YCombinator作为硅谷最负盛名的创业孵化器之一，每年吸引着众多创业者参加其为期三个月的培训计划。该计划不仅提供种子资金支持，还帮助初创企业建立业务模型、获得投资者关注。许多知名公司如Dropbox和Reddit都曾在此孵化。
- By Steven Levy
- May 17, 2011 |
- 10:03 pm |
- Wired June 2011
From left: Business boot campers Sandy Spicer (Moki.tv), Qasar Younis (TalkBin), John Egan (Sendoid), Jonathan Deutsch (Tumult), Aaron Harris (Tutorspree), Laura Valverde (Beetailer), and Wei Hsu: (Hyperink)
Photo: Robyn Twomey
The Y Combinator offices sit at the dead center of Silicon Valley, in Mountain View, on a street called Pioneer Way. Outside, the traffic hums along CA-z85 headed either south to Cupertino or north toward Google headquarters. Inside, the decor of the main room combines modern office (big whiteboard, bright orange noise-dampening panels) with camp dining hall (long trestle tables). Y Combinator shares space with a company called Anybots—which makes robots that can be controlled remotely—and occasionally a droid will motor through the room on a Segway-style base.
On this November day, the Terminator itself could be roaming around the main room and the young men (and the occasional woman) gathered here wouldn’t notice. They are attending Interview Day, a chance to compete for a spot in what has become the tech world’s most prestigious program for budding digital entrepreneurs. The interviewees include former product managers at Google, a Midwestern accountant, and a 17-year-old high school student. They hail from Philadelphia, Minnesota, Greece, Russia, England, Spain, and San Francisco. And like would-be starlets flocking to Hollywood, they have come to Mountain View in the hope that Y Combinator will turn them from nameless coders into Silicon Valley celebrities.
by Steven Levy (52.5 MB .mp3)
Joseph Walla, HelloFax
Photo: Robyn Twomey
Technically, Y Combinator is a launchpad for startups, but that description doesn’t quite capture the experience it provides or the influence it wields. Twice a year, the company—under the tutelage of its founder, Paul Graham—hosts a three-month boot camp. Each team that’s accepted receives seed funding—$11,000 for the group, plus $3,000 more for each member of the founding team. In exchange, Y Combinator gets a small stake in the startup, usually 6 or 7 percent. But the seed capital is almost beside the point. “Really, the money is just for living expenses,” Graham says. “Like a scholarship to go to college.” The program’s real draw is an unmatchable entrée into the otherwise closed world of high-stakes Internet entrepreneurship. Over a period of 13 weeks, enrollees hobnob with some of the industry’s most powerful investors and innovators as they attempt to turn their embryonic ideas into full-fledged businesses. And, at the end of their tenure, they get to participate in Demo Day, a kind of funding free-for-all during which they present their plans to the world’s most respected venture capital firms and angel investors.
Anyone accepted to Y Combinator joins a group that includes many of the elite startups of the past five years. The founders of Dropbox, Reddit, Loopt, and Scribd were all discovered and nurtured by Graham. Indeed, his picks have been so prescient that getting chosen by Y Combinator has become a geek version of the Good Housekeeping Seal. Tech blogs always cover the launches of Y Combinator companies. Angel investors clamor to fund them. Brian Chesky, CEO of Airbnb—a breakout Y Combinator startup that matches travelers with private lodgings—compares Graham to legendary music producer John Hammond. “Just as Hammond found Bob Dylan when he was a bad singer no one knew, Graham can spot potential.”
He can also make an impact. Graham has upset the balance of power in Silicon Valley, creating an environment in which investors compete with one another for a chance to fund the next hot startup—and drive up the amount they must pay for the opportunity. He has also inspired a legion of imitators. A startup accelerator called TechStars runs boot camps in Seattle, New York City, and Boulder, Colorado. Dave McClure, a PayPal alum and angel investor, recently launched 500 Startups, a YC-esque incubator at which McClure plays the role of Graham.
