Silicon Where? (Part 3)

What the chance encounter with Eddie Codel and the subsequent LunchMeet interview interview really highlights is the way that things “just happen” in Silicon Valley. Due to the higher density of people working in start-ups, the probability of randomly bumping into someone useful is higher than anywhere else in the world. Whether it’s funding, a new employee, press coverage or just good, solid advice that one is looking for, it might well be waiting just around the corner. This is not to say one can’t start companies elsewhere, it just means that it’s often easier in the Valley.

Accelerating the start-up process is early-stage investment fund Y Combinator, set up in 2005 by Paul Graham, Jessica Livingston, Trevor Blackwell and Robert Morris. The concept is that around 8 founder teams are selected to work in Cambridge, MA each summer and Mountain View, CA each winter. They then embark on a 3-month process involving a “Demo Day” in week 6 and an “Investor Day” in week 10. During the 3 months, the participants are networked in with many of the top Internet entrepreneurs through master classes, dinners and various other events involving product, marketing and legal experts. Invariably, this results in all the teams receiving substantial funding and going on to form successful companies.

A prime example of this is Zenter, a company which came out of the first class this year . Their vision was to build a product resembling Microsoft PowerPoint (but online) and after 6 months work, they were acquired by Google for an undisclosed (allegedly 8-figure) sum. More recently Xobni (it’s inbox backwards), received $4.2M funding from Khosla Ventures, First Round Capital, Baseline Ventures, Atomico Ventures, Ariel Poler from StumbleUpon, Paul Bucheit (Creator, GMail) and some other angels. Eddie Codel also likes what they’re doing and recently shot their ‘corporate’ recruitment video. It was produced by their Co-Founder, Matt Brezina who I met at the Y Scraper back in August:

The first UK-based team to get on the program was Kulveer and Harjeet Taggar back in January this year. They started off with the largest online marketplace for students – Boso.com and following the launch of Facebook’s marketplace amongst other things, realised that pursuing a new idea – Auctomatic, which makes selling on eBay easier would be more fortuitous. Having got Paul Graham, Evan Williams (Founder, Blogger), Paul Bucheit and Chris Sacca (Head of Special Initiatives, Google) amongst their Advisory Board, and also joined forces with new “Chief Bottlewasher”, Patrick Collison, a former European Young Scientist of the Year, many would bet on Auctomatic having the legs to go all the way.

They were followed by another UK-based team in the summer this year – Peter Nixey and Immad Akhund with their company ClickPass, based around OpenID. Immad and I first met in late 2006 at No. 5 Cavendish Sq. in London at an Imperial Entrepreneurs party when he was working on his former project Revmap, a UK-based local reviews site. The line of British founders is now continuing with Sumon Sadhu and Jamie Quint having just been accepted for the first class of 2008. You can read more about Sumon’s experiences applying at his blog Sharpshoot

For me, one exciting thing that Y Combinator does is instilling faith within seasoned 30- or 40- something Venture Capital investors that these teams in their early- to mid-20′s are genuinely likely to execute upon world-changing ideas. I’ve just finished reading a remarkably inspirational book called Founders at Work, written by Jessica Livingston. It contains a series of 32 candid interviews with the most successful tech entrepreneurs of the last decade including Steve Wozniak who started Apple, Max Levchin who started PayPal and Slide, James Hong who started Hot or Not and various other big names. I’d strongly recommend it to any young entrepreneur – the book highlights many common pitfalls and it’s also a great way to obtain an intuitive feel for the common thread running through all of these successful entrepreneurs.

Earlier this year, Saul Klein (former VP, Marketing at Skype and now a partner of Index Ventures had been thinking that Europe also has the potential to create more of these world-changing companies. Looking at Skype, acquired by eBay for $450M in 2005, Lastminute.com which was sold for $1.1bn earlier this year to Travelocity and also Last.FM which was acquired by the US television network CBS for $280M in May, there is evidence that it’s definitely possible. This vision led Saul to set up Seedcamp with Reshma Sohoni.

I was recently asked to write a post for the Seedcamp Blog expressing my hopes on how the initiative would impact the European ecosystem – I entitled it Silicon Valley is just a state of mind. The first class of chosen founders are now in the midst of their 3-month program and I’m looking forward to seeing how this scheme progresses.

Here ends my series of Silicon Where? blog posts, and to finish, I’ll leave you with a fly-on-the-wall documentary, Clicky Business which (rather amusingly) follows our whole trip back in August this year: