The top three batches were consecutive starting from summer 2011 through summer of 2012. That period happens to also be when the seed and venture capital ecosystem started its recovery from the 2008 crisis [0].
What I wonder is, which way does the arrow of causation point? Did the success of these companies lift the entire ecosystem? Or were macroeconomic factors the dominant driver of capital entering this market, and those three batches happened to benefit?
edit: There's another possibility here, which is that there are two curves that may have maximized for companies around that time period. The first is the batch size, which has increased from ~10 companies to ~100 over the years. And the other curve is that companies take something like 5-10 years to mature. Maybe it's just that the companies of that vintage are just old enough to be really valuable, and that there were enough companies in the batch to push them to the top of this ranking.
> edit: There's another possibility here, which is that there are two curves that may have maximized for companies around that time period. The first is the batch size, which has increased from ~10 companies to ~100 over the years. And the other curve is that companies take something like 5-10 years to mature. Maybe it's just that the companies of that vintage are just old enough to be really valuable, and that there were enough companies in the batch to push them to the top of this ranking.
I think that's basically it.
It takes a while to reach a 100M or 1B valuation, so you wouldn't expect to see many of the most recent YC companies on the list just yet. On the flip-side, YC batches were significantly smaller early on before ~2011.
Getting more popular ~2010 lures more 'big-dreamers' to flood into YC. It's the same thing as the Ivy League effect on universities where top talent chooses top universities which yield top science/business champions in a virtuous cycle. YC's actions to increase batch size, open a startup school are all going to have bigger "net" effect.
Timing-wise the web2.0 and then smartphone waves as business disruptors have their trace on the numbers as well as the prolongation of the market boom with increased venture money and the network effect of YC alumni.
Risks include a market correction, post-smartphone bets, applicants more apt to 'gaming' the YC acceptance process.
I would like more numbers on competition (other accelerators), overall startup market, and the YC batch size.
The results are very different by market cap though. Half of the value on the list came from 2009 alone (Stripe and Airbnb). (Obviously it takes a while to become a unicorn.) Here's the sum of the unicorn market caps by year:
also of note, there was an economic crisis in 2009, which is also the year with the highest current market cap (it was super hard to raise a round of any size at that time)
It's possible the demographics of the applicant pool did change for Summer 11.
Summer 11 (my batch) was the first to apply AFTER Start Fund (Yuri Milner and SVAngel) announced they'd give $150k to every YC company. This program may have attracted founders who wouldn't have done YC previously.
Y-Combinator was very successful while Paul Graham and Jessica Livingston were picking founders.
Now Paul and Jessica retired, so I expect Y-Combinator results of new batches to stagnate (in a similar way how Microsoft performance was stagnant with Steve Ballmer in a CEO role).
It could also be a sweet spot for entering into SaaS before it got too-crowded but after companies warmed up to the fact that they could subscribe to software.
YC has funded approximately 1,900 companies. 93 are valued at $100 million or more. 19 are valued at $1 billion or more. Stripped from nuance, one could say that if you get accepted into YC, you have a 5 percent chance of building a $100 million company, and a 1 percent chance of building a $1 billion company. That's impressive.
Afaik, YC is the only seed funder-startup accelerator in the world, among thousands of other ones, that has given birth to companies worth $1 billion ore more.
At least until three years ago, it hasn't passed funding on a single billion dollar company (1).
Also, rumours are that Coinbase is raising money at a valuation of $8 billion (2). This is the same valuation that the company supposedly gave itself when it acquired earn.com in april this year (3).
> Afaik, YC is the only seed funder-startup accelerator in the world, among thousands of other ones, that has given birth to companies worth $1 billion ore more.
Seedcamp (London) has backed 3 unicorns: Revolut [$1.7B], UiPath [$3B], and TransferWise [$1.6B], and that's just a venture firm I know off the top of my head. While these days they're closer to a first-round fund (with a similar economic deal to YC) than an accelerator, most of those were from back when they were operating in a proper accelerator model.
