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What's The Secret Behind Y Combinator's Success?
- t0 14y agoHis recent Bloomberg interview shed some light on one reason for YC's success: luck.
- Harj 14y agoPresumably that's an ingredient in all success.
- michaelochurch 14y agoIt came up in a time when raising money without connections was hard-to-impossible and there was a lot of young talent eager to take a swing at the startup game. Y Combinator had the reputation and credibility instantly (as opposed to other, mostly undistinguished, incubators) so it could take equity at extremely advantageous valuations-- justifiably, because just being able to say you're YC improves the value of your company by at least 1.1x (probably 1.5-2x). The problem right now is that it seems to be a "feeder school" for traditional investment, and it won't be able to replace VC outright. YC is an impressive and commendable project, but its value is prestige and it's hard to scale without losing it.
- Harj 14y agoThe problem right now is that it seems to be a "feeder school" for traditional investment, and it won't be able to replace VC outright. Why is this a problem? The intention was never to replace VC outright, YC and VC both play different and important roles.
- nodemaker 14y ago"The current VC-funded startup scene, which I’ve affectionately started calling “VC-istan”, is– not to be soft with it– a total waste of time for most of the people involved" "the VC’s stake gives them control. It gives them board seats, influence over senior management, and the opportunity to hand out a few executive positions to their children or to people whom they owe favors" http://michaelochurch.wordpress.com/2012/07/08/dont-waste-your-time-in-crappy-startup-jobs/ http://michaelochurch.wordpress.com/2012/07/08/dont-waste-yo...
- cperciva 14y agoYC has invested $8 million [...] the value of YC’s portfolio is approaching $10 billion, largely due to Dropbox and AirBnB If I understand this correctly, the $10B is the total valuation of all companies YC has invested in, not actually the valuation of YC's portfolio (which starts at 2-10% and decreases as other investors buy in). Which isn't to say that YC hasn't been achieving great returns -- but it's not fair to paint it as turning $8M into $10B.
- citizenkeys 14y ago"YC has invested $8 million... more than 400 companies in over 30 markets." Where have I seen that exact phrase before? http://ycuniverse.com/ycombinator-companies http://ycuniverse.com/ycombinator-companies
- vl 14y agoThis statement seems to be incorrect, but with some stretch it can be attributed to unfortunate wording. The larger problem is that, ironically, the article actually fails to mention one of the key Y Combinators differentiators and ultimate marketing tool - Hacker News.
- aaroncray 14y agoSpray and pray; but there's nothing wrong with that.
- deleted 14y ago[deleted]
- drumdance 14y agoYes an no. I don't know that pg is any better than average at picking winners and losers, but he's found an efficient way to put a little skin in the game with a lot of players and set himself up as an arbiter of quality. "If Paul's invested, we [insert A-list VC] should at least give them a meeting." Also, there's YC, then there's pg's personal portfolio. I would guess that he personally invests in companies that get big A and B rounds, but that's only a guess. The seed-funded companies are like the minor leaguers. The institutional rounds allow him to bet on the major leaguers. Dropbox and AirBnB are the All Stars, and it wouldn't surprise me if he doubled down again on those guys. I certainly would.
- macspoofing 14y agoHow do they not mention Hacker New? I'm not sure Y Combinator would be as popular without this site. It's an incredible marketing tool.
- raverbashing 14y agoThat's probably an example of 'hidden in plain sight' Other incubators may try to replicate it, maybe with a Web 2.0 look and hiring a couple of people to post news and then we end up with a (worse) BI/SAI 2.0
- niggler 14y agoCan we agree, as a community, that Forbes is linkbait and not up vote these articles?
- rdl 14y agoI don't understand what happened to Forbes. It used to be a real publication. Now it's linkwhoring blogspam, fairly exclusively, with horrible design on top of that.
- pedalpete 14y agoIf the network is the biggest 'secret' to YCs success, then is there any reason why YC has been more successful than 500 startups or techstars? These incubators should have an equally impressive group of founders. I think their is something special about YC, though I don't know exactly what that is. At the same time, you have to suspect that some of the cache comes from AirBnB and DropBox hitting bases loaded home runs. What are the most successful start-ups from 500Startups and TechStars? Did YC just get lucky with these two, and luck begets luck because now the best and brightest will apply to YC because it has had the early success? ----update------ I also hadn't realized how many companies have been through more than one incubator program. For example, sendgrid was both 500Startups and TechStars, Webmynd,Chirply and GazeHawk were all part of 500Startups and YC. I'm sure there are many more.
- niggler 14y ago"I think their is something special about YC, though I don't know exactly what that is." YC provides three key benefits: 1) "The Alumni" -- YC founders helping each other 2) "The Man" -- PG and the other partners do bring some value in the form of advice and connections (and the associated branding) 3) "The Cycle" -- Any moderately interesting product/service will have guaranteed customers in the form of other YC companies. AFAICT, the other programs don't have a charismatic character at the helm, may not have as strong an alumni network, and don't have the portfolio breadth to sustain a business from the cycle
- rdl 14y agoDMC might be less "charismatic" than pg, but is pretty aggressive at getting his message out there.
- Mz 14y agoI will suggest that HN is part of the secret sauce. It gives a place for people to get started on learning, making contacts, etc from nothing, long before they ever decide to found a company. It gives fertile soil for seeds to be planted and grow into something ready for an incubator. And gives a lot of opportunity to do some weeding and pruning well before applying to the program.
