Wednesday, November 01, 2006

After the Reddit Sale: The Age of YCombinator Clones

Congrats, Alexis and Aaron, on the Reddit sale! It was the right idea at the right time. Wired Digital is a great fit.

In this TalkCrunch podcast, Mike Arrington seems very surprised that they're still just 4 guys and have taken less than $100'000 investment in total.

This is the genius of YCombinator idea at work: Take smart people, very little money, and try to build something popular. This can become a very profitable business and a back-of-the-envelope calculation suggests that if Reddit sold for more than around $10 million, YCombinator is already in the black. Many other YCombinator startups are doing well and could get bought in the future, such as Xobni, Wufoo, loopt, or Likebetter, among others.

Earlier this year, I wrote an essay on how to clone YCombinator in Europe. When I discussed this idea with VCs and wealthy individuals, some doubted that YCombinator was even worth cloning: "How successful are they?", "Can $10,000 really take them far enough?", "I looked at y combinator very closely for last six months once current project is a success, EU y combinator is definitly [sic] the plan."

The Reddit sale has now proven that the YCombinator idea can be successful. My guess is that we'll see plenty of clones in the future, whether in the US, Europe, or Asia. There are some difficulties: You need smart founding fathers to pick the companies. Ideally, you'd also have another Paul Graham or a strong brand name that will drive the application process.

Incidentally, just a few hours after the Reddit acquisition, one VC already announced their "Quick Start" program, which invests small amounts of money in large numbers of startups.


Anonymous said...

A bunch of Pigeons! VCs love nothing more than their own Kool-Aid.

It takes brains and balls which obviously Mr. Graham has.

Zoli Erdos said...

Congrat's, you're Techmeme'd :-)

jeff barson said...

I'm happy to see these developments. Money is money. A loan does put skin in the game since it's unsecured.

I'd be much more pessimistic if they were looking to have the entrepreneure be personally liable for it (as is the case for some deals here in Utah).