I suspect there are probably a few other accelerators around the world that have unicorns in their portfolio - you just don't hear about them because they're not local.
Suppose each founder owns 10% at $1b and only count the unicorns. Graduating from YC would represent $1b * 10 % * 1% = $1m of value.
Suppose that applying to YC gives you a 1% chance of graduating, this would mean that just applying represents $10k of value!
Of course it doesn't work like this, you need to apply bayesian statistics. Of the great applications almost all get accepted and of the bad applications almost none do.
The _average_ Y Combinator company is worth ~100M [1]
The _median_ Y Combinator company, however, is worth closer to $0 (the majority of YC companies don't get to a Series A).
This just highlights how counter-intuitive power-law distributions are.
[1] Calculation:
Discard pre YC'17 companies for the purposes of this calculation, as these are still too early stage for meaningful analysis. Brex, Faire and Atrium are the only YC '17 or later on this list.
Numerator: The top 100 companies have a combined valuation of ~$110B, according to this list.
In the most successful class (AirBnB in W09), the majority of companies went to $0. In the most successful recent class (W14), the median startup raised a seed round but nothing else in four years.
Meta is at 38 and it recently suspended operations (https://www.bizjournals.com/sanjose/news/2018/09/14/ar-start...)? Is there still hope for an acquisition? I know this list is a ranking of amount raised but it seems odd to list dead companies as examples of the "top".
I imagine that there will be an acquisition of patents/technology but as so much of the company has already gone on to other things the timing of an acquihire, etc. seems to be against them.
1) Jobs created is not a "net new" job creation. I'm still waiting for someone to do research on how many jobs get displaced by tech based companies. I think tech based companies are amazing vehicles for wealth creation, but not so great for global job creation.
1a) I find it interesting that they still have a RFS for "one million jobs" https://www.ycombinator.com/rfs/#million given that their highest number of touted jobs is 4k max. For comparison, Amazon has 500k jobs. Maybe 50k or 100k is more of an admirable goal?
2) Interesting to see YC - in some ways admitting I guess - that technology itself is not a sector, but that technology is enabling certain sectors. I think this is the right way to look at it. Yet we still often refer to many of these companies simply as "tech companies".
3) This really should be split between acquired and not acquired companies. For example, Cruise being valued at $14B after being bought by GM seems weird. Or Dropbox, who is now publicly traded and their value changes every second. YC will never do this, but I'd love to see realized vs unrealized gains.
Wow, basically all of the valuation is generated by the top 10 companies. 81% from the top 5, 95% from the top 10. I guess this explains VC strategy somewhat: if you're not trying to become a unicorn, you're worthless to the VC.
I wish there was more data supporting the idea of making small, long-term businesses, but it really seems like the big money is all in going for unicorn status. Which is a shame, because I think this drives some of the problem behaviors you see in SV.
You can build successful, small, long-term businesses. There is nothing stopping you.
Just don't raise venture capital. You can seek capital, just not venture capital. Venture capital is a very specific style of investing and the model relies on outsized successes. It is a very small portion of the overall capital ecosystem that drives our economy. It is not the end-all be-all of capital allocation.
The mistake laypeople on HN make is thinking that's the only way to capitalize a business. It's not.
So where else do you find capital, then, for something not focused on extreme growth? I've got plenty of ideas kicking around, and the experience and skills to build them, but they're entirely moderate-growth businesses with a ceiling of single- or double-digit millions a year in revenue. Most of them could be started for between $10-100k.
A bank is tricky; you put your own savings on the line, and most banks don't really care about your specific situation, just that you're a risky customer. I'd prefer not to use family and friends because that has the potential to destroy relationships. Angels are usually interested in large growth potential.
If you could really start the company for $10k, I'd recommend self-funding out of savings. Save up $25k working (to give yourself a cushion) and give it a shot. If you have the skills to start a technology business, you definitely have the skills to earn $25k of working capital with your labor. People start small businesses that way all the time, and you can too.
