it's been called the harvard of silicon valley. of most procedures start incubator in the world. it is funded what is 700 behind theoday startup machine is a couple with their own startup story. how do they build y combinator today. .usband and wife thank you for joining us.

so paul, it has been like six months? >> i wish i had done it two years before. it was so hard running y combinator. -- i amt an admin is not an administrator. >> you said you would get your brain back. did you? >> yeah. i had lunch with the founder of the strike and 100% of the conversation was take over the world, that is the best possible office hours. >> i am still involved. i am doing the same things i used to do, engaged in different things. i miss working with paul, but i also enjoyed working with sam.

>> set was the founder of your first company. -- >>ou step down >> he is better at me than this. i was good giving advice to sounders. >> they are different. sound -- sam brings a lot to the table that neither of us have come up this amazing amount of energy and patience that is needed to broker-deals with investors. y combinator is doing a lot of things as a result. my family came here from england when i was three and a half. we lived in pittsburg. when you design a nuclear reactor, he was the one that told you if it was going to explode. i was a bad kid.

half of the kids in the neighborhood were forbidden to play with me. i was always getting a trouble constantly. i was suspended from school i think, at least once every year from first grade through 12th grade. >> at a certain point you got into computers? >> it was something you did on the side. coding?did you start >> when i was 15. >> you when i to harvard to get your phd in computer science, but you also took our classes on the side? >> it was very disorganized. -- like random accidents. >> i grew up in boston. i was an angel. i garrotte with my father and my .randmother

had a very happy childhood, and friends wanted to play with me. i knew i like to write, but i had no idea what i wanted to be or do. up at a boutique investment bank. were you technical? and never learned to code, i'm not technical. someday i will learn to. i was interested in it. >> y combinator before you started via web. thate reason it was called is because the software works via the web. .t is now known as a web app it was an online store builder. it got bought by yahoo!. >> how long did you last at yahoo!? i was basically getting

suspended from yahoo!. i barely asked in one year. what were you writing about? >> i wrote about software, then i realize that no one would come and drag me away fight started writing about other things. >> when did you meet? >> we met at a party at paul's house in cambridge, that i almost did not attend. >> how did you come up with the idea for y combinator? >> jessica was very interested. it is hard to find any information. i was fascinated by all the stories.

then you give a talk at harvard. >> yes. basically about how to start a start up. i told them they should raise --ey from starting a, can because then they could get advice. that, because i i didn'ts thought -- a know how. i thought, i will do it. i will finally start doing some investing. it was not supposed to grow into this big thing. the best way to start startup that will take over the world is don't even try to start. just try to start a project. wasn't -- was like this. it was too tied to one place.

,he y combinator is a trick expressing algorithm, mathematical concept. >> how did you decide to work together on this? it was scary. we had only been dating for one year.

>> there are missed about so many of the great start ups that are boiled down to legend. what is the myth of y combinator and what is the reality? >> people don't believe how we are not interested in making money. in the beginning, we were not trying to make money. >> it was an experiment, to see if these new ideas could work.

>> there is a big myth. >> you call jessica alba secret weapon. >> nothing has ever happened at y combinator said jessica did not set her seal of approval on. she has the detail over everyone. >> this time -- this is the first time you have been interviewed together? i am not as interesting as you. i don't make colorful remarks, and i have chosen to be behind-the-scenes. i like running things. >> this is why she is the secret rep in. weapon. she can talk to somebody and fairly quickly tell whether they are a good person or not. you didn't know if anyone was even going to apply? >> no. we had a few hundred applications. votee most critical in a

at once.tion was they have colleagues. a startup is lonely. now it has some of the advantage of being part of a company without the disadvantage. at what point did you take money from investors? >> we have to, i ran out of money. how long does it take? we don't even know yet, 10 years maybe. your 19th going into funding cycle. was what beehive valuations. andhree are b and b strike. >> we knew the founders were good. them?t is it about

case, he could write software in. &b is a mass movement. i remember thinking, i don't care what the idea is, -- back sincenown him he was 14. he used to e-mail question me about the programming language. i had no idea he was a kid. back, wouldlook they have sold if they had the opportunity? with aomeone came along big offer, we would have taken it. we do know with drew, because with the application early on, we used to ask if someone came along and offered you money for

