Paul Graham is a well-known character in the startup world for his past successes and most recently, the launch of Y Combinator. In 1995, Graham and Robert Morris founded Viaweb, the first application service provider. Viaweb’s software, originally written mostly in Common Lisp, allowed users to make their own Internet stores. In 1998, Viaweb was sold to Yahoo! for 455,000 shares of Yahoo! stock, valued at $49.6 million. Later Viaweb became Yahoo! Store. BusinessWeek included Paul Graham in 2008 edition of its annual feature, The 25 Most Influential People on the Web.
Graham’s Y Combinator, founded in 2005, is an early-stage investment firm and boot camp for entrepreneurs. It seeks to find the country’s most promising startups. Twice a year, Graham and his five partners invite several dozen entrepreneurs to move to Silicon Valley for three months.
Y Combinator has a reasonably good reputation for producing “interesting” companies. As such, for those startups that need funding beyond what YC puts in, the fact that they’ve been one of the chosen few likely gives them an edge over a random startup looking for angel/VC money. Paul’s network is also pretty strong and he can “draw in” outside investors. Famous investors Yuri Milner and Ron Conway have started to offer every single seed-stage start-up firm Y Combinator a $150,000 investment with very favorable terms: a loan in the form of a convertible note with no cap and no discount, the kind of fine print that would make most venture capitalists wince.
Let’s look at the numbers: As Paul Graham shared on his website; in 6 years, YCombinator has invested in 316 startups including this summer. YCombinator has only invested about $5 million, around $15,000 each. They’ve now had 25 companies acquired, 5 of them for over $10 million. As to valuation, the combined value of the top 21 companies that YC has funded is $4.7 billion! The data used for calculation is derived from the most recent funding rounds.
As Paul Graham says, “the numbers look encouraging so far”. I think It’s proved that Paul Graham’s YCombinator has become an absolute success. Congratulations.