One Direction Uses London Based YC Startup To Raise $780,000 For Charity

The extremely popular British boy band One Direction sells everything in the world with their logo on it. Go into a retail store of any kind, and you’ll find 1D branded merchandise from bed sheets to school supplies to talking dolls and everything in between. In fact the band makes more off licensing than album sales. But when the lads decided to raise money for charity, they decided they needed a little help.

Forbes online reports that One Direction turned to a Y Combinator startup with roots at Oxford University. The startup, called Prizeo, harnesses the power of an amazing Rolodex and relationships that range from Samuel l Jackson to Khloe Kardashian to help build up their already amazing client list.

The company uses a raffle model that gives every entrant into a charity contest one entry. They also work with celebrities to offer huge prizes for fans, visits, or interactions with those celebrities.

For the One Directions charity contest ,they chose British non profit Trekstock, which provides funding for cancer research.

The prize in the contest was an evening on the town with Harry Styles and Liam Payne, arguably the band’s two most popular members.

Before One Direction, Prizeo had raised $1 million dollars across 10 campaigns Forbes reported. 1D raised $780,000 in six weeks.

The campaign attracted 1.4 million views, 240,000 shares and 445,000 video views on YouTube. The hashtag for the campaign trended number one globally.

Trekstock was extremely pleased with the results. “We had no idea how much the campaign could raise,” Sophie Epstone, the company’s CEO, told Forbes.

One Direction Image.

Y-Combinator Is NOT The Guarantee Some Think, Two 2011 Startups Close Up Shop

It’s no secret that startups fail, and they fail in large numbers. It may seem like startups “everywhere else” have the deck stacked against them from the beginning, because they do. Access to capital, mentors, and talent are three of the biggest road blocks to startups outside the major tech hubs. That’s one of the big things that will be discussed at Everywhere Else Cincinnati.

There are startup accelerators everywhere. Some of them are naturally better than others. Some accelerators focus on a theme, like the Brandery on branding and ZeroTo510 which is solely for medical device startups. Others, like Techstars and Y-Combinator have huge brand equity.

Even after a demo day at an accelerator, many startups have trouble locking up follow-on funding. Some are able to raise a decent seed or Series A round and then run out of steam. While we hear these stories all the time from everywhere, there are still some founders and entrepreneurs who believe Y-Combinator, 500 Startups, and Techstars companies don’t shut down. It seems we believe there is some kind of fairy dust sprinkled on the co-founders, while others feel that Valley based accelerators have to be great because they’re in the Valley.

Y-Combinator is often thought of as the creme de la creme when it comes to startup accelerators. It’s the first application startups from everywhere fill out in hopes they’ll get into Paul Graham’s highly esteemed program and then be on “autopilot.”

Well we’ve learned this week that this couldn’t be further from the truth. Sure there are a ton of startups that went through Y-combinator and failed, but we rarely hear those stories. This week we’ve heard two.

On Monday PandoDaily’s Carmel Deamicis pointed out that Spring 2011 YC graduate Leaky has shut it’s doors. The company offered a price comparison web platform for finding the best insurance quote. Call it Kayak for car insurance if you wish. It seemed like a good idea.

That was until the founders decided that rather than building lasting partnerships with auto-insurance companies, they wanted to take the disruptive way. Co-founder Jason Traff and his team weren’t patient enough to build those vital partnerships. Instead, according to PandoDaily and Greg Isaacs the President of competing startup CoverHound, the team at Leaky actually scrubbed the insurance carriers’ websites without their permission and then published the information.

Without the blessings of the insurance companies, the startup was doomed. This is despite raising over $600,000 in a seed round from YC, 500 Startups, and Box Group. As soon as they started publishing rate information without permission they were served with cease & desist notifications.

The Leaky team came up with a way to circumvent the insurance companies based on the fact that insurance companies had to publicly report how they came up with their data and pricing. Leaky built its models around that information, but that too failed.

On Sunday, TechCrunch’s Colleen Taylor reported on the untimely demise of Tutorspree, a Winter 2011 graduate from Y-Combinator. That startup was often dubbed the “Airbnb of tutoring”

After graduating from Y-Combinator TutorSpree went on to raise $1.8 million dollars from investors including Sequoia Capital. They also bulked up their staff to ten to help develop the product that matched students with high quality local tutors.

