As for AngelConf, it was equally compelling and valuable. I can’t think of another time in which so many smart angel investors have been gathered to share their perspectives on investing. It was a fantastically valuable event for everyone who participated. Well worth watching the video.

But the fact of the matter is that every year Y Comb gets hundreds of applications from kids who are often not only technically gifted but also business and financially-savvy. Sure if you’ve got a product with tons of customers and solid revenue streams, you don’t need Y Combinator. Yet it’s clearly not so easy to do in practice.

Here’s why I like Y Combinator:
1) $5k + $5n @ 10-15% is not bad. Say you’ve got 3 founders so you get $20k and let’s say at 10%. That’s a $200K pre which is not bad for just an idea.
2) The money they give you is, at the end of the day, irrelevant. It’s INTENTIONALLY barely enough to cover your expenses for 10 weeks during the program. What’s more important is the focus and strong network of fellow hackers and also the lighter weight equivalent to Operational Partners you might have from a VC. This is made even more clear by the fact that a number of Y Combinator startups have been founded by young adults 24-26 years old who came from relatively well-paying jobs and could have easily used $15k of their own money to do a startup.
3) The difference at the end of the day is that Y Combinator targets kids with ideas and the skills to launch who otherwise might not be able to start a startup. Because of its selectiveness (<1%) getting into the program is an extra impetus to really go 100% on your startup and get it off the ground. Y Combinator gets you off the ground period. You’re at a stage where you aren’t haggling over valuations.

Of course you may not agree with this perspective but there are plenty of smart people who do and will apply to Y Combinator this year, as any other. Here’s a snippet of Graham’s VC philosophy:
http://www.paul.../vcsqueeze.html

I bet the founders of those companies are stitched up well an truly

They take “common stock” alright (7% or so.. for free) as well as a convertible note into the next rounds pref stock ($20k), plus a number of contractual rights and privileges to mask a pref stock deal as “common” including veto rights, vetos over selling stock, vetos over ESOP, thus vetos over hiring of pretty much all staff, rights to increase their shareholdings should founders do so, lockup terms, etc etc etc.

Its a pref stock deal. They just call it “common”

Ten bucks says I’m right.

YCombinator? Do you engage in such tactics? If so, do you disclose them to young entrepreneurs?

are you implying that Sequoia, Redpoint, Khosla, First Round, Union Square, NEA, etc who have all invested in YC companies such as (Dropbox, Scribd, Xobni, Loopt, DISQUS, Heroku) don’t count as real investors?

Die am 5. März, passender weise am Pioneer Way, in Mountain View stattfindende AngelConf erklärt es den künftigen Business Angels. Wenn auch du in der Vergangenheit Anteile deines Startups dermaßen gut verkaufen konntest, dass du jetzt bereit bist …

Obtaining VC funding isn’t a good idea these days because it simply burdens the owners with added responsibilities and unwanted influence.

I would think a better idea is to develop a product that generates revenue, fund that product independently, and bring the product to market via deals with customers and distribution networks.

You don’t need VC money for that, believe it or not.

The days are gone when cool novelty products get funded. As they should be.

Develop a product that helps people or businesses and you will see the revenues come to you.

Crazy, huh?

I’ve reviewed their deal docs.

You can’t even hire a lawyer to review the legals for the measly amounts of money they dish out ($20k), and you suddenly get burdened with the telephone directory of restrictions of VC deal would bring.

They then say ‘we will take care of the legals for you’.. which completely fucks over clueless investee companies.

Furthermore you set yourself up for an arse raping next time you raise money – as any real investor would realise a) you’re clueless and b) if you can get these sorts of deal terms for 20k well you should be able to get a hell of a lot more for any reasonable amount of financing.

The noobs that go to these sorts of groups have stars in their eyes thinking looking at all the k-rad funky digs these guys have.

This is incubator 2.0 of the worst kind.. incubators flamed out in the dot com boom because they incubated companies to death like an overcooked egg.

You are better off getting the 20k of family and friends in 100% vanilla common stock if that’s all you need.

They are systemically, operationally and attitudinally different. They have different metrics for acceptance and success; funding, oversight, sourcing, profitability and, most importantly, infrastructure.

What is needed is a Public-Private For Profit dedicated effort to work with, support and compensate the Seed Infrastructure (Incubators, Economic Development Agencies, Tech Transfers). This infrastructure already exists and provides the efficient sourcing, screening and post-investment oversight needed to develop Series A worthy companies. What is needed is a dedicated effort that is not geographically constrained. What is needed is a thorough Virtual Incubation system that brings both Community and Collaboration to all elements of the total Investing community (Corporate/Government partners for “Validation”; Entrepreneurs & the VC/Corp Dev Community for follow on funding after the Seed/Startup stage).

What is needed is the Growth of companies and good jobs.

The Venture Capital stage of the Venture Risk Investing industry has a valuable place – to expand Seed/Startup companies with money, targeted managerial talent and business development/partnership assistance.

By dedicating a private/public collaboration to increasing the value and viability of early stage companies you are also increasing their valuation for their Series A round; thereby leveling the playing field with what will be a smaller group of Traditional VC funds.

This Seed dedicated effort can take two forms:

(1) Standalone Fund
(2) Operating Division of a Traditional VC Firm

Please review the powerpoint – The START Fund -
http://www.slid...rt-fund-feb2009

I look forward to all comments.

Thank you,

Elliott Dahan
Elliott@thegrowthgroup.com

2. Poorly Design Website Claiming You are Success

3. Sit Back and Watch Morons With Bad Ideas Appear in Droves

4. Siphon Through Half-Baked Ideas, Bong-Induced Business Plans, and Crayon Scribble from Mentally Ill College Kids.

5. Find the ONE idea that has potential.

6. Invite Socially Undeveloped Nerd Owner For Beer and Pizza.

7. Offer him $5,000 and all the Beef Jerky He Can Carry in Exchange for 51% ownership.

8. Leak Story to Techcrunch. Decline to Comment on the Record.

9. E-mail Satan. Sell Him YCombinator Business Model.

You should try it sometime.

1. Graham isn’t reading this. Get off your knees.

2. YCombinator provides NOTHING of real value, which is why they are advertising at this very moment.

3. None of you know anything about VCs. Please stick your collective heads in a bucket. Ask for a kick in the ass.

4. Rinse. Repeat.

Trying to get a half-baked idea like “Smart Babes Are Sexy” funded.

Do you know why I’m not trying to get an idiot idea like that funded?

Because it is, perhaps, the most banal, simplistic, subjective, superficial piece of nonesense I’ve seen all week.

Unless a VC firm is run by retards wearing crash helmets strapped to their Jungle gyms—you will never receive a dime for your lame brained concept.

BTW: I don’t know if you’re sexy. But hell, you certainly aint smart.