Demo Day: Y Combinator’s Spring Chicks

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1. Zaid
   

   March 9th, 2007 at 12:31 am

   Insightful summary. Paul Graham is setting himself up well for the future - at least couple of these guys should have few big hits SOMETIME in their lifetime if not with their current Y-Combinator venture.

   A bit more insights about where some of these are headed would be nice. What’s the current top YComb doing after reddit? I’m guessing Loopt.

   -Zaid

2. Alaska Miller
   

   March 9th, 2007 at 12:33 am

   A lot of these things are lame.

3. JoshLowry
   

   March 9th, 2007 at 12:36 am

   Y combinator looks like they are making some wise investments.

   I wouldn’t give away 6% of my company for $5k. That would go pretty quick in my opinion. I guess with the money they made from reddit they are spending it on some new horses. Best of luck to those guys!

4. alan jones
   

   March 9th, 2007 at 12:39 am

   alaska: yeah, but which ones?

5. Katie
   

   March 9th, 2007 at 12:44 am

   anything i can use…..not really. what about something for us in our 20’s?

6. matt
   

   March 9th, 2007 at 12:52 am

   @ Katie– yeah where is the next myspace or yelp:)

7. David N. Welton
   

   March 9th, 2007 at 1:16 am

   Hrm… Tsumobi looks a lot like an open source project I set up, called Hecl:

   http://www.hecl.org

   I’m curious how they intend to make money out of it though… programmer tools is not an easy space to be in.

8. Sean Wolfe
   

   March 9th, 2007 at 2:04 am

   Whitenoise Networks’ correct URL is http://whitenoisenetworks.com or http://whitenoi.se

9. Darren Stuart
   

   March 9th, 2007 at 2:37 am

   I think the top4 are the best on this list. I think some of the others will struggle.

10. Ben Newhouse
    

    March 9th, 2007 at 2:55 am

    Not sure if the URL for Whitenoise is wrong, but it just seems to me to be just a photo site with some slurpee noises in the background…

11. Michael Arrington
    

    March 9th, 2007 at 3:12 am

    Ben - I believe that’s the correct URL, just hasn’t launched yet. Demo was cool.

12. Peter Cooper
    

    March 9th, 2007 at 3:25 am

    I love some of these names. They’re clear demonstrations that domain names are too cheap and anything even vaguely readable has already been poached. I love seeing the creativity people are throwing into names nowadays.

13. Amit
    

    March 9th, 2007 at 4:51 am

    what an lame list of start ups… i dont think even one of them would be around in 3 years time… not in current format anyways…

    i dont understand why anyone would want to go to Y combinator for funding…

14. www.youtubesearcher.com
    

    March 9th, 2007 at 6:05 am

    Amit
    - 3 years is a long time in this space
    - not everyone is just getting 5$/founder I bet
    - they get a fair marketing boost just by being part of Y

15. Dan Gudema
    

    March 9th, 2007 at 6:11 am

    Katie asked if any of these are for somebody in their 20s. I guess not.

    Well guess what, join the club. The rest of the world in their 30s, 40s, 50s, etc, don’t use the majority of these new sites. The majority of people over 30 don’t know and haven’t used Youtube, Myspace, Digg, Reddit or anything like that, less Writewith, Snipshot or Tsumobi. What you are experiencing is being out of touch with the needs of even younger people, like teens. So we can’t be a judge of what may or may succeed. And the funding is great for developers, regardless of whether or not it makes it. Not everybody needs 1 billion, some of us are happy with a million. Some developers are just happy to have a cool project.

16. derek_
    

    March 9th, 2007 at 6:26 am

    The URL for Whitenoise isn’t correct.

    The correct URL is: http://www.whitenoisenetworks.com/

17. Dave
    

    March 9th, 2007 at 7:26 am

    More stuff in private beta or not accessible w/o user/password.

    More clutter on the crowded net.

    OH, SO BORING - Can Techcrunch do netter stories?

18. Colin Dowling
    

    March 9th, 2007 at 7:37 am

    Many of these appear to be features and not businesses.

19. Mike
    

    March 9th, 2007 at 8:09 am

    From an investor standpoint, I like the Y Combinator model and think that they could reap some very good results.

    As far as most of the companies, some are pretty good and some I just ask myself “why?” All in all, several that I think have good potential are WuFoo, Weebly and Buxfer. *my disclosure…I have not looked at all of them yet.

