Definition of mentor capital
The term mentor refers to someone who imparts wisdom to and shares knowledge with a less experienced colleague.
Mentor capital refers to the body of knowledge and skills that is passed from the mentor to the colleague. The skills and knowledge are vital to business development, survival and ultimately success and have equal or possibly more value than financial capital at the nascent stage of the companies’ growth and maturity. In an insanely fast-paced world of technology start-ups, mentors are one of the most critical success factors and key relationships of such ventures.
Experienced serial entrepreneurs, who have been there and done that, are increasingly critical to help start-up chief executives fine-tune their strategy, define key performance indicators, interpret market results, get introductions to business partners and investors, and serve as sounding boards for the fast-paced decision-making required to start and run a business.
Silicon-valley based Paul Graham co-founder of Viaweb, created the first, and most successful, formal mentor capital programme called Y-Combinator in 2005. Through a highly competitive global application process, a select group of start-ups are invited to spend 90 days in the San Francisco Bay area.
The primary goal is to get the companies in the best shape possible as they prepare to formally present and demonstrate their product on Demo Day, which is essentially a graduation ceremony and coming out party for the start-ups in front of the world’s top start-up investors. Y Combinator invests a nominal amount, typically averaging about $18,000 in each start-up.
More importantly, in the Y Combinator model, Graham and a group of eight colleagues, serve as full-time mentors to start-ups during their 90 day residency. In addition, there are three part-time mentors as well as two attorneys and two technical advisors, who are also available to mentor the start-ups during an unlimited number of office hours. This investment of time, referred to as ‘mentor capital,’ is where the real value of the programme is delivered.
Graham and his colleagues work intensively with the companies during the 90 day mentorship cycle. They have vast experience with their own successful start-ups as well as deep and long-standing connections to the Silicon Valley entrepreneurship and investment ecosystem. For example, each week they host an extended session with a prominent Silicon Valley founder/ entrepreneur which lasts approximately four hours and involves deep off-the-record discussion on what it took to make their company successful.
The Y Combinator Mentor Capital method has created an extraordinary track record of success and has been instrumental in creating a number of category defining companies such as Dropbox, Airbnb, Reddit and Scribd.