[chaostheory]

This is what happens when (as an industry) you don't treat people well, when you feel have the power to do as you please. Let me explain: pre-Ycombinator a lot of VCs would routinely either abuse or just simply ignore a lot of entrepreneurs. Someone can correct me but YC was a response to that. One reason everyone flocks to YC is because everyone knows that YC is fair and trustworthy. That's not the case anywhere else (at least back then).

[jacquesm]

They also have a relatively transparent application process. I think that means a more level playing field based on merits rather than on who you know.

[ig1]

It'd be interesting to see hard data on that, from speaking with various YC founders in recent batches it seems a lot of them had recommendations from YC alumni.

Back in the early days pg mentioned around 10-15% of the accepted class were referred but I wouldn't be surprised if that figure had crept up over time.

[jroseattle]

> One reason everyone flocks to YC is because everyone knows that YC is fair and trustworthy.

Another reason is that YC is the gold standard, and having that endorsement opens all kinds of doors.

But simply put, YC is a better mousetrap compared to the old-boy capital firms.

[kamaal]

>>having that endorsement opens all kinds of doors.

This might be the most important of all things. People pay big money to get into Ivy Leagues because its assumed the smartest study there, and then come out even better. Access to a rich, powerful and well connected Alumni, which has a mutual interest in defending each other to keep the value of their network high is best thing you can ever have in your career.

Probably not many people get into YC for the initial money these days. Its just access to that network and the alumni.

[jacquesm]

> Another reason is that YC is the gold standard, and having that endorsement opens all kinds of doors.

Yes it does, but it actually should not. By becoming an endorsement YC loses a bit of its effectiveness and the eventual rate of success will probably decline measurably.

Ideally investors would properly investigate the companies they intend to invest in rather than to just use YC as a way to increase their probability of scoring a hit. That's just another variation on the 'dumb money' theme and the field as a whole will lose from such inefficient allocation.

It will put fewer wood behind more arrows. Even though YC companies are probably already over-valued it would be more efficient if VC capital would concentrate on those companies the VCs actually believe will succeed rather than to see these blanket investments in anything that moves that has been backed by YC.

It even matters to the founders.

As long as there is a glut of capital chasing these companies a number of companies that did not go through YC will likely be passed up on simply because they don't have the stamp of approval that YC offers.

This is a gap that might be large enough for a smart VC to exploit. Ignore the YC stamp of approval, treat all applications equally and invest in a couple of dark horses that did not make it to YC for various reasons (geography, timing, bad fit), but to have their application roughly around the same time as YC has theirs.

That way they can use the YC 'vetted' companies as the benchmark against which they can evaluate their batch of 'dark horses' substantially increasing the hit rate of the latter without having to compete with all the other investors in the YC batch.

[ChuckMcM]

Actually angel investing was the response to that, individuals who weren't wealthy enough to join a fund and become an LP but had enough disposable assets that if they put $50,000 - $1M at risk it wouldn't ruin their retirement if they lost it all.

One of the things that I haven't read about is what is the 'YC' of movies? In many ways the money in Hollywood is there but there isn't nearly the organization like there is at startup incubators. There are so many corollaries between the two environments I would expect something between the studios and Kickstarter to have emerged by now.

[bellerocky]

Individuals have a lot of sway in Hollywood. It's all star power. Money and talent flock to the stars, and by stars I include producers, writers and directors in addition to actors and actresses. They make money and are prestigious to work with, especially if the movie is successful. In addition to individual behavior there are also the various unions like the Writers Guild of America, the Screen Actors Guild, the Directors Guild of America and organizations like the MPAA and AMPAS and in television ATAS which all wield considerable influence and money. Though it is TV and not movies, Netflix succeeded because it played by their rules.

You can't just disrupt this because it's more than wealth, it's a culture that has been around many generations now and created film making what it is today. There's an incredible gravitational well that sucks all the incredible skill and talent found in the world right into Hollywood. It's not going anywhere.

[ChuckMcM]

You could argue its all 'star power' in the valley too, money and talent do seem to follow people who have a couple of big exits on their resume. One of the differences though is the artistic element. Engineering startups is an 'art' but it isn't the kind that brings out the 'artist temperament' as some refer to it.

I don't have enough real knowledge about how that gets done so I can't really say if such a thing could happen, but I do see a lot of similarities between Bay Area culture and So Cal culture which are both warped a bit by their respective economic engines.

[staunch]

YC probably most closely resembles the talent agency William Morris.

[ganeumann]

Nah. WMA is in the business of taking people who are already successful and making them richer. They are negotiators.

YC resembles a top-tier investment bank, like Goldman Sachs: they gussy you up for the road show, they introduce you to their very large network of investors, and they take 7%. And they get high prices for their clients because they (YC/Goldman Sachs) has a reputation for getting the best companies into the funnel, which is in turn based on getting high prices for their clients.

[staunch]

William Morris discovers and coaches talent. They take a management fee. They intro their talent to film makers who have money. They're really only looking for super stars, but they sign a lot of other people by mistake.

[chaostheory]

Angels may be better than VCs, but the thing about angel investing, besides say Ron Conway, is that they're not always guaranteed to be great either in terms of integrity.