

Ask HN: Copying Y Combinator - If there's a right way, what is it? - jedc

I'm writing a master's dissertation on startup incubator programs: Ycombinator and the rising tide of YC clones that are cropping up all over the world.  (TechStars, Seedcamp, etc.)<p>My goal is to provide a guide/framework that other people/regions/cities can use when starting their own Ycombinator-like program.  In a nutshell, I want to show how (or if!) Ycombinator's "secret sauce" can be translated into other schemes.  (More information at my blog post here: http://blog.jedchristiansen.com/2009/07/13/my-dissertation-ycombinator-its-spawn-how-to-do-it-right/ )  I plan on posting drafts and the final version of my dissertation for anyone to use (and criticize!) throughout the summer.<p>I think there are two interesting perspectives that have to meet in order for an incubator to be successful: what do the organizers/funders want as a result and what do the entrepreneurs want as a result?<p>What I'm hoping to get from the HN community is an answer to these questions:
* What are the reasons you would apply and accept funding from YCombinator?
* Are those reasons different for the other incubator-like programs and why?<p>If you'd like to discuss some of this privately, I can be contacted at jed [dot] christiansen [at] Gmail
======
oldgregg
A bunch of these group have popped up but everyone I know will only apply to
YC and TS... The other groups just don't have the credibility yet. I think
techstars has done alright because it slid in as #2 and it has really gotten
out front on the community side of things -- great job differentiating
themselves from YC.

I don't think it will work to copy anything, I'm always going to give 6% to
Paul Graham in the valley before I give 6% to Opie Taylor in Mayberry.

I think there might be an opening on the lower end of the market. Right now
these groups are making total investments in companies around 50k (after
program costs). That still requires a serious potential return to make a
profit. So while they will tell you otherwise, they will rarely invest in an
idea unless it has a very large potential market size. They will take 1%
chance at a billion dollar return over a 50% chance at a million dollar
return. Which leaves a decent number of smaller ideas on the table. The truth
is that a company providing great software to dentist's offices will probably
be ramen profitable before an idea like tipjoy -- but obviously the potential
returns are a lot lower.

Intellectual capital is also a big problem. If you are ambitious and talented
you have probably _already_ moved to a tech hub. That said...

I would buy a giant house and go Heaven's Gate style. Recruit local talent
that hates their demeaning code-monkey job and sell people on the vision. They
get free rent and a very small stipend. Dig up 10 people like this in a
secondary town and now you've got a little community going... Hackers in these
small towns are usually really hungry for people who "get it" so it's not
about the money. Snag really sharp kids right out of high school or college
and spend some time building into them in a really intense way. It's really
talent development in a lot of ways, but it could potentially be a great
funnel for getting people connected.

And just to soapbox for a second, post-industrial age-graded education is
dehumanizing and bureaucratic -- although it's been great for making mindless
factory workers. But it's not working anymore, so sooner or later we'll move
back toward an apprenticeship model where people learn in a holistic
relationship-driven context. That's what these seed stage funds are doing
right now -- and it seems to be working.

~~~
pegobry
Great points. I think the bigger point is that it's not so much the formula
(how long the program is, how much do you invest, is it a seed fund or an
incubator, etc.) as the people who are doing it.

I'd travel halway around the world for ten weeks with pg & a bunch of
brilliant YC geeks. There aren't many venues that have the same appeal.

------
pg
It depends what their goal is. Most of them seem initially to have the goal of
improving the startup scene in a particular region. But, as they then
discover, there's nothing regional about the seed funding business. Founders
come from all over, and leave afterwards for wherever they get more funding.

The way to help a region is to be the place where they get more funding. I
tried a thought experiment about that (<http://paulgraham.com/maybe.html>).
The problem is, it would cost a lot more.

~~~
YuriNiyazov
In that essay (and I think, in other places) you've mentioned Wufoo as being a
very unique and exceptional case - what, besides being based in Tampa, is so
unique about them? I've never met the founders, so this isn't meant as a
challenge, just curiousity.

~~~
pg
There are a couple things. One is how tight the founders are. Two of them are
brothers, and the third guy is almost a third brother. So they trust one
another totally.

The other distinctive thing about them is how committed they are. You can see
it in everything from the design of their site to their reputation for
customer service. They would be aghast at the thought of doing something in a
half-assed way.

------
wheels
I've said it before, but I don't understand why firms trying something YC-like
don't try to differentiate themselves more. The _accelerator for mobile_ , the
_accelerator for B2B / SaaS_ , etc. It would seem easier to differentiate
yourself from YC along industry rather than geographic lines (assuming you're
not crossing a national border).