    Micah
    http://foodforethought.wordpress.com

20. other
    

    March 9th, 2007 at 8:22 am

    “From an investor standpoint, I like the Y Combinator model and think that they could reap some very good results.”

    of COURSE you like it “from an investor standpoint,” they are paying these kids practically nothing, and are getting back potentially millions.

21. Amy Wilsch
    

    March 9th, 2007 at 8:25 am

    Nick, nice post. I like entities like this such as this, IdeaLab, Siemens incubator, etc. They seem to be succeeding where the ‘public’ incubators basically fail (where 4 of them have closed in the past 2 years in the east bay alone). This private public mix seems to work better.

    Not all companies need to be the next Yelp,YouTube or MySpace. They can’t all be on top, and many of them may turn into successful businesses creating good jobs for many people even if they’re not poster boys on the front page of Wired or forbes. Just because they don’t get bought for 1.65B within a year doesn’t make them failures.

22. other
    

    March 9th, 2007 at 8:25 am

    “Not sure if the URL for Whitenoise is wrong, but it just seems to me to be just a photo site with some slurpee noises in the background…”

    are you for real? “slurpee noises?”

    it’s WHITE NOISE in the background - get it? cuz the name of the site is WHITE NOISE. WOW did that one sail over your head.

23. Drama 2.0
    

    March 9th, 2007 at 9:11 am

    I don’t necessarily dislike the Y Combinator model, although from a founder’s standpoint the amount of equity you give up right off the bat is extremely expensive in the long run. Most founders don’t recognize that equity financing is the most expensive form of financing and while sometimes you have to give it up, doing so right at the outset like this has probably locked these startups into total reliance upon angels and/or VCs. Finding a way to bootstrap is always ideal in my opinion, especially when you’re talking about amounts this small.

    Reading the descriptions of this crop of Y Combinator startups I got the impression that quite a few of them are better described as features than they are as services. That’s not to say that features can’t be interesting or can’t evolve into more comprehensive services, but I only saw a few startups here that looked like they might be really compelling.

24. Robert Dewey
    

    March 9th, 2007 at 9:22 am

    On the contrary, ideas are worthless… So having a $100K valuation with little more than an idea is pretty nice. Sure you’ll burn through the capital, but it isn’t really about *monetary* capital — it’s about intellectual capital and social networking.

    When people learn that the most important aspect of initial seed funding is networking, then they’ll understand the Y concept.

25. far33d
    

    March 9th, 2007 at 9:52 am

    If you read Paul Graham’s website, you’ll get the impression that he’s happy to invest in features. The ideal exit for a y-comb company is an acquisition, even before further investment. A lot of these sites, if they generate reasonable traffic, have obvious buyers.

26. rack pallet
    

    March 9th, 2007 at 9:54 am

    I think Y Comb. has a market.

    - I just hope they only accept those that need them, and those that they need. That is THEIR market.

    -If they accept companies that don’t need them, they are essentially Raping them. If they accept companies that they don’t need; (I doubt) this happens.

    - So in review, Hopefully they aren’t raping too many companies. Even if you agreed to be raped, it doesn’t feel good.

    - I think Y Comb. Is a VERY GOOD COMPANY; and are VERY TRANSPARENT. But the fact remains; They are Gambling, betting small amounts on numbers to win a 37:1 ratio - (Its a lot like Roulette)

    -RB

    - ” I beg for every founder of every company, to view the company as his baby, his life …”

27. John
    

    March 9th, 2007 at 9:59 am

    Good model for Ycombinator and inexeperienced young entrepreneurs who don’t know anything about the start-up game. For anyone with ANY experience this would be an AWFUL deal. But I suppose does serves a certain market.

    Working to build a start-up is a huge commitment of your time, energy and resources. If you are willing to take $5000 for 6%, you are either poor with no friends or you don’t believe in your idea that much. I’m all for hedging but $5000 isn’t a hedge against anything.

28. manfmnantucket
    

    March 9th, 2007 at 10:06 am

    speaking of social networks for everyone, here’s a post from the boston globe blog - er, I mean tech columnist - on that topic.

    http://www.boston.com/business....._everyone/

    I think you have to keep in mind that the $5K isn’t their only financial support and isn’t really the main value or of a Y-combinator investment for these incubating ventures.

