Tech Billionaire Boot Camp 178
theodp writes "Forget the Summer of Code. If you've got a hot idea for a start-up, Newsweek says Y-Combinator, the boot camp where Silicon Valley meets 'American Idol', is the place you should be. 'Some critics scoff that Y Combinator's investment is peanuts for that amount of equity. But the opportunity is unparalleled -- total immersion into Silicon Valley start-up culture, advice from Graham and a fast track to the top angel investors and venture-capital funds. When Graham calls the winners, the founders have only five minutes to accept. "If people turn us down," he says, "as far as we're concerned they've failed an IQ test."'" We've previously discussed the program on the site, just over a year ago.
Barely an investment (Score:5, Insightful)
Usually $5000 + $5000 per founder. So $15,000 for two founders, $20,000 for three. Occasionally we invest more. The goal is usually to give you enough money to build an impressive prototype or version 1, which you can then use to get further funding.
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Hence the hard sell. This is not a particularly high powered bunch by Valley standards.
Graham probably hurt the spam world as much as he helped. He thought Bayesian filtering was a silver bullet, it isn't.
$20K for 6%? Thats idiotic. A VC looking at that type of deal is not going to be impressed. $20K should buy no more than a thenth t
Re:Barely an investment (Score:5, Informative)
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Re:Barely an investment (Score:4, Informative)
Readme:
http://www-cse.ucsd.edu/~wkerney/spamfilter.READM
Download:
http://www-cse.ucsd.edu/~wkerney/spamfilter.tar.g
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The reason it worked better tha
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But for those who use Bayesian filtering as intended (one filter per person, teaching about errors when needed) there's no spam problem to speak of, and there hasn't been for years.
Re:Barely an investment (Score:4, Informative)
Bayesian filtering does not come close to the effectiveness of most of the commercial schemes I have used. Since I get over 3,500 spams a day (and 500 legitimate mails) I could not possibly tollerate even a 1% false positive rate. Currently I have less than 30 false negatives and essentially zero false positives. I do not check my junk mail folder, simply can't afford to.
Content analysis as pushed by Graham is much less effective than looking at other message features such as the headers, timing, etc. Bayesian learning is much less effective than other strategies.
Best paper at Graham's first spam conference was by an MIT undergrad from course 6 who completely debunked the whole notion with some rudimentary statistical analysis.
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I'm pretty sure the first thing to do when measuring false positives is to count them. Maybe that paper has some insight on how to do that without looking at them, but I'm still waiting for the .iso they distribute the proceedings by to finish
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You don't know what you're talking about. If you knew anything about Bayesian filters, you'd know that all information in a message is/can be used: that includes headers, time stamps, etc. Even the spacing between words might be used depending on the filter.
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The claim made by Graham was that personal filtering based on Bayesian learning was the silver bullet. It isn't.
The performance of filters of the type described by Graham is considerably worse, orders of magnitude in fact, than filters that do not r
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So you actually don't know what the % of false positives is, you just popped a number. I assume you say it is "essentially zero" because nobody tells you of mail you missed.
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I examine a sample of mail every so often. But 99% is deleted unchecked.
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You can't tolerate 35 spam emails per day?
A false positive is a message that is wrongly marked as spam. I cannot afford to lose 5 legitimate messages a day, I can't afford to lose one. I can't spend the time to read the junk mail folder.
So I have my spam filter tuned so I get 0% false positives which results in somewhat less than 1% false negatives (about 30) which I can live wi
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6% for $20K plus a seal of approval and a summer of mentoring and promotion from a guy who clearly knows how to toot horns, if mainly his own.
It's still not a deal I'd take. But it probably makes sense for some.
$20K should buy no more than a thenth that amount, and thats expensive.
Seriously? His valuation for some kids who have an idea and half-built prototype is circa $0.3m, which I agree is low. You're suggesting t
On Paul Graham (Score:2)
I'm not sure I can think of anyone for whom this would be a good deal, unless they knew pretty much for certain that their business would fail anyway. The kind of money involved is nothing in business, so it's all about the support and "mentor effect", and I rather doubt this is the right mentor for anyone who wants to become a tech billionaire. (Remind me again how many of today's top 100 tech start-ups Graham has helped to set up, an
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I acknowledged the issue about smart people thinking about it before getting in touch with Y Combinator before. However, I think perhaps you miss my point: what they're offering, in real financial terms, isn't enough to make or break a business. As investments go, it's a low risk. But if a business does take off, the Y Combinator folks have a big profit on their hands for negligible investment. Is their advice really worth it? I'm not convinced, but hey, I'd turn down Y Combinator funding, so obviously I'm
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This money covers lodging, food and equipment during the program.
