darn it! Berkeley would have been a great place to start YC. With Berkeley campus supplying a lot of CS students and the easy-going counter-culture that Berkeley provides (which gels well with counter-intuitive funding strategy of YC). It would have been great! Of course, the VCs would've to trek to Berkeley to attend demo days but that filters out the people who aren't serious. :)


I had the opposite reaction: "What good fortune that they didn't have enough time!" Not that Berkeley isn't great, but it isn't in the Valley. It's hard to imagine YC being quite as successful if it weren't right in the thick of things.


Took the words out of my mouth.

On the flip side, now that MobileWorks is here, pg, jl and the YC community have a welcome place to hang out when they're in Berkeley. Thursday nights at the MobileWorks offices are starting to have a YC vibe to them.


I really enjoyed PGs post for the detailed description of the thought process behind the creation of YC and how they took those initial steps (including getting the funds together and deciding how to run it).

A lot of 'this is how I became successful' biographies seldom provide that level of detail. Whilst I still find them interesting, I found PGs writing to be more inspirational (to me anyway) because it's almost like a 'how-to' guide.


I echo that sentiment. :)


Heck, why would anyone down vote a comment which supported a nice comment by someone else? Go figure.


Now THAT down vote reflects a really vicious temperament!


The downvotes are because you are not adding to the core conversation. The community standard is that if you support a comment then up-vote it, and that's it. Additionally if you have something to say in response then write a comment.


Thanks. That's a decent explanation. :) I did read the Hacker News Guidelines but apparently not well enough. I definitely missed this: "Resist complaining about being downmodded. It never does any good, and it makes boring reading." Apologies, all.


agreed. From that post, only missed some more insight on how he dealt with that first batch on the summer camp. Were most of the ideas already good? Did everyone even got there with ideas ready to go? etc


'Cambridge Seed' sounds like a reality TV show about a sperm bank that only accepts donors from elite universities ;)

Congrats to everyone who has ever applied and the YC team! You have changed the rules of the game for the better...


>If we'd had enough time to do what we wanted, Y Combinator would have been in Berkeley. That was our favorite part of the Bay Area. But we didn't have time to get a building in Berkeley.

I'm in Berkeley and quite like it here but that's also because I mostly avoid networking events. Berkeley's startup culture is a bit weird because the city is in some ways anti-software business. If YC were here, it would have been enough of a political force by now to have actually shifted the epicenter of Silicon Valley around enough for Berkeley to be taken more seriously as a place for startups.


I was a junior in college (summer of 07) and been working a disillusioning summer job as an undergraduate CompSci researcher when I first read about YCombinator and Justin.tv.

Knowing that there was a place out there for entrepreneurial geeks like me helped tipped the scales for me; YCombinator plus Hacker News itself has made me feel like I am not alone in trying to make it as a geek-entrepreneur and I am glad for it.

YC + HackerNews has made the tech world feel like a smaller, more accessible place for me.


Happy birthday YC & Co. Been a fan since it was publicly announced.

And not to take anything away from YC's effort but I find it rather amusing that first time some good hackers take their turn at improving the VC industry they transform it and become (arguably) the most successful investors in it.

I wish more people would try to improve the VC industry. There's at least a few YC-level waves that could occur. AngelList the best example.


what I wonder is if/when YC will start to take institutional money....that's what's going to take YC up to upper caliber of VC funds.


sequoia is already an investor


no, I meant like direct to institutions like pension funds.

why would a pension fund give money to Sequoia, and then have them give it to YC? that's an unnecessary management fee the pension funds have to pay


Because the pension funds want to invest such huge amounts of money that I suspect Y Combinator wouldn't know what to do with it.

If a pension fund wanted to invest $250m in YC, they'd have to scale up by so much I doubt it would work the same.


so are you saying there is an upper limit to entrepreneurship? I don't think so.

