"It's Sam's show now." After 9 years and over 500 startups, Y Combinator cofounder Paul Graham is stepping back as president.  In his fireside chat at LAUNCH Festival, PG told Jason why he's handing the reigns to Sam Altman, entrepreneur from YC's first batch. That summer in Boston, Sam was joined by Alexis Ohanian and Steve Huffman of Reddit, Justin Kan and Emmett Shear who later founded Twitch.tv, and more.  

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It's This Week in Startups, and I am so thrilled to share with you this latest fireside chat I was able to do with Paul Graham, the founder of Y Combinator.

Paul is literally 1 of the most helpful individuals to founders in the last decade.

He has helped over 600 startups launch through Y Combinator.

And he's been a tireless supporter of entrepreneurs.

And we had a really great, heartfelt, honest discussion for almost an hour at the launch festival.

He was super honest about stuff, very blunt, but also very joyful.

He's a tremendous entrepreneur and a tremendous supporter of entrepreneurs, a great writer, too, which I really respect.

If you can really crystallize your thoughts as a writer, I think that's something special in the world.

So I have a great deal of respect for Paul, and I was thrilled to have him sit down and do this fireside chat.

You're probably going to want to listen to this twice.

So go ahead and have a listen and make sure that you retweet it My handles at Jason and the show's handles at TWI startups.

gonna live like equals until we get the money, spend

I'm really thrilled to have our next Fireside Chat here.

And perhaps nobody has supported more entrepreneurs, certainly nobody has supported more entrepreneurs in the last 9 years than this individual.

Please welcome the co-founder of Y Combinator, Paul Graham.

There's been some changes at Y Combinator

that you timed perfectly before this speaking gig.

to make sure we got that announcement done before the launch conference.

What exactly is the announcement, and how does

That's Sam Altman, Alexis, Steve Huffman, and Justin and Emmett from Twitch.

And everybody in that picture now works for Y Combinator in some way except Steve Huffman.

Judging by the way people are standing, that is probably a demo of an early version of Reddit.

the way on the left with the blue shirt, who did Looped.

Which was the first really mobile location aware product.

People didn't want to broadcast their locations.

People want to consume location but they don't want to supply it.

And now you've made him the president of Y Combinator.

Were you just tired after 9 years and 600 startups?

I think you said in your piece that you thought he would do a better job.

We grow as the number of startups grows and the number of startups has been growing.

And Y Combinator, it started out, you saw what it was like.

And now we've got like 10 full-time partners, maybe 20 people total.

Sam, however, is going to be good at running a giant thing.

be involved every day or a couple of days or to be determined?

Because that was something that I think a lot of people weren't clear about.

You said you're going to do office hours?

So probably I'll end up doing office hours a couple days a week.

That will probably be enough to talk to everybody in each batch.

And other than that, I'm not doing anything.

I'm not reading applications, I'm not doing interviews, I'm not worrying about all the hideous internal crap that takes up the time of most organizations.

The founders in each batch, they see me at office hours.

And as far as they're concerned, that's what I do.

I spend all the rest of my time dealing with random crap associated with anything of any size.

when you started it and you were in your apartment, I mean, what was the origin?

I mean, why did you start Y Combinator for those folks who don't know the origin story?

So if you go to Google and search for how YC started, I actually wrote down the story of how it started.

I mean what I say in that is the reason it started was a combination of me feeling guilty that I hadn't gotten around to doing any angel investing yet.

And also that Jessica was talking to this VC fund about becoming their VP of marketing.

And the VCs were taking so long to make up their minds, I said, fuck them, we'll just start our own thing, right?

So if that VC fund in Boston had not been so typically slow-moving, Y Combinator would never have existed.

And how did you get those first 6 companies or whatever it was in the first class, 8 companies, How did you convince them to come on this journey

Because when Y Combinator first started, this is something a lot of people don't realize.

When Y Combinator first started, it was a summer program for undergraduates.

And so compared to a summer job, where you have to go work in a cubicle and maybe get up earlier than you would like to and work on not what you would want with people you don't want to work with, right?

Compared to a regular summer job, it was a great deal.

You just go to Cambridge, work on whatever you want with whoever you want, and we, like, you know, pay you money and give you dinner once a week.

We got more than we expected, hundreds of applications.

And in that first batch were Sam Altman, who started Looped.

Kiko, which was started by the founders who went on to start Justin.tv, aka Twitch, all in that first batch.

