Though I know and like these guys, I worry they have set themselves an impossible task. As someone who spends literally every day trying to predict the success of startups, I know how hard it is. And worse still, in this case, hard to automate: the success or failure of a startup depends almost entirely on the personalities of the founders.
What makes the problem more complicated still is, founders can change. E.g. when we meet someone who seems smart and energetic but a bit timid about starting a company, we have to ask ourselves if the guy's intrinsically timid, or just put off by the weirdness of the idea, like we were before we started Viaweb.
1. take every email exchange you've had with past YC companies whose outcomes are now known.
Good=bought, IPO, etc., Bad=no longer exists (with exceptions for folks like Kiko?)
What about a futures market that offers non-voting shares in startups (or Vegas-style wagers)? Startups relevant to the traded instruments can accrue some percentage of the option price. This gives you predictive power and funding. There must be some major pitfalls that I can think of, other than startups deliberately going belly up to cash out negative wagers :)
One aspect of Ycombinator is, I guess, that of a prediction market with people trading in early attention and uptake.
What makes the problem more complicated still is, founders can change. E.g. when we meet someone who seems smart and energetic but a bit timid about starting a company, we have to ask ourselves if the guy's intrinsically timid, or just put off by the weirdness of the idea, like we were before we started Viaweb.