>> harvard of silicon valley, y combinator is the most prestigious incubator in the world and funded 700 companies today included rb and b. there is a couple with their own startup story. how did they build y combinator into what it is today. combinator husband and wife paul graham and jessica

livingston. six months since you stepped down. how is it going? >> so great. i wish i done it two years before. >> why? >> it was so hard. i'm not really an administrator and y got big. i was running a big thing. >> you would get your brain back. did you get your brain back? >> yeah. i had this afternoon, i had the best conversation with the founder that i ever had. stripe.nch with and that is like the best possible office hours. >> how are the hours? >> i'm involved. i'm doing the same thing i used to do. i miss working with paul, but i love working with sam altman.

>> sam was one of the founders of one of your very first companies. when you stepped down, people said he is not you? >> i was not cut out to run this. he is better. >> i was good at giving advice. >> is sam going to be better? >> they are going to be different. sam brings a lot of things to the table that neither of us had which is an amazing amount of energy that is needed to broker deals with investors. y combinator is doing different things as a result. >> i want to talk about you where you came from. >> my family came here from england when i was 3 1/2. and we lived in pittsburgh. when you design a nuclear reactor, he figured out if it was going to explode. i was a bad kid.

>> what did you do? >> i was always, always getting in trouble with everybody, constantly. i was suspended from school i think at least once every year from like first grade to 12th grade. >> and you got into computers. did that help? >> they didn't teach computers in school. >> when did you start coding? >> i think when i was 15. an i combnch m 1401 with 12 k. >> you got your degree from harvard. and you took art. >> i never knew what i was going to do. >> jessica, what about you? >> i grew up outside of boston, and i was an angel. i grew up with my father and my grandmother, his mother. i lived a very happy childhood

and friends wanted to play with me. i knew i liked to write, but i had no idea what i wanted to be or what i wanted to do. >> you ultimately ended up at a boutique investment bank. did you ever learn to code? >> i'm not technical in the least. sometime when i retire, i'm going to learn to code, but i was interested in it. >> you started another company. tell me about viaweb. >> the reason the company was called viaweb, the company worked via the web. it was known as a web a pmp p. it was an online store builder and got bought by yahoo!. and it is yahoo!'s store. >> what was it like working at yahoo!? the guy who was suspended every

year. >> i apologize to the people i ever worked for. i barely lasted a year. >> you went on to write. >> yeah. >> and you started building your following. what were you writing about? >> writing about software and i realized that no one would drag me away if i started writing about other things, too. >> what time did you guys meet? >> at a party in paul's house that i almost didn't attend. >> scary how close. >> how did you come up with the idea for y combinator? >> jessica was writing a book. >> that was the first book that i read when i moved to silicon valley. >> really? i never tire of hearing stories about that. i was fascinated by all the stories i heard from these guys.

and you did the talk at harvard. >> became thes a of how to start a start-up. they should raise money from people who had gotten the money from starting a start-up. they were looking at me like baby bird. and afterwards, i felt sort of bad because i had thought i was going to do angel investment, but i didn't know how. i thought, i'll do it and start doing angel investing. it wasn't supposed to grow into this big thing. the best way to start a start-up that is going to take over the world, just start a start a project. >> how did you come up with the y combinator. >> the original name was cambridge seed. >> we were in cambridge.

, the y combinator is a trick which is a formal expression to a math concept. >> how did you decide to work together? you were not married yet? >> we were only dating for a year.

>> there are myths about so many of the great companies, start-ups, founders that are boiled down into legends and what is the myth of y combinator and what is the reality? >> people don't realize how much we were interested in making money. of all these people, all these forums, all self-serving, we weren't trying to make money. >> it was an experiment to see if these new ideas could work. y lot of people think why

combinator. you call jessica the secret weapon. >> jessica did not like put her seal of approval on. she has detail over everything. >> first time you guys have been interviewed together? >> yeah. >> i can't believe that. >> let's face it, i'm not as interested as you. i don't make colorful remarks. i'm more comfortable behind the scenes. >> that is why she is the secret weapon. she has perfect pitch for character. she can talk to somebody and fairly quickly feel whether they are a good person or not. >> tell me about the first class, eight companies, but you didn't know if anyone was going to apply, right? >> we didn't know if people were going to apply. we had a few hundred

applications. >> it was to fund a bunch of start-ups. it is great for the rin investigator and they have colleagues. it is so lonely and it has some of the advantages of being part of a company without the disadvantages. >> at what point did you decide to take money from investors? >> we had to, frankly. i ran out of money. and it takes -- god, how long does it take? we don't know how long it takes. 10 years maybe. >> going into your 19th funding cycle. what do you consider the most successful? >> it is pretty much the ones with the highest evaluations. drop box and spray. >> did you know they were going to be hits. >> we know the founders were good. them?t was it about