    Many of these folks likely have parents who can afford to send them to decent schools and also to subsidize their living expenses enough that they don’t need demanding jobs - instead, they can spend time hacking and networking. Because their average age is 20-something, they can have very low living expenses - no houses or kids just yet. But presumably the real value of Y-Combinator isn’t the cash, it’s the connections and guidance. Those things can be much more valuable than $5K especially to such early stage enterprises and entrepreneurs.

29. whoopee
    

    March 9th, 2007 at 10:13 am

    zenter i can see a use for. but you better damn well make sure their site is up when you go to present your once-in-a-lifetime presentation to VCs. it would be amusing if they presented their own case to VCs using zenter itself and the site was down.

    buxfer also looks good but really i expect my bank to fold in this functionality on their own site, where they ALREADY categorize all my spending etc. why do i want to re-enter all this data again? the problem i have always had with financial apps is that they turn me into a data entry clerk. no, i want to use my credit card and have nice charts magically appear.

    weebly…neat, but who is the audience? i haven’t seen google pages start a prairie fire. web site creators tend to fall into a few major buckets already - bloggers, myspacers, and people who absolutely want to create their own site.

    “Virtualmin is taking on the lack of innovation in the server admin programs”. oh i am sure Sun will be thrilled to run a comparison of virtualmin to dtrace. let me boil down server admin for you: the unix shell. if you don’t know it, use a blogging service or google pages to run your site.

    most of the other stuff isn’t even worth commenting on

30. Drama 2.0
    

    March 9th, 2007 at 10:26 am

    Robert, manfmnantucket: I understand the points you’re making, and there’s some truth to it, however I think the real value of the “social networking” that you gain when you take money from a prominent angel or VC is typically exaggerated. Let’s not forget that the majority of the investments made by angels and VCs fail. They play a numbers game. Invest in a lot of companies and hope that a few hit the jackpot. They’ll help you out to a point but don’t expect that they’re going to give you the world and perform miracles.

    There’s no doubt you gain access to certain circles and the advice of some smart, experienced people, but all of that is not going to help you very much if you’re starting with a concept that isn’t viable, don’t have a business model (or can’t find one) and don’t have the ability to execute. Can the advice you get help you in these areas? Sure. But don’t expect Paul Graham or Michael Moritz to guide you step-by-step through how you need to build your business on a daily basis.

    I think the question for founders is: is giving up 5-10% of my company for a small amount of money and access to certain circles really a smart thing to do right off the bat or can I bootstrap this and see how far I can take my business and validate the concept before I consider raising money? I don’t think there’s a right or wrong answer, but as I’ve think I posted before, I’ve met a lot fewer founders who bootstrapped and regretted it than I have founders who raised outside investment early and regretted it. A lot of people don’t recognize that equity is the most expensive form of financing and when you choose to start giving it up, especially at the earliest stages, you change the course of the business forever. It could be the difference between a successful exit and a crash-and-burn demise.

    Having access to key people and being able to get advice from experienced entrepreneurs is important when you’re starting a business, but it’s less important than actually building a product that people want, marketing it successfully and implementing a business model that you can validate. The guy who’s going to do that is probably spending more time in his basement or garage than he is dining and schmoozing with investors and entreprenurs in Palo Alto.

    John: it’s an awful deal for inexperienced and experienced founders alike. Experienced founders probably won’t do it. Inexperienced founders will likely get their first major learning experience. Even if they’re successful and have a liquidity event, they may look back and calculate just how much money they lost by selling equity for such a small amount of money so early. You don’t want to be greedy and I’m not saying that you can or should hoarde all your equity, but you also want to be prudent with how, and when, you spend it.

31. Patrick Lor
    

    March 9th, 2007 at 10:59 am

    Killer portfolio. For those of you who are calling some of the companies lame, remember that this is a portfolio - only a few need to be successful for the fund to make money. In fact, in a portfolio, you expect some of the investments to be high risk - that’s where you get your home runs from. Also, when you consider that he’s getting 5 - 10% of each of these companies for just $5 - 10k each, it’s a no-brainer.

    In addition, take the example of Kiko, which ended up being sold on ebay. It may not have been wildly successful, but Paul Graham probably broke even or better, and, he’s funding Kiko’s founders in their next venture. Now, he’s getting a more experienced team of entrepreneurs, and that only increases their chances of success.

