As Y Combinator Prepares to Open Summer Camp, Paul Graham Speaks

5/3/08Follow @bbuderi

Y Combinator bills itself as “a new kind of venture firm specializing in funding early stage startups.” The company also has a different kind of headquarters, one that alternates between Cambridge, MA, during the summer and Mountain View, CA, during the winter. And, as Wade noted a few weeks ago, Y Combinator’s summer camp for startups will open here in June. In the meantime, Y Combinator founder Paul Graham is talking to the folks at GigaOm’s Found/Read.

The first question of the interview (the article was published today) is about the mathematical function from which Y Combinator takes its name. I was totally confounded by the first sentence of Graham’s answer: “The Y Combinator is a function that builds a recursive function without them needing to have name.” (I suspect a typo combined with technical jargon way over my head, but either way, I’m lost.)

The rest of the interview, though, is very interesting and revealing. For instance, the question about whether it’s true that Y Combinator gives companies just five minutes to decide whether to take a funding offer. Graham’s answer:

“The reason people are supposed to decide quickly is that they already know everything except the [equity] percent we’ll ask for. Since all they have to do is subtract one integer from another, five minutes should be enough. In the median case we take 6 percent, meaning we have to improve a startup’s outcome by 6.4 percent for the founders to end up net-ahead. That’s a ridiculously low bar. The ‘IQ test’ is whether they grasp that. One startup turned us down because they received an acquisition offer the weekend we did interviews. It was a good offer; I’d have taken it in their position. There have only been three others who turned us down. I don’t know of any who went on to succeed.”

But my favorite part of the interview was Graham’s response to a question about what founders can do to improve their odds of being selected by Y Combinator.

“Get good co-founders.”

That’s good advice for founders no matter who they’re talking to, or what they’re doing.

Bob is Xconomy's founder and editor in chief. You can e-mail him at bbuderi@xconomy.com, call him at 617.500.5926. Follow @bbuderi

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