As Y Combinator Ramps Up NY Presence, Rival Start-Up Incubator TechStars Claims Home Court Advantage

Eager young techies began showing up two hours early for a Y Combinator pizza party Q&A held on a recent Tuesday night at an office in the Flatiron District. By the time the guys who’d been sent to speak on behalf of the celebrated start-up incubator got started with their presentation, there were more than 200 people there. With the deadline to apply for one of the coveted spots in Y Combinator’s upcoming winter session just one week away, the room was full of hungry New York tech entrepreneurs hoping for a shot at the big time.

The lucky few who get into the program will pack their bags and move to Mountain View, California in January for an intensive three-month crash course designed to help them get their start-ups off the ground. At the end of the session, they will demo their products for scores of investors, and thanks in large part to the formidable Y Combinator brand, many of them will go on to get funding from top angels and venture capitalists.

Alexis Ohanian, the affable fellow who recently moved to New York to serve as Y Combinator’s “ambassador to the East,” did not waste any time that Tuesday night before opening the floor to questions. The audience, in turn, did not waste any time asking him pointedly whether Y Combinator was ever going to offer a program that would allow them to stay in New York instead of moving to the Bay Area.

Mr. Ohanian, who worked on a start-up as part of Y Combinator’s very first class, in 2005, took the opportunity to make an important point: namely, that the purpose of his job as “ambassador” is not to poach the best start-ups and send them to California, but rather to fortify the New York tech scene.

“There is nothing saying that your start-up has to stay in the Bay Area,” Mr. Ohanian told the crowd, with emphasis. “In fact, it’d be great if you come out for three months of education, learn that you hate Palo Alto, and want to come back to New York to make your millions–wonderful, do that. I’m the East Coast ambassador, and I’m trying to encourage as many start-ups as possible to consider that option, to make New York even more awesome.”

There are those who are skeptical on this point — who believe that Y Combinator’s recruiting efforts here will not make New York more awesome, but less. Among them are the leaders of a rival accelerator program called TechStars, a Boulder-based organization that is opening an office in Union Square this winter with an inaugural class of 10 start-ups and a pool of mentors, including some 70 of the city’s most prominent entrepreneurs, technologists, and investors.

At a TechStars happy hour in Murray Hill on Monday night, TechStars co-founder Brad Feld — in town from Boulder promoting the TechStars book, Do More Faster — smiled incredulously when told that Mr. Ohanian had said recently that he is trying to enrich the New York entrepreneurial community rather than weaken it.

“By having New York-based companies move to California?” Mr. Feld asked. “How does that work?”

Later that night, David Tisch, the angel investor and entrepreneur who was tapped earlier this fall to be managing director of TechStars’ New York operation, was more direct.

“I think that’s bullshit,” he said by phone. “I do. What percentage of Y Combinator’s companies move back?”

The quarrel here is not about intent. If you listen to Mr. Ohanian, it’s clear he actually did move here to help make New York a more active tech hub and a more attractive destination for talented developers. Paul Graham, meanwhile, the hacker hero who founded Y Combinator five years ago, is firm in his assurance that Mr. Ohanian “would never sign up for a secret plot to undermine N.Y.C.”

None of that changes the fact that these two accelerator programs are directly competing against one another for New York’s most promising early-stage start-ups, and that TechStars, under Mr. Tisch’s leadership, is positioning itself as New York’s hometown hero.

“TechStars is better because we’re native to New York,” said Mr. Tisch. “We’re here because we want New York to thrive, not because we want TechStars to thrive.”

Check out Top Graduates of Y Combinator and Techstars >

THE Y COMBINATOR model of seed stage investment — in which start-ups are handed a modest amount of capital, no more than $20,000, and a lot of coaching in exchange for a equity stake worth between two and ten percent — has inspired many imitators around the country since Mr. Graham started his program five years ago. But until recently, New York has not been home to any of them, and consequently, there has been little local support here for very early-stage start-ups.

According to Mr. Tisch, more than 600 teams are expected to submit applications for the program’s 10 open spots before the November 21 deadline. So far, applicants have come from all over — including Paraguay, Columbia and Florida — but it is expected that most of the people in the program will be from around New York.

Mr. Tisch is 29, with shaggy brown hair that hangs almost to his shoulders, a narrow nose, and the easy smile of a good-natured athlete. Sitting at an Argo Tea Cafe near Union Square recently, Mr. Tisch talked about how TechStars distinguishes itself from other accelerator programs. The key, he said, is the program’s emphasis on mentorship.

“We are going to surround you with people who can help you and your company better than anybody else can,” Mr. Tisch said.

The list of individuals who have agreed to serve as TechStars mentors is a muscular who’s who of the New York tech scene: It is some 70 names long, among them a number of successful founders as well as a flock of powerful investors like Fred Wilson, Chris Dixon, Brad Burnham, Ben Lerer, Roger Ehrenberg, Mike Brown, and Stuart Ellman. There are also about 20 local venture funds who have invested in the TechStars fund; none has more than a 5 percent stake.

In the case of investors, especially, participating in TechStars is neatly symbiotic: Founders benefit from the expertise and networking opportunities that come with access to seasoned VCs and angels, and the VCs and angels, searching for the next Facebook, get an early look at a bunch of promising entrepreneurs before everyone else in town wants a piece of them.

Mentors are matched with one of the 10 start-ups during the first few weeks of the session, Mr. Tisch said, and the idea is for each company to have between 5 and 10 dedicated advisers. At the end of the three months, the start-ups will present their companies to an audience of several hundred investors. According to Mr. Tisch, 70 percent of the several dozen companies TechStars has worked with nationwide since the program started in Boulder in 2006 have received a “meaningful” amount of funding. (TechStars invests $18,000 and holds a six percent stake in each of its companies.)

“It’s hard to get recognition and to get any sort of validity or stamp of approval in the start-up space,” said Vinicius Vacanti, the co-founder of Yipit and a TechStars mentor. “I think the very fact of these 10 companies getting selected out of this huge pool immediately gives them a ton of credibility. The program will make these companies a lot more desirable than they would otherwise be.”


As Y Combinator Ramps Up NY Presence, Rival Start-Up Incubator TechStars Claims Home Court Advantage