When a startup is finding its bearings, it needs funding. But during that early stage, startups also need advice from experienced people, and to cultivate social and business connections for future funding; the venture capital company Y Combinator (YC) provides all three elements. Named for the program in computer science that runs programs, Y Combinator is a company that starts companies.
Founded in 2005 by Paul Graham with Robert Morris, Trevor Blackwell, and Jessica Livingston, Y Combinator has funded more than three hundred startups. Unlike most seed funding companies, YC funds startups in batches twice a year. Also unlike most seed funding companies, YC provides only $11,000 to $20,000; Graham believes that such an amount is usually enough to create a prototype to secure future funding. They also require that at least one founding member move to the Bay Area for the duration of the three month program. Once a week, YC hosts a dinner featuring a speaker in a specialized startup aspect; these speakers, along with YC’s extensive alumni network, form the long-term benefits of the program.
In return for funding, Y Combinator asks for only two to six percent of the stock in the company, nothing more. During the program, the staff at YC offers only advice and guidance without angling for more power in the company. The guiding philosophy is that the landscape of startup funding is shifting, from the investors to the founders, and that by giving startups as much flexibility as possible they will be in a position to make the best possible choice for their long-term goals. It’s hard to argue with the results of Y Combinator. Though not all of their funded companies succeed, many of them do; alumni of the program include the social site Reddit, revolutionary travel company, Airbnb, and the blogging platform Posterous.