I wanted to call this entry “Y Combinator Is A Bullshit Idea” but the ads on the side wouldn’t have displayed due to the “bullshit” in the title.
So, I just read the Christopher Steiner article “The Disruptor In The Valley” at Forbes.com (which is about Paul Graham and his company Y Combinator) and I immediately thought of the bit from “The Simpsons” (Season 12 – Episode 9) when Homer is undergoing medical experiments for money. He tries an appetite suppressant:
HOMER: “I’m BLIND!”
SCIENTIST #1: “Who’s gonna buy a pill that makes you blind?”
SCIENTIST #2: “We’ll let marketing worry about that!”
Y Combinator is basically offering Silicon Valley a pill that makes them blind (but marketing will fix it).
They offer a little bit cash to grab a whole lot of equity in these tiny start-ups – most which are not even close to being ready for that kind of exposure (or financial decision).
However, with the right spin, PR and influence behind them, they (apparently) ARE ready for the additional money that others might throw their way (for another giant chunk of equity)… IF they can manage to get through the grueling YC BOOTCAMP.
So many of these companies just aren’t ready and, frankly, just aren’t necessary.
It’s like the YouTube star who gets a small role on “The Big Bang Theory” and can barely speak because they’re so nervous and everyone realizes they have no acting skills whatsoever.
This is not to say that there aren’t a lot of geniuses out there with a lot of great ideas. There are. Most are much smarter than me (but not as smart as Khan Manka, Jr. – I’m under order to say).
But these geniuses (and mostly non-geniuses, let’s be serious) are being exploited by Paul Graham and company and tossed to these VC wolves who will eat many a carcass to get to the next Facebook (which MUST BE STOPPED… but I digress).
Seriously, in another Hollywood analogy, any start-up attempting to get their business going through Y Combinator is like the screenwriter in Los Angeles who will pay people to read their script because they “work at a studio.”
The chances of success in one of these cattle call models is virtually zero.
Zero for everyone except Paul Graham (and partners).
As a quick primer, allow me a paragraph (from Wikipedia) to explain Y Combinator to those who may not know what it is:
Y Combinator is an American seed-stage startup funding firm, started in 2005 by Paul Graham, Robert Morris, Trevor Blackwell, and Jessica Livingston. Y Combinator provides seed money, advice, and connections at 3-month programs. In exchange, they take an average of about 6% of the company’s equity.
Compared to other startup funds, Y Combinator provides very little money ($17,000 for startups with two founders and $20,000 for those of three or more). This reflects Graham’s theory that between free software, dynamic languages, the web, and Moore’s Law, the cost of founding a startup has greatly decreased.
In other words, throw a bunch of shit on the wall and see what sticks.
Great for Paul Graham (based on his idea, Y Combinator would have gotten $20,000 from Y Combinator), but terrible for almost all of those thousands who apply to his program every year just in the hope of getting the YC stamp of approval (and 60 lbs of chili).
So Y Combinator is a Venture Capitalist that funds your start-up so that your start-up can get funded by another Venture Capitalist.
Enough with these f-ing VCs, man.
Whatever happened to creating a company, becoming successful and growing it based on that initial success?
Success because you have a product that people really (REALLY) want.
Thousands of techies are just sitting around coffee shops and cafes in all the “Silicon Valleys of the world” trying to think up new ideas that Paul Graham (and others like him) might like.
Not because it’s an idea that the start-up founder actually believes in anymore – but because it’s one that might get funding.
I mean, fuck passion, right?
These days it’s not whether your company succeeds or fails, it’s whether it gets funded in the first place and a mention on TechCrunch.
Jill Kennedy – OnMedea
P.S. – Also Digg is dead – R.I.P. – so is Electus and Comic-Con… but I digress… again.
Nice post, thanks for sharing!
I was thinking Y Combinator quite a success before reading your article.
This post is written by a person who hates YC and got his idea rejected by YC.
retweet of my facebook status on this.
