How did Y Combinator start?

Y Combinator was founded in 2005 by Paul Graham, Jessica Livingston, Robert Morris, and Trevor Blackwell. The idea stemmed from Paul and Jessica's belief that the investment world was broken, particularly for early-stage startups that found it nearly impossible to secure necessary funding without significant connections 1.

Paul Graham, motivated in part by a delayed decision on Jessica's job offer from a VC firm, decided to start his own investment company. The founders applied their startup mindset to the VC world, aiming to create a more standardized and accessible funding process for budding entrepreneurs. They launched the first "Summer Founders Program" in Cambridge, Massachusetts, offering modest funding ($12,000 to $18,000) and streamlined application processes to foster innovation in a supportive environment 2 3.

Y Combinator's inaugural batch, which included companies like Reddit and Loopt, highlighted the potential of batch-funding, where multiple startups were supported together, fostering a collaborative and less isolating environment. This approach allowed Y Combinator to teach and mentor all startups collectively, enhancing the learning curve for new entrepreneurs 1.

Their innovative model quickly proved successful, leading Y Combinator to become the premiere startup accelerator, known for producing highly influential companies like Dropbox, Airbnb, and Stripe 4.