Before Interview Day—which actually lasts several days—winds up this week, 120 groups of founders will pour through the Y Combinator offices. They’ll each have 10 minutes to convince Graham’s team that they deserve a slot in the winter 2011 class. The pressure is palpable as the first batch of applicants mills about the main room. They whisper their rehearsed pitches to themselves as they wait. People have quit their jobs at Google, Apple, and McKinsey for this moment—proof of their commitment. “YC is the perfect environment,” says Tim Shea, a candidate who flew up from LA for the interview. His partner, Brandon Kleinman, nods. “The best of the best.”
Qasar Younis, TalkBin
Photo: Robyn Twomey
The interviews are held in the back office—which doubles as a pantry, stuffed with boxes of Glad bags and 2-liter cola bottles—where the Y Combinator partners sit at a long table. Besides Graham, there are his cofounders: MIT associate professor Robert Morris, Anybots founder Trevor Blackwell, and former investment-bank marketer Jessica Livingston (who is also Graham’s wife). Two new partners join them: YC alum Harj Taggar (his company, Auctomatic, was purchased for $5 million by Live Current Media) and FriendFeed cofounder and Gmail inventor Paul Buchheit.
Over the course of the day, 20 teams come into the room. They are dressed, almost invariably, in T-shirts and hoodies. As they enter, Livingston sets the alarm on a funky Westclox timer for 10 minutes, a cue for applicants to begin their spiels. The encounters have some of the nervous energy of an early-round American Idol episode. Graham and Buchheit rarely wait to hear an entire pitch. After listening to a few sentences, they start circling the table, raising questions about the site or service, wondering why it doesn’t do this, suggesting how cool it would be if it did that. At some point, Graham will ask his favorite question: “What’s your long-term plan to take over the world?” Eventually the Westclox buzzer goes off, Livingston snaps a picture of the candidates, and the next group is ushered in.
Ten minutes is more than enough. Indeed, the YC members sometimes make up their minds in the first 60 seconds. Graham tends not to pay too much attention to a candidate or team’s business plan—it’s likely to change during the course of the program anyway. Instead, he zeros in on the character and intelligence of the applicants. After one team’s presentation, Buchheit says that he would use the product. But Graham is skeptical. “Are these guys winners?” he asks. “It’s all about the guys.” The group is not accepted.
Paul Graham flanked by Y Combinator entrepreneurs.
Photo: Robyn Twomey
As the yeses pile up during the week, it becomes clear that the winter 2011 class will be the biggest Y Combinator cohort yet: 43 companies, a total of 99 founders. Their would-be products and services include a network for conference attendees, a location-based flirting site, two music sites, a catering service, a smartphone fitness app, an iPad app for doctors, and several companies that connect people to local events—not exactly the next Google perhaps, but Silicon Valley is filled with small-seeming ideas that grew to multibillion-dollar companies. Qasar Younis, 29, wins acceptance based on his idea for a text-message- and app-based feedback system. He has an engineering degree and a Harvard MBA and has spent the past few years working in Chicago on behalf of a swanky investment firm. For the next three months, he will share a small apartment with his two cofounders, spending the bulk of his days in a living room dominated by cheap computer tables and a huge whiteboard. “I was making well into six figures. I had a place with a marble bathroom in Millennium Park,” Younis says, beaming. “I traded it for this.”
Paul Graham calls for quiet. Though there’s a bit of bulldog in his build, at 46 his face is still cherubic. Like many in Silicon Valley, Graham affects a kind of studied informality; pretty much everyone calls him by his nickname, PG, and tonight he’s wearing his standard attire of shorts and a polo shirt. It is the first of the weekly Tuesday-night dinners that are a staple of the program. During the week, Y Combinator founders work in offices, apartments, or houses—some find places in San Francisco, and others live in the Valley. But every Tuesday, they gather at YC headquarters to eat chili or similarly humble fare, compare notes, and pepper a guest speaker with questions.
