Y Combinator
Y Combinator
Y Combinator (YC) is an American technology startup accelerator and venture capital firm launched in March 2005. It has been instrumental in launching more than 4,000 companies, including notable names such as Airbnb, Coinbase, Cruise, DoorDash, Dropbox, Instacart, Reddit, Stripe, and Twitch.
History
Y Combinator was founded in 2005 by Paul Graham, Jessica Livingston, Robert Tappan Morris, and Trevor Blackwell. The accelerator program initially operated in both Cambridge, Massachusetts and Mountain View, California. However, due to operational complexities, the Cambridge program was closed in January 2009, and all activities were centralized in Silicon Valley.
In 2009, Y Combinator secured a $2 million investment led by Sequoia Capital, which enabled the accelerator to increase its annual funding for around 60 companies. Sequoia further supported YC in 2010 through an $8.25 million funding round, bolstering the organization's capability to accommodate a growing number of startups.
Funding Model
Y Combinator's funding model has evolved over the years. Initially, the accelerator invested $125,000 in each startup in exchange for a 7% equity stake. In 2011, Yuri Milner and SV Angel offered every Y Combinator company a $150,000 convertible note investment. This amount was later adjusted to $80,000 when the Start Fund was renewed.
Currently, Y Combinator invests a total of $500,000 in each startup that is accepted into its batch program. This investment is split into two parts: $125,000 for 7% equity and an additional $375,000 on an uncapped SAFE (Simple Agreement for Future Equity) with a most-favored-nation (MFN) clause.
Notable Startups
Y Combinator has been the launchpad for several high-profile startups, including:
Program Structure
The Y Combinator program is a three-month accelerator that provides startups with seed funding, mentorship, and resources. The program culminates in Demo Day, where startups present their companies to an audience of specially selected investors and press.
Bookface
Bookface is an internal platform used by Y Combinator founders to connect with one another. It combines features of Facebook, Quora, and LinkedIn. Founders can tag themselves as experts in various topics, post requests for knowledge, and seek introductions.
Office Hours
During office hours, startups discuss various aspects of their business with Y Combinator partners. The topics vary depending on the stage of the company and where they are in the YC cycle.
Leadership
Y Combinator's leadership has included several notable figures:
- Garry Tan, President and CEO, co-founder of Initialized Capital and Posterous
- Brad Flora, Group Partner, co-founder and CEO of Perfect Audience
- Jared Friedman, Managing Director, co-founder of Scribd
- Diana Hu, Group Partner, co-founder and CTO of Escher Reality
Impact
Y Combinator has had a profound impact on the startup ecosystem. It has popularized a now-ubiquitous philosophy of company building and has been a model for numerous other accelerators, incubators, and boot camps. The total valuation of Y Combinator alumni companies exceeds $400 billion.