Is Y Combinator Building Value or Just Guessing?

When I read the attached article discussing the best of Y-Combinator companies, I struggled to see companies with much intrinsic value.  If you read into this article and click on some of the links for the companies, you may find something that you couldn’t live without.  My east coast sensibilities, the ones that remind me that success is never easy, prevent me from seeing a tremendous amount of sustainable, value-generating opportunity in these companies.  Obviously, things look different from the Zynga-coast.

However, in the over-cashed culture of the silicon valley, most of them will experience the euphoria of quick exits or large investments.  And, of course, this is America and I understand how Adam Smith’s “economic man” is supposed to behave.  My blog is named after it.  Entrepreneurs and investors are absolutely free to pursue their own enlightened interests with their own money.

But this list of companies, and maybe it is just Anthony Ha’s selections, just looks like Y-Combinator is guessing.  How selective are they in choosing their 3-month classes?  Where is the innovation that is worthy of earning millions?  The program puts a total of $18,000 into lots of companies at one time…their current group includes 43 companies that here on the east coast, we’d call “concepts”.  Then they help the entrepreneurs basically get ready to raise money.  Of course, they’re in the re-emerged bubble economy of land and most are likely to raise a lot of money.  And Y Combinator’s reputation builds as genius company builders.  In fact, earlier this year, the Silicon Valley Angels began investing $150,000 in every Y Combinator company.  If that isn’t bubble-y, I don’t know what is.

This is good and fine for them…it’s all their money.  Their visibility has brought a lot of attention to the incubation business.  However, I worry a bit about all the attention they’re getting as a “model” for incubation.  Their model is the gold rush.  It’s an oil boom.  It certainly doesn’t look like the Fairchild Semiconductor or Hewlett Packard style of developing and nurturing incredibly valuable innovation that is the legacy of silicon valley.  Many of us need to evaluate technologies and markets and founders and select those we think can build lasting value. 

In a gold rush, and perhaps at Y Combinator, it just looks like guessing. But in a bubble, even bad guesses can get air.

About TechonomicMan

Manager, Entrepreneurial Services at Ben Franklin Technology Partners in Northeast PA.
This entry was posted in Seed/Venture Capital, Tech Based Economic Development, Uncategorized and tagged , , . Bookmark the permalink.

1 Response to Is Y Combinator Building Value or Just Guessing?

  1. I like this – “success is never easy” – spoken like a true business manager. 🙂

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