The Launch Pad: Inside Y Combinator, Silicon Valley's Most Exclusive School for Startups (Excerpts)

Ft: Ilan Zechory & Tom Lehman


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[Ramen Profitable]

“Ramen profitable” was one of Graham’s best-known precepts in the world of startups. Ramen profitability refers to the moment when a startup, in Graham’s words, “makes just enough to pay the founders’ living expenses.” This was attainable only if those expenses were minimal.

Graham personally knew what startup life was like, from a three year period, 1995 to 1998, a decade before he founded Y Combinator. The experience ended happily for him: he sold his company, Viaweb, to Yahoo, achieving sufficient wealth that he would never need to work again. But unlike many successful entrepreneurs in the Valley, he did not try his luck again and start another startup. One reason was that he knew all too well how demoralizing the startup experience is. Another reason was that wealth had drained his motivation. On two occasions, he had come close to starting another startup but “both times I bailed because I realized that without the spur of poverty, I just wasn’t willing to endure the stress of a startup.”

[Paul Graham Longed to be a Painter]

When he started his startup, Graham fit the profile of the twenty-five-year-old founder perfectly, except that he was thirty. He had a bachelor’s degree from Cornell and a PhD in computer science from Harvard, but had no interest in following an academic track. Living in New York, he longed to be a painter and paid his bills as a freelancing software consultant, working for the U.S. Department of Energy, DuPont, and Interleaf. Resolving to start a startup, he hoped to be able to permanently solve that irksome problem of having to work.

[Initial Investment and Formation of YC]

The three Viaweb hackers went their separate ways. Morris followed the academic track that he had planned all along, ending up on the faculty of MIT. Blackwell liked the startup life and in 2001 started a startup of his own in California: Anybots, a robot manufacturer. Seven years after the sale to Yahoo, Graham got the idea of setting up Y Combinator, which would make investments but would also allow the original trio to work together again. Graham invested $100,000 and would be full-time; Morris and Blackwell each put in $50,000 and would help in making investment decisions twice a year. They would also be joined by a fourth founding partner, Jessica Livingston, who quit her job at an investment bank in Boston to join YC full-time. She and Graham were a romantic pair and later married; with YC, they combined their professional lives, too.

[Female Engineers Tend to Play with Legos and Have Engineer Parents]

Asked her thoughts about the rarity of women in computer science, Mah said she usually did not give the matter any thought, but a few days earlier it had occurred to her and she realized that she did not have a satisfying explanation. So she asked the women in Berkeley's computer science department what toys they had played with as children -- and whether Barbies were among them -- and the answers she received were consistent: no Barbies. Legos were the favorite toy.

She also noticed that most of the female computer scientists had either a mother or father who was an engineer. This was true in her case, too: her father, an engineer, had given her Legos and science kits.

[Rap Genius Growth]

Rap Genius is also growing because its users spread the word among their friends, who do the same. This is the same natural way that Wikipedia grew: the editorial content of the site draws users, a portion of whom donate their time to add to the content, which, in turn, draws still more users. At Rap Genius, users contribute the site's content -- the annotation of lyrics -- receiving as compensation only "Rap IQ" score, which is displayed by the contributor's screen name. For now, Rap Genius also resembles Wikipedia in that it too is a Web site free of advertising or subscription charges. When Rap Genius presents the growth graph to prospective investors at the end of the summer, it will be able to show growth only in users, not revenue. But having a lyrics site that has no advertising is of great help in building up its fan base, attracting users who are besieged at other lyrics sites with pop-up ads and ringtone offers. Rap Genius can also lay claim to being the most authoritative rap music lyrics site. It describes itself as basically the internet version of the nerd-ass "rap dictionary dorm-mate you had in college."

The Rap Geniuses do not have to worry about "Launch Fast" or the growth graph for Demo Day. They do not feel the same urgency to look ahead as their batchmates. Just about everything about Rap Genius's genesis places it apart from the rest of the summer group. Not only has it gotten the running start, its founders were able to get it going as a part-time project while keeping day jobs. And it is a service that allows them to spend their working hours immersed in the music they all love. In sum, they are blessed with good fortune in getting started.