“I really like her view on Y Combinator. Most of these companies imo are noise to silicon valley signal, not that I’m not walking down a similar path myself (not a POS idea tho) however in practice the track record in selling these tiny/feature companies for a gajillion millions is mega imba/OP. We need bigger bets, bigger and better ideas that are worth people’s time and products of proper thought, not built to flip. “
The starters are asked to dream big, to create and execute on big ideas… Yet they are then sold to Google and the other corps for their engineering talent and the businesses are shut down. The dirty little secret of the startup boom is that it’s really a jobs fair for the mega-corporations.They are sold for their ‘meat.” Huge returns for YC and pals. I guess YC is educating the young starters on the reality of life — while banking huge returns. Education is expensive in America.
I know a few YC founders.
They seemed pretty passionate to me.
I don’t think 6% of the equity when your company is starting out is that pricey either (given the alternative might going back to getting a job). New ideas are fragile and another way to support them seems positive.
Hi! very interesting article form someone like me that I still thinking to send my application to
I would rather have $18K – is that all? – than zero. but my ideas tend to cost a lot more than that to get going.
Imagine getting establishing a fund and getting equity in every freakin’ company that’s out there. It’s like the TV business – all it takes is one. The losers are the writers who make the show that gets on 2 episodes on the air – and that’s most people.
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This kinda saddens me… I see lots of entrepreneurs that dont even try to do something by themselves, bootstrapping and stuff… they just want to have and idea, get a seed fund/accelerator, go to VC’s and then sell to a major company. As you said, its not about having a idea in which you believe, its about having an idea you believe may get funded.
Thank Thank you. This is by far the funniest thing I’ve read this week. I hope the article is ranting in order to draw traffic, or some other secondary revenue scheme. I can’t believe this decree of ignorance is accidental. So thank you for the laugh.
Hi, Jill.I was going to use YC but I read and found out they only provide $20,000 max funding.I have $50,000 using my own money so how could YC help me? I never use their service for this reason. I have to get the prototype done somehow. I plan to give my project to UC Berkeley professors to make UC famous in bringing out a big disruptive company. I haven’t seen anyone making big news from UC Berkeley. Ming
Interesting post. I was thinking about startup accelerators a lot recently, this post had a big impact on my decision.
Let’s consider two of YC’s most disruptive companies: Airbnb and Dropbox.
Airbnb empowers travellers to rent rooms with hosts in their city of choice – instead of the faceless corporate lodging. While this may not be for everyone, Airbnb has drastically improved the travelling experience for over 10 mil guests, with a new room being booked every 2 seconds all around the world. While Airbnb might have been successful on their own, YC mentored the founders by focusing their product vision to include more than just air mattresses (eg. Airbnb), but also gave them the financial freedom for 3 months in order to execute their product vision. Mentorship and temporary financial freedom YC gave the founders of Airbnb, has developed into the worlds most disruptive company to conventional travel lodging.
Dropbox needs no introduction: empowering people to access their content from anywhere in the world has become a human right. With over 100 mil users and more than 1 billion files being saved every 24 hrs, Dropbox is a prime example of the need for early-stage seed investment. While Drew could have succeed with Dropbox on his own, I believe the mentorship and network at YC allowed him to rapidly accelerate Dropbox to the worlds largest cloud based file storage/sync service.
On the point of necessity or usefulness of YC companies. While many might not understand or see the point in some of the startups that come out of YC:
Think back to dial-up and ask yourself the question, “Who would ever need broadband”
Think back to the bag phone and ask yourself, “Who would ever need a personal cellular phone, or one with internet for that matter.”
Now imagine your life without these technologies….
Yes, YC might have a few companies with technology that I am not personally interested in using, but who am I to speak of their necessity or usefulness.
To the question of loss of equity: currently at 7% for $17,000 seems quite reasonable for an early stage investment. What people often overlook is the fact that 7% equity provides: mentorship with proven entrepreneurs, more mentorship, access to a very exclusive network of talent and investors, and 3 months of financial freedom to work on product execution. Personally, 7% for the mentorship alone is worth the YC experience – I know one thing in life, and that is, I do not know everything. But if you really want to know if it was worth 7% equity, you will have to read the response from the founder themselves (quora.com).
Personally, I think YC and programs similar provide an invaluable service to young entrepreneurs. Mentorship and freedom that my fellow cofounder and I will continue to apply to for the next few months.