~~~
HeyLaughingBoy
This is exactly what I thought when reading the OP's post.

A Y-Combinator clone that specialized in industrial hardware or medical
devices. Man, my brain would be in warp speed. I work for a medical device
manufacturer but for all my experience, would never think of doing a product
in this field because of the huge financial and regulatory hurdles. If yc-type
guidance were available, I'd be going over ever problem I know of in this
field to figure out if I could do a startup to solve it!

------
gruseom
One difference that deserves more attention is that YC comes out of hacker
culture while the clones don't; they've been started by people who have had
business success but are not hackers, who tend to look at YC as a business
model and not as the cultural experiment it also is. As I imagine it, the
founding insight behind YC isn't so much "let's make a bunch of seed-stage
investments" as "let's hack the economy". That, to me, is a fundamental
difference. It's also precisely the sort of thing that most non-hackers would
overlook.

Does this matter? My guess it is it matters a lot, because identifying good
hackers and advising them are two of the most important things that YC does.
These skills are not common. YC have them because they are hackers themselves.
This also lends a dog-whistle aspect to the whole endeavor. To anyone who's
part of the culture or has the mindset, PG's essays and various other things
about YC are instantly recognizable and act as a beacon. This feeling of
"they're one of us" is precisely what I miss in the clones.

With obvious exceptions, the economic fate of hackers has traditionally been
in the hands of people who are not like them and do not understand them. A
seed-stage micro-investment mentoring fund started by the one type is not
likely to work out the same as a similar-looking fund started by the other. If
this were gardening, good hackers might be weird-looking plants that are
commonly mistaken for weeds. An unskilled gardener is likely to make two
mistakes: either rooting them out (i.e. passing them over in favor of other,
perhaps more businessy-looking species) or applying the wrong fertilizer etc.
so they fail to thrive (i.e. not knowing how to work with them or help them
grow).

One thing that follows from what I'm saying comes close to a prediction: if
the essence of YC has more to do with a new investment model, then copies of
that investment model should follow a similar course. But if it has more to do
with amplifying the economic value of hackers, then you'd need to look for
copies of _that_ , and as far as I know there aren't any.

Incidentally, most hackers probably wouldn't be interested in starting a
clone. They'd want to find their own angle instead. I wonder whether Marc
Andreesen's new fund isn't closer to YC in spirit.

------
iamelgringo
It's an interesting question, and I'd love to see your dissertation after it's
done. Thanks for being willing to post drafts, etc...

It seems that a lot of cities/regions want to start tech incubators as a means
of boosting the local economy. A number of cities that I've lived in want to
start a "Silicon Prarie" or a "Silcon Forest" or a "Silicon FooBarBaz" in
their neck of the woods because successful tech businesses produce a lot of
good jobs and tax revenues. So, the city starts an incubator, promote their
new downtown as a tech hub, and hope for technology companies to spring up and
boost the local economy.

I believe that one of the reasons that Y Combinator succeeded was because it
wasn't about boosting tech companies in regions, it was about funding
startups. PG and Co. set out to hack the economy by seed funding crap loads of
startups. So, to that end, they started funding startups in the locations that
were best suited to that: Boston and SV. They then went on to localize
primarily in Silicon Valley because they thought it was the best move for
their startups. ( and they were sick of being bi-coastal )

The difference in those two motivations, is I believe a watershed between the
wins and the fails. YC has done what's best for their startups because that's
their primary goal. The vibe I get is that a lot of other incubators try to do
what's best for their region and are therefore conflicted.

~~~
jedc
Interesting, and I agree that more and more YC clones are coming from outside
the Valley. I guess the question is if the city/region has enough expertise to
make a clone successful. Perhaps if focused on a more vertical field it has a
better chance of success?

~~~
iamelgringo
I've lived in 6 cities in the US: Minneapolis, Chicago, Providece, Los
Angeles, Fresno and now SV. I've also spent significant time in Dallas, New
Orleans and Toledo.

For me the issue is culture.

Chicago, there is a high tech community, but it is generally focused on
helping the other industries in the area function. Chicago also tends to be
kind of a jock driven town, and tends to scares geeks underground IMHO.

