Y Combinator: Investors should back the jockey not the horse

Y Combinator, a leading seed investment incubator, recently announced that it would be accepting startup applications for this years fund from startup founders WITHOUT an idea.

Here’s how the incubator describes itself on its website:

Y Combinator does seed funding for startups. Seed funding is the earliest stage of venture funding. It pays your expenses while you’re getting started.

Some companies may need no more than seed funding. Others will go through several rounds. There is no right answer. How much funding you need depends on the kind of company you start.

It appears that the technology investment market arrived at the point where ideas no longer matter. This sounds a little bit insane but I must say that I don’t think it is.

Yes, there are ideas that can change the world but they are few and far between. In truth, I firmly believe that people change the world, people make a difference and people build successful businesses.

Any VC worth their weight in capital will tell you that they back people and not ideas (most of them will actually refer to the founders of a business as “Jockeys” and the idea as the “Horse”). I completely agree with this as a principal to invest by.

It is the founders that make a good idea great, not good ideas that make founders great. And if we’re honest about the world we live in right now, there are very, very, very few (if any at all) ideas that are truly unique. It’s execution that sets ideas apart.

My feeling is that Paul Graham and the gang at Y Combinator have seen enough ideas in their time to understand that it takes people to build ideas and, more often than not, if you put the right people together in a room for a long enough period they will come up with an idea that can be built in to a great and marketable business.

I stress the point here that there is a significant difference between an idea and a business. An idea can be had by millions of people simultaneously. A business is built on an idea and involves real things like revenue, expenses, staff, a plan and execution as well as a billion other things but let’s not harp on them.

The thing that attracts me to Y Combinator is their approach to the world of business, technology, ideas and people. They love to innovate, they love to push people and I’m sure they are ruthless and cut throat when they need to be. The final sentence of the “No idea” application introduction sums it all up for me:

We’re not sure this will work, but if it does we’ll do it from now on.

That is innovative thinking. We need more of it, everywhere.

*If you think you’ve got what it takes, apply here.