- pshin45 14y agoGiven that YC is essentially the "Harvard" of startup accelerators, I think that by analyzing how Harvard got to where it is today, we can gain a lot of insight into YC's success as well. Not unlike YC, Harvard was also the first of its kind (oldest college in the US), which gives them a first mover advantage right off the bat. And then somewhere along the way, just like YC with Airbnb and Dropbox, Harvard too probably got "lucky" early on with several alums who became super rich and successful, who then started giving back to the Harvard community via generous donations of their money and time, which coupled with their first-mover advantage resulted in a virtuous cycle of success that no other university has been able to replicate since. Smash cut to the present, and Harvard has a $32 BILLION war chest (endowment) and a network of alumni who go out of their way to ensure that the next generation of Harvard students can succeed as well. Lastly, I think YC's small size has been essential to its success. I myself went to a very small liberal arts college (total student body of only ~2,000), and the small size allows for a level of intimacy and personal care that larger universities could never dream of. It also causes us to feel like underdogs and war buddies, and thus that much more willing to help other alums in order to keep growing and sustaining our small but precious community. Oh and btw, it just so happens that pg got his Masters and PhD from Harvard. Coincidence? You tell me :P
- argumentum 14y agoThe secret is that YC is not run like an incubator, but like a startup .. because it is a startup .. that generates other startups. They iterate on their own successes and mistakes .. don't follow the latest trend, but genuinely think for themselves.
- kamaal 14y agoThe problem with analysis done by pony tail management guys is they take successful story of which largely- a successful team with a amazing leader is involved, identify some patterns and try to a make a process out of it, while totally neglecting the human aspects of it. How long are we going to pretend that its the people who are the center of success and not the process. If someone is saying if you do Step X, Step Y and Step Z you will become like <insert a successful leader> they just lost the whole point. A leader is not successful because of steps X, Y and Z. Some other leader would execute step A, B and C exactly opposite to X, Y and Z and be equally successful.
- dschiptsov 14y agoInvesting in personalities instead of technologies + connections.
- tyang 14y agoYou all keep underestimating Dave McClure. That man is incredibly savvy and smart.
- confluence 14y agoOh I know! It's fundamental attribution error! (http://en.wikipedia.org/wiki/Fundamental_attribution_error http://en.wikipedia.org/wiki/Fundamental_attribution_error) Oh wait - that's not right, that's actually the gross error that all "What's the X behind Y?" questions make - when in reality, it's probably about 100+ different things all coming together at the same time. For YC it's the falling cost of bandwidth, the falling cost of storage, the falling cost of computation, an increase in the number of internet users by nearly 1 billion over the last decade, a doubling in the global economy over the last 2 decades - quite frankly the list leading up to the creation of a Y Combinator is almost endless - and I haven't even dealt with the actual people who help make YC the success that it has become today. Single factor explanations of complex phenomena are stupid.
- pshin45 14y agoAll factors are not created equal though, and you must admit that there is probably a combination of a few key factors that help explain most (but not all) of their success, no? (http://en.wikipedia.org/wiki/Pareto_principle http://en.wikipedia.org/wiki/Pareto_principle) I think that is what they/we are trying to get at. I agree with your general principle that causation is rarely as black and white as we make it out to be, but saying that all/most phenomena is a result of hundreds of different factors coming together at the right time and right place would make it very difficult to ever learn anything about anything. > "..the falling cost of bandwidth, the falling cost of storage, the falling cost of computation, an increase in the number of internet users of nearly 1 billion over the last decade, a doubling in the global economy over the last 2 decades." These are all situational factors common to TechStars, 500 Startups, etc. but which don't explain YC's unique success.
- confluence 14y ago> very difficult to ever learn anything about anything Not really - if you are talking about investigating things that have a multitude of conflating variables affecting the end result. In that case you aren't learning anything either - because then everything is just correlation. When one investigates some arbitrary phenomena, it is important to constrain one's experiment and control all but one variable so that one can be sure that the changes one observes are more likely to be due to causation rather than correlation. For example: Stating that Africa is a failure because of X thing is full of peril. However, stating that when people don't have easy access to safe drinking water, they are more likely to die of water borne illnesses, and that this has probably contributed to the failure of Africa is a much more secure statement. It's not nearly as pithy, and it includes many qualifiers - but then again, it is a much more accurate and true assessment. It is also much less likely to be subject to vague/"woo"/dumbass business like thinking. > These are all situational factors common to TechStars, 500 Startups, etc. but which don't explain YC's unique success. First mover advantage anyone? Path dependence is a bitch - just ask DVORAK.
- jes5199 14y agoHow successful is Y Combinator, anyway? I've seen some vague numbers, and I have no idea how that compares to other investors
- pshin45 14y agoHow would you define "success"? Forbes publishes a ranking of accelerators based on financial results, and YC was #1 for what it's worth: http://www.forbes.com/sites/tomiogeron/2012/04/30/top-tech-incubators-as-ranked-by-forbes-y-combinator-tops-with-7-billion-in-value/ http://www.forbes.com/sites/tomiogeron/2012/04/30/top-tech-i... "The rankings are based on a number of factors, focusing on the value of the incubators’ companies. In other words, we took the exit prices or the last priced equity valuation of the companies that have gone through each program. We also took into account other measures, such as how much venture funding their companies have raised, what percentage of their companies have raised funding and what percentage of their companies have been acquired or gone out of business."
- jacquesm 14y agoI see several major factors behind Y Combinator's success: - to organize applications in classes that are solidly oversubscribed This allows YC to select the cream of a batch of applicants rather than to have to judge each proposal at some point in time on its merits on an individual basis. Having a background against which to judge is a huge benefit. - Hacker News Having a place that is a breeding ground that already works before joining/applying gives another way to look at applicants and creates a way for applicants to join up. After YC had run for a while a third ingredient came to represent an ever growing factor in the success, the YC alumni, as the article rightly points out. Like any network there are second order effects at work here, effectively YC has a very large multiple of the number of eyes, ears and brains compared to other entities.