Perhaps the most ambitious campaign of start-ups, 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. Paul Graham, it’s fearless and optimistic leader, supplements his nominally sized investments of under $25,000 with lots of smart advice, technical help, and sense of community. The model has produced 145 companies to date, a few sizable acquisitions, and copycat funds in cities across the country and around the world.
For all the pain of nurturing a start-up, Graham believes that founding a company is the most efficient way to create wealth — for investors, for founders, for society at large. “There’s this classic pattern that has happened over and over again throughout history in which something is made one at a time, very expensively and unreliably by hand, and then someone comes along and figures out how to make large numbers of them cheaply and reliably,” Graham says. “We’re pulling this kind of transformation with venture funding. We’re mass-producing the start-up.”
Graham is something of a folk hero to a generation of ambitious techies, who debate his essays, read his books, and pitch him start-ups by the hundreds. His philosophies are simple: founders should live as cheaply as possible so that they can first become cash-flow positive. Wealth will follow.
Indeed, there’s something exhilarating about Graham’s optimism, especially at a time when so many once-great companies are sitting on the verge of bankruptcy. 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.