A Model for Krakow to Emulate...

Silicon Valley’s Start-Up Machine

By NATHANIEL RICH

Michelle Crosby, an energetic 37-year-old lawyer in Boise, Idaho, applied for a loan last November from a local bank, Western Capital. She proposed to use the money, $10,000, to help start a new business, Wevorce, which could be described most reductively as an H&R Block for divorces. The bankers liked the idea, and Crosby was a strong candidate. They had even given her an earlier loan to open Wevorce’s first office. But after four weeks, the bank was stalling and Crosby had yet to receive a cent. At the height of her frustration, she received an e-mail from a small group of private investors in Mountain View, Calif. They invited her to an interview and, after listening to her story, promised her $100,000 in exchange for a 7 percent stake in Wevorce. Crosby accepted on the spot. The next day, she found a condo for rent, at $2,500 a month, in Mountain View, and left Boise, and her boyfriend, behind.

Haisha Chen is a 23-year-old Chinese-born University of Chicago graduate who goes by David so that Americans remember his name. With two friends, Teng Bao and Dafeng Guo, Chen created software that allows Internet users to build simple, elegant Web sites, designed with mobile devices in mind, in 15 minutes. They called their product Strikingly. Last July, to their parents’ alarm, the men bought one-way tickets to San Francisco — Chen from Shanghai, Guo from Hong Kong, Bao from Chicago. They rented a single bedroom in a cramped apartment in San Francisco’s Outer Richmond neighborhood, sleeping on two futons, one of which prevented the door from opening more than a few inches. They spent $1,600 a month on rent, food and all additional expenses combined. After four months, they got a call from Mountain View, offering $100,000 for a 7 percent stake. They moved immediately. “When I got here, I was very emotionally touched by all the great companies in this area,” Guo told me in an outburst of passion. “These were all the companies I had heard of since I was a kid. I felt like I should be here. Like I belong.”

Last year at Brown University, Walker Williams and Evan Stites-Clayton created Teespring, a crowdfunding Web site that sold custom-made apparel — “Kickstarter for T-shirts.” For six months they had mild success with fraternities and campus clubs but were only slightly profitable. Then something unexpected happened: a New Zealand man used Teespring to design a Sherlock Holmes T-shirt and sold it on a Facebook fan page with about 300,000 members; ultimately, 1,800 people bought the shirt. The man earned about $18,000; Teespring made $8,000. Soon other virtual communities — like the Twitter account for fans of the 1990s TV show “Boy Meets World,” and a Facebook page called “I Big Trucks, Mudding, Bon Fires . . . Country BOYS! :)” — began selling shirts, with staggering success. In November, Teespring earned $133,336; in January, $489,029. But the founders felt they could do better. “We don’t want this to be a $30-, $40-, $50 million business,” Williams told me. “We’re looking at the big picture here.” I asked Williams and Stites-Clayton to define “big picture.” They responded in unison: “A billion dollars.” When the investors called with their offer of $100,000, Williams and Stites-Clayton also moved to Mountain View.

The Mountain View investors are the partners of Y Combinator, an organization that can be likened to a sleep-away camp for start-up companies. Y.C. holds two three-month sessions every year. During that time, campers, or founders, have regular meetings with each of Y.C.’s counselors, or partners, at which they receive technical advice, emotional support and, most critical, lessons on the art of the sale. There is no campus, only a nondescript office building in Mountain View — on Pioneer Way, around the corner from Easy Street. Founders are advised to rent apartments nearby, so that they can run to the office in minutes should an important investor pay a visit.

Among the eight start-ups that graduated Y.C.’s first class, in the summer of 2005, were the social-news site Reddit, recently valued at $400 million; and Infogami, the Web-site builder created by the tech martyr Aaron Swartz, which merged with Reddit. Other Y.C. success stories include Dropbox (file-sharing service, $4 billion), Airbnb (online market for vacation rentals, $1.3 billion) and Stripe (Web-based credit-card-payment software, $500 million). In Y.C.’s first six years, 72 percent of its 249 start-ups raised money after Demo Day. Today the average value of a Y.C.-financed start-up is $22.4 million. For the most recent term, which ran from January through March, Y Combinator received 2,633 applications. Wevorce, Strikingly and Teespring were three of the 47 groups invited.