That may sound snarky to some but I feel like it's the right response. Sometimes we forget what risk really is (and why it pays well when it works) when we talk about romantic stories like this list.
Hmm. It certainly exists for startups. I've been part of teams for many startups where the team is shitty, the idea is shitty, and the startup has no future, but they're able to get funded to the tune of $100k easily before they crash and burn. There are certainly no obligations attached to most VC money.
Meanwhile, if I want to build something sustainable, even if I'm willing to give up a decent share of my company, and submit myself to oversight of how this money is spent and great terms for repayment or equity, I can't get anywhere. VCs aren't willing to consider a $XX MM market, only a $XXXX MM market. Even for a good team and a good idea, I've gotten nowhere. I'm totally willing to give up some double-digit percentage of a company, I'm just not willing to have to risk $100k if I want to start a company that requires $100k.
Expand quickly or crash and burn trying IS an obligation. Any startup would love to have years of no rush to try and figure out their business plan, but the most valuable commodities in the valley are time and patience, not money.
And you're saying you pitch decks to VCs that say the maximum value of the company can be double digit millions and then wonder why you aren't getting anywhere?
> VCs aren't willing to consider a $XX MM market, only a $XXXX MM market.
You're missing the point again. VCs can't consider an $XX MM market because if they did then they wouldn't be practicing Venture Capital. Again, it's a very specific type of investing which is seeking very specific type of risks and returns.
What you're saying is the equivalent of saying: "I have a basketball team and none of these football players want to join me". Yes they're athletes, and they might even make good basketball players...but they're football players for a reason - they want to play football.
> Most of them could be started for between $10-100k.
If you're in the US (or able to get a visa to work here a few years – admittedly a much harder prospect recently than it should be) and have technical skills, it's not difficult to find a job that will allow you to save $100k in 2-3 years if you're willing to live very frugally. At that point, you'll have the freedom to bootstrap your own company without giving up any equity.
I think you're best off doing some bootstrapping or prototyping first before deciding on what business to pursue, keeping startup costs in mind.
As others have said, don't expect much luck looking for a risk-free loan that let's you have your cake and eat it too unless it's from close friends or family.
If it's closer to the $10k range, start it yourself. If it's closer to the $100k range, you could try presenting to some local business organizations that offer favorable loans or apply for grants, but no logical VC is going to put out $100k for a $250k return.
All of those are options- just, like a fellow child commentor says, they have risk associated with them (not to mention, VC funding also carries risk!)
You also have the option to crowdfund in B2C and land a major contract to fund development of an aligned product to your own in B2B.
Seems like a strange exercise, since it doesn't actually touch on the bubble part. A bubble is when valuations are higher than the actual value, which usually means the performance after an exit. Presumably we would have to wait some time after that happens to see whether that is true. If they perform well we weren't in a bubble and if they don't valuations are likely to fall as people lose confidence.
(1) is pretty close to being true. Will be true with Uber's $120B valuation
(2) is already true according to the list. Stripe and Instacart alone are already worth > $27B in aggregate
(3) might actually be already true, or at least close to it. Gitlab is worth $1.1B, and there are a few other YC W15 companies that are already worth hundreds of millions and are on track to become unicorns: EquipmentShare, AtomWise, RazorPay, Qventus, GrubMarket, among others.
How are the valuations calculated for companies that haven't raised a priced equity round in a long time? Specifically I'm thinking about companies like Zapier. They initially raised $1.3M in 2012 but haven't raised since and have funded off revenue. Is it based on private 409A valuations or some sort of formula on YC's end?
They're based on fundraising or acquisition valuations, not 409A valuations. You're right that some of the companies have not raised money in a while, which in many cases means that their valuation would be higher if they were re-valued today.
Is it a safe assumption that any company on the list who was in operation as of October 2015 with a valuation below $300 million at the time was accepted into YC Continuity?