Graham calls everyone’s attention to the whiteboard, where a timeline labeled “The Process” depicts the steps that every entrepreneur must navigate on the way to building a successful startup. It looks like a mountain range, climbing and falling as it enumerates a series of small victories and crushing setbacks: The TechCrunch of Initiation, Wearing Off of Novelty, Trough of Sorrow, Releases of Improvement, Wiggles of False Hope, and finally an upward slope climbing to the Promised Land, where Acquisition of Liquidity awaits.
The class’s schedule is similarly codified. The coming weeks will be dotted with milestones—presentations of prototypes, coaching days with VCs—all leading to the climax: Demo Day, scheduled for March 22, when the founders pitch their companies to the Valley’s most powerful investors. Graham tells the assembled startup teams to think always about that deadline—work like mad for these three months, launch a product that draws customers, amass proof that the business model can work, and take advantage of the feedback from Y Combinator partners, all to ensure that they give the best possible presentation on March 22. “There are 77 days until Demo Day,” Graham tells the group. “After that, anything you do will make you better—but it won’t make you better on Demo Day.”
Graham had no such formalized plan when he started Y Combinator on a whim in March 2005. He was back at his alma mater, Harvard, to give a speech to the undergraduate computer club. It was a paean to startups, something Graham knew a bit about: His own company, Viaweb, had been acquired by Yahoo in 1998 for $49 million in stock. Graham told the audience to look for angel investors who had actually started their own companies, because they best understood the needs of founders. Then he noticed that people were looking at him, he says. He decided to create an organization so he could start investing himself. He thought he may as well coach some of the hopefuls, offer them funding, and take a stake in their companies in exchange. Graham drummed up a few geek-trepreneurs for what he called a summer founders program and took on eight startups. (Three eventually wound up being bought by larger companies.) The group coaching he provided was more efficient than schooling one company at a time, and the participants learned from one another’s setbacks. In 2006, Graham began an annual winter session in Mountain View to complement the Cambridge summer session. In 2009, he relocated the summer session to Silicon Valley as well.
Over the course of his career, Graham seems to have worked with or befriended everyone of consequence in the tech industry, and he’s happy to tap his contacts for the benefit of his Y Combinator classes. This session’s speakers will include Salesforce.com CEO Marc Benioff, eBay CEO John Donahoe, superangel investor Ron Conway, and Quora founder Adam D’Angelo. And the perks won’t stop there. YC offers free incorporation services from its in-house lawyer. Investors from Sequoia Capital will provide one-on-one coaching. Free office space at AOL’s Palo Alto headquarters will be given to one of the YC startups. Rackspace will supply $20,000 worth of web hosting to each company. And Facebook will invite the entire class to its headquarters for a dinner with its top engineers and founder Mark Zuckerberg. (During the dinner, Zuckerberg will take an interest in one particular YC company, which is building a social Pokè9mon-style game called MinoMonsters—and urge its founders to work harder on a Facebook-compatible version.)
Tonight’s alumni guests include the founders of Heroku, members of the winter 2008 YC class. A service for software developers, Heroku was acquired the month before by Salesforce.com for $212 million, the largest amount ever for a YC company. (Several other YC companies appear to be worth similar sums: Airbnb, Scribd, Dropbox, and Weebly are all estimated to have eight- or even nine-figure valuations.) To celebrate, they’ll be forgoing the usual one-pot meal. For the first time in YC history, the class will dine on steak.
Prototype Day is held in late January, three weeks into the program. It’s a chance for each team to give a two-minute presentation of its project. Some of the YC companies are already well on their way. LikeALittle, a flirting site for college students that launched last fall, is expanding to new schools at a furious pace. Grubwithus, a site that sets up restaurant dinner parties at which strangers can “eat with awesome people,” as the founders put it, has launched in its second city and is selling out tables regularly. Graham is so optimistic about Grubwithus that he refers to it as a potential “square on the periodic table”—a company that seems almost organically preordained, like Twitter and Facebook. Then again, Graham is a bit hyperbolic about most of his companies, routinely referring to them as “the next eBay” or talking about how they will unseat established, billion-dollar businesses.