For 3 months in SV. Where are these guys going to live?
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$20k , ridiculous. (Score:5, Informative)
Twenty grand really is peanuts. Hell, some venture capital groups have proposal fees that can easily run a few thousand dollars (that the startup needs to pay just to present the business plan to them), not to mention cookie-cutter research [scri.com] for business plans alone can easily run $5-10k (I won't even get into custom research).
My advice if you need $20k of investment capital? Put it on your Visa (worked for Under Armor [msn.com]). Selling off a chunk of anything you genuinely believe to be a good idea should only be considered when you have no other available means to bring that idea to fruition.
Re:$20k , ridiculous. (Score:5, Interesting)
The biggest draw is not the money, it's the connections, the advice, the hype and recognition you get for being a YCombinator grad, and the investor meetings they set up for you.
Precisely because the barrier to entry is so low on the web, getting people to take your idea seriously can be very valuable. I believe one of Paul Graham's arguments in favour of YCombinator is - which would you rather do, keep the 2-10% of a company that has few chances of succeeding, or give away 2-10% of a company with higher chances of success?
Most of the YCombinator projects are run by people in their mid-20s - not exactly experienced at running a business, and this is the point in life where connections and advice can be more valuable than standard of living.
Is it worth it for everyone? If you already have capital, connections, and a rock-solid business plan, no way. If you have a great idea and lots of energy, but you're not actually sure how to make it work, then it might be.
And yes, my co-founder for "the next digg.com or whatever web-two-point-oh site is hot this week" (see my signature) flew down to San Francisco about a month ago to pitch our site to Paul Graham & co. for this year's summer YCombinator. And no, we didn't get it (we weren't expecting to
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Want to hook me up with some of your billionaire friends? Send me an email and I'll share my ideas.
kfischer at g mail dot com
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A few moments elementary Googling, you're [yahoo.com] in Bellevue, Washington, so sure, you're in proximity to at least four of America's 372 billionaires [cnn.com].
But you post on YC's site, and comment [ycombinator.com] about how it's bad that Bay Area women are "skinnier (but more expensive)", of those that "want to date geeks". Complaining about women with expensive tastes isn't really the mark of someone has really climbed the finan
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So, if someone had a good idea and had moved it along to the point where it was worth funding, it would not be hard to talk to this guy.
No, I'm not interested in making connections or introducing anybody... my point is that this isn't
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the reality is, the higher your net worth, the more shallow (skinny) vapid women and men there are... the more you have to deal with idiots who have dollar signs in their eyes.
I know, your fantasy that as a millionaire you'll be able to keep a trophy wife is probably a key motivating factor in your life.
But if you ever achieve it you'll realize that, after taking half your net worth, the money you lost was th
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I guess there are people out there who are inexperienced enough to think that "connections" are actually valuable.
Trading in "connections" is the kind of ivy league old-school, old-economy BS that we have gotten past.
I don't live in the US, but while I hope that connections aren't as valuable as they used to be, I wouldn't underrate them if I were you.
Personally, I wouldn't know where to start if I wanted to get a foot on the door of a mid-sized or large company, which are the ones you want to sell to (assuming you have a decent product/service).
The value of each additional connection after the first one drops off because once you have a large satisfied customer, you can leverage that since other companies think th
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This is why, if you ever start a startup, you really need to hire a really good salesguy. ITs clear to me that you don't know how to get your foot in the door of a mid-sized company-- even though I just told you in my original post in this thread. (Here's the secret- you call them. And I don't mean cold calling every c ompany in the book-- but identifying the businesses that are key and investing time in them.)
Really, every business that is likely a potential customer of yours is likely also never going t
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Do some research and if you can get unbiased information about the "top tier" VCs, you'll find out I'm right there.