TutorSpree didn’t go into specifics as to why they shut down. The company’s three co-founders Ryan Bednar, Aaron Harris, and Josh Abrams said:

Ultimately, we learned about the challenges of willing a company into existence, of building an incredible and unique team to tackle constantly shifting challenges. And finally, we learned about how to make the toughest decision of all – to shut Tutorspree down, not because it was not a business, but because we could not make it the company we wanted.

In an email to TechCrunch, Tutorspree CEO Harris added, “We built something we were incredibly proud of, but got to the point where we realized it would not scale in a way that would meet our goals. It was a tough decision emotionally, but it was the right move from the rational perspective.”

We talk startup failure with Lucas Rayala the founder of Altsie, a startup that failed last year. As they failed Rayala chronicled the experience on TechCrunch. See Rayala speak at Everywhere Else Cincinnati.

Demo Days Are The Worst Source Of Deal Flow? Mark Suster Says Yes

Since starting our nibletz sneaker strapped startup road trip last year we’ve seen hundreds of startups pitch at countless demo days. Nick and I were finally relaxing with one of our advisors, Patrick Woods’ with a>m ventures, on the last night of SXSW and we had counted over 65 startups that we saw pitch through a variety of demo events at the annual festival.

We’ve also seen countless accelerator demo days and with it being May and most of the spring accelerators graduating this month, we’re on track to enjoy another dozen or so before we get to the thick of the summer. Speaking of summer, last August their were three accelerator demo days in Tennessee alone.

Startup community members and leaders are constantly debating “the rise of the accelerator” and where accelerators should focus their resources. Is the best accelerator model general tech and cohort based? Or vertical and rolling? Who knows, it will take several more iterations until each community finds the accelerator model that works best for them.

But what about demo day?

On Friday Business Insider ran this piece which references an indepth article about YCombinator and it’s historic demo day from the New York Times. In it, author Nathaniel Rich, quotes an investor saying that YC’s demo day, often thought of as the super bowl of demo days, “used to be a can’t-miss event, but that’s not so anymore. It’s a different vibe. Some major investors are starting to skip it.”

Rich points out that one investor said that YC Demo Day used to be a feeding frenzy for deal flow and it’s just not anymore.

Of course YC’s demo day is all the way at one end of the spectrum. Y combinator is said to take the best of the best and with hits like DropBox and Airbnb, the newer teams know they can set their valuations and standards higher, pricing a lot of smaller VC firms out of the deal. This either leaves VC’s empty handed or startups empty handed.

“The only way for a company to be overvalued is if there’s someone willing to pay that price,” Graham told the NYT. “So what they’re saying is: Going through Y.C. causes companies to raise money on better terms than they would have otherwise. We wouldn’t have the barefacedness to make that claim ourselves!”

Graham acknowledges that YC does take some bad startups though, saying sometimes investors can’t pick out the good startups; “Well, it’s not because the good start-ups look bad,” Graham says. “It’s because the bad start-ups look good! Which means we’re doing our job.”

Business Insider recently shared some of Mark Suster’s, a VC with GRP Partners and the founder of LaunchPad LA, best and worst sources of deal flow from his personal blog.

Surprisingly, blogging was revealed to be the best source of deal flow available. “The sheer number of relationships I’ve built through being public, transparent and being willing to engage in comments and through social media has enabled me to get to know entrepreneurs even before they launch their next company,” Suster said on his blog.

Investment bankers were said to be bad sources of deal flow, but the worst? Demo Day.

“Getting excited about a company at a conference and investing is a sucker’s bet,” Suster writes. “Entrepreneurs raising at prices not normally supported by progress face risks downstream when they have to raise more capital. And that fund raising is part of the job of being an entrepreneur – not something that gets in the way of your doing your job.”

Startup accelerators everywhere else are having a hard enough time getting investors in the door for demo day as it is. One accelerator participant in the middle of the country told us “outside of the investors that had a stake already in the cohort, no investors came to our demo day last year.” That can be hard to swallow.

As to the blogging, we have a handful of angels and VC’s that email us from time to time to get the vibe on some startup we wrote about. We also get thank you cards in the mail from startups that have gone on to raise money after getting their first piece of press from nibletz. To that end, we live off of our crowdfunding so to help out the everywhere else cause, click here.