Chris Chen, Like.fm
Photo: Robyn Twomey
But some startups have barely come up with a plan. One group of founders knew from the beginning of the session that they were going to have to ditch their original idea, which was a tool to make real-time plans with friends. They used it as a way to get into the class but always intended to abandon it once they came up with something better. The trio—two engineers and a derivatives trader with degrees from Stanford and MIT—has been spending 14-hour days in front of a whiteboard, trying to brainstorm a promising concept. Time and again, they have proposed potential businesses to Graham; none of them worked out. But just before the first weekly dinner, they lit upon the idea of building a curated mailing list of high-demand jobs linked to college alumni networks. Graham gave them the go-ahead, and they are just getting under way with their new company, Insider Posts.
That kind of radical reinvention is standard practice here. Indeed, a sizable percentage of YC companies will, at some point, drastically rethink their business—a process known in the startup world as pivoting. During last winter’s session, an 18-year-old Israeli founder named Daniel Gross pulled the most notorious pivot in YC history. Two days before Demo Day, soon after his cofounder quit on him, the young engineer realized that his original business plan was fatally flawed. Gross concocted an entirely new idea, a site that would allow users to search all of their social networks at once. He quickly coded a demo and gave the pitch. Within a year, he had launched the product. Now his company, Greplin, has $4.8 million in funding.
Helen Belogolova and Christine Yen are trying to accomplish a similarly successful pivot. When the two MIT grads interviewed for Y Combinator, they outlined their vision for Citythings, a site to help people discover local events. Over the next few months, they realized it wasn’t working and dropped the idea. But as they researched, they discovered another potential business: Because venues for special events often sit unused even as party and conference planners spend days trying to find space, Belogolova and Yen decided to set up a system that connected planners with available spaces. Citythings would become Venuetastic. Pivot completed.
A couple of days after Prototype Day, the class convenes for a special Friday-night session at YC headquarters. Nobody knows why they are there; when Graham announced the mandatory meeting, he gave no clue as to what he had planned.
There has, however, been plenty of speculation. Is there going to be a big party for Jessica Livingston’s 40th birthday? Is Steve Jobs going to speak? Is Barack Obama?
Now Graham stands before the class. In an early sign of the evening’s significance, he is actually wearing long pants. He introduces the group to Ron Conway, the noted angel investor. Then Graham introduces a special guest, Yuri Milner. Milner has been conducting a relentless campaign to become a prominent Silicon Valley investor, putting hundreds of millions into Facebook, Groupon, and Zynga. Milner is not in Mountain View; he’s attending the World Economic Forum in Davos. But Trevor Blackwell has set him up with one of the Anybots, which Milner can control remotely from Europe. A tiny screen atop the wheeled robot’s saucer-shaped “head” carries a projection of Milner’s face, allowing him to talk to the group.
Christine Yen, Venuetastic
Photo: Robyn Twomey
“So, the surprise,” Graham says, gesturing to Conway and the Milner-bot, “is that they want to invest in all of you.”
For a few seconds there is stunned silence as 99 founders try to process this news. It’s like a denial-of-service attack on their brains. Finally, there’s a collective exhale and a round of applause. This is good. Then Graham explains the terms that Milner is offering in collaboration with Conway’s firm, SV Angel: “$150,000 on a convertible note,” he says. “No cap.”
Translation: Instead of demanding a relatively large share as their ground-floor stake, Conway and Milner are agreeing to invest at whatever valuation the next round of investors sets. In other words, they get no advantage from taking such an early position. These are the most founder-friendly terms imaginable, with no downside. The room erupts into applause, hoots, and shouts. The budding entrepreneurs look like an Oprah audience after learning that everyone is getting a free Pontiac.
Conway and Milner are essentially betting on Paul Graham, investing in all of the companies that he has handpicked for YC. That’s one way of looking at it. Another is that Milner has just dropped more than $6 million on companies he knows almost nothing about—indeed, some of which haven’t yet decided what business they’re in—at terms that even one YC insider admits are “just crazy.”