Furthermore, you really shouldn't be seeking VC money, unless you need to build a manufacturing facility. If you don't, you can bootstrap far more effecively. Truthfully, the bad advice from VCs will hurt you more than their money helps.
That "fluid highly educated workf
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Ad hominem. Argue againt my points if you wish, but since I wasn't making argument from authority, my status as authority is irrelevant.
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Sigh... this is what passes for intelligence in "the valley":
"many investors in the valley wouldn't think very highly of your business acumen risked your house."
When you buy a house you have a mortgage on it. Right off the bat you have "risked your house" and you haven't evne started a job.
When you borrow against the equity in your house, you're borrowing money at a reasonable interest rate, probably %8 or less.
On the other hand, when you borrow money from a venture capitalsit, you have to pay it back at a
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Anybody who build their business on nights and weekends while working a fulltime job is someone who has shown a great deal of commitment. I've done this, its damn hard... its hard not to let the startup wither away because you're too busy with your day job, and its hard not to loose interest after even 3 months of spending all your time on your job or your other job with little time for anything else.
Show me someone who built thier company that way, and I'll be interested in putting money in.
YC seems to a
Living in the past (Score:5, Interesting)
Re:Living in the past (Score:5, Interesting)
It's funny in that the engineering team that I work with (who cannot afford a house) agree with your sentiment, but of course, the management team (who do have houses) refuse to even consider relocating the company (or a part of it). My informal poll has showed that everybody in the engineering team would gladly pick up and move if given the chance. This company has no need to be in the Valley, the customers that we are going after are either outside of the United States, or have offices nationwide, which are generally not in the Valley. The company founder could easily save money by relocating us.
I would gladly take a small pay cut to live and work in a nicer area with a lower cost of living, and be able to lead a better life. After this job, I'm out of the Valley, and not looking to return. There's too much BS in the Valley, and California as a whole.
-- Joe
Re:Living in the past (Score:5, Informative)
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CoL is kinda shitty, but it's comparable to the Boston and NYC suburbs.
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Sorry, Vancouver hasn't been affordable for at least the last 2 years when the housing market heated up ahead of the Olympics in 2010.
A 700 sq foot condo downtown goes for at least 500,000. A house anywhere near downtown is at least a million. Even condos in the suburbs are going for 300,000 now.
Vancouver is the second most expensive c
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WTF? You must have some really nice taste. The cost of living in the Bay Area, compared to Texas, is really dramatic. Its a hell of a lot more expensive.
And I understand if you just moved to the bay area you may like it-- I say, give it a year and you'll be ready to leave.
I lived there 3 months and I quickly learned why it sucked... now I can barely make it 3 days on a business trip before I'm pissed off and ready to fly the hell out of there.
ITs a hellhole...
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I think I'd move back to the Valley if I had a good enough opportunity, but I must admit that if I started a company (which is a serious possibility), I likely would stay in Toronto. There's a good community of VC's, engineering talent, etc. The cost of living isn't great (houses average C$ 350k), but it's better than Cali. And I'd probably find ways to use people in lower-cost areas where there's local talent, like Sudbury, North Bay, Ottawa, etc., though i
Too Late for Spring...Wait for Winter (Score:5, Informative)
Good timing for this article...
Re:Too Late for Spring...Wait for Winter (Score:5, Funny)
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Wonder why they could not get a serious group of VCs to back their oh so original idea.
Seriously though, not impressed with the list of partners. One would have to be spectacularly desperate to go into this sort of scheme.
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Hmm, a bit like "We don't do NDAs"... (Score:2, Interesting)
What was more interesting was that these jerks weren't around during after dot-bomb, but money still was, and I got some of it.
These people might be fine, but anyone whose view of me is based on "He said
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I'm a very level-headed, even-handed person and I have fired clients who started down the abusive path.
I just don't do toxic relationships. They cause a lot more harm than good.
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Funny you should mention NDAs. This is from the Y Combinator FAQ [ycombinator.com]:
Will you sign an NDA? How do I know you won't steal my idea?
No, we won't sign an NDA. No venture firm would at this stage. The informal commitment to secrecy on our application form is more than any VC would make.