The director of this camp, as well as its founder and animating spirit, is Paul Graham, an infectiously giddy and hyperarticulate programmer, investing magnate and essayist who, depending on whom you ask, is the closest thing the technology community has to either a Bertrand Russell or a P. T. Barnum. Wearing a fleece jacket, khaki shorts and sandals, Graham spends much of his day offering advice and encouragement to the founders in whom he has invested. Every Tuesday night the entire class congregates in the basketball-court-size dining hall that serves as Y.C.’s main meeting space, where, over burritos or spaghetti Bolognese, they are lectured by guest speakers like Mark Zuckerberg, Marissa Mayer and Al Gore.

The Y.C. term culminates with Demo Day, or D Day. Before 450 of the world’s richest and most influential technology investors and about two dozen journalists, a representative from each start-up delivers a two-and-a-half-minute pitch. Afterward the investors meet with the most-impressive start-ups, which can receive millions in financing. In the weeks and months following Demo Day, those few who fail to attract enough interest must decide whether to begin a new company, find employment at Google or Facebook or persist and grow “organically” — an unsightly word in the valley of silicon.

Demo Day has become a biannual milestone, Silicon Valley’s version of the N.F.L. Scouting Combine, where investors size up the new talent. It also serves as the industry’s State of the Union, a chance to learn about the most-recent developments in technology and gauge the buoyancy of the market. Are prices increasing, or are there murmurings, sotto voce, of a “cooling off”? Although the word “bubble” is blasphemous in Santa Clara County, even Graham admits that valuations for start-ups became “frothy” (adj.: “full of bubbles”) a couple of years ago. Still, a gold-rush mentality reigns. According to the research institute Wealth-X, there is now a higher per-capita concentration of “ultrahigh-net-worth individuals” (assets worth at least $30 million) in the San Francisco Bay Area than anywhere in the country — more than that of the New York and Los Angeles metropolitan areas. An unspoken question on Demo Day is, How long can this possibly last? Y.C.’s job is to assure investors that it is here to stay.

Several years ago, Paul Graham — whom everybody calls P.G. — began to film the interviews he and his partners held with prospective Y.C. inductees. When reviewing the footage, he focused on the interviews with start-ups that ultimately failed. Like any savvy marketing executive, he wanted to isolate patterns that portended ill, which he called “negative predictors.” He was already aware of a few — investors tended to be biased against older founders, for instance. “The cutoff in investors’ heads is 32,” Graham says. “After 32, they start to be a little skeptical.” And Graham knew that he had his own biases. “I can be tricked by anyone who looks like Mark Zuckerberg. There was a guy once who we funded who was terrible. I said: ‘How could he be bad? He looks like Zuckerberg!’ ”

Watching the video footage, Graham noticed another correlation: the longer he took to decide a group’s fate, the less likely the group was to succeed. “When you have to talk yourself into something, it’s a bad sign — that’s true also of relationships, hiring and so many other parts of life.” (Graham has a rhetorical talent for moving swiftly from the valley to the universal.) But after ranking every Y.C. company by its valuation, Graham discovered a more significant correlation. “You have to go far down the list to find a C.E.O. with a strong foreign accent,” Graham told me. “Alarmingly far down — like 100th place.” I asked him to clarify. “You can sound like you’re from Russia,” he said, in the voice of an evil Soviet henchman. “It’s just fine, as long as everyone can understand you.”

This was bad news for Strikingly’s David Chen, who moved in 2005 from Guangzhou to the United States to attend high school at Houghton Academy, in upstate New York. He spoke English fluently but struggled to pronounce words like “build,” “mobile” and, most ominously, “strikingly.” Yet Chen had clearly established himself as the fledgling company’s impresario and spokesman. While his partners spent their days writing code and fixing software bugs, Chen met with lawyers, potential investors and reporters. In a Forbes magazine article, a college classmate wrote of Chen’s evolution since moving to the Bay Area: “He used to tell me, ‘I want to build a product that helps social entrepreneurs and changes the world.’ Now he tells me, ‘I want to be the next Airbnb or Dropbox.’ ”

One week before Demo Day, Graham told the Strikingly founders that Chen’s accent was too strong. The quiet, reserved Bao — who spoke less frequently than either of his partners despite being the group’s only native English speaker — would have to deliver the pitch instead. Bao denied that he was anxious, but as he tried to memorize the pitch, he grew even quieter than usual. “I haven’t gotten to the point where I’m comfortable with public speaking,” he admitted. There was only one day before Rehearsal Day, when every start-up would deliver its pitch in front of the entire Y.C. class. One Y.C. partner thought it odd that in Strikingly’s final pitch meeting, Chen still did all the talking while Bao sat mutely off to one side.

Michelle Crosby, meanwhile, pacing around the rental condo that served as Wevorce’s office, hadn’t even begun to practice for Demo Day. But she had been perfecting her pitch for years. When she was 3 years old, her parents had, as she put it, “one of those ‘War of the Roses’ divorces.” At 9, she was called to the witness stand, where a lawyer asked her, “If you had to be stranded on a desert island with one parent, which one would you choose?” She couldn’t answer the question. “I knew then that the system was broken,” she told me. Her story, far more emotionally wrought than those of her Y.C. competitors, has become one of Wevorce’s most valuable assets. Unmentioned in the pitch is the fact that Crosby herself, after a 12-year marriage, divorced — amicably, she says. One source of tension in her relationship, she said, was her determination to start Wevorce.

On the cusp of becoming a partner at her corporate law firm, Crosby had what she calls “a quarter-life breakdown” and quit. She attended Harvard’s mediation training program and developed a six-step process designed to yield an amicable divorce. Using a software program with a video-game-like interface, the couple, with the help of a Wevorce mediator, creates an exhaustive divorce contract, its stipulations extending to such subjects as a child’s diet and curfew. Crosby puts the average divorce at around $27,000 in legal fees; Wevorce charges a flat rate of $7,500. She imagines a Wevorce office for every 400,000 Americans and estimates $1 billion in annual revenue. “We want,” she said, reaching for one of the valley’s most ubiquitous buzzwords, “to disrupt divorce.”

Crosby’s business partner is Jeff Reynolds, 38, a kind, jittery software designer. He had found it difficult to explain to his wife, a dental hygienist in Boise, and their two children, 9 and 12, why he moved to California for at least three months to start a divorce company. Crosby can sympathize — her current boyfriend of a year, a homebuilder in Boise, has grown frustrated by her absences. “It’s one of the gifts of Y.C. that you get three months of ‘Sorry, don’t bother me, I’m building something,’ ” Crosby said. “But you can’t sustain this. Everything else would start to crumble.”

When Crosby and Reynolds joined Y Combinator, Wevorce had a single office in Boise. Graham told Crosby that investors would be impressed if they were to expand quickly to other cities. In the next two months, they opened offices in four states. Each required a lawyer, a counselor and a financial professional, and they had to be trained. In the previous weeks, Crosby flew between Seattle, Portland, Boise, San Francisco and Asheville, N.C. The term of art for this is “nefarious business” — creating the appearance of success in order to attract actual success. Fake it till you make it. But Wevorce’s success rate wasn’t fake: only one out of 110 Wevorces has gone to court.

Back at Y.C., Teespring’s Walker Williams was rehearsing his pitch with Sam Altman, who founded Loopt as a Stanford sophomore and sold the company, which makes location-tracking applications, last year for $43.4 million. Altman is, at 28, Y.C.’s second youngest partner. Because of this, Altman is, after Graham, the most highly esteemed by the entrepreneurs. He is skinny, short and pallid, and he speaks rapidly, with the assuredness — if not quite the cockiness — of a Ph.D. student forced to teach a section of Intro to Comp Sci. Williams, on the other hand, despite being four years younger, looks like the kind of jock who might have tormented a kid like Altman in grade school; he has the broad shoulders, fair hair and rugged boyishness of a rugby player, which he was at Brown. But Williams has always idolized Altman. They happened to have lived as children on the same block in the Hillcrest neighborhood of St. Louis.

Williams and Altman were conducting a “walking meeting,” pacing slowly around Y.C.’s cul-de-sac. They passed three Teslas, one that belonged to Altman and two that belonged to other Y.C. partners. It had just rained, and the pavement was slick.

“Investors,” Williams said, “always think our ideas are crazy. So I’m going to lead with the numbers. When we were interviewing with Y Combinator, we were coming off our best month: $185,000 in top-line revenue. This month, we’re on track to do $750,000.”

“You’re going to do a million dollars next month, right?” Every sentence Altman speaks sounds urgent.

“Yeah.”

“Say that. It’s more impressive. What’s next?”

“We’ll say: Why are we so successful? Because we turn affinity into money.”

“I would add that, traditionally, if you had a consumer Internet site or a community, the only way to make money was by selling display ads. But ads suck. Users hate them, and they don’t make much money. What if there was a better way? Then say what you do.”

