Geeks in Boston

I got an email today from the PR rep for another YCombinator clone, based in Philadelphia:

DreamIt Ventures is a new pre-seed venture firm launched last week by three Philadephia-area tech entrepreneurs. DreamIt basically takes the Y Combinator approach to funding with the noted difference of providing the entrepreneurs (if they choose) with strategists to help run their new businesses. [press release; discussion on hacker news]

Boston-and-Silicon Valley-based YCombinator pioneered the “buncha dudes make a company over the summer” approach to funding, and as far as one can tell from outside, they’re doing pretty well. They’ve got Paul Graham’s recruiting cachet, plenty of industry connections, and a few years of experience. The clones (Techstars in Boulder, CO; SeedCamp in Europe; LaunchBox in DC; and now DreamIt in Philly) throw in a few variations, touting their own strategists or connections. The ones that advertise teaming with the local lawyers start to scare me — the last thing most 3-month-old companies need is a business prevention department.

But let’s put aside the pursuit of innovation here. Regular VCs don’t try to compete by developing innovative ways to invest; they compete for capital and deal flow and try to pick winning investments. YC may be famous but, with only 25-35 investments a year, must be turning down some good candidates. Can’t our clones fund the best of the rest and do almost as well?

Maybe. Venture investments are very risky; people often guess that 10% perform well and 90% tank. If all the founders apply to YC first, and if YC has a very good nose, they could cherry-pick virtually all of the promising investments before the clones ever get a chance.

On the other hand, seed investments aren’t a sophisticated nation-wide market. If an investor knows a kid who’s got some energy and brains, a little motivational nudge can turn that geek into a business. Getting better connected in schools and companies, especially around a specific industry or in an underserved locale, can probably help a lot.

On the other other hand, though, lowering barriers doesn’t always serve the investor well. Aren’t people who’re willing to move to Silicon Valley more likely to work hard and sacrifice for the business? I mean, we’re talking about an environment useful for running computer companies and playing frisbee, but virtually nothing else (maybe In-N-Out Burger). What about the “strategists” that DreamIt plans to offer? Who’s a better founder: one who will learn accounting so he can understand all parts of his business, or one who thinks an outsider with some stock and a salary can handle that “while I focus on the big picture”? A friendlier investor may be inviting more extra losers than winners. Perhaps the goal should be to tear down social barriers (risk stigma, family expectations, getting taken seriously in deals) while preserving barriers that test competence and perseverance.

In any case, it’s great to see this kind of venture firm growing. Despite the competition, Paul Graham et al. must feel at least a little vindicated to see their hack so widely duplicated. But some–perhaps most–of these firms are bound to fail. How many can succeed? What will the next round of successful “summer-stage” firms look like?

A recent post on Hacker News asks about this question on YCombinator’s just-opened application for their Summer 2008 seed funding round in Boston:

Please tell us about the time you most successfully hacked some (non-computer) system to your advantage.

That’s just a fun discussion question, with a few good stories in the responses. My answer, still kinda computer-related, is that time in high school that my friends and I built a computer lab so we could study Computer Science AP. (Although my treadmill desk and simulation of a door using a paperclip also came to mind.)

What’s yours?

Today brings news that everyone’s favorite Davis-square-based-alien-mascot-bearing startup, Reddit, has been acquired by CodneNet, the digital-internet-Wired portion of magazine giant Conde Nast.

Reddit soaks up all my slack time for reading online. The New Yorker brings dozens of physical pages worth reading every week. So I must also congratulate Conde Nast on completing their virtual monopolization of my news intake.

Unfortunately the Reddit guys will be moving to CodeNet HQ in San Francisco. We’ll miss you guys, but wish you all the best in your new digs. Congratulations!

Local Y-Combinator startup Kiko is up for sale on eBay. Having made fun of calendaring apps in the past, this isn’t exactly shocking, and you have to respect the Kiko founders’ willingness to let go. For sale is the domain name, the web hosting account, and all Kiko intellectual property including the software; as well as the option to buy a week of consulting time from the founders for $1500.

Now the big question is whether it’ll sell. Most of the recent, smaller tech acquisitions seem to be thinly veiled signing bonuses. Perhaps owning upcoming.org isn’t that important to Yahoo! — they could rebuild it in a few weeks — but it is a sign of hiring a highly competent person. As alternative to recruiters that charge $7000 per hire, an acquisition that binds a small group of people to your company for 3-5 years while their stock vests could easily be worth several tens of thousands. But without the option to acquire the Kiko team, I’m not sure who would buy their domain and software.

After all, who sits around with $50k wondering “gee, I wish I could get myself a neat but young implementation of something Google is really good at?”

Update: Tucows, the buyer, explains. Pretty convincing logic, actually.