Isegoria

Y Combinator is not really a VC firm:

Depending on how you parse it, you can make a case that it’s any one of these five things:

1. A university that treats companies, not people, as the atomic unit
2. A startup that monetizes through an uncapped income share agreement
3. A for-profit college that scales (and is not a scam)
4. A social network for some of the world’s best entrepreneurs
5. An industrialized venture firm

[…]

It does not seem hyperbolic to suggest it may be among the most consequential entities across industries of the last twenty years. Not only did YC support Airbnb, Stripe, Coinbase, DoorDash, Flexport, Rappi, Reddit, Vanta, and many others, it popularized a now-ubiquitous philosophy of company building. “Make something people want,” “do things that don’t scale,” and “getting to default alive” are gospels that owe their proliferation to YC. Over time, it has turned its success into a series of compounding advantages that make it look very different than anyone else in the market.

[…]

None of YC’s founders had ever been venture capitalists before. To learn as quickly as possible, they landed on the idea to fund a “batch” of companies, all at once. Rather than learning from ten startups stretched over an investment period of three years, they’d follow that many over just three months.

[…]

In hindsight, many of YC’s core innovations were visible in this first class. The firm took four non-consensus positions:

1. Investing terms needed to be standardized. Seed funding was immature when YC got started. As a result, there were no benchmarks for typical deal terms. Founders often cobbled together cash from family and friends. YC decided to standardize the process by offering $20,000 for roughly 6% equity.
2. Entrepreneurship is teachable. Innovation is often depicted as resulting from a single stroke of genius rather than a concerted process. YC’s curriculum challenged this notion by teaching new founders how to build a business, step by step.
3. Hackers make for better founders than suits. YC is optimized for a different kind of entrepreneur. Rather than pursuing grey-haired executives ready to leave the bower of big business, it sought technologically-gifted youngsters. Over the next two decades, this would become the prototypical profile for tech entrepreneurs.
4. Startups can be funded synchronously. Venture capital firms traditionally funded companies one at a time. By experimenting with funding ten businesses at once, YC uncovered a crucial lesson: connecting early-stage entrepreneurs to one another is extremely valuable. This marked the beginning of YC’s network effects.

Reddit proved to be the breakout winner of the batch, though it took some time for it to fully play out. Several other startups, including Parakey and TextPayMe, were acquired.

On an individual level, the caliber of talent assembled was extremely impressive. YC’s summer 2005 batch (abbreviated to “S05”) included Sam Altman, Alexis Ohanian, Steve Huffman, Aaron Schwartz, Brett Gibson, Blake Ross, Joe Hewitt, Emmett Shear, and Justin Kan. Outside of Reddit, that constellation has been involved with the creation of companies and funds including Twitch, Firefox, Initialized Capital, Seven Seven Six, and OpenAI.

[…]

Many connections within the YC community occur on the internal platform, Bookface, which grew out of one of the accelerator’s creations: Hacker News. In 2006, Paul Graham launched Hacker News (then called Startup News) as a way for YC founders to communicate, connect, and ask for help. The following year, it was opened up to the public. Eventually, in 2013, YC formally bifurcated the platform: the external forum retained the Hacker News name while the internal version became Bookface. Today, it acts as a place for YC’s 7,000 founders to connect, ask questions, and learn from one another — a private social network for some of the world’s best entrepreneurs. Many end up partnering or selling their products to one another.

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