Providence, because of RISD and Johnson and Wales tends to be an arts/food
driven town. Players from Brown don't tend to stay around long enough to
influence the culture too much. They're too busy figuring out how to get into
Harvard or Yale Grad school. There also tends to be a strong current of
complacency among the locals that makes it hard to innovate technologically.
The biggest tech firm in Rhode Island is GTech, a lotto machine maker.

LA is all about the movie and music industry (and a little bit about
aerospace). There are plenty of geeks in LA, but they all tend to serve the
larger interests of the movie, music and aerospace industries. A lot of geeks
I ran into would have been interested in developing their own VFX shop, but
you have to have a _lot_ of connections to make that happen. LA is also run by
pretty people. And, that makes it harder on geeks, IMHO. It made it hard for
me, and I moved after a year and a half.

Fresno is all about farming, it's really hot, and I'm shocked I lasted a year.
That's all I'll say.

SV on the other hand is steeped in technology and startups. My day job is as a
ER nurse, and in the first year of being here, 3 people at the hospital
offered to connect me with investors. I started the hackers and founders
meetup ( www.hackersandfounders.com) a year ago, and now there's 350 people on
my mailing list, and we have 20-25 people show up every 2 weeks to talk tech
and startups. It's just in the air here.

I think that SV offers a much better ecosystem for startups than the other
towns I've lived in my several orders of magnitude. There's already water,
carbon, and oxygen. Silicon Valley's orbit is in the green belt of the startup
sun.

Trying to do the same thing as YC in a different area of the country would
require a lot of terraforming to be able to support a startup ecosystem. It's
possible, but like colonizing Mars, it's going to be a lot more expensive to
support an ecosystem there than on earth.

If I were going to recommend starting a technology company in another area,
I'd definitely look at the strong industries in that area. If I were starting
a YC clone in Detroit, I'd fund manufacturing technology startups, and perhaps
robotics companies. If it was Dallas/Houston, I'd fund petroleum tech or
energy startups. If it was San Diego probably biotech. LA, I'd focus on more
media oriented startups. Fresno, or the rural midwest, farming automation
technology.

Startups outside of Silicon Valley could have a competitive advantage if they
can focus on building technology that supports the local industry. That way
the networking that naturally happens can strengthen their business. I talk
with a lot of hackers here that are interested in building tools for specific
businesses or industries, but they have problems meeting people that work in
those industries and aren't geeks. A seed fund could take advantage of that.

------
wmeredith
As a complete outsider I can tell you that, in my mind, the _only_ thing
separating Y-Combinator from the others you mentioned are Hackernews and PG's
essays. Both of which are of such excellent quality that I would apply here
before anywhere else. That's it, I don't know anything else about the people
behind the program.

~~~
paulsb
I would agree with you but recently I have really started to like the
TechStars program. Why? Because of the impression given to me from their
recent videos about the start-ups and the program that have appeared this
time. The videos show how the program works, the openness, the mentoring, the
city (Boulder not Boston), the community/spirit there, what the founders are
like. When TechStars first started, I was thinking 'they have no chance, YC is
the only place to be'; but now, I really respect what they have going on
there, and wouldn't mind going there.

YC seems a bit more closed. Outsiders can't gage what it is really like except
from a few vids here and there and the comments on HackerNews. Plus, with the
increased popularity of HackerNews, it is quite difficult to track the
comments from YC company founders. Of course, when someone gets in then they
probably don't care any more, but it's always nice to be open and show people
what you're all about. The same goes for all the other programs.

The point: if you're starting a new program, especially in a traditionally
non-tech area, it is best to be open and show what the program (including
location) is all about. It's just good marketing.

------
rms
In Pennsylvania, the "Y Combinator clones" AlphaLab and DreamIt Ventures are
funded by the state of Pennsylvania (and a DreamIt partner is running for
Congress!). AlphaLab is an overt incubator run by a larger early stage
investment group and DreamIt is more of a direct YC Clone. The goal of the
money they are given is to create jobs. Their motivations get more complicated
when the taxpayers are footing the bill.

Probably the most common flaw in cloning Y Combinator is to make an incubator
investing in micro seed magnitudes. Y Combinator is not an incubator; it's a
micro seed stage fund. <http://seedfunding.weebly.com/>

~~~
jedc
I didn't realize AlphaLab and DreamIt are funded by the state. But as part of
my project I hope to recognize the different types of funding sources & people
that are starting YC clones. I've even heard about companies that are looking
at running small programs like this. I agree that the motivations are
complicated, and that's what I want to explore.

