I've been rejected from YC several times. Now, I actually have a profitable company with real growth, and this time I've decided NOT to apply.
Because I don't need it. Unless you're in an industry which is fundamentally capital intensive, or you absolutely need to hire staff very early on, capital limitations are actually a good thing. My first startup (which failed) was funded, but now I find I make better decisions on a shoestring budget. You really are forced to be creative and cut the fat to make things work. It's also a natural inhibitor to growing too fast. I find my thinking is clearer when I know I cannot spend more than I earn.
True "networking" is done on the basis of trust, merit, and warmth of the intro, not on having more people in your batch to spam. This article gave the example of finding a contact at Apple to get something done. But the larger the batch size, the less warm the intro you can get/offer. Why should I provide an intro to a random other YC member whom I have no relationship with? At some point it becomes about as valuable as LinkedIn.
If I actually felt that getting into YC would help me grow faster or better, or I really needed access to capital, then I would do it. But so far I feel like it would just be a distraction.
I've also been rejected by YC several times! I think not doing YC is a really smart choice for some companies.
That said, I think the value of yc is twofold. (1) it's the best possible way to get to a first round of funding and (2) the partners give exceptionally good advice, even for experienced founders.
(1) is useful even if you don't think you'll raise round after round after round of funding. Some of my favorite YC companies took no extra funding. They did yc, raised a normal sized seed round, and are off building fun things and living delightful lives. Seed rounds buy a lot of time and flexibility. In my case, a seed round has let me make big decisions to move our company closer to what I want, even when it meant turning down revenue or firing a bunch of customers. There's nothing more freeing than the ability to escape boat anchor customers.
Even still, yc will help most any company grow faster. That's pretty much what it's designed for. Not all companies should grow faster.
I got rejected from YC b/c they hated my product despite it doing >$100K/month at the time. It honestly felt like a big waste of time flying out and then getting told they didn't like my flavor of cannabis company.
The value I see in YC is the network, not the money nor the advice. The money is poorly priced for the equity and the advice is all online. Knowing people who can help you do things you need to do is basically all business is. Knowing higher quality people helps you get done things faster without it feeling like as much of a grind.
Back to the question of scaling YC. IMO, scaling YC isn't really about the quality of companies but the quality of people. I'm honestly not sure. Maybe, but it's a risk. Staying the same size and focusing on refinement is less of a risk. Why YC as an organization needs to take a risk as opposed to staying the same is probably more a reflection of the ambitions of the partners and investors more than anything.
Circa 2014 I was out of college and very intent on getting into YC for mostly the wrong reasons - which were credentialism and thinking it meant you "made it". Eventually went through another accelerator, and wasted a year+ when I should have scrapped and moved on to something better.
Now to me is obvious if you start a business of value with revenue and you can sell yourself, you can easily raise funds, build a team, get early b2b customers, etc. just like everyone did before accelerators were considered a career move. The Rockefellers and Carnegies of the world were voraciously independent business builders and I really do love meeting the types who were able to make it to seed on their own.
This seems to be good for YC, bad for companies in YC. The value of YC, as far as I can tell, has been access to great advisors and a cohort of folks going through the same thing as you (maybe some other fringe benefits as well like discounts for services). As you scale up, both those things seem like they will be watered down (the quality of advisors and peers goes down as the quantity increases). This reads to me like YC has decided that a spray and pray approach is best.
This is most people's first reaction - they assume that if YC is getting bigger, some limited resource must be getting diluted. But that's actually not the case: there is no limited resource that isn't being increased. And it also misses an important trend that works in the opposite direction: the network effects that make YC more valuable for companies when the batch is larger.
These network effects aren't obvious to outside observers (actually some of them weren't obvious to us at first!), so here are some of them.
1) The larger the batch is, the more companies there are that are similar to you. The author of the parent comment described this as a "cohort of folks going through the same thing as you".
Suppose you're building a fintech company in India. In an earlier batch where we only had 75 companies, you might well have been the only India fintech company in the batch. Now, there are probably 4 other companies in the batch that are also India/fintech. Those companies are likely to be the ones that can be most helpful to you.
2) Related to (1), having more scale in each vertical has allowed us to specialize our program and deliver more specific advice for different kinds of companies.
We now have specialized advice, content, and events for devtools, fintech, saas, consumer, enterprise, bio/healthcare, hard tech, & hardware companies. Much like AWS's large scale allows it to offer more and more specialized products, our larger scale allows us to offer more specialized programming.
3) For a large percentage of the YC batch, other YC startups and YC founders make up an important customer segment. The more YC companies there are, the more potential customers they can get from this community.
Related to that, the YC network is also a powerful tool for getting introductions to non-YC companies. Suppose you want an introduction to a key person at Apple. Apple isn't a YC company, but the YC network of founders who used to or currently work at Apple will be very helpful for reaching the right person. And that gets better when we have more founders.
4) The YC companies effectively collectively bargain for a large variety of things: discounts on services (worth over $1M / company now), press exposure, investor attention, etc. The more companies in the pool, the stronger our bargaining position becomes.
5) The more highly successful companies YC has, the more brand recognition YC's name has. That's obviously good for YC, but it is also good for YC companies. One of the hurdles new companies have is getting other people and particularly big companies to take them seriously. The YC brand name is now pretty helpful for accomplishing that in the tech world; we're still getting to the point where it works in every other industry and that requires more scale.
