But YC is extracting 6% from promising startups for the same reason that 37signals is extracting millions of dollars for a web-based bulletin board: the total package is compelling.
In YC's case, you're getting access to a hands-on software startup fanatic who's words you already hang on, plus the network of VC's his team has built up over the last N years. "
which is why the "Indian Y-Combinator"(http://news.ycombinator.com/item?id=842150) will (eventually) fail as well.(besides the fact that they won't attract smart people with stuff like how they micromanage the 10,000$ they might give you for 10% of your company - Founders can't operate the bank account, and apparently need a board meeting to decide on line item expenses! See http://news.ycombinator.com/item?id=842882 for details).
Cloning the legal/financial structure isn't enough. YC succeeds because it has very high calibre people leading it, not because it has a specific "algorithm" that others can copy.
"YC succeeds because it has very high calibre people leading it, not because it has a specific "algorithm" that others can copy."
Why are you assuming the "algorithm" just includes the finance bits? It also includes the people involved (mentors, investors, community). Why wouldn't that be replicable in other cities outside the Valley? As long as they have both the financial capital and the social capital I don't see why it couldn't be successfully duplicated.
TechStars seems to be doing well in Boulder and Boston. Seedcamp seems to be doing well in London. Launchbox seems to be doing pretty well in DC. DreamIt seems to be working well for Philly. Someone could do it in Chicago (or any other moderately sized city with some semblance of a tech community already, some willing investors (or the ability to attract investors from other parts of the world), and a few nearby universities) with the right network.
Obviously something like YC could in principle work outside the Valley, because YC itself used to be. We had to fly startups from Boston cycles to present to investors in Silicon Valley, though, and the more prominent clones do as well, so I think you have to take that as a given.
Probably the biggest disadvantage for startups in Boston cycles was the scarcity of experienced founders there. In our Boston cycles, we considered ourselves lucky to get 2 or 3 speakers of the caliber we get in SV cycles (http://ycombinator.com/w9speakers.html). I would guess this problem is even worse in other towns.
It won't work in Chicago because $20,000 and some "mentoring" is not worth 6% of any company founded by someone who can execute on a tech startup in Chicago.
YC has two things that YC'/Chicago can't have: access to a very active pool of local angel investors and tier-1 VCs, and a brand built in part by several years of passing on hundreds of (probably solid) applications.
Completing YC'/Chicago might teach you something about business or about shipping product, but it won't get you funded (you are not getting funded in Chicago) and it won't get you written up just for getting in.
But YC is extracting 6% from promising startups for the same reason that 37signals is extracting millions of dollars for a web-based bulletin board: the total package is compelling.
In YC's case, you're getting access to a hands-on software startup fanatic who's words you already hang on, plus the network of VC's his team has built up over the last N years. "
which is why the "Indian Y-Combinator"(http://news.ycombinator.com/item?id=842150) will (eventually) fail as well.(besides the fact that they won't attract smart people with stuff like how they micromanage the 10,000$ they might give you for 10% of your company - Founders can't operate the bank account, and apparently need a board meeting to decide on line item expenses! See http://news.ycombinator.com/item?id=842882 for details).
Cloning the legal/financial structure isn't enough. YC succeeds because it has very high calibre people leading it, not because it has a specific "algorithm" that others can copy.