I wonder if pg has written anything about this, if there is some point of diminishing returns in the lean startup scene


I think there's an upper limit to the quality of entrepreneurial mentorship you can give, mostly as a function of (1) the mentors and (2) the mentor-entrepreneur ratio. Right now, YC invests in roughly $20k/company * 60 companies/batch * 2 batches/year = $2.4M per year. If they were forced to invest 50-100x that in a year, it'd be really hard to find 50-100x more mentors on the same level as the existing ones.


Very happy read.

What this says me, and hopefully you is this: "that inconsequential thing you are staring today.. do not be so sure it is that inconsequential. Most of all just do it"


"We realized early on that what we were doing could be national in scope and we didn't want a name that tied us to one place."

Personally I find that one of the most important reasons to think long and hard about a name. Most startups go through many pivot points until they finally get it right. Choosing a name that is overly representative of the present business model can lead to team lock-in that could spell the death of a company before it even gets going.

It seems a wiser decision is to go with a name that represents a startup's future ambitions instead of its present circumstances.


"But the founders in the first batch turned out to be surprisingly good. And great people too. "

I'd love to read a "where are they now" post on the first couple batches of founders, along with some quotes from them.


Reddit - Acquired by Conde Nast.

Kiko - Acquired by Tucows, team founded Justin.tv

Loopt - Raised 15million in Series A and B financing, at it's peak was valued at $500m, sold for $40m to Green Dot

Simmery - Closed. Founder went back to uni.

Infogami - Merged with Reddit.

MemAmp - Never launched, one founder (Chris) joined reddit one (Zak) went back to uni.

FireCrawl - Never launched, team founded TextPayMe and got acquired by amazon.

ClickFacts - YC stake acquired by private investors because YC wasn't a good fit. Company still exists.


Wow, that's phenomenal. In 7 years, out of 8 companies there were 5 acquisitions (and a couple mergers). I'm sure any VC would be ecstatic to have that kind of success rate.

Reddit is the most prominent. It's had a huge impact although from what I understand it hasn't done extremely well financially.


"Wow, that's phenomenal."

That's quite a halo effect that has prevented you from seeing the true "success rate".

Where are you getting 5 acquisitions from?

Reddit, Loopt basically made out.

Infogami merged with Reddit. That's essentially a save face maneuver and doesn't exactly signal success.

Clickfacts - "YC stake acquired by private investors" doesn't sound like that would be a win but a break even. More like "take it off our hands".

Kiko - Sold in an ebay auction for 258,000.

http://gigaom.com/2006/09/05/tucows-bought-kiko/

http://tucowsinc.com/news/2006/09/why-we-bought-kikocom/

I'd give it 2.1 out of 8.


I don't know what Reddit sold for, but while Loopt's $40M was far down from its earlier $500M, it's still a hell of a lot more than the ~$300k valuation it would have had when YC invested in it.


Loopt raised $32M in funding [1], so a $40M exit is roughly scratch.

[1] http://www.crunchbase.com/company/loopt


I think he's not just talking about the dollar value of exits, but the value of the founders.

The founders of Loopt, the Reddits, and Justin.tv have done a lot for the YC program (and for startups in general) going forward; arguably these 3 moderate successes financially for YC but having very involved alumni might be worth more than a huge financial success which didn't stay involved with YC.


The comment that I was specifically replying to was this:

"Wow, that's phenomenal. In 7 years, out of 8 companies there were 5 acquisitions (and a couple mergers). I'm sure any VC would be ecstatic to have that kind of success rate."

I don't see how that statement has anything to do with the value of the founders.

He said "5 acquisitions" not "2 (or 3) acquisitions and additionally they have very involved alumni.


Amazon just announced today that TextPayMe will be shut down.


I think Reddit is the greatest thing to come out of the first batch.


And I always think that if you pitched it to anyone at the time, how many would've laughed in your face?


Can't find a link, but I think I saw somewhere that pg/YC actually pitched reddit to the reddit team because they liked the team but disliked their original idea.


Pretty ballsy either way.