Walker nodded. He acknowledged that he was anxious about speaking in front of the crowd of investors on Demo Day. Perhaps his partner would do a better job. Stites-Clayton, the Oakland native, was never nervous.

“Both prepare,” Altman said. “But if, that morning, you get overcome by anxiety and can’t go on, then Evan can do it. I’ve seen this happen before. But I think you’ll be fine.”

Walker shrugged. He was hunched over, as if trying to shrink himself to Altman’s height.

“A little-known piece of trivia,” Altman announced. “This smell, after it rains for the first time. You know what’s that called?”

“Is this going to freak me out?” Williams said.

“Petrichor,” Altman said. “It’s my favorite smell. You only get to smell this once or twice a year, because it has to not rain for a while, and then rain. It’s the smell of summers in St. Louis.”

“Petrichor?” Williams said, uncertainly.

“Petrichor,” Altman said.

On Rehearsal Day, each start-up presented its idea before the entire Y.C. class while pretending not to sneak looks at Paul Graham. Standing off to one side, Graham scribbled notes on a pad but often communicated his reaction through exaggerated pantomimes — exasperated sighs, rubbing his temples as if suffering from a migraine and smacking his forehead. When he couldn’t take it anymore, he screamed:

“This sounds like a bunch of numbers. Tell us what you do!”

“Don’t just stand there holding your device, grinning.”

“You’re using that intonation people use when reciting a memorized speech. That tone tells the audience not to pay attention.”

“You’re talking too fast. You’re turning five syllables into one. And in a foreign accent!”

After one pitch, in which a group promised future revenues of $360 million, one Y.C. partner, Paul Buchheit, said, “$360 million makes me lose interest.”

“It should have a ‘B’ in front of it,” said another Y.C. partner, Geoff Ralston.

Michelle Crosby’s Wevorce presentation, while unpolished, was a hit. “Divorce,” she said, “is a $50 billion space.”

“I got a little teary,” said Jessica Livingston, a Y.C. partner and founder who is married to Graham, after Crosby finished.

“It’d be good to put the cost savings on one of your slides,” Buchheit said. “Because whatever, kids, you know — ” he made a flicking gesture. “But money. . . .”

Everyone laughed.

During his pitch, Walker Williams appeared relaxed and forceful. “Teespring turns affinity into money,” he said. “And we do it through beautiful, high-quality T-shirts.”

“That was pretty good,” Graham said. “You could give the exact same presentation on Demo Day and still be one of the better ones. You’ve got an unfair advantage there with those numbers.” Teespring had another advantage: almost every single founder in the room was wearing a T-shirt, or hooded sweatshirt, embroidered with the name of his start-up. All of the apparel had been made using Teespring. Williams and Stites-Clayton made about $10,000 off their fellow Y.C. classmates alone.

There was a break for lunch before Strikingly’s presentation. Chen encouraged Bao, who was sitting catatonically in his seat. Chen asked if he wanted lunch. Bao didn’t reply. He began mouthing the words of the pitch to himself. When, after the break, Bao took the stage, Chen sat in the front row with his head bowed, his hands clasped behind his head. It was as if he couldn’t watch.

“We are Strikingly,” Bao began. “We are the fastest-growing mobile Web-site builder.”

Graham was already beside himself.

“Slower!” he interrupted. Someone laughed anxiously. “Talk slower!”

“Start again!” Livingston said. More nervous laughter. Chen’s head went deeper into his lap.

“Why do our users like Strikingly so much?” Bao said.

“Oh, my God,” Graham interrupted, in disgust. “That was like one syllable! Slow, slow, slow!”

By the time Bao finished, Graham was groaning audibly. Demo Day was only six days away.

The number most frequently cited in the pitches did begin with a “B.” This might be because the most famous start-up success of the last year is Instagram, which Facebook bought for a cool billion. The sale caused great befuddlement, at least outside Santa Clara County, because Instagram had no revenue. It was not merely unprofitable — it had no way of making money whatsoever. But Instagram wasn’t alone. Some of the more prominent deals for “zero revenue” start-up companies in recent years have included TweetDeck (Twitter took the bait for $40 million); GroupMe (purchased by Skype for $85 million); and Siri (Apple, $200 million). Instagram, by some measures, is already looking like a bargain. In February, investors valued the revenue-free Pinterest at $2.5 billion.

