The Value of the Y Combinator Experience
I'm often asked about my Y Combinator experience so I thought I would take the time to blog about it. I did Y Combinator the Summer of 2007 in Boston with two awesome co-founders. We built Anywhere.FM, a web music player that brought an iTunes-like experience to the web, and eventually sold it to imeem.
So what is Y Combinator? Y Combinator is a new kind of seed stage venture firm. While they provide financing and advice like all venture investors, their model for doing so is very different. They give small amounts of cash (<$20,000), take small amounts of equity (<10%), and fund startups in batches twice a year. These summer and winter batches bring all the entrepreneurs in a given batch together in Silicon Valley for 3 months to have each startup build a demo-able product to show off to investors at the culminating Investor Day in hopes or raising a follow-on angel or VC round.
I would break down the value of the Y Combinator experience into four main benefits: jump starting the startup process, access to a fraternity of entrepreneurs, investor day, and funding.
Jump Start the Startup Process
Starting a company is a lot of work and a lot of very important decisions need to be made early on. Who do you pick as co-founders? How should you set up vesting schedules? What corporate structure is best? How do you assign board seats? How much money should you raise? What do you focus on early on?
Y Combinator not only provides a solid battle-tested structure for setting up your startup, but also gives tons of advice on how to succeed at your startup. The advice comes from a variety of speakers that Y Combinator bring ins. This included people like Langley Steinart, founder of TripAdvisor, who shared incredible advice on getting deals with partners and having a strong hand in investor meetings. Greg McAdoo, venture capitalist at Sequoia, also came in to provide us a complete inside look into the VC funding process. And Paul Buchheit, creator of Gmail, provided a ton of valuable lessons learned from the early days at Google and how to build a product to tens of millions of users. It's these kinds of high quality speakers that YC is able to attract that would be difficult to have access to on your own.
Fraternity of Entrepreneurs
One of the most remarkable phenomenons is the bond that is created between fellow entrepreneurs who have gone through a shared experience of trying to make something people want. What results is a fraternity of startup founders. This fraternity extends beyond your own class of YC startups to the entire alumni network of YC startup graduates.
This strong network is accessible each and every day for founders to get advice ranging from who is the best hosting provider, to evaluating deal terms, to making intros, and more. I've never met a group of people more willing to help you out. For those new to the startup community, there is no easier way to get assimilated.
The culminating Investor Day is by far one of the most valuable aspects of the YC program. In one or two days, you get access to an unbelievable number of top notch investors that are eager to hear your pitch. Due to early YC success stories, including Reddit, Loopt, Xobni, and Zenter, YC has been able to attract an incredible line-up of VCs who come out every batch in search of the next big thing. These investors span the entire range of angels to VCs looking to make small to large investments in a variety of tech startups.
While the funding is an important benefit, I believe it is actually the least important of the above mentioned benefits. YC only invests a very small amount of money, which is really just enough to help you cover basic expenses during the three month project. It's not difficult to scrap this kind of money together on your own. So if you evaluate Y Combinator purely as a funding source, there are many other options out there. But the real value of YC comes from the funding combined with all the other more important benefits.
My overall assessment is that Y Combinator is an amazing program for a young first time entrepreneur who is serious about jump starting the entrepreneurial experience with the advice and guidance of a strong network of fellow entrepreneurs and successful investors.
A whole class of Y Combinator style seed stage venture firms have cropped up due to Y Combinator's success. They typically offer a similar program in a different city. These range anywhere from TechStars in Boulder\Boston, LaunchBox Digital in Washington DC, DreamIt Ventures in Philadelphia, Shotput Ventures in Atlanta, or Seedcamp in Europe. My advice though is if you are serious about starting a company, I would highly encourage you to get to Silicon Valley, as its a night and day difference between starting your company in the heart of technology innovation as compared to the outskirts.
So what are you waiting for? Go ahead and apply. The deadline is March 18 :)
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Feb 26, 2009