Y Combinator is the investment firm that pioneered the current vogue for investing seed money ($18,000 on average) in nascent startups and then helping them turn their ideas into companies. The partners, all successful entrepreneurs, offer individualized attention during a three-month program held each winter and summer in Mountain View, California. But the secret of YC’s success--more than 25 of its grads have been acquired and the firm has fostered breakout stars such as Airbnb and Dropbox--is its network.
"The closest thing before was the PayPal mafia,” says cofounder Paul Graham. "That was 15 or 20 people. Before the last [class], the Y Combinator network was 672 people." The tight-knit community is forged through weekly dinners attended by the founders in a particular season’s class, where they show their progress, seek advice from each other and YC alums, and question guest speakers such as Mark Zuckerberg. Membership has its perks: 100% of YC companies leave the program with additional financing to build their businesses, thanks to a deal with star investors Ron Conway and Yuri Milner, who offer $150,000 to any graduate.
Infographic: How Y Combinator's powerful alumni network operates.
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When it comes to funding startups, Y Combinator is an incubation machine. And behind it all are founder Paul Graham's unique insights about what constitutes true innovation.
Paul Graham: Why Y Combinator Replaces The Traditional Corporation
The YC network, he says, now operates as a "distributed peer-to-peer replacement" for the traditional company.
Y Combinator, TechStars: Investor Mentorship and Leverage Outweigh Capital
Rather than seduce startups with offers of millions in seed money, Y Combinator is part of a growing trend of investors that offer what Taggar describes as a mix of mentorship, networking, leverage, and brand value.