The announcement, quickly picked up by the technology press, adds heat to the simmering animus among some angel investors toward Y Combinator’s increasing influence. Before Graham came along, angels held great sway over startups. Entrepreneurs clamored to take meetings with angels, fell all over themselves trying to impress them, and more often than not parted with sizable chunks of their companies in exchange for the investors’ money and imprimatur. But now, thanks in large part to Y Combinator, it is the angels who are scrambling. Whereas they used to be able to set their own terms, now they must compete with one another on Demo Day, when the Y Combinator entrepreneurs meet all of the prospective investors at once. Some grumble that the result has been “YC inflation”—higher valuations driven by the abundance of bidders. What’s more, entrepreneurs can pick and choose which investors they’ll deign to do business with, often relying on inside knowledge among YC alumni and advisers as to which investors are the best connected and most trustworthy. “Investors are uncomfortable with this disruption,” YC partner Harj Taggar says.
Some moneymen have begun to revolt. Last year, a handful of the Internet industry’s top angels held a secret meeting to discuss, among other things, “Y Combinator’s growing power and how to counteract competitiveness in Y Combinator deals,” according to a TechCrunch post that blazed through Silicon Valley. The incident, which became known as AngelGate, generated a small controversy, even as some investors claimed that the event had been blown out of proportion. Still, nobody could deny Y Combinator’s disruptive influence.
But there’s one group that isn’t grumbling about Milner’s investment: the YC entrepreneurs. They will use this money for all kinds of pressing needs: to take on an engineer, hire a freelance web designer, buy new computers, or simply enjoy a longer grace period before they need to raise more cash. Neal O’Mara, cofounder of a company called HelloFax, is temporarily speechless when he receives his check a couple of days later. “I moved here from Boston to be in the center of the Internet world,” he says. “Now I’m really part of it.”
Josh Buckley, MinoMonsters
Photo: Robyn Twomey
By mid-February, most of the companies are progressing nicely. Many of the founders have been doing the unglamorous task of going door-to-door, trying to drum up customers, like hoodie-wearing Willy Lomans. Some of them are starting to find success. Three founders of a company called Tutorspree close a deal with Henry M. Gunn High School in nearby Palo Alto to connect tutors and parents. Qasar Younis, the investment-firm refugee from Chicago, has been hitting up local restaurants and cafés, trying to interest them in his team’s customer-feedback platform; he has already installed the system in cafè9s and local frozen-yogurt franchises.
When the companies run into questions—and they all run into questions—they sign up for office hours with one of the YC advisers. Taggar, Buchheit, and Livingston have all made themselves available. So has Jon Levy, YC’s in-house lawyer. Garry Tan, the founder of a YC company called Posterous, advises on design issues. But appointments with Graham are the most coveted. A few times a week, he and the other partners announce their availability in a private section of Hacker News—a news site hosted by YC—and founders can book a time slot.
Graham often conducts office hours while perambulating. He favors a quarter-mile circuit around the cul-de-sac at the end of Pioneer Way, dispensing wisdom while founders scamper alongside him like acolytes of Socrates. One day in February, he has several of these meetings, one after another.
The first group asks about its financial situation—should they begin seeing investors? Graham explains that the YC program is designed to let them create the best product possible, shutting out distractions. “Money comes with Demo Day,” he says.
“But when do the best startups raise money?” one of the founders asks.
“It’s random!” Graham says. “The best startups do things when it’s right to do them.”
Another founder confesses to having trouble getting customer leads. After some discussion, Graham realizes that the company is focusing its efforts on huge potential clients. “Find smaller companies that will be faster,” Graham says. “You have to find out who is the most desperate to launch your product!” Then his voice takes on a cheerfully conspiratorial tone: Yes, it’s important to sign up new business, he says. But it’s more important to have a good, proven idea. “By Demo Day,” he says, “all you have to do is show that it works.”
