Paul Graham Founded Y Combinator 7 Years Ago To Create A Job For His Wife

paul graham jessica livingston
Paul and Jessica Graham founded Y Combinator in 2005.

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Last week, startup accelerator Y Combinator turned 7.Paul Graham writes about its founding on the company blog.

In March 2005, Graham’s wife Jessica did not like her job.  She worked for an investment bank in Boston and was looking to leave.

Graham, who made money selling a web application he developed called Viaweb, decided to create a job for her.

The two discussed the initial idea for Y Combinator on a walk home from dinner.  Graham would put $100,000 into the project and Jessica would quit her job to work for the new early stage investment firm.  Two of Graham’s friends, Robert Morris and Trevor Blackwell, gave the couple $50,000; Y Combinator began with $200,000.

The original name for the Grahams’ fund was Cambridge Seed. It was quickly changed to appeal to startups everywhere.

Y Combinator was modelled after Viaweb’s investor, Julian Weber. For $10,000 and help setting up the company (he was a lawyer), Weber was granted 10% of Graham’s old company.  Graham wanted to play the same role in other startups’ lives.

Graham called for college students to join Y Combinator’s first session in Boston, then called Summer Founders Program.

The first batch of startups was surprisingly good, says Graham, who admits he didn’t take Y Combinator’s launch seriously.  “That’s one of the reasons we especially like funding ideas that might be dismissed as “toys” [now]—because YC itself was dismissed as one initially,” Graham writes.

The second batch of startups was hosted in Mountain View, CA. Graham realised there were a lot more startups in Silicon Valley than Boston.  Blackwell let Y Combinator rent space in his building.

“Even then we barely made it,” he writes. “The first dinner in California, we had to warn all the founders not to touch the walls, because the paint was still wet.”

Now the accelerator program invests in more than 60 companies at once. It has produced companies with monstrous valuations, including DropBox and Airbnb.