I worked for #15 on that list and let me tell you those guys are some real jerks. This is their COO yelling at their carriers https://youtube.com/watch?v=ooTmdOyKYpQ
I'm not sure what the spirit of your comment is, but I feel like I should point out that this is to some extent the "point" of technology: to create more value with less human capital.
Perhaps the raw number of jobs isn't the best denominator then, since many of the jobs in tech likely pay more to acknowledge this fact. A better measure would be something like the total of wages payed, or total of wages payed for the bottom 4 quintiles of workers by salary (cut out C-class executive outliers). Equity of course makes that harder, but most of the companies on this list are big enough that they're probably paying more in salary at this point anyways. I'd be interested to see where that places tech companies vs. more traditional businesses.
i think that's an interesting idea. instead of "how many jobs did we create?" you could ask "how much socioeconomic mobility did we create?". or something along those lines
I think Pfizer has 3 times the number of employees and 2 times the valuation. So not really something that jumps out as being such a huge difference. Even though you would expect a large difference since most tech companies don’t employ unskilled labor and instead just (ab)used them through the gig economy.
They state that the cumulative valuation of these 100 companies is $100+ billion, of which $81+ billion comes from the top 5 companies, and $95+ billion comes from the top 10.
Also interesting that the top 2 (Airbnb and Stripe) were in the 2009 cohorts. From the depths of the recession to $50+ billion combined valuation.
Yeah these statistics should give any armchair VC/angel wannabees some thought:
Out of the 2000 or so startups that deserve some type of funding[1], the chance that you will pick a $1B unicorn is about 0.2%.
Additionally, the chance that you will choose the next Airbnb or Stripe is closer to 0.002%.
For comparison, you could turn $150,000 into $4,500,000 with about a 3% chance if you find a vegas table willing to service this bet size (which they have done in the past).
From the article, 19 / 1900 YC startups are above $1B, or 1% (not 0.2%). Many of the 1900 are young, so the fraction of any cohort that will eventually reach $1B is more than that.
The chance of having picked exactly AirBnB or Stripe from among YC startups is 2/1900, or 0.11% (not 0.002%). More companies out of that 1900 are likely to achieve similar valuations in the future.
The payoff ratio for angel investing is much higher than the 30:1 that Roulette pays. On the order of 1000:1 is typical ($10M cap safe - $20B IPO with 50% dilution on the way.)
A16Z said that there are 2000 startups worth funding every year. Side note, A16Z only talks to about 1000 of them due to focus areas and competitive overlap.
Based on the 19 unicorns that YC has unearthed over the past decade, we can really only say that roughly 2 unicorns are born every year, and 2 megaunicorns born every 5 or so years.
They payoff is immense for finding one, but the chance that you keep at least all 150k is probably worse than your roulette odds, not to mention time invested and emotional capital.
What am I missing? You seem to be taking the YC-specific unicorn numbers and dividing them by the much broader A16Z "fundable" numbers. Apples & oranges, no?
I assert that they aren't apples and oranges becauss YC has picked every single unicorn there is to pick up until very recently. Therefore, both the 2,000 number from A16Z and 19 number from YC can be directly compared.
Do you think it is significantly easier to pick unicorns than I am describing? Because it seems very, very hard.
So hard, in fact, that YC has to pick 150 or so per year and hope that one or two hit 1000x to make up for the others.
I've done quite a bit of angel investing and have a pretty good IRR. The key is to make sure you stay within your area of competence or within area of competence of those you trust.
Also, the numbers will necessarily look worse for a fund or accelerator like Y Combinator than for an individual angel. Y Combinator has to fund cohorts of companies, right? they can't just say one year, nope, I found nothing I want to invest in this year. But as an individual angel you can.
I am torn about using valuation to rank companies. Valuation is is a vanity metric. Its just a number that VCs use to trade their capital, not the true worth of a company. You could raise $1 million from your rich uncle claiming to hold 0.1% of company and claim a $1B valuation. But then the question is, what do you use as the true worth of a company?