iur company right after yc, think drew answered $1 million. it is convenient for everyone involved that nobody wanted to bite drop box early on. futureyou identify the drop boxes earlier? sooner than everybody else? >> we might be able to identify them better than other people. there are limits to how well you can identify them. there is a good deal of luck. you have to boil it down into one word. authentic. you are looking for people who are real friends, you don't want people who are just in it for the money. >> how has the interview process evolve? >> i think it was 40 minute interview. now with a 10 minute interview,

we don't have a pitch. >> how can you really know? >> you can't know for sure. after each minute, how likely are you to change your mind? if you had another 10 minutes, you might only change your mind 2% of the time. >> what is the average valuation of all yc? crossed 3 billion. all the money is in the few big hits. what percentage do you and up with after dilution? we assume it will end up being like 3%, something like that. $900 million. until u.s. me that, i have never multiplied the numbers together. >> an article was written more money has been made --

makepolicy is you don't investments, right? did you ever consider changing the policy to make money off the hits you pick? >> we never say never. the problem is that is a signaling thing. if we are telling other investors we believe who would be the best and that would hurt probablyers, who are great investment opportunities, we just did not choose to follow on it. >> y combinator has gotten praise and also criticism. why is it so controversial? >> one of the most surprising thing is the more famous something becomes, the more people want to attack it. >> it has been a mystery to me. did we sleep i think,

help the founders today? and the answer is almost always yes. says why arehe people saying all these mean things about us? it is not true. >> you have said some have tried to stab you in the back. there are some things you cannot believe someone would do that to you. i don't know why they -- it probably boils down to money and power. i don't know. >> one thing people have said to me is why you have invested over 700 companies. is that a good track record >>? are y combinator companies overvalued? >> maybe. two timesrd they are overvalued. that means we can take people in and even if they did nothing

else, they would be able to get twice the valuation. if it is worth a lot, then it was a bargain anyway. >> i know this is something that jessica has thought about is not meeting enough women. >> we don't have enough women applying, we are really making an effort on trying to do. we don't ask on the application on someone's gender is. we are trying to get the word out that more women should be starting start out -- start ups. we have conferences winter where we bring successful, female founders that tell their stories to inspire more women. >> some of the words people use our cars. aey have called y combinator frat house. funded 4% of the

founders were female, and no are -- now it is more like 12%. we don't want to ideally be there, but it is moving in the same direction. >> how do you get more women? >> examples make everyone want to start start ups. how do you make sure you are getting the best people? >> one thing that changed recently is that we have a female partner in everyone of the interview rooms. why not blind screen everyone? >> then i cannot observe their interactions. ♪

>> you have two children. a kind of parents are you? >> policy best father i ever met.

-- he is the best father. he's since been time exposing them to things, and teaching them. how do manage being married and colleagues? >> you have different responsibilities. each person is responsible for their own thing. boosted boards. let's just say they have bigger ambitions than making skateboards. >> i put out fires, at least 10

week of co-founder disputes. that and fundraising, interactions with investors. we intervene. how do you protect a startup from its own investors? make don't have to explicit threats. you say, come on guys, be nice. the investors know that beyond that, if you don't, we will not send any more startups to you. >> and if you don't come all of the founders will know about it. like the next day. >> is a bit grim. very easy for me to say what my biggest mistake? >> i can't. my biggest regret is i squandered my college education.

i didn't learn as many things as i could learn or work as hard as i could have. i compare myself to the founders who are doing so many interesting and ambitious things . i squandered a bit of my youth. i have to say it carefully so i can remain in control of myself. remind your parents to be screened for: cancer. fourcolon cancer. colon can is a catchce it early, it is preventable. r, make your parents get screen. next, is y combinator it, or will the be a second act for pauline jessica -- paul and

jessica? ? >> we are doing so many exciting things. i'm going back to writing. that is what i was doing before y combinator. yhow do you guys want combinator to be remembered? exist.nted to still i wanted to be an institution that persists for a long time. structurally it is more like a university. >> i wanted to change a lot of people's lives. and hopefully, make the world a little bit better place. and jessica livingston, thank you very much. ♪

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