Y Combinator, Silicon Valley’s Start-Up Machine

Photo illustration by Bobby DohertyMichelle Crosby, an energetic 37-year-old lawyer in Boise, Idaho, applied for a loan last November from a local bank, Western Capital. She proposed to use the money, $10,000, to help start a new business, Wevorce, which could be described most reductively as an H&R Block for divorces. The bankers liked the idea, and Crosby was a strong candidate. They had even given her an earlier loan to open Wevorce’s first office. But after four weeks, the bank was stalling and Crosby had yet to receive a cent. At the height of her frustration, she received an e-mail from a small group of private investors in Mountain View, Calif. They invited her to an interview and, after listening to her story, promised her $100,000 in exchange for a 7 percent stake in Wevorce. Crosby accepted on the spot. The next day, she found a condo for rent, at $2,500 a month, in Mountain View, and left Boise, and her boyfriend, behind.

Michelle Crosby, of Wevorce, which mediates amicable and inexpensive divorces.

Haisha Chen is a 23-year-old Chinese-born University of Chicago graduate who goes by David so that Americans remember his name. With two friends, Teng Bao and Dafeng Guo, Chen created software that allows Internet users to build simple, elegant Web sites, designed with mobile devices in mind, in 15 minutes. They called their product Strikingly. Last July, to their parents’ alarm, the men bought one-way tickets to San Francisco — Chen from Shanghai, Guo from Hong Kong, Bao from Chicago. They rented a single bedroom in a cramped apartment in San Francisco’s Outer Richmond neighborhood, sleeping on two futons, one of which prevented the door from opening more than a few inches. They spent $1,600 a month on rent, food and all additional expenses combined. After four months, they got a call from Mountain View, offering $100,000 for a 7 percent stake. They moved immediately. “When I got here, I was very emotionally touched by all the great companies in this area,” Guo told me in an outburst of passion. “These were all the companies I had heard of since I was a kid. I felt like I should be here. Like I belong.”

Last year at Brown University, Walker Williams and Evan Stites-Clayton created Teespring, a crowdfunding Web site that sold custom-made apparel — “Kickstarter for T-shirts.” For six months they had mild success with fraternities and campus clubs but were only slightly profitable. Then something unexpected happened: a New Zealand man used Teespring to design a Sherlock Holmes T-shirt and sold it on a Facebook fan page with about 300,000 members; ultimately, 1,800 people bought the shirt. The man earned about $18,000; Teespring made $8,000. Soon other virtual communities — like the Twitter account for fans of the 1990s TV show “Boy Meets World,” and a Facebook page called “I Big Trucks, Mudding, Bon Fires . . . Country BOYS! :)” — began selling shirts, with staggering success. In November, Teespring earned $133,336; in January, $489,029. But the founders felt they could do better. “We don’t want this to be a $30-, $40-, $50 million business,” Williams told me. “We’re looking at the big picture here.” I asked Williams and Stites-Clayton to define “big picture.” They responded in unison: “A billion dollars.” When the investors called with their offer of $100,000, Williams and Stites-Clayton also moved to Mountain View.

The Mountain View investors are the partners of Y Combinator, an organization that can be likened to a sleep-away camp for start-up companies. Y.C. holds two three-month sessions every year. During that time, campers, or founders, have regular meetings with each of Y.C.’s counselors, or partners, at which they receive technical advice, emotional support and, most critical, lessons on the art of the sale. There is no campus, only a nondescript office building in Mountain View — on Pioneer Way, around the corner from Easy Street. Founders are advised to rent apartments nearby, so that they can run to the office in minutes should an important investor pay a visit.

This article has been revised to reflect the following correction:

Correction: May 7, 2013

An earlier version of this article erroneously included a peak value for Loopt, a company that produces location tracking apps.  Its peak value is not known; but it was not $500 million, an unconfirmed figure reported on several tech Web sites. (As the article noted, the company was sold for $43.4 million in March 2012.) The article also referred incorrectly to Sam Altman, who founded Loopt. He is Y Combinator’s second youngest partner, not the youngest.

Bits Blog: One on One: Jerry Weissman, Silicon Valley’s Storyteller

Jerry Weissman

Jerry Weissman may produce more revenue than almost any director in history. His big successes haven’t been plays or movies, though. For more than two decades, Mr. Weissman, a former television and stage director, has coached the executives of technology companies on the theater of the initial public offering.

Mr. Weissman’s company, Power Presentations, works with chief executives on the “roadshow,” a major step toward a stock offering. The presentations consist of speeches, slide shows and question-and-answer sessions with prospective investors. Getting that story right builds enthusiasm for a company’s shares, sending initial stock prices higher.