The phone call for Joey Flores comes at 3:30 pm on Wednesday, March 9. Flores is hanging around outside the YC office, relaxing with a few other founders. But as soon as his iPhone buzzes, he knows it’s TechCrunch. The launch is on.
Benjamin Bryant, Earbits
Photo: Robyn Twomey
At Y Combinator, a company is considered launched when it gets its first significant press notice. Most often that’s a posting on TechCrunch. Michael Arrington, the site’s founder and coeditor, says any company chosen for YC is newsworthy by definition. “Someone has already done the due diligence,” he says. The process works with assembly-line precision. When a company is ready to launch, Graham will sit with the founders and brainstorm key points, writing them down on a whiteboard. Then he uses those points to craft an email to TechCrunch. A day or so later, a reporter interviews the founder; an article gets posted soon after.
TechCrunch isn’t the only news outlet paying attention to this session’s companies. Slate runs a mind-blowing article about HelloFax. CNET calls another YC company, Like.fm, “how social music is supposed to work.” That kind of attention brings new users, always welcome as Demo Day approaches.
Flores, a 33-year-old former LA musician with long dreadlocks, takes the call and begins fielding questions about his company, Earbits, a collection of streaming-music channels paid for by labels and artists. While he talks to the reporter, his partners converse nervously. “When he used to work in affiliate marketing, he could sell anything,” one says. After half an hour, Flores trots up to them, looking relieved. “It went well,” he says. “It was all about the business model. He asked all the challenging questions, but those were the ones we had prepared for.”
A few hours later, an item goes up on TechCrunch, describing Earbits as “an online radio startup with a twist” and praising its design. Flores spends the evening monitoring the article’s comments section and replying to particularly skeptical or snarky readers. “We’ve had 600 to 700 tweets of the headline,” he says the next day. “We broke 1,000 daily listeners for the first time in company history.”
In their hunt for new customers, YC companies have special access to one particularly attractive group of prospects: other YC companies. Mailgun, which offers email systems for web-service companies, boasts that almost 60 percent of this year’s startups are using its product. But that access goes beyond current YC companies: Many of the hundreds of entrepreneurs who have been through Y Combinator remain in close contact with one another and with YC and offer guidance and new business to the latest class members. (That may not mean much to a music-streaming site—which needs thousands of customers to be profitable—but it can make a real difference to a business-service company.) Graham compares the effect to a coral reef, a self-generating ecosystem whose members provide nourishment for one another. “Pick the right founders and help them—and the coral reef will just happen,” he says.
Laura Valverde, Beetailer
Photo: Robyn Twomey
Still, most YC companies build traction the old-fashioned way—by sitting at the computer, churning out code. That’s the case with MinoMonsters, the social Pokémon-style-game company that won Mark Zuckerberg’s attention. Its founders, 19-year-old Josh Buckley and 17-year-old Tyler Diaz, spend all day in their drab apartment in a downscale area of Santa Clara—the only place they can find that will rent to people so young. For two months, they prepared their game to launch on Facebook, working with artists in Chile and Poland that they’d never met in person. Just one week after that launch, Buckley and Diaz have more than 25,000 users. MinoMonsters has traction. In honor of the man who helped bring them such success, the pair has introduced a new monster. Its name: PeeGee.
Beginning March 16, the rhythms of the winter class change dramatically. There is less than a week to Demo Day, and until then the entrepreneurs will work ceaselessly to hone their pitches into 130 seconds of perfection. The doors to headquarters will be open all night for those who want to practice, and the tables that usually fill the main room will be replaced by folding chairs, in preparation for the big event.
Over the next few days, every team will meet with Graham, whose usual cheerful excitement is taking on a new intensity. He urges the founders to boil down their presentations to four main points that investors will remember. Even four, he admits, is pushing it—the audience will be numb after hearing 43 pitches. The key is getting something to stick in investors’ heads.
It’s all about selling. In this last week of the session, Graham has transformed from product consultant to marketing coach, fanatically focused on getting the founders to make the most of their few minutes in front of investors. “You should say why you’re better,” he tells the Grubwithus guys. “You’re better than dating sites because yours isn’t creepy! You’re better than Groupon!”
