March 2012  
  
Y Combinator's 7th birthday was March 11. As usual we were so busy we didn't
notice till a few days after. I don't think we've ever managed to remember our
birthday on our birthday.

On March 11 2005, Jessica and I were walking home from dinner in Harvard
Square. Jessica was working at an investment bank at the time, but she didn't
like it much, so she had interviewed for a job as director of marketing at a
Boston VC fund. The VC fund was doing what now seems a comically familiar
thing for a VC fund to do: taking a long time to make up their mind. Meanwhile
I had been telling Jessica all the things they should change about the VC
business � essentially the ideas now underlying Y Combinator: investors should
be making more, smaller investments, they should be funding hackers instead of
suits, they should be willing to fund younger founders, etc.

At the time I had been thinking about doing some angel investing. I had just
given a talk to the undergraduate computer club at Harvard about [how to start
a startup](start.html), and it hit me afterward that although I had always
meant to do angel investing, 7 years had now passed since I got enough money
to do it, and I still hadn't started. I had also been thinking about ways to
work with Robert Morris and Trevor Blackwell again. A few hours before I had
sent them an email trying to figure out what we could do together.

Between Harvard Square and my house the idea gelled. We'd start our own
investment firm and Jessica could work for that instead. As we turned onto
Walker Street we decided to do it. I agreed to put $100k into the new fund and
Jessica agreed to quit her job to work for it. Over the next couple days I
recruited Robert and Trevor, who put in another $50k each. So YC started with
$200k.

Jessica was so happy to be able to quit her job and start her own company that
I took her
[picture](https://web.archive.org/web/20170609055553/http://www.ycombinator.com/yc05.html)
when we got home.

The company wasn't called Y Combinator yet. At first we called it Cambridge
Seed. But that name never saw the light of day, because by the time we
announced it a few days later, we'd changed the name to Y Combinator. We
realized early on that what we were doing could be national in scope and we
didn't want a name that tied us to one place.

Initially we only had part of the idea. We were going to do seed funding with
standardized terms. Before YC, seed funding was very haphazard. You'd get that
first $10k from your friend's rich uncle. The deal terms were often a
disaster; often neither the investor nor the founders nor the lawyer knew what
the documents should look like. Facebook's early history as a Florida LLC
shows how random things could be in those days. We were going to be something
there had not been before: a standard source of seed funding.

We modelled YC on the seed funding we ourselves had taken when we started
Viaweb. We started Viaweb with $10k we got from our friend [Julian
Weber](julian.html), the husband of Idelle Weber, whose painting class I took
as a grad student at Harvard. Julian knew about business, but you would not
describe him as a suit. Among other things he'd been president of the
_National Lampoon_. He was also a lawyer, and got all our paperwork set up
properly. In return for $10k, getting us set up as a company, teaching us what
business was about, and remaining calm in times of crisis, Julian got 10% of
Viaweb. I remember thinking once what a good deal Julian got. And then a
second later I realized that without Julian, Viaweb would never have made it.
So even though it was a good deal for him, it was a good deal for us too.
That's why I knew there was room for something like Y Combinator.

Initially we didn't have what turned out to be the most important idea:
funding startups synchronously, instead of asynchronously as it had always
been done before. Or rather we had the idea, but we didn't realize its
significance. We decided very early that the first thing we'd do would be to
fund a bunch of startups over the coming summer. But we didn't realize
initially that this would be the way we'd do all our investing. The reason we
began by funding a bunch of startups at once was not that we thought it would
be a better way to fund startups, but simply because we wanted to learn how to
be angel investors, and a summer program for undergrads seemed the fastest way
to do it. No one takes summer jobs that seriously. The opportunity cost for a
bunch of undergrads to spend a summer working on startups was low enough that
we wouldn't feel guilty encouraging them to do it.

We knew students would already be making plans for the summer, so we did what
we're always telling startups to do: we launched fast. Here are the initial
[announcement](summerfounder.html) and
[description](https://web.archive.org/web/20170609055553/http://ycombinator.com/old/sfp.html)
of what was at the time called the Summer Founders Program.

We got lucky in that the length and structure of a summer program turns out to
be perfect for what we do. The structure of the YC cycle is still almost
identical to what it was that first summer.

We also got lucky in who the first batch of founders were. We never expected
to make any money from that first batch. We thought of the money we were
investing as a combination of an educational expense and a charitable
donation. But the founders in the first batch turned out to be surprisingly
good. And great people too. We're still friends with a lot of them today.

It's hard for people to realize now how inconsequential YC seemed at the time.
I can't blame people who didn't take us seriously, because we ourselves didn't
take that first summer program seriously in the very beginning. But as the
summer progressed we were increasingly impressed by how well the startups were
doing. Other people started to be impressed too. Jessica and I invented a
term, "the Y Combinator effect," to describe the moment when the realization
hit someone that YC was not totally lame. When people came to YC to speak at
the dinners that first summer, they came in the spirit of someone coming to
address a Boy Scout troop. By the time they left the building they were all
saying some variant of "Wow, these companies might actually succeed."

Now YC is well enough known that people are no longer surprised when the
companies we fund are legit, but it took a while for reputation to catch up
with reality. That's one of the reasons we especially like funding ideas that
might be dismissed as "toys" � because YC itself was dismissed as one
initially.

When we saw how well it worked to fund companies synchronously, we decided
we'd keep doing that. We'd fund two batches of startups a year.

We funded the second batch in Silicon Valley. That was a last minute decision.
In retrospect I think what pushed me over the edge was going to Foo Camp that
fall. The density of startup people in the Bay Area was so much greater than
in Boston, and the weather was so nice. I remembered that from living there in
the 90s. Plus I didn't want someone else to copy us and describe it as the Y
Combinator of Silicon Valley. I wanted YC to be the Y Combinator of Silicon
Valley. So doing the winter batch in California seemed like one of those rare
cases where the self-indulgent choice and the ambitious one were the same.

If we'd had enough time to do what we wanted, Y Combinator would have been in
Berkeley. That was our favorite part of the Bay Area. But we didn't have time
to get a building in Berkeley. We didn't have time to get our own building
anywhere. The only way to get enough space in time was to convince Trevor to
let us take over part of his (as it then seemed) giant building in Mountain
View. Yet again we lucked out, because Mountain View turned out to be the
ideal place to put something like YC. But even then we barely made it. The
first dinner in California, we had to warn all the founders not to touch the
walls, because the paint was still wet.  
  