There's a good reason for "We don't do NDAs"... (Score:4, Interesting)
Take the following example: X comes to you with an idea. You reject X because the management team is weak (another perfectly valid reason). A few months later, Y comes to you with a very very similar idea. You like Y's management team and invest in it. As Y grows and becomes publicized, X reads about it, sees that you invested in it, and gets pissed off that "you stole X's idea!" Lawsuit.
Another example: You've been focusing on a certain field, say the Web 2.0 crap. You've by now gotten so much info, you've discussed it with so many companies, that when you're talking to X that came to pitch its idea, when you tell them why it'll fail you're probably going to say something that was covered under one of the dozens of NDAs you signed in the past year, but how are you going to know?
Signing NDAs would completely obliterate a VC's ability to operate. The problem is that most entrepreneurs are so obsessed about their idea being the one-and-only greatest thing ever that they aren't able to see the issue from a VC's perspective.
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It's a pretty small community of people who know each other rather well. If the VC leaks or misuses confidential info, he'll lose trust and won't get in on the juiciest deals, which is what he's aiming for.
Generally the entrepreneur worries too much about people stealing his ideas, and not enough about how good the idea is, and how well it can be implemented.
Failed an IQ test - depends on perspective (Score:5, Insightful)
In other words, if you say no, or demand to "think about it for 24 hours", you probably might have an IQ that is too high to allow them to take advantage of you, and thus makes you ineligible to be one of their patsies.
The smart people are the ones that after receiving the call, say no, realizing that the idea has been vetted as having potential, and should run with it on their own.
Everything that is wrong with Venture Capital (Score:5, Insightful)
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Yet there are always plenty of people with money prepared to hand it over to, or on the say so of, an arrogant twat. "Oooohh isn't he aggressive Mildred? I like THAT, excuse me sir, how many millions did you say you needed?"
Words of code? (Score:4, Interesting)
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in a day.
Taking VC is almost guaranteed to screw you (Score:5, Interesting)
Make no mistake: if you take VC funds, they, not you, get into the driver's seat. And it means that their priorities, not yours, are what will drive the company.
Back in the dotcom days, before the crash, it generally meant the VCs would attempt to groom the company for a quick IPO. That meant growing the company quickly and sacrificing the long-term viability of the company in order to do it.
It was common for the original founders of the company to be booted from the company or otherwise sidelined. The VCs would bring in their own executive management teams, all the way up to the CEO, which would answer only to the VCs, of course.
The end result is that the startups were unable to maintain their focus on their original mission and were vastly over-committed compared with their needs. And predictably, most of them tanked shortly after their IPO. The VCs usually made a nice profit when the companies IPO'd, but once stock investors finally realized what was going on, IPOs suddenly became worthless. And thus the dot-bomb ensued.
If I were the founder of a startup, the last thing I would do is take the money of a VC. That money is heavily tainted. Taking it would be akin to committing suicide. The only way I would take it is if it came with a contract that clearly stated that I would remain in complete control of the company as if I had not taken the funds at all. And I doubt any VC would ever sign such an agreement.
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If I were the founder of a startup, the last thing I would do is take the money of a VC. That money is heavily tainted. Taking it would be akin to committing suicide. The only way I would take it is if it came with a contract that clearly stated that I would remain in complete control of the company as if I had not taken the funds at all. And I doubt any VC would ever sign such an agreement.
VCs sign such agreements all of the time. By definition if outside investors have less than 50% of the voting stoc
Bad idea. (Score:2, Funny)
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$250k for 2% means a $12.5 million pre-money valuation. 1% is a $25 million pre-money valuation. For two no-name kids before the prototype? You're smoking crack. One thing that I think you've overlooked is that ideas aren't worth much by themselves. An idea along with the will and ability to build a company is what's worth something.
Now, I'm completely aware that early stage valuation is largely speculation and hand-waving, but I have yet to see a
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a word of advice (Score:5, Insightful)
1) the surroundings are hyped up, for example a "boot camp for Web 2.0 entrepreneurs" that is a "combination of Silicon Valley and American Idol";
2) you are given a ridiculously short time limit to make up your mind, let's say five minutes
and
3) if you don't accept, you "fail the IQ test" in the eyes of the people making the offer
then grab your shit and head out the door as fast as possible. Don't forget your cell phone.
(following Harvey Mackay).