See Dave Tisch’s biggest pet peeve when VC’s are talking to women entrepreneurs.

Pittsburgh Startup PayTango Will Make Sure You Never Lose Your Wallet Again

Last month we brought you this story about Pittsburgh startup, turned Y-Combinator company, PayTango. They were one of the first in the biometric wallet space.

When we spoke with PayTango co-founder Brian Groudan at TechCrunch Disrupt he acknowledged how crowded the biometric mobile wallet space has gotten after their videos and pitch decks started popping up online. We talked about New Jersey startup PulseWallet, that we met at CES 2013 and Groudan pointed out another biometric mobile wallet startup that was also in the Startup Alley at Disrupt.

PayTango was one of the first in the space and for now they are focused on smaller networks where they can really get a feel for the technology and what it can do.

What is PayTango and a biometric wallet?

Well by now everyone has heard the term mobile wallet. We all know that you can use your NFC enabled phone and other forms of mobile commerce without having to bring credit cards along. What PayTango and other startups in their space hope to do, is to eliminate the wallet altogether and use your finger print as your wallet.

Using a biometric wallet is not just easier and more convenient but it’s a lot safer when it comes to fraud.

PayTango tested on the campus of Carnegie Mellon University and has also tested in some health clubs as well. While students who signed up for the beta can use their finger print to pay for meals, there’s also the capacity to store your entire academic history in the cloud, accessible by finger print.

While only saying that PayTango is looking at a lot of different uses, it’s easy to see that the team behind PayTango is looking at a much bigger picture than just syncing your American Express card with your index finger.

Groudan was actually excited about all the competitors in the space because it gives PayTango more market validation.

Check out our interview with Groudan below and for more info visit paytango.com

We’ve got more startup coverage from TechCrunch Disrupt NY 2013 here.

In The Wake Of The Boston Marathon Bombings Paul Graham Turned To Watsi, And Then Took His First Board Seat On Their Board

Chase Adam founder of Watsi (photo: Jim Wilson/New York Times)

Y Combinator founder Paul Graham is a busy man. Based on the West Coast, when America’s hearts turned to the Boston Marathon bombings, his did as well. Being so far away there wasn’t much he could do to help the situation in Boston so he turned to Watsi.

Graham tweeted on Monday “When terrible things happen to people I can’t help, I go to watsi.org and help people I can”.

Watsi is a crowdfunding platform that allows users to connect with patients with real serious needs for low cost medical care and enables users to fund high impact treatments.

For example the Watsi home page shows Eliazar a young Guatemalan man who had to have his right arm amputated after gang members threw a grenade into his home. For just $650 he can get a prosthetic device that will help him perform simple daily tasks that are impossible at the moment. He is just $205 away from that goal.

Currently Eliazar is the only fundraising patient on the site, to date they’ve funded over 300 patients and helped them get their much needed medical attention. Now you can see why Graham would choose such a service to actually help people.

It was this revolutionary new concept in crowdfunding for social good that motivated Graham to invite the founders out to Silicon Valley for a meeting and then invite them into Y-Combinator as the accelerator’s first ever non-profit startup.

Like many Silicon Valley power players, Graham is a very busy man. He enjoys helping and nurturing the startups that are in the YC program and serves as a “father figure” to many of them, well beyond their YC days. He’s known for going to bat for his startups with other power players in the investment community, like the ever so famous Paul Graham, Fred Wilson debate over Airbnb.

While many power player’s resumes include laundry lists of board seats that they serve on, until now Graham has never taken a board seat. Just like Watsi was the first ever non-profit in the Y-Combinator program, it was also the first startup that Graham has ever decided to take a board seat on.

Graham will now provide guidance to the young company that money can’t even buy. With that in mind you also have to consider the fact that this is a non-profit so Graham can’t expect a large return, if any at all.

For decades, heart wrenching commercials have shown up on the TV urging people to sponsor kids in foreign countries for education, clothing and food. For just $.25 a day you can make a difference. While those programs are great, most people receive a photo in the mail of one kid and aren’t clear on where their money actually went. With Watsi it’s very clear. Of course they are also vetting the patients’ stories as well to make sure the money goes in the right place.

