Paul Graham's business school and investment fund, Y Combinator, has launched 145 companies -- for a lot less money than you would think.
Graham's start-up days are more than a full decade behind him, but he can't help recalling them with a shudder. "It's like talking to someone who went to war," Graham says. "It sucks to run a start-up." His company, Y Combinator, is a hybrid venture capital fund and business school that invests in, advises, and, literally, feeds 40 or so early-stage businesses a year. Investments are small -- less than $25,000 per company -- but Graham supplements the money with smart advice, introductions to later-stage investors, technical help, and a sense of community.
Graham encourages founders to spend all their energy on product development. In most cases, companies are expected to release a finished version of something -- whether it be a Broadband App or a photo-sharing widget -- before the three-month program is over. That's an incredibly short amount of time for a two- or three-person team. It requires that founders work more or less around the clock.
Y Combinator began as an experiment in angel investing, conducted during the summer of 2005. The pitch was straightforward: $6,000 for a company with one founder, $12,000 if the company had two founders, and $18,000 if the company had three. In exchange, Y Combinator would get roughly 6 percent in common stock.
Graham believes, deeply, that start-ups are the answer to the world's problems; that they are easy to make if you are determined enough and cheap enough; and that it's getting a lot easier to start one.
