Last night I went to hear Amir Nathoo of Webmynd talk about his experience of Y Combinator, a San Francisco based venture firm that offers young entrepreneurs around the world money to come to Silicon Valley for 3 months and try to prototype a new internet product, demonstrate it in front of local Silicon Valley venture capitalists and raise funding to bring it to market.
Y Combinator aren't a charity, they take a stake averaging 6% in the company for their seed funding of up to $20,000, because the ideas are at very early stages and mostly what they are investing in is just the team. Few of the applicants who submit ideas via their webform are invited to present at their US interview sessions. Few of those who are funded manage to make it through the three months in Silicon Valley without burning through all that seed money just eating. Amir and his team managed it because one of their members was from San Francisco and they all went and lived in his house - and brought a second team who they had met at the interview round to live in the basement. From what Amir said, the few who manage to get Venture Capital funding out of the process got it because they were already in negotiations with Venture Capitalists. The validation offered by Y terminator's process clinched the deal. With a huge smile, Amir described as "happy founders" those very fortunate few (Anywhere.com, Omnisio, Parakey, Reddit, Textpayme) who have already managed to sell out.
Amir feels huge affinity to San Francisco, and speaks with awe of the local venture capitalists there.The fact that Sequoia just put $2,000,000 into Y combinator further validates them for him. He and his team have incorporated their company there and are still struggling through the complex and lengthy process of acquiring US visas, despite the fact that his wife works in Cambridge. He and his co-founders left their day jobs in 2007 and worked through a series of ideas before settling on their current product. Clearly he is living the dream of becoming a "happy founder" too, negotiating with publishers as hundreds of thousands of users download his product for free, a new version of the California Gold Rush. His images of hard work and hard choices reminded me of Eavan Boland's wonderful poem on the Emigrant Irish. Maybe the Americans offering a hand to these struggling young enterpreneurs are revolutionary patriots, since they give money which they sometimes lose and mostly see it spent on food and drink in downtown San Francisco, in the interests of getting the smartest young people across the US and across the world to emigrate there. However it is important to note that some of their alumni do make it home and establish great businesses here - we were pleased to see people from Song Kick who popped in from East London and who I know are doing brilliant things with University of Cambridge.
At the end of the talk, the questions from the very senior audience of local academics, angel investors, venture capitalists and aspiring technology enterpreneurs came quickly. One observed that the model of prototyping a product to get a demonstrator out in 3 months was only really applicable to internet products, something which was generally agreed. Another asked whether, like the Oscars, there is only room for one programme of this type on the planet. Amir thought that Y combinator had the international market pretty much sown up, but that local regions in other parts of the world could probably do similar models for local entrepreneurs. Others mentioned Plug and Play Tech Center, who offer accomodation rather than cash, which didn't seem to be very appealing. Someone asked Amir if he could name a single company that had achieved fast growth without giving away ownership to Venture Capitalists, a question he struggled with until he pointed at the founders of Red Gate Software sitting at the back of the room. This raised a laugh since it was their party.
At the end of the talk I turned to a friend who co-founded ARM and who now invests here. We chatted about his recent accident where a young motorist had knocked him off his bike and broken his collar bone, despite his fluorescent jacket. I could empathise with him on the difficulty of not cycling for 12 weeks - I used to commute to London. Apparently Lance Armstrong just broke HIS collar bone and had opted for surgery to be able to get back into the saddle quicker. Perhaps that says something about the strange pleasure of cycling. My mind went back to the time 10 years ago when I was interviewing my friend as part of my PhD research on the way his teams managed to innovate in collaboration with semiconductor and device manufacturers around the world. I had asked him why he didn't simply move to Silicon Valley and work for Intel. He responded that he had had offers, but it was more interesting to do something new, and that it was quite hard to cycle there with all the cars. Clearly there are people who cycle on the West Coast, but that chimed with my own experience of the vast low-rise sprawl of the Valley and the smog over its street grid.
If Silicon Valley is the capital of geeks, it seems we have some revolutionary patriots elsewhere in the world who are managing to avoid paying taxes there. Actually, Intel have been paying ARM since the late 1990s - they licensed their designs to get into mobile devices because ARM has such a lead in that space - although the empire may strike back. Remembering the Argentine, Indian and Chinese faces I had seen in the ARM cafeteria earlier in the day when chatting to one of our Board Directors, I reflected that it is lucky that our visa schemes are not as chancy and drawn-out as the US. We will need the best and brightest in the world to hold onto that lead.
My friend had a hard question for me too. Cambridge Network is a talking shop, he said. That is all very well. But are you going to do anything about this? Glancing over at Amir's smiling face I thought that it was probably worth trying.
I really enjoyed Amir's talk yesterday and networking with the lovely people who attended. I'm a Cambridge entrepreneur who would much rather stay in Cambridge (or at least the UK) than move to Silicon Valley, but the perspective offered by Amir on the American opportunities makes me wonder how far Cambridge has to go before it can play in the same league.
The Cambridge Network has the potential for becoming a hub for Cambridge's entrepreneurial activity. Would the Cambridge Network be the right organisation to initiate something like Y Combinator over here? It would need a bit of a change in mindset though. The attitude of Y Combinator is all about being fast, dynamic, appetite for risk, low overheads, choosing the very best, connecting the best people with each other, and an understanding for those with lots of enthusiasm but little track record. These are not qualities which I have associated with the Cambridge Network so far, but I hope that with your new leadership there will be a new approach.
Posted by: Martin Kleppmann | March 26, 2009 at 08:36 AM
I must say that purely from a constructive viewpoint I totally agree with Martin Kleppmann's views. I can see so much potential and it just needs the vision and supportive funding for a new way of doing things. There are so many of us with positive suggestions. Cambridge Network would only benefit from a more open forum for them
Posted by: Martin Kendall | March 28, 2009 at 05:28 PM