It is a modern-day riddle of the Sphinx: How can a company that earns no money be worth a billion dollars? How you answer that question will determine whether you believe that what is now occurring in the office parks and strip-mall coffee shops of the San Francisco Peninsula is the last gasp of another speculative financial bubble or the early articulations of a new world order. It is tempting, given recent history, to make ominous comparisons to the last days of the gold rush or the dot-com bubble in 2000. But it was also tempting, in 1999, to view Google as merely the next AltaVista, or in 2005 to view Facebook as merely the next MySpace. Mark Zuckerberg was ridiculed more for turning down Yahoo’s $1 billion offer for Facebook in 2006 than for buying Instagram at the same price.

“This is the most counterintuitive aspect of the business,” said Paul Buchheit, or P.B., a baby-faced former programmer whose retiring, junior professorial manner makes an appealing juxtaposition with the fingernails of his left hand, each of which is painted a different color of glitter. Though Buchheit’s name may be unfamiliar, it is very likely that his inventions occupy much of your waking life. The 23rd employee of Google, he developed the prototype for AdSense, which earned Google about one-quarter of its annual revenue; he coined the company’s credo, “Don’t Be Evil”; and he was instrumental in creating Gmail. After leaving Google, he helped found FriendFeed, another company with zero revenue, which was sold to Facebook for $47.5 million.

“The general public doesn’t understand start-ups at all,” Buchheit said. “They’re mystified how a company with no revenue can be worth a billion dollars. It’s because of this power law: If a company has a 1 percent chance of being a hundred-billion-dollar company, then it’s worth about a billion dollars. That kind of thing doesn’t happen in your normal life experience. If I get a cup of tea, it’s a cup of tea — there isn’t a chance that it’s actually made out of solid gold. But that’s how this works.”

We were sitting in the Y.C.’s cafeteria. Founders were scattered around the tables, working on their Demo Day pitches. “One of the companies in the room will be worth more than all of the others put together,” he said. “Ninety percent will ultimately fail. That makes for a very interesting game of trying to figure out who that one company is.”

Graham has a different analogy: “Imagine an assembly line where Facebooks and Googles come along every few years. You can either pick that cookie off the assembly line or not. If you pick it off, it’s market price, which varies. But if you don’t pick it off, you’re out of the game.”

There is a lot of talk in Silicon Valley about the “game” and who is “winning.” Whatever the game is, Graham has been winning in a rout. I asked him whether he thought prices had become inflated. He freely acknowledged that they were — perhaps by double or, as he puts it, “two X.”

“One of the reasons,” he said, “is because there’s nothing else to invest in. If you have money, there’s nothing to put it in. Bonds return nothing. And the stock market — what public company do you feel reasonably assured is going to go up at historical norms of 8 percent a year? It could all just fall apart. . . .” If, on the other hand, you discover the next Google, you can increase your investment by “a thousand X.”

But what if there isn’t another Google?

“If there’s not going to be another Google,” Graham said, “then we’re so deeply screwed that we all should be getting bags of silver and shotguns.”

It is safe to say that everybody in Silicon Valley believes there will be another Google. If anything, the consensus is that there will be many more Googles, and soon.

“We’re in the early days of the Internet,” Buchheit said. “Every other industry will be eaten by tech.” This conviction, more than any other, explains the feeding frenzy that occurs on Y.C.’s Demo Day. If there’s going to be another Sergey Brin and Larry Page, and anyone can be Sergey and Larry, then it’s only logical for investors to bet on as many founders as possible. You can’t win the game unless you ante up.

This also explains Y.C.’s role in the game. To earn a large valuation, a Y.C. start-up doesn’t have to be the next Google. It must only persuade buyers that it could be the next Google. It is crucial therefore that Y.C. founders be charming salesmen, with persuasive sales pitches.

At 10 o’clock on the morning of Demo Day, there was a traffic jam in Mountain View. Priuses, Teslas and Fiskers queued on North Shoreline Boulevard, on the way to the Computer History Museum. Inside, an hour before the presentations began, obsession was in the air; also insomnia, caffeine and paranoia. The prominent venture-capital firms were represented in force — Sequoia Capital, Bessemer Venture Partners and Andreessen Horowitz — as were the Hollywood investors, which included Ari Emanuel and his associates from W.M.E.; a trio of superciliously grinning representatives from C.A.A.; and Guy Oseary, Madonna’s manager and Ashton Kutcher’s partner at A-Grade Investments. The man who attracted the most attention of all was Ron Conway, a founder of S.V. Angel and an early investor in Google, PayPal, Facebook and Twitter. Conway is a regal personage with a sweep of thick white hair and a stately manner. He greeted well-wishers and acolytes with a wry, avuncular smile, distributing his business card as a priest might hand out alms. Less-prominent investors cautiously approached founders, asking questions designed to obscure interest and commitment. One approached Evan Stites-Clayton and squinted at his nametag.

