At Y Combinator's Startup School, it's not all tech cheerleading

On a cloudy Wednesday morning in August, dozens of startup founders stream into Y Combinator's industrial-chic office in San Francisco's SoMa neighborhood. The mostly young hopefuls are attending a lecture at Startup School, the prestigious tech incubator's free online program for people starting tech companies. The 10-week curriculum is intended to be streamed online, but company founders can also attend recordings, where they can meet other participants in person.

The startup scene so often gets skewered for being tone-deaf or self-important, but the lecture taking place is surprisingly sober. Tim Brady, a YC partner, discusses the importance of instilling a healthy company culture early on. One of his what-not-to-do examples is a familiar tech-land whipping boy, though a less-expected target in the womblike venture capitalist confines of YC: Facebook . 

Brady takes aim at the social network's now-notorious former mantra, "Move fast and break things," and the long-term damage that mentality has wrought on the company. "It shouldn't be a surprise, when you look at this, at some of the privacy violations they've been charged with," Brady tells the group. "I don't think for a second anyone at Facebook set out to violate anyone's privacy. But the culture certainly didn't help them." 

As he's talking, a siren screeches outside as an ambulance whizzes by, almost drowning out Brady's voice. It's a common occurrence in this part of SoMa, one of San Francisco's grittier areas. But it's on-the-nose symbolism as Brady sounds the alarm on Facebook's cultural problems. The social networking giant declined to comment. 

The rumination on Facebook suggests a more measured, introspective tone for Y Combinator, one of Silicon Valley's most important and storied institutions. Started in 2005 by the investor Paul Graham, the accelerator nurtures early stage startups with funding and mentorship in exchange for equity. The company took its name from a computer science term for a program that runs other programs. It's incubated some of the industry's most successful startups in its iconic boot camp program, including Airbnb, Reddit, Dropbox and Twitch. 

But it has struggled with its image in the last few years, as the startup scene fends off criticism that it's insular and out of touch. Some jabs are lighthearted, like the farce of HBO's Silicon Valley or Amazon's Betas. Other critiques are devastating: YC's popular message board Hacker News, a front-page forum for software engineers, was noted by The New Yorker as being called "toxic." 

The perception of Y Combinator has become even more muddied as the tech industry at large faces a reckoning. Consumers, politicians and the media are taking a harder look at the privacy tradeoffs ushered in by an industry that often says it subscribes to the high ideals of altruism, but has been blinded by its own hubris and recklessness. Facebook and Google bear the brunt of that backlash, but on the other end of the spectrum is the vast startup ecosystem pumping Silicon Valley's lifeblood. And for many in the Valley, where audacious ideas are often rewarded with big bucks, YC is still the North Star of that ecosystem. Many unicorns, the industry's shorthand for billion-dollar startups , started as ponies in Y Combinator's stables. Whether the accelerator likes it or not, YC has become a proxy for all startups. 

Startup School isn't meant to be a reclamation project for YC's reputation, but it can help. The initiative, which is separate from YC's highly selective main program, has enlisted 30,000 startups and enrolled more than 40,000 founders. It's meant to give more people access to the dream of Silicon Valley -- particularly those outside the bubble of the Bay Area. Almost 70% of participants are based outside the US. The YC team has traveled to several international cities for lectures, including Mexico City; Sao Paulo; Bogota, Colombia; and Kyiv, Ukraine. 

The incubator is trying to improve people's perception of YC, acknowledges Kevin Hale, who leads Startup School. But that will take time, he says.

"A lot of people are impatient about change, wanting it to be immediate," the 38-year-old financier says in an interview at the company's office. "We probably are the most impatient, to be quite honest."

Trekking far and wide to international cities isn't only beneficial to the startup hopefuls, says Paul Saffo, a Stanford University professor and Silicon Valley prognosticator who's watched the industry for decades. "It's not only for Y Combinator to help teach," he says. "It's for Y Combinator to go listen." (Saffo has no affiliation with Y Combinator.)

'Nervous about the culture'

Startup School is an open enrollment program, meaning there are no rejections. Everyone who signs up is in. It's a stark contrast from Y Combinator's core program, in which thousands of startups vie for around 200 spots in a highly selective admissions process. The lucky few who are chosen are invited to participate in an intensive workshop that culminates in Demo Day, a high-profile startup showcase attended by heavy-hitter investors and covered by the national press. 

The come-one-come-all approach of Startup School wasn't the original idea. It used to be an application-only process too. But last year, when the company was sending out replies to applicants, it made an embarrassing mistake: It sent acceptance letters to rejected candidates, and rejections to those who were accepted. Instead of rescinding the acceptance offers, YC just decided to let everyone in.  

The organizers made tweaks on the fly. Instead of 3,000 people, they accepted 15,000. To go through the course, participants must watch online lectures and submit progress reports. At the end of 10 weeks, which concluded last month, those who have met the requirements get completion certificates. While some people actively participate, 35,000 more audit the program -- meaning they just watch the lectures. 

This year, YC decided to keep the open enrollment. Vijay Ratthinam, 40, who attended the lecture taping in San Francisco, went through Startup School last year and is repeating the program. He developed a platform called Big Fish to connect people with mentors, and says it's helpful to be reminded of the basics of starting a company. He's says he's most interested in learning how to build out the product. (Building, by the way, is a classic startup trope. The guest Wi-Fi password at YC, posted on the wall, is "makesomething.")

Even with the egalitarian bent, diversity is still an issue. The company says 19 percent of founders in Startup School are women. That's significant, but the program still has a long way to go to be truly representative. At the lecture I attended, I counted only a handful of women in the audience. 

Hale acknowledges the "cultural challenges" and says they stem from the "default percent participation rates of the people that are attracted to tech." He says the low commitment required for Startup School can help. 

"We're able to have just all these females who would have been worried" and "kind of nervous about the culture," says Hale. "This is a program that allows them to do it in a very, very comfortable way. They can do it from home. They don't have to make major sacrifices in their life." 

A prerequisite?

Some participants are less interested in Startup School's lesson plans and more attracted to the resume boost it could provide. Y Combinator says more than 60 companies from last year's program were accepted into the winter batch of this year's selective core program -- about 30 percent of the entire cohort.

Several of the participants I spoke to at the San Francisco lecture taping were mainly enrolled in Startup School because they thought it'd give them a better shot at getting into the core program. 

"Getting in this room is really hard," says Steve Derico, 32, co-founder of ConnectMD, an app that prepares patients for medical procedures with texts, emails and phone calls. Another participant, 32-year-old Olu Ogunlela, also said he was there to get into the core program. The entrepreneur, who started a time management company called Liferithms, said he flew to San Francisco from Lagos, Nigeria, to network with people.

Adora Cheung, a YC partner who runs Startup School with Hale, thinks that kind of motive is "great." I ask if it creates another gate for people to pass through if they want to pursue the core YC program, like a prerequisite for college. She says no, especially because the degree of participation in Startup School varies for many of the participants. Some people will turn in every progress report, while others will just watch a couple of lectures. She concedes, though, "I think it will be the highest source of founders [for the core program] in the future, but it certainly won't be the only source."

Walk around the San Francisco office and you'll see a subtle sign of what's at stake when it comes to success in the Valley. Outside the big warehouse windows, there's a huge ad plastered on a building overlooking the office. It's for the cloud startup Looker, which Google acquired for $2.6 billion in June. Looker isn't a Y Combinator alumni company, but the ad is a quiet reminder of the fortunes beckoning if a startup succeeds on its own or becomes an attractive prize for a tech giant.

Hale says the aim of Startup School is to help inexperienced founders "get the resources -- the advice and information they need to help get to the next level." Then, he says, people will feel like they have a place in the tech industry, and "be able to participate in all the riches it gives."