9GAG, the Biggest Little Startup at Y Combinator's Demo Day

By Whitney Phaneuf , written on August 21, 2012

From The News Desk

What startups were the big winners at today's Y Combinator Demo Day? ReelSurfer, who we recently profiled, just closed a $880,000 seed round, and financial-advice engine SmartAsset raised $900,000 in seed funding. We also hear a San Francisco-based travel deals site that's staying "off the record" will soon announce a big round of funding.

But the biggest winner in Y Combinator's summer class had already won, back in April when comedy website 9GAG closed $2.8 million from True Ventures, Freestyle Capital, Kevin Rose and more. 9GAG is Reddit for jokes and memes, and it's quickly grown to 70 million unique visitors and a billion page views per month.

Like many international startups, Hong Kong-based 9GAG came to Silicon Valley through 500 Startups, where it gained a US audience and met its early investors. When 9GAG co-founder Ray Chan was in the Bay Area in July, Sam Altman took him to coffee and asked him to join Y Combinator.

"We wanted to get into best network in Silicon Valley," says Chan. In return, Y Combinator gets equity in the company, which Chan says is a fair trade. Whereas 500 Startups shaped the product, Chan says Y Combinator helped the four-year-old 9GAG figure out its long term mission.

Y Combinator is Silicon Valley's "in crowd," and these days it's more competitive and crowded than ever. The first cycle in summer 2005 had eight startups, today's summer 2012 batch had 82.

When I spoke to 42Floors founder Jason Freedman about his experience in the 2009 and 2012 batches, he says Y Combinator consistently maintains its quality. The grumbling Robert Scoble might disagree, comparing today's short demos to advertisements.

“Curation is really needed here. But we’re sitting through all these because it's Y Combinator," writes Scoble on his blog Scobleizer.

At seven years strong in a time of huge demand for startup accelerators and incubators, it's Y Combinator moment. Now it's tasked with staying in the leader position and not turning into a startup sweatshop.

In its FAQ, Y Combinator states: "We can probably help any startup that hasn't already raised a series A round from VCs." Including 9GAG in this summer's batch could be a sign that Y Combinator wants to accelerate startups past the seed investment stage, which would significantly change its approach and stake in the game.