And Loopt


It's amazing to see the humble roots of YC and what it has grown into now. As a person who made it through 2/3 of the previous batch I can honestly say there is no other experience like it and solely the intelligence of the people you are placed in the same room as week in and week out is enough for you to be at least as ambitious as the founders of YC were. Quit your job, make the leap, build something great.


I'd love to read your story on how you only made it through 2/3, and not the whole YC session.


you probably wouldn't honestly. just a simple founder dispute which lead to me leaving, nothing too eventful there


Au contraire, founder disputes are something very few entrepreneurs write about, especially YC-caliber entrepreneurs; and yet anecdotally, they happen rather frequently. I stand by my assertion that writing a blog post about it would be good; please consider doing so, especially if you have insight on how to avoid or prevent it from happening.


It's hard for people to realize now how inconsequential YC seemed at the time. I can't blame people who didn't take us seriously, because we ourselves didn't take that first summer program seriously in the very beginning.

I attended the "How to Start a Startup" talk in 2005. I remember going home and reading pg's website, the whole thing, cover-to-cover. Later that year I met Steve Wozniak at the first Startup School held in Cambridge. Woz, Chris Sacca and pg left a lasting impression on me. I had never witnessed that level of information density and knowledge sharing. Amazing to look back at those humble beginnings. Always grateful for YC and the HN community.


One of the things that I noticed is how YC's opinion regarding patents has evolved since its founding.

>"If you're accepted, we'll deal with the paperwork for you. We'll incorporate you, get you a corporate bank account, supply simple, generic employment agreements for you to use, and so on. We can give some advice about patents, though you don't have to deal with that in the earliest stages; you have a year after making a discovery to file a US patent application for it." [http://ycombinator.com/old/sfp.html]

However, the best part of the story was the I'm-quitting-my-job smile.


As he wrote this, PG asked me if I remembered the chronology of certain things and it was very hard. So much is blurred together in my mind. But I remember the night we decided to start YC and this photo.

It wasn't just happiness that I was quitting my job. I was also so excited about this idea and the opportunity to work on something that could make a difference in the world.


It shows and I wasn't intending to trivialize what I know was a complex decision. [edit] There's nothing quite like the person one loves confirming that it truly is for better or worse.[/edit]

Congratulations on a job well done.


That picture was priceless. I'm so happy pg captured the moment :)


To be fair, patents were a far less ugly beast back then. They were still stupid, but not the existential threat they pose today.


Patents were a brutal business weapon seven years ago. Indeed they have been for more than a century. [http://en.wikipedia.org/wiki/Elisha_Gray_and_Alexander_Bell_...]

However, the claim that they have recently become an existential threat is dubious, in my opinion.

Yes, there are lots of stories in the techpress about industry titans battering each with patents and partisan ranting which often accompanies it. What there aren't is stories on HN about startups forced to shutter because of patent claims.

But more importantly, funding for startups is accelerating not slowing as would be expected if software patents were a serious threat on the scale your post implies.

The problem with software patents for an investor such as YC is that they are hard to quantify as a risk and thus create uncertainty. What I see is that YC's initial approach to software patents was naive from an investment standpoint, i.e. that the risks of uncertainty turned out to be significantly greater than the potential gains from patent licensing.

I don't think YC's change was do to wholesale adoption of a FOSS ideology or conversion to Stallmanism. The day patents become a true existential threat, YC will not be funding software startups.


I work at a startup whose founder was forced to shutter a previous startup with more promise (ever heard of Modista?) because they were sued by iLike for a patent that had clear prior art. The suit came in the midst of a funding round and basically killed the company as it was just gaining steam. I anticipate that there are numerous similar stories that you've never heard... People don't exactly like to talk about succumbing to bullying.


