Or at least maybe they oughta. After ten years, I’m disgusted with consistently hearing from many founders after they “do Y Combinator” that they wouldn’t have wasted any time on it at all if they had known the firm effectively belongs to the computer scientist’s wife (Jessica Livingston) instead of the computer scientist (Paul Graham). There seems to be a misunderstanding that I’m frustrated about not doing Y Combinator. Although I’ve applied, just to have the experience of applying, I would never take that firm as an investor. For one thing, I’m already synonymous with the term “y combinator”. For two, I don’t need the firm’s $80k (or whatever it is now). For three, many people that have gone through the program anytime recent say that it has turned into twelve weeks of nothing more than the firm teaching everybody (falsely) why Airbnb is a great company and a great investment opportunity. Without even bringing it up, founders says if they had known the real details of this firm upfront, and could do it over, that they would skip the stupid dinky Y Combinator shit and go to a real venture capital firm instead. The sentiment from founders that have just finished the program is increasingly that they want to sue the venture capital firm to get the equity back and then politely tell the venture capital firm to fuck off. This post includes my well thought-out criteria for writing it, the real history of the venture capital firm, and why I very sincerely think they should do the right thing and just go out of business immediately permanently. I really don’t want to write this post, but after ten years I feel obligated to do so for the greater good.
Ten Year Later
Truly and honestly, I made a conscious decision ten years ago that if I was still writing this blog ten years later, and still feel the way I felt then based on everything I had seen and heard, that only then I would write about it. The founders all say that they resent having given equity to this firm, and doing all the work and taking all the risk, while Y Combinator is indifferent to their startup, or encourages them to get acqui-hired, and Jessica Livingston makes sure to remind everybody every time she opens her mouth that, in her opinion, Airbnb co-founder Brian Chesky is the greatest human being who has ever lived. The consensus appears to be that the entire firm only exists so that Jessica can get her allowance money out of it (or whatever arrangement she has with her husband) and as an elaborate support network for Airbnb and its CEO, who has no education or business experience besides standing on the sidewalk begging people to buy boxes of cereal from him.
I also decided, when I started this blog ten years ago, that I would wait to write a post like this until I knew how the two companies ended up that Y Combinator kept pointing to as the examples of why the firm was so brilliant that founders should give it equity: Dropbox and Airbnb. Dropbox went public two years ago and immediately lost half its value. That company has yet to recover that value and every institutional investor I know has already dumped their Dropbox stock and cut their losses. Airbnb, as it is still playing out, is one extreme controversy after another. The company has been under multiple state-wide investigations. Just a few months ago, five people were murdered in an Airbnb party house. The latest controversy is that the company’s entire business appears to have evaporated almost overnight and could arguably end up in federal bankruptcy court within the next year.
The overwhelming amount of other startups that have Y Combinator as an investor end up either a failure or an acqui-hire. Many startups over the years have suggested that they failed on purpose just to get Y Combinator out of their business. The founders concluded that Y Combinator simply didn’t care at all about them or their startup and it wasn’t worth continuing the effort to make Y Combinator proud of them. There’s a lot more I could say about some of the very ambitious startups that have failed and probably would have succeeded if Y Combinator gave them as much attention as it gives Airbnb, but out of respect for the people involved I’d like to just leave it at that.
Y Combinator’s Real Origin Story
Jessica Livingston, Paul Graham’s girlfriend, is really where the story about how the firm got started should begin. It would only be somewhat accurate to say that “Paul Graham started Y Combinator.” It would be more accurate to say that “Jessica Livingston
manipulated encouraged her boyfriend, Paul Graham, and his two friends, Robert T. Morris and Trevor Blackwell, into starting a venture capital firm and putting up the money to fund it, so that she could then encourage them into giving her a free partnership in the firm when they went to setup the legal paperwork.”
As the story goes, Jessica Livingston went around to every bank in Boston begging for any job at a bank. She had no education or experience in banking, finance, venture capital, startups, or anything like that. The extent of her formal education was, and is, an undergraduate degree in English composition from Bucknell. I can only guess as to why she wanted a job at a bank so bad, but my best guess, and personal opinion, is that she was single and in her mind the bank is obviously where the money is and she thought if she stood around the bank long enough that it would improve her odds of meeting a man with money. I won’t call her a gold digger, but that seems to be the word consistently used by many people to describe her.
