And now our weekly guest post from my Twitter friend Paisano. I’ve got mixed feelings about Y Combinator and haven’t spent enough time with them to have a smart-enough take on what they do. That means I largely just don’t cover them. So when I saw Paisano Twitter about how much he loved their startups, I asked him to weigh in on the latter-day incubator’s recent demo day. Enjoy!:
is a seed stage investor with a network of entrepreneurs, Venture
Capitalists and others needed to start a company. Think of the Y
Combinator as the American Idol for startups. They select companies to
finance and consult twice a year. Instead of the winners getting a
ticket to Hollywood, the companies that the judges from the Y
Combinator pick get to go to Cambridge, Massachusetts in the summer or
Mountain View, CA in the winter. Instead of the winners getting a
recording contract, the winning startups generally receive $5,000 plus
an additional $5,000 per founder.
Although
the comparison to American Idol is tongue in cheek, there are some
unfortunate real similarities.
It’s well-known that the recording deals
that the Idol winners sign are extremely one-sided in favor of the
producers and record companies and rather unfair to the artist. The
same can be said for the "winners" of Y Combinator funding. Sure, they
get some cash and valuable guidance and experience but they have no
choice but to give up a sizable chunk of potential revenue. Generally, they give up on average 2 to 10 % *** of ownership which Y
combinator argues is crucial
for the success of the project.
that never would’ve seen the light of day otherwise. So, hey, at least users benefit from the transaction.
Y Combinator success stories?
to name a few. While some of these names are well-known, none of them can be considered home runs ala YouTube, eBay, or even Digg or Twitter. (The latter two still haven’t cashed in their chips yet.)
Despite the many cool hip services that continue to come out of this factory, the hit ratio appears to be a little low (but the jury is still out on what THAT ratio should be). One can’t find fault with the startups but perhaps with the selection process and the members that make the selections. It’s a skill that can’t be taught, much like making selections in professional sports on draft day. You either have the touch or you don’t. Doesn’t matter how much money you have, if you don’t spend it wisely than you’ve lost. It’s like being a quarterback with a multi-million dollar arm but a ten cent head.
Summer 2008 Hopefuls
Here’s a roundup of the most recent "DEMO DAY" at Y Combinator
for the summer of 2008. A small group of startups pitched their products and
services hoping to receive the funding and support they will need in
order to achieve success. Some have launched already while others are hoping to achieve lift off.
- Posterous is like Tumblr but you post to it via email. Clean and simple interface.
- Anyvite is another invitation management service like eVite and Pingg.
- ididwork Tracks what you’ve done at work for easy review by supervisors.
- TicketStumbler helps find tickets at the best available prices across several sites.
- Picwing takes picture frames to the web by allowing instant display of photographs.
- Popcuts lets you purchase songs for $.99. Every subsequent purchase of
that song nets you a cut of the revenue. The earlier you buy, the
bigger the cut you receive. - Slinkset lets you create your own social news site
- People and Pages describes their service as “a better Google Groups” but it does more.
- MeetCast is yet another WebEx online meeting service with more social media tools.
- BackType is a search engine for comments that crawls every kind of blog on the web.
- CO2Stats measures the carbon footprint of your website. Al Gore invented it (Just kidding!)
- Youlicit gives one-click access to the information and users most relevant to the immediate context
- JobSyndicate provides widgets that pays the website owner whenever a click-thru leads to a job hire.
- Frogmetrics puts touchscreen devices into the hands of customers to get accurate, realtime feedback at the point of experience
- Snipd lets users "snip" content from webpages including graphics, videos and
text.
Most Likely to Succeed?
It’s
always difficult to predict which startups will succeed and which ones
will flame out. Here are the services that look and feel like
winners to me. (In other words, who really knows.)
TicketStumbler appears to have generated the strongest buzz even though there’s stiff competition in their space such as StubHub.
Picwing
is promising because of its simplicity. Even non-technical types will
be itching to buy this thing. Anything that makes life easier is poised
for success.
Posterous has also gotten lots of attention because of its easy simple design. Just send an email and it’s posted on your blog.
JobSyndicate has a good shot with its monetizing widget. Look for the big job sites to start sniffing around with their wallets open.
Here’s a video recap with highlights of YCombinator’s Demo Day for Summer 2008
Conclusion
Like them or not, the future of the web depends on these seed fund incubators like YCombinator, TechStars, SeedCamp and Highland Capital Partners,
among many others. For those startups that can’t generate the funds
necessary to keep their dreams alive thru the regular channels,
these alternatives are a Godsend. The most important thing every
entrepreneur and investor needs to ask themselves about any new startup
is this: "Is this a nice to have or a must have?"
For example, my
Information Technology experience has taught me a valuable lesson when
it comes to purchasing and investment in technology. Whenever someone
comes to me with a purchase request for something new I ask them a
simple question, "Is this a WANT or is this a NEED?" Most of the time,
the person becomes silent and slowly slinks away.
Sometimes the best
thing we can do is just be brutally honest, especially with ourselves. If we were to apply this type of tough love and evaluate the best of the offerings for Y Combinator’s latest Demo Day here’s what we’d get:
TicketStumbler could be the MUST Have service, depending on how it competes with existing services in their space such as StubHub which has been at it a long time. Sometimes existing services see extreme value in a new startup and decides it’s better to purchase them and integrate their new features rather than develop their own similar options. We’ll see what happens here.
Picwing serves too small a niche to seriously be considered a must have. It’s sweet and fun but sorry.
Posterous suffers from a glut of existing similar services so it will be tough to differentiate itself enough to warrant the funding it would need to continue to innovate this stale space. Still, I like the simplicity of their service. If anything it has fired a salvo which has awakened their competitors. While it’s important, it’s not a MUST HAVE at this point.
JobSyndicate serves an important niche. Unemployment is a serious matter and anything helps people possibly land a new position that will allow them to support their family and the economy is a must have in my book. If it uses monetary compensation in order to influence website owners to help others find a job then all the better. It sounds like a win-win situation for everyone involved.
***Editor’s Note: After communicating with Paul Graham the decision was made to change two statistics that were not as accurate as it could have been. The two areas have been highlighted in bold and followed with ***. The original text was "approximately 10%" which was replaced with "2 to 10%".
The other statistic that was updated was the number of funded startups which is now "over 100" where the original text had "80". There was no axe to grind or hatred involved in this piece.