He also chafes when a pitch focuses too much on the product. “You’re talking about why users should be excited,” Graham chides. “You have to say why investors should be excited!” What gets investors excited? “Traction! Show it’s working!” If possible, he says, include a hockey-stick growth chart showing the number of users jolting upward. One company even put its growth chart on T-shirts that all three founders will wear on Demo Day.
Next, Graham plants himself in a chair and listens to each company’s pitch. To founders who talk too fast, he advises they focus on talking too slow. To the foreign-born, he suggests imitating an American accent. To those who sound like they’re reading a script, he tells them to pretend they’re talking to a friend. And every time he hears a dull sentence, he raises an objection: “That’s when they’re going to look at their BlackBerrys!”
There are so many teams in this class—and so many potential investors—that Demo Day actually stretches over two days. In 2005, 15 investors showed up to the first Demo Day; this year, 365 are expected to attend.
And that doesn’t include the 100 or so YC alumni who show up at a warm-up event the evening of the 21st. Although it’s intended to be a low-pressure dry run for the formal Demo Day, the tension is palpable in the minutes before the first presentation. “It’s like the moment in Saving Private Ryan when you can hear the lapping of the boats as they’re headed to the beach,” says Younis. But by the time Livingston calls for order through a bullhorn, the founders appear ready to storm the beachhead. Almost everyone gets through their presentations fine, even the ones who seemed ill-prepared just hours ago.
The one exception: HelloFax, the online fax service that is generally considered one of the stars of the group. Graham feels that their presentation is still weak. So when the two founders—Joseph Walla and Neal O’Mara—show up at YC headquarters the next morning for formal Demo Day, Graham is already there waiting for them. He takes them to a side room and hammers out new text. For the next two hours, Walla stands in front of his partner, repeating the new script over and over.
That afternoon, a scrum of investors and founders gathers at Y Combinator HQ, chatting over the hors d’oeuvres and waiting for the first presentation. The angels and VCs are handing out cards before they’ve heard anything about the startups. Even though this is their moment, the climax of the entire session, the entrepreneurs don’t seem as tense as they did the previous night.
It’s 1 pm when Rick Morrison, cofounder of a firm called Comprehend Systems makes the first presentation. His company’s mission is complicated—it involves cross-database interactions that streamline the process of pharmaceutical drug testing—and a couple of days earlier, Morrison and his partner were squabbling with Graham about how technical the presentation should be. But now, taking Graham’s advice, Morrison emphasizes the importance of efficient testing, the long experience of the founders, and the huge potential market. The audience sits in rapt attention. One demo down.
Throughout the day, investors are treated to a rapid-fire barrage of polished pitches. Chris Chen, a timid 20-year-old, delivers his spiel with newfound conviction. Laura Valverde, a CEO from Sevilla, Spain, who has struggled with her English, speaks authoritatively and clearly. And the Insider Posts team—which barely a week ago changed its business yet again, from a curated job list to a site that coordinates care for ailing relatives—breezes through its presentation.
Halfway through the program there’s a break to let investors mingle with founders and swap contact information. But some investors don’t wait, texting or emailing the entrepreneurs immediately after their presentations, making sure they’ll get an audience later. They continue the rapid-fire highlights_texting throughout the day, until the chairs are folded, the bar is opened, and the investors and founders are free to schmooze away. The two camps finally converge, creating a din that the noise dampeners can’t contain. “It’s a feeding frenzy,” one investor says. The next day, two more groups of 130 investors will respond with the same fervor.
Three weeks later, most of the companies in the class have won at least some funding, and several have closed their entire seed rounds. “Last summer the companies did very well, and this year it’s as good or better,” Livingston says. “And the valuations are higher.” Grubwithus closed a round of more than $1.6 million after Demo Day—the founders canceled 10 meetings they had scheduled with other prospects. Tutorspree also roped in $1 million. One team—Humble Bundle, which distributes software—raised $4.5 million in a round led by Sequoia before Demo Day began; they didn’t even present. And Josh Buckley says that MinoMonsters “has closed $500,000 and has another $500,000 on the table. It’s looking very promising.”
