Y Combinator

Posted on October 13, 2010


Another interesting NYC start-up world event tonight:  @YCombinator’s Q&A session with @kn0thing and @Harjeet.  The latter is the distinguished right hand to @paulg at Y Combinator, the former is Y Combinator’s “Ambassador to the East” (to underscore his commitment to this very important position, @kn0thing recently traveled to Laos and met some easterners).

The best part of the night was seeing Hunch’s offices.  @cdixon was hosting the event, so we got a glimpse at his workplace.   As I have written before, I think Hunch is brilliant.  I also have enormous respect for its founders.  Hunch’s HQ is a very spare, smallish loft fitted with IKEA furniture and 27’’ iMacs.  I saw some framed newyorker pictures on the wall, that establishment mag we often ridicule but can’t stop reading.  There are two conference rooms, one called “Banjo Room” and one “Decision Room”.  The space is truly basic, but I would swap it for my wall street office in a second.

The second best part was meeting Benjamin Sherman, the founder of @penisbanz.  He reminded me that some people are still producing something tangible.  And Ben is not just producing nice little wristbands in the shape of a penis (if not used as intended – on the wrist that is), but also produces condoms that bear the face of politicians like POTUS and John McCain.  You might wonder whether you would be able to see those men’s visage on your utensil once the device is put to work.  Sorry to disappoint you – Obama and McCain’s images only appear on the package.  Ben did add, however, that the Obama condom was black.  Please go to http://obamacondoms.com/ and order your supply.

Let’s skip to the worst part: Y Combinator.  Well, let me explain.  Y Combinator would be great if it wasn’t that expensive.  What Y Combinator basically does is put a bunch of smart people in a room and let them come up with ideas.   It provides an ideal environment for the idea-generating process: Dinners, talks by smart people, help with the basic legal documentation, advice from seasoned entrepreneurs, introductions to investors, etc pp.  That is absolutely great!

However, all these things are what society should (and does) provide for free already.  YCombinator’s website even compares its service to a “modernist version of an Oxford college dining hall, but without a high table”.  Universities and great cities like New York are a breeding ground for new ideas and for new companies because they provide all these services, and have been doing so for centuries.

YCombinator, on the other hand, is terribly expensive.  It will provide you with a grant of “up to” $20,000 and in return it will take a “small” stake (2-10%) in your company.  Since $20,000 is the highest amount they will invest, it is fair to assume that they will ask for a 10% stake in exchange for that amount.  That is as much as is typically assigned to the whole option pool of a start-up.  In other words, YCombinator is swallowing as much equity as you would usually spend on all your employees combined.

This can’t be right.  Networking with fellow entrepreneurs (whether young and smart or old and experienced), being introduced to investors, listening to talks – all this is the fun part of being an entrepreneur, and traditionally absolutely free.  Luring young people to sign away a part of the company they are about to found with the promise to provide these services is ostentatious at best and unethical at worst.   The only point where people usually have to pay is when it comes to legal documents.  And for that reason I have founded legale.se, which will make this process much much cheaper (we will provide top notch legal forms for free, and will thereby reduce legal costs to a minimum).

So let’s continue to foster our community, take advantage of the great city we live in, and help each other build great companies.  Like @penisbanz, for example.