How Y Combinator Helped Shape Reddit

Alexis Ohanian and Steve Huffman, co-founders of the social news site Reddit, have become Y Combinator (BusinessWeek, 9/26/07) poster children since their company was snapped up by Condé Nast for an undisclosed (but no doubt, tidy) sum in 2006. Their success is one example tech superstar Paul Graham points to when he says Y Combinator, his ultracompetitive seed-funding program, is a better way of developing early-stage companies than traditional incubators, venture funds, or business plan competitions.

The difference, Graham says, is that Y Combinator picks people, not business plans—or even business ideas. "The idea is going to change anyway, so the most valuable thing about the idea is what it tells you about the people," he says. Of course, picking people is easier said than done. In fact, Reddit's co-founders were initially Y Combinator rejects—like 95% of the program's applicants.