>> different things. different things about the two of them. in drew's case, he was the guy who could write this software. the dropbox exceeded by solving an impossible problem. mass movement where people are staying in people's houses. >> we were skeptical and i remember thinking we don't remember what the idea is. >> patrick, i have known him since he was 14. back when he was a high school kid in ireland, he used to email questions and i had no idea he was a kid. >> now these companies are worth billions of dollars, if you look back, would they have sold? >> if someone came along with a big enough offer would have taken it. we know withdrew, in the y combinator application, we used to ask if someone offered you

money, what is the least you would take. drew answered million dollars. it was convenient that no one wanted to buy drop box early on. >> can you identify the future everybody sooner than else? >> we might be able to identify them better than other people, but there are limits to how well you can identify them. if you had to boil it down into one word what you are looking for, it's authentic. people who are real friends, not people who got together for purposes of a start-up or in it for the money. zuckerberg turned down the acquisition offer. >> how was the interview process evolved? >> 40 minutes. >> 40-minute interviews and now

with 10-minute interviews we don't have a pitch. >> how can you really know? >> you can't know for show? >> after each minute, how likely are you to change your mind. another 10 minutes, you might change your mind. >> what is the likelihood? >> the valuation is is $30 billion. all the money is in the few big hits and you have to ask what percentage you end up and we assume it will be end up being 3%. 3% of 30. i have never done this. >> $900 million. until you asked me that, i never multiplied those numbers together. >> an article said see coya has made more money than y combinator than y combinator

has. and your policy is you don't make follow-on investments, right? >> yeah. >> would you consider changing that policy in order to make money off the hits that you pick? >> we never say never. there is a signalling thing. f we are going to do follow-on investments, that would hurt the founders who are probably great investment opportunities but we that. choose to answer on >> i'm happy for them. >> y combinator has gotten so much praise and a lot of criticism. why do you think it is so controversial? >> one of the most surprising things why y combinator became successful, the more famous something becomes, the more people want to attack it. >> every night i go to sleep, i think did we help the founders

today and the answer is almost always yes. >> she goes to bed and say why are people saying mean things about us. it's so not true. >> you think investors have tried to stab you in the back? >> you can't believe someone is going to do that to you. it boils down to money and power. >> one thing that people have said to me is that, well, why invest in 700 companies, there is only a handful of picks. >> a couple hits or no hits. hose are the only two options. >> are y companies overvalued? >> i have heard investors that yc startups are 2 x over value. we can take people into yc and

if nothing else, they would get twice the value they would have had otherwise. >> if it's not worth it? >> if it is worth it, it is a bargain. >> i know something that jessica has said, not enough women. >> we don't have enough women applying. we are making an effort in trying to do. we don't ask on the application what someone's gender is. we're trying to get the word out there that someone should be starting start-ups. we bring successful female founders and tell their stories to inspire more women. >> some of the words that people use are harsh. they call y combinator a fat house. how many women have you founded? were the past were 4%

female and more like 12%. and that's not where we want to be. >> how do we get more women founding women? >> examples of what makes everyone to start start-ups. >> how have you changed the interview process to make sure you are getting the best process? >> one thing that has changed is we have a female partner in the interview rooms. >> why not blind screen everyone? >> i couldn't observe their interaction.

>> we've got two kids. >> what kind of parents are you? >> best father i ever met. i'm going to say that.

he spends so much time with them, speaking to them, exposing to things, rarely seen that other fathers have done. >> how do you manage being married and being colleagues? >> it always worked really well. >> very easy. we never disagreed on anything. >> y combinator. >> i don't believe it. >> it's really true. and the secret is the same secret for co-founders in general, you have different responsibilities. each person is in charming of their own thing and experts in their own thing. >> what is the hottest thing about a y combinator company? already booster board. >> why booster board? >> they have bigger ambitions. >> what is the biggest fire you had to put out? >> at least one a week of

co-founder dispute, that and fundraising, interactions with investors and investors mal treating the start-ups. we intervene. >> how do you protect a start-up from its own investors? >> you don't have to make explicit threats. you just sort of say, come on, guys. be nice. but the investors know behind that, if you don't, we won't send any more start-ups to you. >> if you don't, all of the y combinator founders will know about it the next day. >> biggest regret? >> very grim. but very easy to say what my biggest mistake is. >> i'll do my answer. my biggest regret is i kind of

squandered my college education. i didn't learn as many things as i could learn or work as hard as i could have and i compare myself to the founders, who are doing so many interesting and ambitious things and i kind of squandered a little bit of my youth. >> paul. >> i have to say it very carefully. but remind your parents to be -- colon r coal own cancer. >> i understand my father passed away. there are many things i would like to ell tell him. >> colon cancer. f they catch it early, it's so preventable. >> what is next? is yc it? or will there be a second act from paul and jessica?

>> i'm fully just as enthusiastic about y combinator. we are doing so many exciting things. >> actually seems like a good idea. >> how about you, paul? >> i'm going to go back to writing. that was what i was doing before y combinator. >> how do you guys want yc to be remembered? >> i want us to still exist. i want yc to be this institution that persists for a long time. it could last a lot longer than a product company does because structurally it is like a university. it could in principle last for 100 years. >> i want us to be remembered for changing a lot of people's lives and making the world a better place. >> thank you so much. >> thank you for doing this.

>> welcome to "money clip," where we tie together the best stories, interviews, and business news. i am adam johnson. here is a rundown. no rest for carl icahn -- he is going after apple again, demanding even more cash for shareholders. so how do you top that? here is how. media and tech heavyweights speak out at the "vanity fair" new establishments summit, and we will take you there. and in fact, mark zuckerberg, his new frontier, he wants to get india hooked on the internet. and we are actually going to head back to that summit in san francisco to hear from the former head of the nsa, and he