But I don't think any of these were valued by their rich uncles—they were primarily valued by professional venture capitalists putting money into the companies at said valuations. Venture capitalists may have flaws in their valuation methodologies, but who's valuation could you trust more than theirs, as they put their money where their mouth is?
It would be interesting to graph the valuations of all of these companies over time. You could make the x-axis "company age" rather than time in order to make a more apples-to-apples comparison between older YC companies and younger YC companies. I did a bit of work along these lines a few weeks ago:
Really interesting to see the number of jobs created. I imagine that just means "number of employees". Even so, the fact that Brex is a company with only 48 employees with over a $1billion dollar valuation is interesting (also the fact that I've never heard of them, and they only went through YC a year ago).
Does anyone have any stats on Reddit (users, revenue etc) because $1bn seems like a pretty low valuation for one of the most popular sites on the internet?
I don't imagine they count AngelList as a fund, or AL would easily be at the top of the list. (If they counted each company that had an AL series LLC on its cap table.)
Listing private companies by valuation has nothing with reality, just trying to bump up the next investment rounds.
Until a company is public and traded you can put almost any price on it.
With that being said - kodus to all the companies about the thousand of jobs created.
If all of these companies were incorporated as part of YC batch that would be very impressive. I've increasing feeling that many companies just want to get listed as "YC company" to leverage investor network and take advantage of branding.
Look carefully at the number of jobs created. Some companies have less than 100 employees with >100 million valuation. I believe that Heroku had just 40. It’s amazing how small these teams are and what they are able to achieve.
Are they ranked by valuation? Can't seem to find any explanation of how the rank is calculated. Also surprisingly many of those I've never heard of, despite spending way too much time at HN :)
> In addition, we will continue to support the company in the priced equity round in which the safe converts, and subsequent financing rounds (priced equity rounds or bridge financing rounds) by participating in those rounds to approximately maintain our 7% ownership.
This has been the case since 2015 approximately [1]. This means YC's stake in many of these companies is in the order of 10s or even 100s of millions, since they keep their 7% through subsequent funding rounds. That's huge.
I always get a kick out of the 'created jobs' meme. It is always bandied about in such a positive way. As if you took people out of work and employed them.
The truth is you also need a number that reflect the amount of people that were put out of work or disadvantaged by a startup. And the people who worked for startups (to a lesser degree) that would have gotten a job somewhere else.
What is really sad for young people I think is this perception that the road is paved with gold for anyone in the startup business. Sure they know most don't succeed in the same way that they know it's hard to play major league sports or be a music or movie star. But I really don't know if they fully understand how much of a long shot it really is.
YC celebrating this is fine it's what I would do from a marketing and PR angle. But the truth is they are in the business of getting as many people involved in startups that they can because it benefits them greatly.
This is not sour grapes either. I make money off of all of these startups directly (in a pick axe kind of way). It has been great for sure but it also takes advantage of the hopes and dreams of a generation who think the only thing you can do is 'do a startup by going to an accelerator and raising angel and vc funds'. That is most certainly not the case.
$3.5M mobilized capital per job, when is it more efficient to just give handouts to random people? :)
But I think it's extremely misleading to talk about jobs, we are all here to destroy jobs and concentrate wealth, and some of us are doing worse than others at Uber, Lyft and co, where the value coming from the destruction goes to the VCs, and if they crash the value taken goes nowhere.
What I wonder is, which way does the arrow of causation point? Did the success of these companies lift the entire ecosystem? Or were macroeconomic factors the dominant driver of capital entering this market, and those three batches happened to benefit?
edit: There's another possibility here, which is that there are two curves that may have maximized for companies around that time period. The first is the batch size, which has increased from ~10 companies to ~100 over the years. And the other curve is that companies take something like 5-10 years to mature. Maybe it's just that the companies of that vintage are just old enough to be really valuable, and that there were enough companies in the batch to push them to the top of this ranking.
My money is on macro effects, though.
[0] https://medium.com/the-mission/state-of-seed-investing-in-20...