Interesting note about the funding. I was talking to a VC about this and while
he wanted to support a similar type of program locally, he was very hesitant.
Mainly because if he chose not to follow-on with funding, he would likely be
killing the startup before it even really got going.

~~~
rms
> Mainly because if he chose not to follow-on with funding, he would likely be
> killing the startup before it even really got going.

Good point. I'm pretty sure pg said someone similar on this site at some
point.

~~~
jacquesm
That's true, but the chances of finding follow up funding are larger anyway if
you already have a seed fund backing you.

The one things most VC's are scared of is being first (and the other thing is
having missed an opportunity). It's a fine line between those two...

------
dejan
Good idea. It would be great to see a lot of incubators popping up, as it can
have a significant impact on the overall economy.

It is not the funding that is the main reason for applying. Although some
small amount of money is great to cover living costs so that you can devote
full time to your project, it can be handled differently. What I think most of
the people here are interested in is the post funding period - getting big
investments and connections through those that already did the talk and walked
the walk. Note that I am not referring to YC only, but also to all those that
YC helped or involved. There is a lot to learn from such condensed
entrepreneurial community.

However, don't idolize YC. They are not best. They are not even the first ones
to do so. They are just best known and publicized.

I would highly recommend doing a criticizing and constructive thesis. That is
- seeing the shortcomings of YC and suggestions on how to do it better. Your
question to HN should be how to do it better?

Such thesis is benefiting to all then, YC and other that are copying the
model, but most of all - us :)

~~~
jedc
My instinct is that I agree. But YC seems to be the top-tier choice for
companies applying to the whole group of incubator-type programs. Is that
because YC is seen as a better/bigger step toward connections and further
investment?

~~~
rms
It's not just that YC is seen as better; by the numbers alone they offer the
best outcomes of any of the micro incubators/micro seed stage funds.

~~~
jedc
I would love to be able to verify that, though I agree it looks to be true. My
dream would to get a fairly comprehensive list of startups to come from _all_
of the different programs, and see which of those are a) still in business, b)
received follow-on funding, and c) exited.

I know PG has these stats for YC, I'm just curious if he would share.

~~~
pclark
those stats wouldn't be hard to acquire. There are various lists of all the YC
winners. Love to see a comparison of YC vs Seedcamp.

~~~
jedc
I'm hoping to compile them; I just know that PG keeps _accurate_ records. :)

------
Anon84
The right way is to _not_ copy it. Learn from it, see what worked and what
didn't and adapt it to your specific goals.

~~~
jedc
Exactly. I'm hoping to write a generalized framework to help guide others in
what's important and what's not, and _how_ to adapt it to specific goals!

------
lyime
I love incubation. YCombinator and others FTW. Although you need to understand
that there really isn't a secret sauce. Just like there is opinionated
software/frameworks (rails) there is opinionated venture capital.

Ycombinator funds companies based on certain principles. Paul Graham and co.
pick ideas based on what they see fit. They have built relationships with
successful entrepreneurs,VCs, angels and other outfits based on their
judgement which has lead to their some success. They do things a certain way
and you/others should not try to copy them.

I think you can definitely try to tell their story and motivate others. You
are not going to be able to make other people create or build another
Ycombinator.

------
bayareaguy
Too bad y2combinator[1] is no longer around. I'm sure they could help you :-)

1-
[http://web.archive.org/web/20070705045529/http://y2combinato...](http://web.archive.org/web/20070705045529/http://y2combinator.com/index.html)

------
csomar
* What are the reasons you would apply and accept funding from YCombinator? *

If I applied that's because of

\- Place: I live in north-africa, so US would be better for business.

\- Support: I can't handle tax/company issues and papers myself, if i hire a
lawyer, it'll cost a lot.

\- Promotion: More odds that I'll get better investors.

------
alanthonyc
I'm working on a project right now. The amount of money that YC would invest
in my project would be helpful, but not game changing at all (since I have
savings).

The only reason I would consider applying is to have access to the resources
and experience that PG would be able to share via his contacts and other YC
alums.

------
lrgco
This question is probably as hard and as interesting as "what makes
entrepreneurs entrepreneurial"

Cant wait to see your results!

