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A new report shows that most companies developed at Y Combinator, the much-watched Silicon Valley incubator known for both the geeky prowess of the startups it grooms and the Hollywood glitz of the investors it draws to its Demo Day events, launched on the cheap. The Y Combinator graduates, including much-discussed stars like travel site Hipmunk and online-storage service Dropbox showed a strong preference for cost-saving cloud-computing services for storage and processing and Web-based software like Google’s Gmail for internal communication.
Roughly 3 out of 4 companies participating in Y Combinator’s incubator program used Gmail, Google’s mail service, as their primary email service. That includes some of Y Combinator’s most successful companies like Disqus and video streaming site Justin.tv. (The rest hosted their own email rather than using a Gmail competitor like Hotmail.)
And in a sign of the popularity of cloud-computing services, which place computing demands on rented servers hosted by third parties in vast data centers rather than a company’s own machines, more than half of Y Combinator’s startups hosted their services on Rackspace and Amazon’s cloud computing options. Both services allow users to offload heavy-duty computing onto remote servers, delivering the results of computations or stored data through the Internet. Both companies also offer storage options that can be purchased incrementally (by the gigabyte) without having to buy one’s own storage hardware.
Some of Y Combinator’s most successful startups, like Xobni and Dropbox, went with SoftLayer over the more popular Rackspace and Amazon cloud computing services. Posterous, a casual blogging service that has seen some success with fundraising after participating in Y Combinator, went with Rackspace.
Most Y Combinator companies purchased their domain names from Go Daddy, one of the most popular sites that sells domain names. (They’re hardly alone: On the strength of its low prices and well-regarded customer service, Go Daddy is estimated to be worth $1 billion.)
Y Combinator companies generally receive about $5,000 in funding, plus an additional $5,000 per founder and are relocated to Y Combinator’s Mountain View locale for three months, in return for a 2-10% ownership stake. The program’s alumni include Loopt, Justin.tv, Weebly and Scribd.
The incubator, founded by Paul Graham (pictured above, left), has become so prevalent that it even sparked some concern over growing valuations among the investing intelligentsia of Silicon Valley.
Here’s ab reakdown of Y Combinator companies’ computing preferences: