VC Corner: Jessica Livingston of Y Combinator (Stripe, Reddit, Weebly, Dropbox, OpenAI)

When Jessica Livingston, Paul Graham, Robert Morris, and Trevor Blackwell founded Y Combinator the heavens didn’t part and the angels didn’t sing. “No one cared,” Jessica Livingston told a crowded room of entrepreneurs in Silicon Valley. “No reporter even thought YC was interesting. They wouldn’t even call me back. But we just kept moving forward, little by little, not caring what people thought about us.”

Jessica Livingston is an atypical Silicon Valley entrepreneur. She didn’t start a business in high school. She doesn’t code. She grew up near Boston, not Silicon Valley.  “No one has ever come this far to California in my family.“ Yet here she is, the co-founder of one of the most influential startups in the Valley and having also written one of the most practical and useful entrepreneurial books Founders At Work. Here are a few things I learned about the company from our hour long chat.

Jessica Livingston is a founding partner at Y Combinator. She is also the organizer of Startup School, the big annual startup conference, and the author of Founders at Work, a collection of interviews with successful startup founders. Y Combinator was the first of the new startup “incubators” that fund a bunch of startups at once. Since 2005 YC has funded over 560 companies, including Dropbox, Airbnb, Stripe, and Reddit. She's one of the first backers of OpenAI, a non-profit group focused on artificial intelligence research available to all.

Watch Jessica Livingston of Y Combinator at Startup Grind Silicon Valley, and read our highlights below.

Meeting Paul Graham And the Beginning Of YC

Jessica is married to her YC co-founder Paul Graham, but originally they met in Cambridge. After being invited to a party by a mutual friend, Jessica showed up only to find that the friend who invited her had moved out of the state. Alone at the party and not knowing anyone, she met Paul, Robert Morris, and Trevor Blackwell - the founders of Viaweb, which had sold to Yahoo! a few years earlier.

After spending time with the group, she started to hear the real stories of how Viaweb and other companies were really built.  She describes Paul as very observant, extremely bright, and as someone who on his first day at Yahoo! worked from “8 AM until midnight, thinking that’s what people do.” Turns out they don’t. He lasted exactly one year.

As Jessica planned to write Founders At Work, Paul starts thinking about angel investing. “We sort of hashed up the idea for YC. It was very different from what it is today.” Paul wanted to work with the founders on their ideas. Jessica suggested that she could do everything else.

“I remember we were coming back from dinner and he said, “I’ll put $100,000 into this. We’ll just do it.” I said “Great.” Then we said, “Do either of us know how to do angel investing?” They brought in Trevor and Robert for the technical side, and Jessica took care of the rest. “I am not technical but Y Combinator would never have been incorporated if I had not been involved.” Paul has called Jessica the "Social Radar" because she is a great judge of character. Her intuition famously led to them reaching back out to the Reddit team who were initially turned down.

No One Cared About YC, but the Founders Powered Forward

Because of Paul’s essays, founders were already following him which helped get a few hundred applications in the first batch. They interviewed 25 in March of 2005. They funded 8 teams including the teams behind Reddit, Loopt, and Justin.TV. They learned quickly watching so many companies at once and stumbling onto the concept of batches.

Paul had seed funded the program himself, and without that it would have never gotten off the ground. “Investors just laughed at us,” Jessica said. “But we just moved forward. We called every rich person we knew in Boston and invited them to Demo Day.” 15 people showed up.

Even with Viaweb's success and engineering pedigree, they still received little to no attention. “Nobody knew me and my book wasn’t out. I was a definite nobody. But we just kept moving forward. Just doing a good job with the founders, helping them build a new product and the more our startups got out there people started paying attention.”

While they were founded in Cambridge, Massachusetts, more and more of their companies were getting funded in Silicon Valley. They could also sense they were onto  something big, and didn’t want someone else to become "YC in Silicon Valley.”

Paul Graham recently wrote that, “Because Boston investors were so few and so timid, we used to ship Boston batches out for a second Demo Day in Silicon Valley. Dropbox was part of a Boston batch, which means all those Boston investors got the first look at Dropbox, and none of them closed the deal." After coming to the Valley Dropbox got funding from Sequoia Capital.

You're A Founder, Not A Movie Star

A lot of people are worried about the popularization of starting a company. From the Social Network movie, to the IPOs, to Palo Alto getting really really crowded again, the startup fever is back in full force.

“Dig down deep within yourself before you do this, and know it’s not very glamorous most of the time. It’s really hard, it’s very stressful, and very emotional.” Jessica warned entrepreneurs. “One day you’ll think you are just dying, and the next euphoric, and it’s very hard on people, especially, if they’re in relationships, in our families, and it’s not for everyone.”

Some entrepreneurs think that while the beginning stage is probably going to be tough, once you get the hockey stick growth your problems magically disappear. “You have your world under a microscope and the press hates you, takes apart every move you make,“ Jessica says. “Now you’ve got millions of employees to manage, HR departments, and now you are not programming anymore which is why you did the startup in the first place. Just new problems.”

Can't get enough Y Combinator's story? See Jessica Livingston's appearance at Startup Grind Global in 2014 next.