The Y Combinator offices sit at the dead center of Silicon Valley, in Mountain View, on a street called Pioneer Way. Outside, the traffic hums along CA-z85 headed either south to Cupertino or north toward Google headquarters. Inside, the decor of the main room combines modern office (big whiteboard, bright orange noise-dampening panels) with camp dining hall (long trestle tables). Y Combinator shares space with a company called Anybots—which makes robots that can be controlled remotely—and occasionally a droid will motor through the room on a Segway-style base.

On this November day, the Terminator itself could be roaming around the main room and the young men (and the occasional woman) gathered here wouldn’t notice. They are attending Interview Day, a chance to compete for a spot in what has become the tech world’s most prestigious program for budding digital entrepreneurs. The interviewees include former product managers at Google, a Midwestern accountant, and a 17-year-old high school student. They hail from Philadelphia, Minnesota, Greece, Russia, England, Spain, and San Francisco. And like would-be starlets flocking to Hollywood, they have come to Mountain View in the hope that Y Combinator will turn them from nameless coders into Silicon Valley celebrities.

Technically, Y Combinator is a launchpad for startups, but that description doesn’t quite capture the experience it provides or the influence it wields. Twice a year, the company—under the tutelage of its founder, Paul Graham—hosts a three-month boot camp. Each team that’s accepted receives seed funding—$11,000 for the group, plus $3,000 more for each member of the founding team. In exchange, Y Combinator gets a small stake in the startup, usually 6 or 7 percent. But the seed capital is almost beside the point. “Really, the money is just for living expenses,” Graham says. “Like a scholarship to go to college.” The program’s real draw is an unmatchable entrée into the otherwise closed world of high-stakes Internet entrepreneurship. Over a period of 13 weeks, enrollees hobnob with some of the industry’s most powerful investors and innovators as they attempt to turn their embryonic ideas into full-fledged businesses. And, at the end of their tenure, they get to participate in Demo Day, a kind of funding free-for-all during which they present their plans to the world’s most respected venture capital firms and angel investors.

Anyone accepted to Y Combinator joins a group that includes many of the elite startups of the past five years. The founders of Dropbox, Reddit, Loopt, and Scribd were all discovered and nurtured by Graham. Indeed, his picks have been so prescient that getting chosen by Y Combinator has become a geek version of the Good Housekeeping Seal. Tech blogs always cover the launches of Y Combinator companies. Angel investors clamor to fund them. Brian Chesky, CEO of Airbnb—a breakout Y Combinator startup that matches travelers with private lodgings—compares Graham to legendary music producer John Hammond. “Just as Hammond found Bob Dylan when he was a bad singer no one knew, Graham can spot potential.”

He can also make an impact. Graham has upset the balance of power in Silicon Valley, creating an environment in which investors compete with one another for a chance to fund the next hot startup—and drive up the amount they must pay for the opportunity. He has also inspired a legion of imitators. A startup accelerator called TechStars runs boot camps in Seattle, New York City, and Boulder, Colorado. Dave McClure, a PayPal alum and angel investor, recently launched 500 Startups, a YC-esque incubator at which McClure plays the role of Graham.

Before Interview Day—which actually lasts several days—winds up this week, 120 groups of founders will pour through the Y Combinator offices. They’ll each have 10 minutes to convince Graham’s team that they deserve a slot in the winter 2011 class. The pressure is palpable as the first batch of applicants mills about the main room. They whisper their rehearsed pitches to themselves as they wait. People have quit their jobs at Google, Apple, and McKinsey for this moment—proof of their commitment. “YC is the perfect environment,” says Tim Shea, a candidate who flew up from LA for the interview. His partner, Brandon Kleinman, nods. “The best of the best.”

The interviews are held in the back office—which doubles as a pantry, stuffed with boxes of Glad bags and 2-liter cola bottles—where the Y Combinator partners sit at a long table. Besides Graham, there are his cofounders: MIT associate professor Robert Morris, Anybots founder Trevor Blackwell, and former investment-bank marketer Jessica Livingston (who is also Graham’s wife). Two new partners join them: YC alum Harj Taggar (his company, Auctomatic, was purchased for $5 million by Live Current Media) and FriendFeed cofounder and Gmail inventor Paul Buchheit.

Over the course of the day, 20 teams come into the room. They are dressed, almost invariably, in T-shirts and hoodies. As they enter, Livingston sets the alarm on a funky Westclox timer for 10 minutes, a cue for applicants to begin their spiels. The encounters have some of the nervous energy of an early-round American Idol episode. Graham and Buchheit rarely wait to hear an entire pitch. After listening to a few sentences, they start circling the table, raising questions about the site or service, wondering why it doesn’t do this, suggesting how cool it would be if it did that. At some point, Graham will ask his favorite question: “What’s your long-term plan to take over the world?” Eventually the Westclox buzzer goes off, Livingston snaps a picture of the candidates, and the next group is ushered in.

Ten minutes is more than enough. Indeed, the YC members sometimes make up their minds in the first 60 seconds. Graham tends not to pay too much attention to a candidate or team’s business plan—it’s likely to change during the course of the program anyway. Instead, he zeros in on the character and intelligence of the applicants. After one team’s presentation, Buchheit says that he would use the product. But Graham is skeptical. “Are these guys winners?” he asks. “It’s all about the guys.” The group is not accepted.

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