With all that’s going on in the world today, this is just a great story to share on a Sunday. Share it below!

Brandery 2012 Alumn Flightcar Nabs $5.5 Million From Investors Including Ryan Seacrest

So back in July when we heard the original idea behind FlightCar I thought this group of teenage ivy league dropouts was absolutely crazy. Their Cincinnati startup Flightcar is a crazy idea. Their simplest pitch, “let someone else rent your car while you’re traveling” seemed a little far fetched. Combine that with the fact that there’s maybe 10 years driving experience between the three of them and even less business traveling experience, and I was totally disconnected.

Sometime during the Brandery’s demo day back in October my opinion changed. By the end of their pitch, and then a brief meeting with all three founders and I was completely sold.

With the “sharing economy” becoming more and more popular, why wouldn’t someone let another person borrow their car while they are away on a trip. People are doing it with their homes all the time now, by way of Vayala and Airbnb.

The concept is fairly simple. You’re flying out of town for a trip and you have to pay for parking for your car. Rather than paying for parking, Flightcar allows you to park your car in their lot and then while your gone it gets rented out to someone else who is coming into town for the same length or a shorter amount of time. Now, instead of spending money to park, you’re making money with your car that would otherwise be sitting in a parking lot.

To make the value proposition work Flightcar founders Rujul Zaparde, Kevin Petrovic and Shri Ganeshram had to insure a few things for their customers to be comfortable with the transaction.

Insurance: Of course the entire transaction, car, renters, drivers and passengers would need to be fully insured. Flightcar has done this by securing a $1 million dollar insurance policy.

Ease of transaction: The Flightcar team has managed to build in several factors to make the transaction as easy and painless as possible. The Flightcar website helps pre-determine the “borrowing”. Once at the airport (participating airports), you park your car at the Flightcar lot where a ride is provided to the gate. Flightcar will also wash and clean your car prior to renting it out and prior to you picking it up.

After the Brandery, Flightcar was accepted into the YCombinator accelerator program in Silicon Valley. Now they’ve raises $5.5 million dollars from investors. This first round of funding comes from General Catalyst, Softbank Capital, Ryan Seacrest’s Seacrest Global Group, founder of Airbnb Brian Chesky, with participation from a host of other investors including First Round Capital, Andreessen Horowitz, and Reddit co-founder Alexis Ohanian, according to TechCrunch.

Check out their pitch video from Brandery’s 2012 demo day below:

Find out more about Flightcar here at flightcar.com

The Brandery is one of the country’s top 15 accelerators, check out all of our Brandery coverage here.

Pittsburgh Startup PayTango Moves Mobile Wallet To Your Fingertips

As the mobile wallet begins to catch on, the next wave of mobile wallet startups are starting to come alive as well. Back in January we interviewed New Jersey startup PulseWallet at CES 2013 in Eureka Park. There we learned that PulseWallet is working on biometrics to serve as someone’s mobile wallet.

Simply put, with this kind of technology you’ll be able to ditch your credit cards, debit cards, and loyalty cards. Instead, your finger will become your secure wallet. With a finger scan and a pin you’ll be able to pay for anything with any number of payment forms in a much safer, fraud resistant way.

PulseWallet isn’t alone. Biometrics is a hot space as is mobile wallet. Four Carnegie Mellon University students have also recently launched a biometrics based mobile wallet called PayTango.

According to the Pittsburgh Post Gazette, using PayTango a customer would swipe there finger and in less than 15 seconds they would be linked to their payment sources.

“We wanted to eliminate the need to carry anything around to identify yourselves. Like you have these plastic credit cards and if you lose them or get the numbers stolen off them, essentially someone could wipe your bank account,” said co-founder Kelly Lau-Kee.

Lau Kee says that credit cards are antiquated and haven’t really evolved in the last 40 years since their introduction. Yes security has gotten better and reconciliation is much more reliable with phone lines and the internet,but storing the information on the magnetic strip is still the same technology today as it was back in the 70’s.

PayTango was brewed in Pennsylvania. All four founders; Brian Groudan, Umang Patel, Christian Reyes and Lau-Kee, are all either seniors or recent graduates of Carnegie Mellon. They conceived the idea in the fall of 2012 for a TechLab startup course at CMU and then continued working on it during the University of Pennsylvania’s PennApps Hackathon.

