Y Combinator, the incubator with buzz

updated

Y Combinator has nailed the start-up incubator model, most likely because of its visionary leader.

Many famous incubators, from Idealab to CMGI, have come and gone over the years, and there are predictable autopsies suggesting the incubator model is flawed (see a list of articles about incubators here). Without doubt, the incubator flavor of the year is Y Combinator. Few of its companies have matured enough to judge its success, but we’re seeing promising ideas emerge. Reddit, for example, was sold to Wired parent, Conde Nast. Its guiding light is leader Paul Graham, who thinks and writes deeply (we’ve linked to him often) about start-ups, and nurtures young founders with the best practices of the day. It provides a cooperative environment, and draws people who want to help. Paul Buchheit, the creator of Google’s Gmail, has since left Google and spends a good deal of his time advising these companies, sometimes making investments.

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The Mercury News has a good description of how Y Combinator works:

Here’s how it works: twice a year, Y Combinator invites “hackers,” or programmers, to fill out an online application, outlining who they are and a business idea. One winning batch of teams is funded in winter and the other in summer. With Y Combinator’s help, each becomes a real company – one that is expected to create its product within three months. The amount of money Y Combinator gives each group – $5,000, plus an additional $5,000 per founder – is a pittance for what it asks in return, which is, on average, a 6 percent stake in their start-up. That money has to really stretch. Beyond their living and working expenses, it must also cover relocation costs, as the winter winners must relocate to the Bay Area and the summer winners to the Boston area.

Here is Y Combinator’s winter Class

Here are some alums.

Update: See our follow-up, which addresses the critical comments below.