    Rack Pallet - I’m interested in where you got the 37:1 stat from. Thanks!

32. Emmett
    

    March 9th, 2007 at 11:02 am

    As someone who’s been funded by Y Combinator, I feel the need to point out a couple things:

    1) It’s not $5000 of funding. I don’t know where everyone got that figure from, but it’s simply wrong. From the article above: “their standard deal is $5000 + $5000 per founder”. So even in a one person company, it’s at least $10,000. And since most of the companies that Y-Combinator accepts are 2-3 people, it’s more like $15,000-$20,000. Which puts valuations (assuming 6% of the company) around $250,000.

    2) Since Justin and I were funded by Y Combinator in the summer of 2005, the first round, I’ve met almost everyone funded, and know at least 50% of those funded personally. I’ve yet to meet a single one who felt ill used. The amount of equity they take is tiny in comparison to the value of mentoring, community, and connections that Y Combinator provides.

33. anonymouse
    

    March 9th, 2007 at 11:02 am

    not a single one of these ideas is original, but all that counts is whether they can sell memberships/ads/whatever.

34. anonymouse
    

    March 9th, 2007 at 11:03 am

    and “socialmoth” is utterly dumb, and I cannot fathom how it would receive VC funding. it is tantamount to a bored freshman CS student’s weekend project. whatevs.

35. ... bored surfer
    

    March 9th, 2007 at 12:10 pm

    As anonymouse above points out, these are not original ideas for the most part. But Paul Graham’s objective is clear: he believes that someone will acquire, say, writewith or zenter (word processing & presentation, respectively), and incorporate it in a broader product suite. But given his cynical characterization of the acquisition process (”Smart geeks taking advantage of dumb suits” would sum it up pretty accurately) and the fairly obvious “role model” he serves as to take the money and run, it is hard for these companies to a) emerge as substantial enterprises on their own, because Y Combinator companies are always known to be ready to be flipped or b) attract high valuation in exits, because even “dumb suits” know when they are being treated as dumb suits.

    Kiko got, what, $300K? Given that valuation going in was at least $100-150K, and there was probably some money put in after the initial seed, it is not clear there was much of a win there. Reddit was more of a hit, but even that I doubt got more than $3-4 million, netting Paul $300-400K.

    There aren’t all that many acquisition opportunities out there, and the few large public players know they have all the leverage (suits can negotiate better than geeks can!) so it is harder and harder to score that cool hit you can brag about to your friends for ever (like Paul has been doing ever since he unloaded ViaWeb on Yahoo). Like a good general, Paul is executing a battleplan ideal for the go-go 90s. May be this time around, private equity or hedge funds will do some web roll-ups and offer Paul a good ROI and an opportunity to smirk about dumb suits but …

36. matthew
    

    March 9th, 2007 at 1:13 pm

    “Most founders don’t recognize that equity financing is the most expensive form of financing and while sometimes you have to give it up, doing so right at the outset like this has probably locked these startups into total reliance upon angels and/or VCs. Finding a way to bootstrap is always ideal in my opinion, especially when you’re talking about amounts this small.”

    true that. what a gip. $5,000 for 6%? c’mon.

37. David
    

    March 9th, 2007 at 1:30 pm

    I’ll have to agree with Emmett here: most commenters did not read the story very carefully. Besides the fact that most investments are in the order of $15,000 - $20,000 for 6%, it’s hard to understate how crucial the mentoring and networking help can be — and maybe that’s why most will continue to criticize from their vantage point (likely not an entrepreneur themselves).

    Even a great product, on merit alone, won’t get the attention it deserves. Before you’re in the Y Combinator program, you’ll be fighting for attention. Afterwards, you’ll be in meetings with the most prominent investors in the valley — it’s really a stamp of approval of sorts for investors. And this helps along every stage: product advice from the best out there, a kick-start to the investment game, connections when it comes time for an exit, and sometimes a boot in the ass saying: “Don’t get distracted, make something people want”.

38. why?
    

    March 9th, 2007 at 1:50 pm

    Sell out!!!

    Why won’t you own 90% of your company? You invented it…. That’s right… Not the investors…..

    Greed is good for investors. You founders should give your money back to investors!!!

