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Enabling innovation by lowering the barriers to entry

Yesterday afternoon Sam Altman of Y Combinator published a blog post talking about a new YC Fellowship program for even earlier stage companies. 

For those of you who aren’t familiar with Y Combinator, they are a super successful funding platform for early stage startups. They are located in Mountain View, California.

What’s unique about their approach is that they invest a relatively small amount of money ($120,000 for 7% of your company) in a relatively large number of companies. Their most recent cohort was around 85 companies and they do that twice a year.

The rationale behind this approach is that it can be incredibly hard to predict which people and ideas will produce the next great company. Oftentimes the best ideas appear really shitty at first. (Here’s a post by one of the cofounders of Airbnb talking about the company’s early rejections.)

So instead of putting all of their eggs in one basket, YC invests smaller amounts in more companies.

But beyond this being beneficial to them, it’s also a model that I think helps to reduce the barriers to people starting a company. It gives more people the chance to prove that their company has the potential to be something great. 

And that’s precisely what makes this new YC Fellow program/experiment so interesting to me.

Instead of $120,000, YC fellows will receive $12,000 and they won’t have to move to the Bay Area (although it’ll be encouraged). They’ll still get mentorship and advice like the regular YC program, but it’ll be a kind of light version. 

Though this is almost certainly just the beginning. Here’s how Sam ended his announcement post:

“Someday if it works, we’d love to fund 1,000 companies per year like this.”

Now all of a sudden that’s some scale.

What’s exciting about this is that I believe our cities have the potential to be far more innovative than they are today. Every city is trying to be the next Silicon Valley, but every city is not the next Silicon Valley.

I saw a great tweet the other day that went something like this (I wish I could remember who the author was):

“Entrepreneurs aren’t risk takers. They’re just rich kids with big safety nets.”

It’s a bit of a tongue-in-cheek generalization. But to unlock the full potential of our cities, we should be figuring out how to get everyone participating and building their ideas, not just those with a head start. 

I think there are a lot of people around the world who could be doing great things, but they just haven’t been able to take that first step for one reason or another.

Hopefully organizations like Y Combinator will be able to help them take it.

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