The technology is currently up and running at three eateries on the Carnegie Mellon campus. For the live beta at CMU, over 700 students have registered their fingerprint which was linked to their student ID which has their meal plan attached. To eat at those eateries, students in the beta just swipe their finger at checkout.

Now they’ve relocated to Mountain View California after being accepted into the prestigious Y Combinator accelerator program. They’ve already expanded PayTango into gyms, restaurants and convenience stores in Silicon Valley.

What they’re doing is bringing a very simple idea into reality,” said Garry Tan, a partner at Y Combinator. “Payments should be easier, and we’re now capable of doing it without fancy cards or readers or anything besides what we carry around with us all the time right now — our fingerprints.”

Find out more about PayTango here

Now check out New Jersey startup PulseWallet

Accelerators Everywhere Else Are Still Great For Startups

After Thanksgiving many startup and tech sites feverishly began telling the story of doom and gloom for startups, follow on funding and startup accelerators.

This vicious news cycle began with the Dow Jones VC Edge report released at the end of November. The report highlighted many positive things, including growth for some key areas in high growth potential tech sectors both here and abroad. Fred Wilson, the principal at Union Square Ventures and a respected authority in the startup and VC space, was quick to point out that VC funding for consumer web and mobile companies was down 42% in the first 9 months of 2012.

The Dow Jones report coupled with Wilson’s commentary sent a tremor through Silicon Valley that we could be on the cusp of a bubble.

While startups and high growth potential technology companies are contributing to job growth, what’s not being considered is the fact that his down turn in VC funding may actually be more of a leveling off.

The same week the Dow Jones report and the Wilson piece came out, Paul Graham, founder of YCombinator sent out more troubling news. Again, interpreted at some of the startup and tech sites as bad news.

Graham had explained how the next cohort of YCombinator companies would receive less funding. The very next day Graham again took to the YCombinator blog to let everyone know that the class size was shrinking as well.

For a startup accepted into the program it instantly meant prestige and validation, not to mention a huge six figure seed investment. Reading the news from Graham made people all around start doubting the accelerator model. PandoDaily quickly opined. Erin Griffith, a writer for Pando Daily, said “We know accelerators are headed for a shakeout- but do they“? Griffith pointed out that there were over 100 startup accelerators across the country churning out thousands of startups with only a 10% success rate.

But what’s really happening in accelerators and across the startup space, is that people are getting more conservative in the valley because they’re used to a culture of ginormous funding rounds and even bigger exits. Everyone knows the story about Color. Everyone’s also seen the value of the Instagram Facebook deal diminish as Facebook’s stock went down hill fast. Truth be told, even after the $1 billion dollar Facebook deal, Instagram still had less than 25 employees when they moved into Facebook’s offices back in September.

That billion dollars really produced a lot of jobs right? Consider the fact that the $1 billion dollar Instagram Valuation was more than the New York Times is currently worth and they employ over 10,000 people.

The real question about accelerators is really about whether the goal behind an accelerator is to help yield larger than life venture investments or is it about building companies with solid foundations and solid founders. It is about the cash or the wave of now more educated entrepreneurs who may not get their first startup entirely off the ground but may hit a home run or even just a double in the next go round?

It seems accelerators with the real goal of producing these crazy funding rounds and crazy exits are no better than public schools who are just teaching whatever standardized test it is to graduate the next class.

The beauty about accelerator programs “everywhere else” is that the startups in the programs are being taught important lessons about starting up, business and even life.

It’s awesome that YCombinator and TechStars have mentor networks that read like a “Who’s Who” in the startup and tech world. Every startup founder wants to learn from these great mentors, and they can, sometimes even in small towns. Take Oklahoma City’s Blueprint For Business accelerator. They all got a chance to learn from a day with Brad Feld.

Perusing the websites of startup accelerators outside the valley (everywhere else) you don’t typically find a “who’s who” of the startup and tech world. What you do find is a “who’s who” in most local business communities.

