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Getting The Band Back Together: Why The Justin.TV Mafia Returned To Y Combinator

Y Combinator helped make the guys behind the ne plus ultra of silly startup ideas rich. Now they’re helping to remake the startup factory.

Getting The Band Back Together: Why The Justin.TV Mafia Returned To Y Combinator
[Photo: Hulton Archive, Getty Images]

This past October, Justin Kan and Michael Seibel spent a week reading Y Combinator applications. Kan did his part while hunkered down at London’s Ace Hotel; Seibel read the applications from the Philippines while on a round-the-world trip with his fiancee. Each man, working in concert with Y Combinator’s other partners, looked at the pitches of about 500 startups, eventually helping to narrow down a field of more than 5,000 wannabe YC startups to the 114 companies that are currently engaged in a frantic, three-month sprint of product building and customer acquisition as part of the firm’s Winter 2015 batch.

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This side of the YC application process was a something of new experience for both men, who joined the startup factory as full-time partners last year, but it was, in another way, an entirely familiar one. Both have spent much of the past decade in or around YC. Ten years ago, Kan joined Paul Graham’s then-nascent program for aspiring startup founders with Kiko, an web-based calendar app that he created with Emmett Shear. Kiko failed–Kan and Shear sold the company on eBay–but they reentered YC in 2007 with Seibel, a fourth cofounder, Kyle Vogt, and a new concept: the online reality show, Justin.TV.

Justin.TV, in which Kan video liveblogged his life and encouraged others to do the same, had a tumultuous youth and adolescence before molting into the e-sports network Twitch and the video social network Socialcam. Seibel ran the latter and sold it to Autodesk for $60 million, and Shear shepherded Twitch to an almost $1 billion exit when he sold it to Amazon last summer. (Kan, who left in 2012 when his namesake startup launched those two escape pods into orbit, started an assistant-on-demand startup called Exec, which he recently sold to Handy, the home-services-on-demand startup.) The Justin.TV story may be the ur-example of YC helping founders turn dumb ideas into brilliant businesses. As Kan puts it, “With Justin.TV, infinite people told us that it wouldn’t work, and to some extent they were right. But it was still a good investment.”

Kan and Seibel would probably have started new companies, but Paul Graham’s decision last year to turn over the leadership of YC to Sam Altman, another member of the inaugural 2005 class, helped changed their thinking. “It was clear that Sam wanted to push the limits of YC and grow it,” says Kan. “I wanted to be a part of that.” Kan joined YC full-time in June, becoming one of Altman’s first hires as part of a push to expand YC’s breadth and ambitions. Seibel joined in December. Shear, who is still Twitch’s CEO, says he wasn’t surprised by Kan and Seibel’s decision to go “full investor” at YC, as he puts it cheekily. “You had this amazing, life-changing experience that greatly accelerated your company,” he says, of the group’s experience. “YC didn’t just provide me with funding. It provided me with my entire social context.”

Unlike conventional venture capital firms, YC is staffed almost exclusively by former entrepreneurs, beginning with Graham, who founded Viaweb and sold it to Yahoo in 1998. Whereas many VC firms require that the entire partnership vote in favor of an investment, YC’s model of small bets on lots of startups gives its partners a great deal of autonomy, which is appealing to former CEOs. “We don’t have to build a consensus,” Seibel says. “If you can get one partner in the meeting to say yes, then you’re in.”

Kan says he initially imagined that he’d use YC as a “holding pattern” before embarking on his next thing, but he has found being a YC partner surprisingly fulfilling. During the three-month batch, each partner mentors a group of roughly two dozen startups during weekly office hours. (Each YC company is assigned to a cohort that includes several partners; Kan’s group also gets regular advice from YC partners Garry Tan and Kathrina Manalac.) “It’s kind of like being a professor,” says Kan, who was surprised to discover that even tossed-off suggestions–advice that seems obvious to him after a decade’s worth of entrepreneurial experience–can be valuable to less seasoned founders. “I like the idea that I can make a big difference to a startup in a short period of time,” he says. Seibel is similarly optimistic. “We have all these smart people who can devote time to making YC better,” he adds.

If there’s any indication that Y Combinator has grown up in the 10 years since its founding, it is that people like Kan and Seibel–entrepreneurs with the money and connections to write their own tickets anywhere in Silicon Valley–have decided to stay put rather than join larger venture capital firms or raise big funding rounds on their own. And they’re not the only ones: Shear has been a part-time YC partner since 2011. Meanwhile, the fourth member of the Justin.TV mafia, Kyle Vogt, isn’t a partner yet, but that’s at least partly because he’s still running his own wildly ambitious startup–founded with Kan’s brother Daniel, and two engineers, Rita Ciaravino and Ian Rust. Their company, Cruise, is developing driverless cars and seems poised to beat Google to market. (I’ll have more on how YC has been able to attract these ambitious companies in a subsequent post.)

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Vogt could have easily raised funding independently, forgoing the roughly 7% equity stake YC takes in its portfolio companies, but he chose to reenter YC in early 2014. Though loyalty to his old friends almost certainly played a role, Vogt says the decision made business sense for Cruise because YC alums tend to raise venture capital at higher valuations and because the weekly dinners foster a competitive environment that pushes companies to move faster. “When you have all these hyper-intelligent people showing their progress, you’re able to achieve far more than you’d ever be able to on your own,” says Vogt, adding that the decision to reenter YC was not really a decision at all. “It was a no-brainer,” he says.

Next Week: Can Software Really Eat The World? This is part three in a series.