“We’re Teespring,” Stites-Clayton said. “It’s like Kickstarter for T-shirts.”

The investor winced. “I just want simple,” he said apologetically, beginning to inch away.

“We made $750,000 this month.”

The investor stopped and chatted for a while. “We have to do something,” he said finally.

David Chen darted around the room, introducing himself, indiscriminately, to as many investors as possible. He seemed re-energized — after Bao’s disaster on Rehearsal Day, Graham encouraged Chen to present after all. They had simplified Chen’s script, avoiding difficult words. “Create,” for instance, was swapped for “build”; “options” for “tools.” “If they don’t understand, there’s a problem,” Chen said. “But I’m very confident. Very, very confident.” Bao, for his part, appeared enormously relieved.

The doors to the auditorium opened, and the founders, the 450 investors and the press filed past the museum’s wall of fame, with its framed portraits of Steve Wozniak, Steve Jobs and Bill Gates. After a brief introduction from Graham, the lights dimmed. Michelle Crosby was waiting in the wings with Jeff Reynolds. She wore jeans and a jean jacket, brown leather boots and matching belt, and her blouse was bright green — Wevorce green. She had goose bumps. Reynolds touched her arm.

“You’re better when you smile,” he said.

Crosby took the stage and told her desert-island story.

“I guarantee someone you know will need a Wevorce,” she said, before walking off to applause.

The 46 presentations that followed were dominated by the language of Silicon Valley, a hybrid of tech slang and insipid sales patter. Common terms included “disruption,” “scale” (verb), “game changer,” “thought leaders,” “ecosystem,” “pivot” and “verticals.” “We’ve 10 X’ed,” one founder said, using a Grahamism to describe his company’s growth. Most of the founders wore T-shirts and sneakers — Asics mostly, never Nike — and spoke in a manner that might best be described as Zuckerbergian: pauses imposed after every four words, delivered in an insistent, cheerful tone, with a painted-on smile.

A formula emerged. Most pitches began with a slide that showed a steeply rising graph, representing the company’s growth (“40 percent month over month!”). Then came the inevitable “Why have we been so successful?” An answer followed: “Our product is simple, and it’s solving a fundamental problem.” Hearty outrage at the status quo was expressed. The size of the market was estimated (“the rental-car market is an $11 billion industry,” “the authentic-designer retail market is $30 billion,” “the fashion-magazine market is a $2 billion industry, and it’s dying”), and the founder promised that his company would soon take it over. The pitch concluded with a summation of three main bullet points and an invitation for investors to “come see us.”

Not every investor was sold. During the first break, one told me that Demo Day “used to be a can’t-miss event, but that’s not so anymore. It’s a different vibe. Some major investors are starting to skip it.”

“It used to be a feeding frenzy, but not anymore,” another said. “It was more pumped up last year.”

“It’s more standoffish now,” said a third.

All of the naysayers insisted that they not be named, out of fear that Graham wouldn’t invite them back next year.

Another common complaint was that the entrepreneurs have become too powerful. Investment terms, it is true, have become increasingly favorable to start-ups. Y.C. has contributed to this trend by creating a standard investment contract, preventing investors from taking advantage of naïve founders. But this criticism hardly bothers Graham. If Y.C.’s founders are doing well, that means he is doing well.

“There are two things that people grumble about Y Combinator that are actually compliments,” he told me. “One is that Y.C. start-ups are overvalued. The only way for a company to be overvalued is if there’s someone willing to pay that price. So what they’re saying is: Going through Y.C. causes companies to raise money on better terms than they would have otherwise. We wouldn’t have the barefacedness to make that claim ourselves!

“The other thing they say is that they can’t tell on Demo Day which are the good start-ups. Well, it’s not because the good start-ups look bad; it’s because the bad start-ups look good! Which means we’re doing our job.”

