Y Combinator’s basic approach is to give promising ideas a small amount of seed capital (the average investment is less than $25,000), then house those startups for a short period of time. The startups get the capital, strategic input from the Y Combinator team (Graham and his wife), access to a robust network of potential investors, and the opportunity to learn from other Y Combinator–funded startups. In return Y Combinator gets a slice of the business.
…
Tight windows enable “good enough” design. Most Y Combinator–funded companies are expected to release a version of their idea in less than 3 months. That tight time frame forces entrepreneurs to introduce “good enough” software packages that can then iterate in market. This approach contrasts to efforts by many companies to endlessly perfect ideas in a laboratory, only to fail the real test of being exposed to real market conditions.
Business plans are nice, not necessary. Y Combinator doesn’t obsess over whether entrepreneurs have detailed business plans. Again, the focus is getting something out in the market to drive iteration and learning. After all, if you are trying to create a market, most of the material in a business plan is assumption-based anyway.
…