His clients have included Intuit, eBay, Cisco, Dolby, Netflix and most recently Trulia, the real estate Web site. His clients also include executives at established companies like Microsoft, where he helps with other kinds of presentations, like conference speeches and product marketing.

Mr. Weissman, who is based in Burlingame, Calif., has written several books on his craft, the most recent of which is “Winning Strategies for Power Presentations.” I caught up with him recently, in between client meetings.

How different is an I.P.O. pitch from a conference presentation?

I have worked on I.P.O.’s, private placements, product launches, board meetings, keynotes, conference talks and partner meetings. The goal is always the same: Tell a crisp, clean story; make sure your PowerPoint doesn’t become “death by PowerPoint” by cluttering things up or confusing the audience; show poise and confidence; and show you can handle tough questions.

If it’s that easy, how do you stay employed?

They’ve been selling stuff to a different audience, people who want to buy software or computers. They have to rotate the benefit of their product to a different audience. If the audience is potential investors, those people have only two interests: return on investment and risk management.

Most of my clients come at the task of telling their story like engineers, in a logical fashion. But they assign six slides to Tom, eight points from Dick and four items from Harry, and that creates a patchwork of ideas that don’t flow and ideas that don’t match each other. Then they see the audience squirm at what they’ve done, and that raises their discomfort level, which the audience feels. After that, it’s lost.

They need to merge the logic with the art, and that goes back 2,300 years, to Aristotle. Give things a beginning, a middle and an end.

How do you do that?

You set the context by defining who the audience is and what you want to achieve by talking to them. Then you let the ideas flow about what you can say, you brainstorm like crazy without throwing out anything. You distill that into four or five key ideas. Then you put it into a logical flow that is meaningful for what the audience wants.

How long have you been doing this?

It will be 25 years on Sept. 1.

What has changed?

My specialty is I.P.O.’s. The biggest change there is NetRoadshow, which is a Web site where people post a video of their pitch. That means they have to put something tight into the can. Then they go on the road, and if they’re good, it’s 90 percent audience questions about investing. If it’s not good, it’s all about how people didn’t understand what they were talking about. So, I train them to make a video, then I train them for a Q.&A. session that is tougher than anything they’ll face on the road.

The other change is that sometimes people just post slides on the Web, and get on the phone and talk. Either way, the new media means they have to learn to tell stories without making eye contact. It’s even more important that you have a clear story that flows. In the questions, you listen to make sure you understand the key issues. You paraphrase the question to level the playing field for the rest of the audience, and to make sure it addresses the question. And you pitch yourself, so you can end up saying “…and that’s why we are the best.”

How is the I.P.O. market doing?

It is smaller, compared with 10 years ago, but there is lots of other kinds of work. If I’m a bellwether, though, I’d say I have more companies knocking on my door for I.P.O. training this year than last, and more last year than the year before.

Disruptions: Disruptions: Looking Beyond Silicon Valley's Bubble

Jim Wilson/The New York TimesA party to celebrate AirBnB’s new headquarters. A select group of people in the Valley are oblivious to the rest of the world, ensconced in their own protective bubble.

It is still up for debate whether there is a bubble in Silicon Valley.

One thing I know for sure: much of Silicon Valley is enveloped in a bubble.

I moved to the center of the tech industry from New York City last year, and I have never experienced anywhere quite like the Valley.

The money here is obscene. The newly minted rich are obsessed with outperforming their rivals. One industry party I attended had a jungle theme. This included a real, 600-pound tiger in a cage and a monkey that would pose for Instagram photos. A prominent Googler’s Christmas party in Palo Alto had mounds of snow in the yard to round out the festive spirit. It was 70 degrees outside. Sean Parker, a founder of Airtime, threw a lavish, $1 million party that included models he hired to roam the room and a performance by Snoop Dogg.

Eat dinner with start-up founders and venture capitalists, and the conversation can quickly shift from industry banter about the latest billion-dollar acquisition to the type of private jet people own.

This is where a select group in the Valley are oblivious to the rest of the world, ensconced in their own protective bubble. In the rest of America, where the unemployment rate is stuck above 8 percent, people are struggling to cover their mortgages or to find jobs that won’t be replaced by technology or sent overseas. In Silicon Valley, some people are worrying about which multimillion-dollar home they can buy — there are only so many available, after all — or whether their handcrafted jeans subtly signal that the wearer is more attuned to aesthetics, like, say, Steve Jobs was.