Startups may apply to programs like the Fort in DC because they want to be close to the epicenter of government. They may apply to the Brandery in Cincinnati because they want to be close to the biggest branded company in the world, Proctor & Gamble. Startups that are logistically focused or enterprise focused may want to apply to Seed Hatchery in Memphis to be close to FedEx. Startups in the entertainment and music space may choose an accelerator in Los Angeles or even Jumpstart Foundry in Nashville.

While some of these accelerators “everywhere else” may have mentors from the Valley participate or founders with big exits, the bulk of their mentor list is either mentors who speak to their niche or mentors in the local community. Which can be equally, if not more important than name brand mentors elsewhere.

Are you building solid companies or is the accelerator only looking for “the next big thing”?

Linkage

Apply for SeedHatchery here

Check out these accelerator stories from nibletz, the voice of startups “everywhere else”.

And check out the two great accelerator panels at the everywherelse.co The Startup Conference, the biggest startup conference in the U.S

Toronto YCombinator Startup: Canopy Labs Raises $1.5 Million

Y-Combinator Toronto based startup Canopy Labs has just raised $1.5 million dollars to help further their company that helps mid-sized businesses build predictive customer models. These models help identify high value customers that can lead to repeat business.

While big businesses typically outsource he development of lead optimization tools, medium sized businesses that may still have over 10,000 customers often don’t have the money to hire a company to build a specific tool. Canopy Labs offers those companies a self serve tool for a fraction of the cost.

To some that may not be the best model in the world but Canopy Labs founder Wojciech Gryc, told TechCrunch in August that their target customers may not need “the most accurate, the best model ever built” instead they need something that’s “actionable and quick”

Gryc is a Rhodes Scholar who is applying his Master of Science Degrees in Mathematical Modeling and Social Science to create the Canopy labs platform.

“We offer our clients insights into their customer data that marketing or sales analysts can understand and use right away to make customers happier and increase their sales. We’ve launched analytics capabilities for our clients in under 24 hours.” Gryc said in a statement.

Canopy Labs helps consumer and retail enterprises with a large customer base prioritize efforts and deliver different marketing messages to different customers. This results in a more personalized sales experience and higher revenue. Customer modeling case studies have shown that the Canopy Labs platform is capable of processing three million records within minutes, increase sales leads by 25%, and increase sales conversions by 200%.

Canopy Labs’ self-serve platform creates customer models by importing all of the interactions that a business has with its customers. Everything from email, social media, voicemail and call center recordings are analyzed with the products that customers buy and how much they paid for these products. Canopy Labs clients are then provided recommended actions for each customer without a sales rep having to reflect upon each customer, thus saving time for the company while decreasing customer churn and increasing customer spend.

“Many analytics companies say they can solve tough problems but most IT projects in enterprises fail or end up stagnating,” said Ron Warburton, managing partner at the BDC Venture Capital IT Fund. “Canopy Labs has found a way to address a very clear problem for enterprises that don’t want to hire consultants or create customized customer modeling programs – streamlining their analytics process and delivering smart, usable data in a very short timeframe.

Canopy Labs $1.5 million dollar round was led by BDC Venture Capital IT Fund. Peter Thiel’s Valar Ventures and a number of other angel investors participated in the deal.

Linkage:

Check out Canopy Labs here

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YCombinator Shrinks Class Size Too, Smaller Is Better

Late last week we reported that Paul Graham’s YCombinator was changing it’s seed investment structure going into the “Winter 2013” class of startups. What began as power angels Ron Conway and Yuri Milner investing $150,000 into each of the YCombinator startups has been reduced to a seed investment of $80,000 with four stake holders, further diluting the risk.

When Graham started YCombinator it was (and still is) one of the best startup accelerators in the country. Graham and the YC team made it big, big, big. Big money, big names, big startups. After two years though, it seems that Graham and his cohorts are honing in on the things that really matter. While their first class was 66 startups and their next class was 84 startups, you still needed to be the “best of the best”, for your team to get in.

Of course with 84 teams, there were even some bad apples in the “best of the best”. Graham reports in this blog post that:

“The reason we accepted fewer applications was that in summer 2012 we grew too fast. We had 66 companies in winter 2012, and that was fine, but for some reason more things than usual broke when we jumped from 66 to 84.”