IQ Test (Score:5, Interesting)
Taking 5% of a company for TWENTY THOUSAND DOLLARS? Anyone who accepts that deal should be shot. Saying that "they failed an IQ test" just makes Graham out to be a fraud.
Also, and this is a personal pet peeve for me, he wrote "The Plan for Spam" in August 2002. Bob Boyer and I (Bill Kerney) while grad students at UC San Diego wrote a very similar statistical spam filter, which we open sourced and released in December 2000 (and which some people took and continued working on it). And we didn't invent the idea either -- we based our work on the UC Irvine Machine Learning Database.
And yet somehow he never corrects the notion that he invented the idea.
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Oh but I'm sure this type of hustler will be quick to point out that if he takes 5% of your company for 20k, that means he thinks you are really worth FOUR HUNDRED THOUSAND DOLLARS! Isn't that amazing!? And that's without doing anything at all! Imagine what you will be worth in just a few years... etc, ad nauseam
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Re:IQ Test (Score:5, Insightful)
Re:IQ Test...Mod parent up. (Score:3, Insightful)
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Note this is after you've already (from what I can tell from TFA) put together a business idea and they picked the top whatever percent of ideas. He's buying a chunk of your company for a couple pennies and a slap on the back, and then insulting people that don't think that's a great idea. It's not the offer that's necessarily insulting -- perhaps you really might only be worth a half million or so -- but ca
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Graham selling tactic
Y Stealer (Score:2, Informative)
For a guy wh
Don't jump the gun now... (Score:2, Insightful)
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That would be inspiring if your next sentence wasn't "... and that's why I spent my life savings to found FerretTube."
An old scam for a new generation (Score:3, Insightful)
If you accept in 5 minutes, you've failed an IQ test. These people are not that important, regardless of what they tell you, and neither is the amount of money they have on the table. This is an attempt at simple manipulation on the part of older investors looking for wage slaves that will ask how high when told to jump. Unfortunately, if you're a 20-something, they're targeting you.
Understand the strength of your signature and the committment it represents. Never, EVER, be afraid to walk away from a deal. It's a big planet and there are plenty of legitimate people to do business with.
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Guy Kawasaki tried this (Score:2)
Guy Kawasaki has been doing something like this for years, with Garage.com [garage.com]. Their biggest success was Claria, which distributed adware. Not a great track record there.
Wow, I think every single person here misses the.. (Score:2, Insightful)
VC 101 For the /. Developer (Score:3, Interesting)
There's a fork at the beginning of the road: Quit your job or keep your job and commit to your startup as best you can.
For the Quitting My Job crowd:
1. Make an actual living at it ASAP. If you can't, then forget it. If others around you are, and you can't for some reason, there simply isn't the time to learn the hard knocks. Either way, you have about 12 months. You should, after 12 or so months, have a good idea if it's gonna work. If you can't make that decision on your own, then you are in dire need of some Management. You don't need to go to Paul Graham to get it.
2. AFTER you are making some money with a workable widget 2.0. reassess. From here, you work with a great clarity that is not available to a Paul Graham graduate. If you want the big VC $$ it will take a great deal of time, effort and money to get. In fact, it's probably a full-time job on its own.
For the Moonlighting crowd:
You will need to work MUCH more smartly than the Quitting My Job starter because the pace of "ground breaking innovative Widget 2.0" is limited. If you are good at whatever you want to start, then there should be success despite the Job Quitter that is competing against you.
Your success STILL needs to be measured in dollars. Forget Youtube style VC burn for now, but concentrate on generating revenue. Despite working less at it, it MUST make money with a pretty clear path to replacing your salary and benefits.
________Tips for either group_________
You must know what you need and how much you are willing to give away to get it. Hint: 5% is a whole heck of a lot of equity to put on the table.
Grow on your own revenue. Don't be tempted by the other ways to do it. If you have a good business, it will grow on its own.
There are too many barriers to youtube-like startups in the U.S. Seriously consider starting it someplace you'd like to emigrate. VC capital is wasted largely on lawyers in some way, shape or form in the U.S. If you are tempted by the conventional public offering, the amount of money the banks sucks up is absolutely shocking. This is one reason why Google cut some of the bankers out in their IPO.
Stay flexible. Chances are excellent what you started out doing for money will be somewhat different than what actually brings the money in.