Aaron Swartz was in that first batch too.

He had sort of made, at that point, I think he was 18.

And he had sort of made a career of being precocious up till that point, right?

He sort of had decided, he had realized, like most kids don't realize this, but he had realized, like, when he was probably about 13 or so, he was sort of very obstreperous.

He never wanted to do what he was supposed to.

And he realized that he could just sort of start acting like an adult and maybe no 1 would stop him.

And so he didn't go to high school and he made money by writing code.

He just started acting like a grownup, right?

And he realized, essentially, kids don't realize this but they're all kept in place by a bunch of dotted lines that aren't real.

And they could just start acting like a grown-up and no 1 is going to come away with submachine guns and black ski masks and drag them away.

So he was 1 of the few people who realized he

And when you look at his untimely death and sort of what happened with him, how do you

Aaron and the federal government were not very evenly matched, right?

Like, those guys are a bunch of humorless motherfuckers.

I don't know, innocent is not quite the right word to use for him, because he was a pretty scheming innocent.

But anyone who's had small children could understand that scheming and innocent can be combined.

And that's what he was like in some ways.

In some ways he was like an adult when he was 13 and in some ways he was still a child when he was

But I think the federal government just like, the federal government they assume that everyone is Al Qaeda.

And so they just hit you with everything they got, which turns out to be a lot.

And then he discovered he had bitten off more than he could chew.

Yes, Scott Walker is a great attorney who is also a tireless supporter of startups.

He's partnered with me to bring you this program for years now.

And he runs a boutique law firm that specializes only in startups.

All of his attorneys come from those bigger firms, but they prefer to be at a boutique firm where they don't have to ratchet up the hours and try to destroy startups with these crazy legal bills.

He gives flat fees for all the different things you have to do at your startup, whether it's in corporation, employment agreements, or you're selling your company, he's a true mensch.

He truly focuses on the founders and he makes himself available.

In the same way I try to make myself available or Paul Graham makes himself available to founders, he's a really great guy.

And you just put Jason in the subject line, and I guarantee you he will respond quickly, and he will be an incredible advocate of your startup.

I've gotten so many great, great responses back from people I've referred to Scott over the years.

So he's just a tremendous, tremendous supporter of startups.

Go ahead and thank Scott Ed Walker on Twitter and follow him.

Really great guy, really great team over there.

I can't give them any bigger endorsement.

They've been a great partner of the program.

Everybody I send over there is pleased, what more do you need to know?

Let's get back, thanks Scott, and let's get back to this incredible fireside chat with Paul Graham.

the next sort of seminal moment I guess was bringing Y Combinator to the valley, leaving Boston.

I went to Foo Camp after the first Y Combinator batch and I thought, wow, it's so much better here.

The streets are paved with the corpses of startups.

What I thought was, actually, someone is going to start the Y Combinator of Silicon Valley, and it better be us.

So we thought we had better go out here and plant the flag.

And also, Boston in the winter is not as nice as Silicon Valley in the winter.

So we decided, and Jessica was freaking, right?

Because we had just figured out how to make this thing work.

Let's move across the country and do the next batch in Silicon Valley.

And the reason we ended up in Mountain View was because our friend Trevor had a building there.

And the only way we could get a building on such a short, with such short notice is to take over part of his.

But even so, that first dinner, we had to tell the founders not to touch the walls, because the paint was still wet the first dinner.

And when people applied, we said on the application form, we don't know where it's going to be.

You're applying for this thing, and you don't know whether it's going to be in Cambridge or Silicon Valley.

So let us know if either of those is a problem for you.

Prior to Y Combinator, the only incubators that really existed, I know it's you don't consider an incubator really, but there was a class of incubators in the first...

Yeah, there were these things called incubators.

They were like the model of what not to do.

So the early version, most people here probably never even knew what the incubators in the bubble were like.

But their idea was they would do all your funding ever.

Y Combinator is just supposed to be first gear and then you go off and raise money on at the market at market rates from whoever these things in the 90s the idea was It was almost like you were a subsidiary of the incubator They would like you would operate out of their building and you wouldn't have to have an accountant because their accountant would manage your money.

And they would give you a lot of money and take like 30, 40% of the company.

And that model seemed to me, and you had to like work out of their building, right?

That model seemed to me, because I had the advantage of having been a founder.

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Y Combinator's Paul Graham sits down with Jason at LAUNCH Festival 2014