The Launch Pad

Inside Y Combinator, Silicon Valley's Most Exclusive School for Startups

Investment firm Y Combinator is the most sought-after home for startups in Silicon Valley. Twice a year, it funds dozens of just-founded startups and provides three months of guidance from Paul Graham, YC’s impresario, and his partners, also entrepreneurs and mostly YC alumni. The list of YC-funded success stories includes Dropbox (now valued at $5 billion) and Airbnb ($1.3 billion).

I was most fortunate to be granted access to Y Combinator’s summer 2011 batch of young companies. Sixty-four startups were funded in the batch, most of which had two or three founders. Over the course of the summer, they scrambled to heed Graham’s seemingly simple advice: make something people want.

Among the sixty-four were Codecademy, a Web site offering to teach anyone programming; Rap Genius, a Wikipedia-like site for rap lyrics; and Clerky, whose software is written by a pair of attorneys who are also software engineers seeking to “make attorneys obsolete.”

Founders are guided by Graham’s notoriously direct form of tough-love feedback. “Here, we don’t fire you,” he says. “The market fires you. If you’re sucking, I’m not going to run along behind you, saying, ‘You’re sucking, you’re sucking, c’mon, stop sucking.’” Some teams would even abandon their initial idea midsummer and scramble to begin anew.

The program culminated in “Demo Day,” when founders pitched their startup to several hundred top angel investors and venture capitalists. A lucky few attracted capital that gave their startup a valuation of multiple millions of dollars. Others went back to the drawing board.

The Launch Pad presents the story of a seismic shift that’s occurred in the business world, in which coding skill trumps employment experience, pairs of undergraduates confidently take on Goliaths, tiny startups working out of an apartment scale fast, and investors fall in love.

       

Portfolio/Penguin