I co-founded a company funded by Y Combinator (Score:5, Interesting)
First up, about the equity. YC asks for between 2% and 10%. Mostly, it's 5 or 6 percent. The companies funded are all quite early stage. It's very rare for one to be launched, and even moreso for it to be profitable. In some cases, it's no more than a mocked up demo. YC are very early stage investors, usually getting involved before anyone else will touch it--they invest in smart people, not really ideas or businesses. In the three months I've spent meeting once a week with the other founders, no one has ever even hinted that they regret giving up equity to YC. We certainly don't, and we're one of the few that had a launched product and paying customers.
The "5 minute IQ test" is being misconstrued. Applicants know well in advance exactly what the terms are going to look like. You don't bother applying if you don't like the terms, so you never get to the yes/no IQ test. I don't think anyone has ever turned them down at that stage. It's a good punchline, and makes for good magazine copy, nothing more.
Paul Graham is extremely smart. Wherever he goes crowds gather round, and it's not just for his boyish good looks. He's got a touch of ADD, at this point, due to his popularity, but we've never had trouble getting advice when we needed it, and his advice has generally been spot-on. YC has three other partners, two of whom (Jessica and Trevor) were as deeply involved as Paul during WFP. Paul's celebrity leads to a ridiculous array of speakers at the weekly dinners...He has an uncanny knack for bringing in the most interesting people in the valley: Joe Kraus (Excite, JotSpot), Evan Williams (Blogger, Twitter), Paul Buchheit (Gmail), Greg McAdoo (Sequoia), Ron Conway (largest angel investor in the world), etc.
Which brings me to contacts. If you believe contacts don't mean anything, you're fooling yourself. I started a business outside of the valley in 1999, and now I've started one in the valley. Big difference. I paid my bills and bought myself a nice car with my previous business. I have much higher expectations with my current business, and a large percentage of those expectations have been brought nearer by our affiliation with YC. Try dropping a random investor an email sometime, to arrange a meeting to tell them about your great business. We've never received a "no thanks" to such a meeting, and I've been hearing from fellow YC'ers that they've always gotten the meetings they wanted (not just random VCs...they're talking to exactly the people they want to talk to). We're in talks with our first choice VC and it's going very well, and at least three of the other companies have already closed rounds. If you are in Y Combinator you increase your chances of getting funded by a good investor by a huge amount (and let's be clear: A bad investor brings nothing but money and disaster will follow...the right investor brings more contacts, good advice, expertise in the right areas, and also money...with the right investor your odds of explosive success are remarkably higher). YC brings the best contacts in the industry.
Some other bits that aren't obvious unless you think it through and actually read the YC information on their page:
YC pays for the incorporation and all legal stuff for issuing shares. It's about ten grand worth of legal work from a top valley firm.
YC feeds the company founders every Tuesday night for three months. Paul cooks the meals personally (I've seen it with my own two eyes). These dinners are the single most valuable aspect of the program (aside from providing the motivation needed to get people out to the valley). Chatting with fellow founders every week about what you're working on, what they're working on, and exchanging ide
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Well, sorry to burst your bubble, but there is no way I would have applied to YC, so there's no way I could be jealous of having been turned down. (Plus, $15,000 is less than I have in cash on hand, not a meaninful equity investment.)
"It's about ten grand worth of legal work from a top valley firm.
Three things you need. (Score:2)
1) People
2) Ideas
3) Capital
Every startup needs these ingredients. Good people, good ideas & capital are in short supply. I left out technology because it's is a commodity. Throw enough money at a technical problem and it gets solved. YC doesn't seem ideal for everyone but can still be valuable and help hone your people & ideas. $20k is a paltry amount but legal fee's are included. Advice among your peers and veterans in the industry would be invaluable.
Re:What a load (Score:5, Insightful)
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Yes it _could_ be worth millions. Probability is against that, however. Otherwise getting rich would be easy.
Re:Graham? (Score:4, Informative)
Paul Graham is an essayist, programmer, and programming language designer. In 1995 he developed with Robert Morris the first web-based application, Viaweb, which was acquired by Yahoo in 1998...
He has a really interesting essay-blog at his website [paulgraham.com] which is worth checking out.
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