This is a company town, like Los Angeles and the movies, or Washington and politics. Everything revolves around the tech industry; there is often nowhere to hide.

Like other tech reporters I have spoken with, I often hear pitches for people’s start-ups in the most bizarre places: waiting in line at coffee shops or on the beach. “Hey! You’re Nick Bilton from The Times!” I once heard someone yell when I was standing at a bathroom urinal. “I’m an entrepreneur — can I show you my new iPhone application?”

Everyone here introduces themselves as an “entrepreneur.” It’s as if they hand out the title at the airport when you arrive. “Welcome to San Francisco, you are now an entrepreneur! Which start-up T-shirt would you like?”

This belief that everyone is an entrepreneur has a stultifying effect. It can drive founders to seek an easy acquisition instead of a quest for true innovation and a sustainable, profitable business — a truly entrepreneurial challenge.

There is also a bizarre micro-celebrity culture here. People who are famous within the Valley but wouldn’t be noticed anywhere else in the world, even if they were spray-painted fluorescent yellow, create copycat start-ups, with only slight modifications on a previous success — a diminutive variation of Facebook, Instagram or Twitter.

But there is another side to the Valley. One where people are building truly innovative companies. Where founders aren’t driven by seeing their name on tech blogs or tweeting a picture of themselves with their new investors, M.C. Hammer or Ashton Kutcher.

There are truly excited inventors, designers and programmers here, some of the brightest people in the United States, who are trying to build something that will fix a problem in the world. This is why I love working in Silicon Valley.

Where else in the world would people try to make a better and more efficient taxi service, thermostat or tool for revolt? Where else would they reinvent education, the Boy Scouts and even government? And there are those who are helping the economy, creating services that enable people to find new forms of income.

Once you are able to navigate through the sludge of pandering and ostentation, you can see there is truly magical work taking place.

Luckily for people who live outside the bubble of Silicon Valley, there is a wonderful group of creators here who believe that everything is broken and that technology, creativity and guts can actually fix it.

Disruptions: Disruptions: Looking Beyond Silicon Valley's Bubble

Jim Wilson/The New York TimesA party to celebrate AirBnB’s new headquarters. A select group of people in the Valley are oblivious to the rest of the world, ensconced in their own protective bubble.

It is still up for debate whether there is a bubble in Silicon Valley.

One thing I know for sure: much of Silicon Valley is enveloped in a bubble.

I moved to the center of the tech industry from New York City last year, and I have never experienced anywhere quite like the Valley.

The money here is obscene. The newly minted rich are obsessed with outperforming their rivals. One industry party I attended had a jungle theme. This included a real, 600-pound tiger in a cage and a monkey that would pose for Instagram photos. A prominent Googler’s Christmas party in Palo Alto had mounds of snow in the yard to round out the festive spirit. It was 70 degrees outside. Sean Parker, a founder of Airtime, threw a lavish, $1 million party that included models he hired to roam the room and a performance by Snoop Dogg.

Eat dinner with start-up founders and venture capitalists, and the conversation can quickly shift from industry banter about the latest billion-dollar acquisition to the type of private jet people own.

This is where a select group in the Valley are oblivious to the rest of the world, ensconced in their own protective bubble. In the rest of America, where the unemployment rate is stuck above 8 percent, people are struggling to cover their mortgages or to find jobs that won’t be replaced by technology or sent overseas. In Silicon Valley, some people are worrying about which multimillion-dollar home they can buy — there are only so many available, after all — or whether their handcrafted jeans subtly signal that the wearer is more attuned to aesthetics, like, say, Steve Jobs was.

This is a company town, like Los Angeles and the movies, or Washington and politics. Everything revolves around the tech industry; there is often nowhere to hide.

Like other tech reporters I have spoken with, I often hear pitches for people’s start-ups in the most bizarre places: waiting in line at coffee shops or on the beach. “Hey! You’re Nick Bilton from The Times!” I once heard someone yell when I was standing at a bathroom urinal. “I’m an entrepreneur — can I show you my new iPhone application?”

Everyone here introduces themselves as an “entrepreneur.” It’s as if they hand out the title at the airport when you arrive. “Welcome to San Francisco, you are now an entrepreneur! Which start-up T-shirt would you like?”

This belief that everyone is an entrepreneur has a stultifying effect. It can drive founders to seek an easy acquisition instead of a quest for true innovation and a sustainable, profitable business — a truly entrepreneurial challenge.

There is also a bizarre micro-celebrity culture here. People who are famous within the Valley but wouldn’t be noticed anywhere else in the world, even if they were spray-painted fluorescent yellow, create copycat start-ups, with only slight modifications on a previous success — a diminutive variation of Facebook, Instagram or Twitter.