39. David
    

    March 9th, 2007 at 2:21 pm

    To the above commenter — maybe you’d enjoy owning 100% of $0?

40. carmen
    

    March 9th, 2007 at 3:40 pm

    given the nature of the beastly companies in the class that adds features via acquisition, all these apps would likely to have to be completely rewritten to integrate with the company’s diistributed serverfarm/bigtable architecture anyways - at that point youre hoping you can hire the founders for some fixed period - and im guessing most of these guys would rather cash out and remain entrepreneurs than do that - they’re smart recent grads from CS schools im sure they could get a job working for Google or eBay if they wanted..

    these improved ‘features’ praobly wouldn’t see the traffic needed to be acquisition-worthy unless they were actually acquired (since the companies whose products are being fixed, have amassed enough talent to fix it themselves), which is the second chicken and egg. so i do think these guys have their work cut out for them.

    the main disappointment is the lack of fresh ideas. wheres the distributed peer-moderated replacement for the FDA/FCC/IRS? what about the dollar itself? the last thing we need is another twittr..

41. anti-troll
    

    March 9th, 2007 at 5:14 pm

    To all the trolls who have to hate on y combinator…

    How about you pitch in to help starving 20-something entrepreneurs get a leg up in the world?

    Mouth –> money.

    Assume that y combinator companies are rational decision-makers.

    To all the trolls who hate on the companies themselves:

    1) most startups fail, so what’s worse about this list? especially considering its comprised of young hackers making something out of nothing in ~2 months on a shoestring

    2) do you have stats to prove that any of these companies are failing to attract people who like what they have to offer?

    3) vc’s and angels invest in y combinator companies; bets are actively being made against your opinions. cheers.

    —

    @ carmen: your web site = fresh idea?

42. David Mackey
    

    March 9th, 2007 at 10:19 pm

    So, when is Conde Nast going to acquire Y Combinator? And are there any competitors to Y Combinator? 6% is an awful lot for so little cash.

43. Brian
    

    March 10th, 2007 at 2:13 am

    There must be more to Tsumobi than what is written above. Does anybody have more information?

    In particular, I am curious about two things:

    (1) How is Tsumobi going to get onto the user’s phone? If installing JME apps is too hard for an end-user, and Tsumobi is a JME app, then isn’t Tsumobi itself too hard to install? Why would handset manufacturers and/or carriers pre-load Tsumobi onto phones?

    (2) Is Tsumobi something that can be embedded into another JME application (basically, a scripting framework), or is it a standalone app that works like a midlet manager + Nokia Catalog?

    I am developing some tools that sound a lot like Tsumobi based on the description above, which is why I’m so curious.

44. Rahul Dighe
    

    March 10th, 2007 at 10:30 am

    I am currently in a b school, and as a part of our school’s venture fund am doing due diligence on something exactly like white noise. Although Y Combinator might be gambling by taking stakes at $5000 in the long run it has a reputation to maintain, its i think funding websites not businesses, i just cannot imagine what are the revenue projections, marketing plans, entry strategies and whole other things that are fundamental to launching the businesses. it looks to me that they are all proof of concepts and if someone likes it they buy it.

45. Kevin Fischer
    

    March 11th, 2007 at 9:55 pm

    David: Techstars is the only direct competitor to Y Combinator, offering a similar program with similar investment terms. They’re located in Boulder Colorado.

    Charles River Ventures offers 250,000 quickstart grants, which could appeal to Y Combinator type companies.

    Also Lightspeed Venture Partners in Menlo Park: $10,000 grants per team member, for free.

46. magwa
    

    March 12th, 2007 at 10:41 am

    6% for 5K is ridiculous, someone tell these kids about http://www.prosper.com

47. missed the point
    

    March 12th, 2007 at 2:43 pm

    magwa:

    first of all its more like 6% for 15-20k AND these kids instantly have an in with everyone important in the valley. You can’t put a monetary value on instant respect and attention. Try doing that with prosper.com…

48. Joseph
    

    March 13th, 2007 at 8:19 pm

    Why wait for White Noise when you can use Scriggle-it today?

49. Sean Wolfe
    

    March 13th, 2007 at 10:37 pm

    Scriggle-it is a completely different type of service. They deal with the artist to consumer relationships. Whitenoise hopes to address the relationships between professionals within the industry.