Somehow, Jessica ended up as a “plus one” (the uninvited guest of an invited guest) at a party at Paul’s house. And from what I’ve consistently heard very indirectly over the years, from the moment she showed up at the party she began trying to come up with some project that she and Paul could work on together. Eventually, from what I’ve heard indirectly over the years, she convinced Paul that he and his two friends, Robert T. Morris and Trevor Blackwell, should start a venture capital firm and she’d work for it if they set it up. However, when Paul, Robert, and Trevor went to actually setup the legal paperwork for the firm (Y Combinator), she began insisting that she should get a partnership the same as the other three.
It obviously wasn’t good business to give Jessica a partnership just because she was Paul’s girlfriend. The other three founding partners had known each other, literally for decades, and done a successful startup together that they sold to Yahoo! in the late 1990’s for tens of millions of dollars (Viaweb). None of them, including Paul, knew Jessica very well. However, they all came up with a reasonable compromise, which is that anybody wanting to be a founding partner in Y Combinator would each put up $50,000 of their own money to fund it. It’s worth noting that when they came up with that compromise, they all knew that Jessica could not, or would not, put up the money.
Instead of putting up the money, from what I’ve heard over the years, Jessica threw a child-like tantrum and began arguing that she should not only get a partnership, but get a free partnership because the whole venture capital firm idea was her idea to begin with. And in what would apparently become a running theme at Y Combinator, Jessica got her way because Paul took his girlfriend’s side and everybody else was too cool and too nice to argue with her.
Fast forward to now, when everybody seems to have quit Y Combinator, including Paul Graham and his friends, and Jessica Livingston, who has no education or experience with startups/founders/venture capital/etc, is basically bossing everybody around by herself. From what I understand, nobody wants to work for Y Combinator, or be affiliated with the firm, and nobody stays working there any longer than necessary.
Jessica Livingston and Brian Chesky
It would seem, based on everything I’ve observed, and everything else that many other people involved with the firm have observed, that from the moment Jessica Livingston first laid eyes on Brian Chesky that she knew he was The One and nothing else mattered. And by many accounts, Jessica decided at some point that Airbnb was something they could hype to a public offering and dump the stock for tens of millions of dollars. Once she decided that, it appears that she decided on behalf of herself and Y Combinator that none of the startups, or their founders, mattered at all. I have consistently heard over the years that Jessica Livingston is extremely condescending, inconsiderate, rude, and disrespectful to basically everybody except Brian Chesky.
It’s Not Fair To The Founders That They Give That Equity And Then Find Out The Firm Doesn’t Care About Them At All
Many of the founders say the same thing: that Y Combinator couldn’t even remember who they are and what their startup does between one day and the next. “Indifferent” seems to be the right word to describe the situation. There is a lot of drama that I can’t write any details about because it would could reveal some of the sources. But suffice it to say that the overwhelming amount of founders are frustrated, and disgusted, that the entire firm exists as a support network for Airbnb. Many founders feel like they could’ve done way better if they had the attention and resources that Y Combinator gives Airbnb.
Don’t Do Y Combinator
I had the benefit of having seen Y Combinator with my own eyes and met Paul Graham, Jessica Livingston, and others involved with the firm before applying even once. I figured out the situation fairly quickly and everything over the last ten years just confirms it. My conclusion was, and is, that Paul and his two friends never wanted to do this, Jessica manipulated them into it for nobody’s benefit but her own, and the entire firm exists for her to goof around with her husband’s money and make a buck off everyone while everybody besides her is doing all the work. However, many of the founders don’t have that benefit of having any direct experience dealing with Y Combinator until after they’ve already signed the papers and given away that equity.
It’s not fair to anybody that the founders start off excited about Y Combinator and by the end of the twelve weeks they all want to fail on purpose just to get Y Combinator out of their business. The overwhelming amount of founders that apply, and go through, Y Combinator are smart, talented, creative, often very well-educated, and certainly very ambitious people that deserve better.
Y Combinator has long over-extended itself and already invested in way too many startups. The track record of the firm isn’t great, or even good, and certainly not what the firm would have everybody believe it is. Y Combinator’s two flagship investments, Dropbox and Airbnb, aren’t worth a damn. The best days of Dropbox are ten years behind it. Airbnb is about to be a colossal failure and possibly end up in bankruptcy court. For the greater good, Y Combinator needs to do the right thing and just go out of business immediately permanently.