But there is another side to the Valley. One where people are building truly innovative companies. Where founders aren’t driven by seeing their name on tech blogs or tweeting a picture of themselves with their new investors, M.C. Hammer or Ashton Kutcher.

There are truly excited inventors, designers and programmers here, some of the brightest people in the United States, who are trying to build something that will fix a problem in the world. This is why I love working in Silicon Valley.

Where else in the world would people try to make a better and more efficient taxi service, thermostat or tool for revolt? Where else would they reinvent education, the Boy Scouts and even government? And there are those who are helping the economy, creating services that enable people to find new forms of income.

Once you are able to navigate through the sludge of pandering and ostentation, you can see there is truly magical work taking place.

Luckily for people who live outside the bubble of Silicon Valley, there is a wonderful group of creators here who believe that everything is broken and that technology, creativity and guts can actually fix it.

Disruptions: Disruptions: Looking Beyond Silicon Valley's Bubble

Jim Wilson/The New York TimesA party to celebrate AirBnB’s new headquarters. A select group of people in the Valley are oblivious to the rest of the world, ensconced in their own protective bubble.

It is still up for debate whether there is a bubble in Silicon Valley.

One thing I know for sure: much of Silicon Valley is enveloped in a bubble.

I moved to the center of the tech industry from New York City last year, and I have never experienced anywhere quite like the Valley.

The money here is obscene. The newly minted rich are obsessed with outperforming their rivals. One industry party I attended had a jungle theme. This included a real, 600-pound tiger in a cage and a monkey that would pose for Instagram photos. A prominent Googler’s Christmas party in Palo Alto had mounds of snow in the yard to round out the festive spirit. It was 70 degrees outside. Sean Parker, a founder of Airtime, threw a lavish, $1 million party that included models he hired to roam the room and a performance by Snoop Dogg.

Eat dinner with start-up founders and venture capitalists, and the conversation can quickly shift from industry banter about the latest billion-dollar acquisition to the type of private jet people own.

This is where a select group in the Valley are oblivious to the rest of the world, ensconced in their own protective bubble. In the rest of America, where the unemployment rate is stuck above 8 percent, people are struggling to cover their mortgages or to find jobs that won’t be replaced by technology or sent overseas. In Silicon Valley, some people are worrying about which multimillion-dollar home they can buy — there are only so many available, after all — or whether their handcrafted jeans subtly signal that the wearer is more attuned to aesthetics, like, say, Steve Jobs was.

This is a company town, like Los Angeles and the movies, or Washington and politics. Everything revolves around the tech industry; there is often nowhere to hide.

Like other tech reporters I have spoken with, I often hear pitches for people’s start-ups in the most bizarre places: waiting in line at coffee shops or on the beach. “Hey! You’re Nick Bilton from The Times!” I once heard someone yell when I was standing at a bathroom urinal. “I’m an entrepreneur — can I show you my new iPhone application?”

Everyone here introduces themselves as an “entrepreneur.” It’s as if they hand out the title at the airport when you arrive. “Welcome to San Francisco, you are now an entrepreneur! Which start-up T-shirt would you like?”

This belief that everyone is an entrepreneur has a stultifying effect. It can drive founders to seek an easy acquisition instead of a quest for true innovation and a sustainable, profitable business — a truly entrepreneurial challenge.

There is also a bizarre micro-celebrity culture here. People who are famous within the Valley but wouldn’t be noticed anywhere else in the world, even if they were spray-painted fluorescent yellow, create copycat start-ups, with only slight modifications on a previous success — a diminutive variation of Facebook, Instagram or Twitter.

But there is another side to the Valley. One where people are building truly innovative companies. Where founders aren’t driven by seeing their name on tech blogs or tweeting a picture of themselves with their new investors, M.C. Hammer or Ashton Kutcher.

There are truly excited inventors, designers and programmers here, some of the brightest people in the United States, who are trying to build something that will fix a problem in the world. This is why I love working in Silicon Valley.

Where else in the world would people try to make a better and more efficient taxi service, thermostat or tool for revolt? Where else would they reinvent education, the Boy Scouts and even government? And there are those who are helping the economy, creating services that enable people to find new forms of income.

Once you are able to navigate through the sludge of pandering and ostentation, you can see there is truly magical work taking place.

Luckily for people who live outside the bubble of Silicon Valley, there is a wonderful group of creators here who believe that everything is broken and that technology, creativity and guts can actually fix it.