From the May
21, 2007 issue of NEWSWEEK - Sitting at the long trestle tables in Y Combinator's
Mountain View, Calif., headquarters last January, the Weeblies felt
wobbly. Back home at Penn State, the three undergraduates were alpha
geeks, go-getters who'd capitalized on the university's requirement
that students have a Web portfolio by creating software that makes it
really easy for students to build a personal site. The trio—David
Rusenko, Dan Veltri and Chris Fanini, all 22 years old—decided to start
a company, calling it Weebly because it sounded good and the domain
name was open. Then last November they heard about a company called Y
Combinator that gives seed money to fledgling start-ups and imports a
bunch to Silicon Valley for three months of intensive entrepreneuring.
They sent off their application the day before the deadline, and made
the cut.Now
they were here, just down the road from Google and Yahoo, one of 12
companies that would be part of Y Combinator's winter program of total
immersion in the Silicon Valley start-up life. For a techie, it was as
if you were making home movies one day, and the next day found yourself
on the Paramount lot with a contract and empty film cans to fill. No
matter where the start-ups came from—Sweden, Chicago, Oxford or even
the South Pole (yes, one person arrived straight from graduate research
there)—their lives would never be the same. Also attending the dinner
that night were veterans of the previous three Y Combinator
programs—some of them millionaires before 25. You don't see too much of
that in State College, Pa.
That's
the charm of Y Combinator. It's "American Idol" meets Wired magazine.
The inspiration came from Paul Graham, a high-energy 42-year-old who
himself had a monumental start-up experience, selling his company
Via-web, an e-commerce application, to Yahoo at the height of the boom,
enriching himself and his buddies. In the spring of 2005 he made a
speech at Harvard that was a broadband update of Horace Greeley ("Start
up, young man!"), then realized that he could help make it happen for
others. He gathered his former partners—Trevor Blackwell, now making
robots, and Robert Morris, who achieved brief notoriety in the 1980s as
the author of a virus that almost shut down the Internet—and recruited
another friend, an investment banker named Jessica Livingston. They
drew up the plans for an operation: from hundreds of applications, the
YC partners would cull the 30 most promising, conducting "Idol"-style
auditions to choose a dozen or so companies for the program. Each
start-up is given $5,000 plus $5,000 per founder (a start-up with two
founders would get $15,000). This money covers lodging, food and
equipment during the program. In exchange, Y Combinator (named after a
mathematical function) gets a piece of the start-up, usually 5 or 6
percent.
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."
Every
Tuesday during the program, Y Combinator hosts a dinner of chili or
stew for the start-ups. At this first one, Graham and Livingston
distribute gray T shirts emblazoned with one of Graham's pithiest
admonitions, MAKE SOMETHING PEOPLE WANT. A second, black shirt is
bestowed only to start-ups that achieve a "liquidity event"—a purchase
by a larger company or an IPO. It reads, I MADE SOMETHING PEOPLE WANT.
Read the rest of the story.