Teespring was up. Before Walker Williams took the stage, he rolled his shoulders and jumped in place like a boxer. His delivery seemed effortless, spontaneous. The audience applauded vigorously. When he walked off the stage, Stites-Clayton gave him a thumb’s up.

Then it was David Chen’s turn. He stuttered at one point, and pronounced “Strikingly” in such a way that the “ly” was inaudible, but he spoke forcefully, with charm and enthusiasm. Polite applause followed. In the greenroom, once the door closed, he and Bao high-fived.

Over the following weeks, the Y.C. start-ups met with dozens of investors. They had been told by Graham and Altman that they never would have more interest than in the days following Demo Day. It was Graham’s insight that scheduling all the presentations for a short period of time would create a sense of urgency, driving up interest and prices.

In less than two weeks, Teespring raised $1.3 million. Their largest investor was Sam Altman, at $500,000; Paul Buchheit contributed as well. Williams and Stites-Clayton might have raised more, but because Teespring’s profits were already so large, they didn’t want to dilute their ownership unnecessarily. They expected to surpass $1 million in monthly revenue in April.

Wevorce has raised $1.5 million so far. Crosby has hired a chief operating officer and a chief legal officer and will hire additional staff and rent office space on the peninsula. Reynolds is moving his befuddled family to California, but Crosby’s boyfriend won’t leave Boise. “There’s a tidal wave of change coming quickly at me,” she said. “As you go on a journey like this, you have to tell yourself little lies to make it through. But at some point the adrenaline stops, and you have to re-evaluate things.”

Strikingly raised $1.4 million from 16 investors, among them Ron Conway. They, too, were in the position of turning down more money. They celebrated at an all-you-can-eat sushi bar in Mountain View. “I’m more excited than ever about our business,” Chen said. “I feel a relief that strengthens my excitement.”

I wondered whether the ease at which all three companies raised millions of dollars might be considered a sign of excess — that the market was getting too high, an Icarus racing for the sun. When presented with 47 consecutive audacious pitches, some investors seemed to have shown signs of fatigue, even cynicism. But then I remembered the last thing that Graham told me on Demo Day, as the crowd was filing out of the Computer History Museum. It helped me to understand the nature of Graham’s enthusiasm. From 1993 to 2004, Graham suffered a crippling fear of flying. The anxiety had arisen suddenly one day, with no good reason. “I said to myself: Wait a minute, I don’t like this! I’m five miles high in the sky, and nothing is holding me up, I can’t control it, and all I can do is look out of this one little window.”

Finally he hit upon a miracle cure: he would learn how to fly. He began with hang-gliding lessons. It was a gradual process. First he ran along flat ground with a hang glider strapped to his back. If there was any head wind, he would feel a sensation of lift but not enough to levitate. Next he walked 10 feet up a hill and ran down it, clearing the ground by several inches. He increased the height until, before he knew it, he was jumping off a 450-foot cliff. “By that point, you’re not even worried anymore,” he said. “My reputation as a hang-gliding pilot was at stake. I was trying not to mess up.”

Next he enrolled in flight training. In one lesson, his instructor switched off his Cessna’s engine, and he had to guide it onto the runway. This was easy for him, because the glide ratio of a Cessna 152 is almost exactly the same as a hang glider.

After 30 hours of classes, Graham decided that it was time for the real thing. He booked a ticket on the shuttle from Boston, where he was living, to New York. Not only was he fine — he found it exhilarating. Never again did he fear a crash. “Compared to a Cessna,” Graham said, “that plane was like a spaceship. It took off like a rocket, went up to this immensely high altitude, and there was zero turbulence. It was like flying for the first time all over again — like starting over with a new brain. It felt fabulous. And I thought, Wow!”

Nathaniel Rich last wrote for the magazine about an Amtrak trip from New Orleans to Los Angeles. His new novel is ‘‘Odds Against Tomorrow.’’
This article has been revised to reflect the following correction:

Correction: May 19, 2013

An article on May 5 about Y Combinator, a Silicon Valley organization that helps technology start-up companies, erroneously included a peak value for Loopt, a company that produces location-tracking apps. Its peak value is not known; but it was not $500 million, an unconfirmed figure reported on several tech Web sites. (As the article noted, the company was sold for $43.4 million in March 2012.) The article also referred incorrectly to Sam Altman, who founded Loopt. He is Y Combinator’’s second-youngest partner, not the youngest.

This is a repost of an article that appeared on the New York Times on May 2, 2013