Silicon Valley’s Latest Startup Offering Is a Whole City

Y Combinator's $100 million research lab will make affordable housing a focus.

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Y Combinator partner Adora Cheung.

Photographer: Jan Haas/Picture-Alliance/DPA via AP

Y Combinator, the startup accelerator and investment firm that helped produce Airbnb, Dropbox, and Instacart, is embarking on a creation project arguably more ambitious than any company.

"We want to build cities," wrote Y Combinator partner Adora Cheung and President Sam Altman in an announcement slated for release Monday. YC Research, Y Combinator’s nonprofit arm, plans to solicit proposals for research into new construction methods, power sources, driverless cars, even notions of zoning and property rights. Among other things, the project aims to develop ways to reduce housing expenses by 90 percent and to develop a city code of laws simple enough to fit on 100 pages of text. Eventually the plan is to actually produce a prototype city. "We’re not trying to build a utopia for techies," says Cheung, the project’s director and the former CEO of failed housecleaning startup Homejoy. "This is a city for humans."

Initial applications are due July 30. Cheung says she'll start hiring researchers this year and is already thinking about possible locations. If all goes well, the project would be a showcase for new urban policy ideas—and for the expanding ambitions of Y Combinator, which was dismissed as unserious by rival venture firms when it was founded in 2005. Early on, YC, as it’s known in Silicon Valley, was best known for making investments as low as $6,000, so small that its portfolio companies were told to aim for "ramen profitability," or to generate enough profit so that the founders could afford instant ramen.

YC has since seeded more than 1,000 startups and today competes in later-stage deals with the likes of Sequoia Capital and Andreessen Horowitz through a $700 million venture fund managed by former Twitter Chief Operating Officer Ali Rowghani. Altman formed YC Research last year with a $10 million personal donation and a contention that "research institutions can be better than they are today." He now says the lab will eventually have an annual budget of $100 million. "The central theme is to work on things that we need for the successful evolution of humanity," says Altman.

Last December, Altman and Elon Musk, the Tesla and SpaceX CEO, announced the formation of OpenAI, a research effort aimed at ensuring that advances in artificial intelligence don’t lead to killer robots that destroy human civilization. (Musk has suggested that artificial intelligence could be "more dangerous than nukes.") The following month, Altman announced a long-term study into "basic income," the concept of giving citizens a cash allowance to spend as they wish. (A pilot program is now in the works in Oakland.) In May, Altman and computer scientist Alan Kay formed the Human Advancement Research Community, a research lab focused on education, among other things.

The city project inserts YC into a long-running debate over housing affordability. For years, activists in San Francisco have blamed tech startups—especially Airbnb, Y Combinator’s most valuable portfolio company—for record-setting rents and home prices.

Altman denies that YC’s new research efforts represent a response to the backlash against tech investors, characterizing them as an an effort to apply the firm's innovation model to society’s most intractable problems. "I believe that we should view it as a basic human right to have enough money to afford food and shelter," says Altman, referring to the basic income study. "It’s an idea that’s makes sense to most children."

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