Some of these startups will die. Over the past six years, about a quarter of Y Combinator companies have folded, and many more are barely hanging on. That’s a relatively small failure rate in the risky world of Silicon Valley startups, but there’s still no guarantee of success. Still, the next Airbnb, Heroku, or Dropbox may be lurking within this group. Many of the investors that now attend Demo Day once passed on the opportunity to put money in those companies—as well as into the likes of Facebook and Twitter—and continue to regret it. At this point, they are scared not to invest.
It’s hard to blame them, considering how quickly opportunities can vanish. In April, just five months after Qasar Younis interviewed for a spot in the winter class, Google acquired his startup, TalkBin, for an undisclosed sum.
Meanwhile, the Y Combinator team is already poring over applications for its summer session, which begins in June. Submissions have spiked—more than 2,000 startups are clamoring to be part of YC’s lush coral reef. Interviews begin in less than a month, and the clock is already ticking down toward the next Demo Day.
Portraits of the Y Combinator Entrepreneurs | |||||
 AppHarbor, Michael Friis |  AppHarbor, Rune Sørensen |  AppHarbor, Troels Thomsen |  Apportable, Collin Jackson |  Beetailer, Laura Valverde |  Beetailer, Miguel Angel Martinez Triviño |
 Bitplay, Arend Naylor |  Bitplay, Denis Mars |  Comprehend Systems, Jud Gardner |  Comprehend Systems, Rick Morrison |  Custora, Corey Pierson |  Custora, Jon Pospischil |
 DrChrono, Daniel Kivatinos |  DrChrono, Michael Nusimow |  Earbits, Benjamin Bryant |  Earbits, Joey Flores |  Earbits, Yotam Rosenbaum |  Fitfu, Jof Arnold |
 GiftRocket, Jonathan Pines |  GiftRocket, Kapil Kale |  GiftRocket, Nicholas Baum |  Grubwithus, Daishin Sugano |  Grubwithus, Eddy Lu |  HelloFax, Joseph Walla |
 HelloFax, Neal O’Mara |  Humble Bundle, Jeffrey Rosen |  Humble Bundle, John Graham |  Hyperink, Kevin Gao |  Hyperink, Wei Hsu |  inPulse, Eric Migicovsky |
 Lanyrd, Natalie Downe |  Lanyrd, Simon Willison |  Like.fm, Chris Chen |  Mailgun, Eugueny Kontsevoy |  Mailgun, Taylor Wakefield |  MinoMonsters, Josh Buckley |
 MinoMonsters, Tyler Diaz |  Moki.tv, Sandy Spicer |  Mokitv, Matt Huang |  Noteleaf, Jake Klamka |  Noteleaf, Wil Chung |  NowJS, Darshan Shankar |
 Sendoid, John Egan |  Sendoid, Zac Morris |  Swipegood, Anthony Nemitz |  Swipegood, Steli Efti |  TalkBin, Michael Ma |  TalkBin, Qasar Younis |
 TalkBin, Sunny Dhillon |  Taskforce, Courtland Allen |  Taskforceapp, Niccolo Pantucci |  TellFi, Conor Lee |  TellFi, Jason Corwin |  Tumult, Jonathan Deutsch |
 Tumult, Ryan Nielsen |  Tutorspree, Aaron Harris |  Tutorspree, Josh Abrams |  Tutorspree, Ryan Bednar |  Upverter, Michael Woodworth |  Upverter, Stephen Hamer |
 Upverter, Zak Homuth |  Venuetastic, Christine Yen |  Venuetastic, Helen Belogolova |  WhereBerry, Nick Baum |  WhereBerry, William Ferrell |  YouGotListings Inc, Gordon Chen |
| Photos: Robyn Twomey | |||||
Senior writer Steven Levy (steven_levy@wired.com) is the author of In the Plex, an inside look at the history of Google.
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