While some may suggest the reduction in class size this time around is about stacking the deck, what YCombinator is really trying to do is weed out as much possible failure as they can. This way they can focus on growing the best of the best, to be, well, the best. Graham says to do that they needed to start looking at the predictors of failure rather than the predictors of success.

They’ve finished the interviews for the Winter class and right now have less than 50 startups signed up. That doesn’t mean that number will stay the same. As Graham explains there are startups that get in after the interview process and others that drop out or fall apart before they can be funded. He’s also quick to point out that this number may not stay the same. As odd it it may be to hear, YCombinator, is itself still a startup and they’re still iterating themselvers.

Linkage:

YCombinator original blog post

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Y Combinator: The Power In An Accelerator Is Not The Cash

Startups around the world, who’ve had their eyes set on Y Combinator, have all been scratching their heads over the past two days while stomaching a major change in the way the accelerator program at Y Combinator is run.

Two years ago Russian venture capitalist Yuri Milner and Ron Conway, principal at SV Angels, decided that they would invest $150,000 in seed money to each of Y Combinator’s startups. In a blog post Monday Y Combinator said that they often ended up managing the investments and the program, which was awkward because they hadn’t actually started it.

Y Combinator has announced a new program called YCVC where four Yuri Milner and three other firms will join together to invest $80,000 in each of the startups as opposed to the $150,000 figure. Joining Milner are Andreessen Horowitz, General Catalyst and Maverick Capital. Absent from this program is Conway and SV Angels.

Graham explained to Forbes magazine that while SV Angels fund doesn’t fit into the new mold of the program, Conway is still one of YC’s “favorite investors”

So what’s going on?

Startup spinmasters everywhere are wondering why this change in investment strategy. Some worry does this have to do with the bubble bursting? Others wonder if it has to do with the general trend in consumer tech investing going down? While others understand that cash isn’t the core to a good accelerator program.

That’s just what YC has said as well.

By decreasing the actual cash investment in the startups, YC is asking that the investors take a more active interest in the program itself. Each of the investors will participate in office hours helping to cultivate the startups in the program. Graham, along with the powers that be at YC are hoping that this invaluable investment with time will more than compensate for the decrease in seed funding.

YC also says that $150,000 may not have been the optimal investment. In some cases a seed investment that size was too much for a new startup.

“$150k was more than the successful startups needed, and it sometimes caused messy disputes in the unsuccessful ones. Switching from $150k to $80k may not completely eliminate such problems, but it will make them at most half as bad.” YC posted on their blog.

YC is confident that even in Silicon Valley $80,000 should be more than adequate to give startup founders about a year to work on their idea, and live financially above water.

Many successful accelerators across the country including MassChallenge, DreamIt Ventures, TechWildCatters and even the Brandery have been making do with substantially less seed funding for startups, and more active programs.

Some startups feel that having a name like Y Combinator, 500 Startups or TechStars behind them is enough to help them get ahead. Others really want the opportunity to work the program, beef up their contacts, and learn from the triumphs and failures of the top shelf mentors associated with funds like those backing the newest program at Y Combinator.

What do you think, tell us in comments.

Linkage:

YC’s original blog post

More startup stories from “everywhere else”

Startup Conference? Yes!

Everywhere Else Beats The Valley In Forbes Top 10 Incubator List

Nibletz is growing a lot faster than we could ever imagine. We thank every one of you that’s come to the site to check out a story, or two, added us to your RSS feed and shared us on social media. Despite the rate we’ve been growing (500% month over month), we still find ourselves explaining “everywhere else” at least once a day.

Nibletz is the voice of startups everywhere else. We’re proud to bring news, interviews, and resources to those startups that are “everywhere else”. Monday Forbes posted their list of the top ten start up incubators across the country. Y-Combinator, in the valley, topped the list with $7.8 billion in value.

If you take a closer look at the Forbes list, you’ll quickly notice, like we did, that the number of incubators “everywhere else” trumped the number of valley based incubators 6-4. In fact TechStars, with offices in Boulder, Boston, New York, Seattle, and San Antonio, came in second place.

TechStars has had 114 companies through the program with 98 still active. TechStars has a franchise model of sorts, and is headquartered in Boulder Colorado. TechStars founder David Cohen has hired directors for each of the other locations. TechStars selects 1% of about 4,000 applications into their program.

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