Is there a difference between building a successful for-profit and nonprofit startup? Not much, according to Paul Graham, founder of Y Combinator, there isn’t much of a difference. Y Combinator is an elite accelerator program in Mountain View, Calif., that accepted a nonprofit for the first time this month, Watsi.org. “You could never tell there was a nonprofit mixed in,” he said in a phone interview recently.
Watsi, a medical crowdfunding platform that launched in August, is among 47 startup businesses in the latest Y Combinator class. Past graduates of the competitive three-month program include DropBox, Reddit and Airbnb.
Mr. Graham began thinking about inviting nonprofits to join Y Combinator about a year ago. “I was talking to a friend who wanted to do a nonprofit project and I realized I was giving exactly the same advice I’d be giving to a startup,” he said.
But at the time, the program had grown to include 84 startups, and Mr. Graham was actually planning to scale it back. “That was too large to manage with the structure we had then, where every partner had to understand every startup,” he said. “Now we’re redesigning YC to be more sharded. So we probably could handle 84 with our current structure.”
Mr. Graham discovered Watsi from reading about it on Hacker News, an online news aggregator run by Y Combinator. “I just knew it was going to be huge,” he said, adding that he’s currently considering opening up the program to other nonprofits.
Watsi, based in San Francisco, connects medical patients who can’t afford the procedures they need with donors via the Web. The funds it collects go entirely to the patients, as the organization’s own costs are covered separately. The eight-person nonprofit has so far raised $120,000 for overhead expenses such as employees’ salaries, rent, utilities and Web services. Its financial backers include organizations such as the Conway Family Foundation, as well as individual donors like Mr. Graham.
Startups that get accepted into Y Combinator typically receive $20,000 in seed capital in exchange for an equity stake of about 7%. Watsi, a 501C(3), only accepted the funding. “If this was a [for-profit] startup, they would have their pick of investors,” said Mr. Graham, adding that he expects the nonprofit to attract donors in the same way that past Y Combinator graduates have raised investment capital. “They’re going to present to Demo Day. A lot of people in that room are rich.”
Watsi co-founder Chase Adam, 26 years old, said he and his two business partners participating in Y Combinator have been getting along nicely with the other founders in it. “We thought we were going to be the oddballs,” he said. “But we’re around people exactly like us.”
Mr. Adam developed many of the relationships with the medical facilities that manage the funds collected on Watsi as a result of doing volunteer work in Haiti for six months after graduating from the University of California, Santa Barbara, in 2008. Watsi has so far collected $90,000 in donations for 100 patients in various third-world countries.
“We’re just taking the power of the startup model and applying it to a problem,” Mr. Adam said. “We look, feel and operate like a startup.”