How Y Combinator Started

Paul Graham’s essay How Y Combinator Started recounts Y Combinator’s founding on March 11, 2005.

The Problem YC Solved

Seed funding was “very haphazard” before YC, with inconsistent deal terms and unclear documentation. They aimed to standardize seed investment using their experience from founding Viaweb.

The Synchronous Funding Innovation

YC’s most transformative idea—funding multiple startups simultaneously—wasn’t initially strategic. The summer program structure proved unexpectedly perfect for their model.

Reputation Building

The organization faced initial skepticism. YC “was dismissed as one initially,” which paradoxically aligned with their strategy of funding unconventional “toy” ideas others overlooked.

Location Strategy

The move to Silicon Valley emerged from practical constraints but proved strategically ideal, positioning YC at the startup ecosystem’s center.

My Takeaway

Great opportunities arise from combining practical necessity with ambitious vision. The best models are often discovered rather than designed.