First, I wanted to say Happy 7th birthday to Y Combinator. So, happy birthday! Before I even knew there was a Y Combinator, I began learning of innovative companies such as Stripe that I could get excited about implementing in building the platforms for my own businesses. Scribd was a helpful resource for me while working to finish my MBA as well. After applying, I learned that both of these companies were Y Combinator alumni. A real benefit of the process for me has been gaining an awareness of more companies like these. Y Combinator has helped facilitate a cooler world. Thanks for that.


If you are interested in those early years, there is also some video footage of that first class (and interview with PG) in Aardvarked, the Joel Spolsky video made that same summer: http://www.youtube.com/watch?v=0NRL7YsXjSg&feature=playe...


SOmetimes, opportunity meets preparation, or so the saying goes. When things fall into place and fit, usualy great things emerge. And that happy smile, even it would have been only for that moment and one summer batch, I think most people involved it would have ben worth it. Happy birthday and continue on like you do!


Fantastic read. It's really interesting to hear about how Y Combinator started much like a startup itself. Today we take YC for granted, but 7 years ago that concept must have been extremely novel and easily dismissed. It's hard for me to imagine the modern tech world without YC, though.


Speaking of good ideas, does anyone know a good way to save/record an idea? I always think of one at the most inopportune time and by the time I have a chance to write it down I forget parts of it. Is there an app or service to help me?


A notebook?

No seriously get one of those tiny (1/3 A5) ones which fit in any pocket, then all you have to do is remember a pen!


I've love to hear about this as well.

As for me, I've gone through Google Notebook, now Docs - one big Ideas doc for undevelopped ideas, then as ideas get developped, they get their own doc. And now also Trello, which is great. On the dashboard, you see only card titles, and this allows you to hide complexity.


This is an app I made to help me remember my ideas: http://atomyard.com/

I made it to scratch my own itch but I hope other people find it useful too.


Write it down on your phone? Or the back of your hand?


Happy birthday YC! It's awesome that YC is as scrappy and as startup-minded as the hackers they fund. They stick to their roots. They talk the talk and walk the walk.

now pg, please put some left and right padding on those static pages =]


Interesting how YCs very first web-statement in 2005 remaines true and current.

http://web.archive.org/web/20050324062234/http://ycombinator...


From the Legal page (http://web.archive.org/web/20050324100821/http://ycombinator...)

"Privacy Policy: We're too lazy to look at log files, and haven't yet written any software to do it.

Terms of Use: When you click on a link, our server will send you the corresponding page."

Love it. Unlike many other sites, this one hasn't changed in years.

edit: privacy policy is gone (so I presume they got around to writing the software)


Wow, thanks for that link. That was before we even had a logo. I should go see if we have that file somewhere.


My pleasure PG.

Wayback is instructive for founders. If ever you doubt the value of what you're doing, and fight desires to hold fire and perfect more features, the wayback machine is a great reminder that those companies that succeeded started somewhere less than minimal too, and executed on from there.


"Initially we didn't have what turned out to be the most important idea: funding startups synchronously, instead of asynchronously as it had always been done before. Or rather we had the idea, but we didn't realize its significance. We decided very early that the first thing we'd do would be to fund a bunch of startups over the coming summer."

I wonder what the best batch size is: each cohort seems to be larger than the last. When does it makes sense to do three, four, or six a year as smaller batches.


Thank you, Pail and co. You're doing great things not only for those who apply and join YC-family but for the startup community all over the world. The great thing is that you've found something that helped you to become more rich and to help the humanity (at least its geek part :)) in some way.


Through the "rabbit hole" effect I read pg's start.html page.. some great insight which has given me more confidence with my own endeavour. Thankyou.


Great read, amazing to see what YC has grown to in 7 years and how it has shaped tech startup investing.


What companies emerged from first batch? Can anyone tell and their cofounders name?


That's such an encouraging read.


Yeah, the story is absolutely inspring. I will copy this in China! Money does not go against freedom, money is part of our freedom.


pg: thank you for sharing this.


Many thanks from me too!


Hurrah! War is Over! Upvote to the Googolth degree! To be brutally honest, it concerns me that dissent on HN is not welcome.




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