6) With more YC companies, we're now able to run https://www.workatastartup.com/ to help YC companies hire. From the standpoint of someone who is looking for a job at a startup, the more (successful) startups there are on Work at a Startup, the more useful the site is.
7) Most of the advisors who work with companies (we call them "group partners") are YC alumni who started a successful company. Because of this, when we fund more successful companies, it expands the pool of potential great group partners we can hire. To scale to the next level, we need more group partners (a.k.a more expert advisors). The trick of hiring our own alumni allows this seemingly limited resource to actually scale more-or-less proportionally.
8) As YC becomes better known, more great founders become interested in applying. YC is well known in silicon valley but still has a long way to go to be well known everywhere in the world. We've consistently noticed a trend where after we fund our first company in a new country, we get a surge of applications from that country. When we have more companies in each country, we make YC more accessible and useful to new companies in that country as well.
Interestingly, some of these network effects have just become apparent to us in the past couple of years - we had to reach a certain scale to even see them. This makes me think there will probably be other network effects that kick in as we reach even larger numbers.
I think this is totally valid and for YC, scaling has obvious advantages (more chances of finding the next hit).
For founders, the reality is that the scaling of YC, fairly or not, does change the perception of being admitted into YC, in that having a larger class size gives off the impression (whether true or not), that the program is no longer as highly-selective/elite. For what it’s worth, I don’t think YC is at that stage and I don’t think the expansion dilutes the YC name (this isn’t like TEDx). There is a big gulf between admitting everyone and expanding class size the way they have been expanded now. Still, as I said, an increased class size can absolutely change the perception, amongst applicants, alumni, or outsiders, that the program is no longer as “elite.”
This isn’t unique to YC. Elite colleges and universities are often artificially limited in their admission figures (Harvard College has about 6600 undergrads whereas Harvard University has like 14,000 graduate students across the different schools and programs) and while some have attempted scale through either extension schools or online programs, there is a not insignificant social construct surrounding the idea of keeping something deemed “elite,” selective.
So everything you write is true. But it’s also true that the perception of scaling can be negative in some ways, even if the program isn’t actually diluted.
When you put it that way, to me it sounds like a great thing. YC has always sought to filter out the resume-padding sort of founder who sees YC as a step up the status ladder. Such founders are not up for the gruelling slog of really building a startup, and tend to bail not long after the batch since they've already gotten what they wanted out of it.
People should apply to YC because they believe it would them them build a successful startup, not because they want prestige. If expanding YC leads to a decrease in prestige (alongside an increase in real value to startups, as Jared explained above), that's a win for everybody: more business-builders get access to YC, YC gets to fund more successful companies, and status-seekers can find something else that will look better on their resume.
In this sense YC is very different from the elite colleges whose brand depends on their exclusiveness. The upper bound on YC's expansion is how much startup opportunity exists in the world.
I think status has as much value as what someone is willing to give you for it. If the YC “Badge” is a currency that opens doors based on its perceived status, that feels like a helpful bonus to founders. I agree that if someone is in YC for status, that trait alone is likely not sufficient to help them create a successful company. However if someone is able to get a meeting with a VC because of their enrollment in the program (or a PM with a larger company to discuss a partnership, etc) that seems helpful and worth preserving.
That being said, it’s not clear to me that YC is lowering it’s acceptance rate. By accepting companies from all around the world, it’s pool of potential applications exponentially increases. If YC accepts 100 more companies from 10,000 more applicants that still feels like a pretty exclusive acceptance rate.
What could be going on is that people are comparing the batch sizes now to the batch sizes in the past and assuming the same rate of company applications. I’m not sure if YC publishes their application data, but without it I think it’s tough to say based on batch size alone whether or not YC is statistically becoming easier to get into.
>> the network effects that make YC more valuable for companies when the batch is larger.
This is only part of the story though. THe size of the network doesn't mean nearly as much as the quality of the connection; i.e. edges over nodes.
Every other point is true to some extent but addresses the accidental vs. essential aspects of a startup. Collective bargaining for services? hiring pool? potential customers? These all seem like nice-to-haves vs. must-haves.
Call me jaded but I see a VC machine that hires it's friends, associates and good-but-not-great investments, and then needs to fuel the machine with startups at scale. This could work but I can't see how it's better than smaller batches for anyone but YC.
Love this comment - really insightful. We did YC ourselves, and I guess there are two points here where I think YC can help improve things further.
1) Regarding getting other YC companies as your customers, I don't think there is a really great mechanism for that yet. With a network of thousands of founders, it is hard to pitch your company to the YC network without it becoming spam.
2) I agree that we learned most from companies relatively similar to ours. But it is also clear now that there is a lot of direct competitors within the YC network. I don't see a way to avoid that, but it feels important to think about at this scale.
> there is a lot of direct competitors within the YC network
I would never view other small startups in the space as competitors. I would view them as 1) people that will help lower our r&d costs b/c you can watch them 2) potential companies that could acquire you if they turn out to be executing better 3) potential companies that you could acquire if you turn out to be executing better.
That depends on how fast they fail. A successful company should be around for years and will have lots of money to publicize itself; how long does it take the typical "failed" YC startup to fold?
I agree with most of this. However, (3) has issues:
a) NASDAQ in 2000 had a ton of companies selling to other VC backed companies. When the flow slowed, even profitable companies failed because they sold to unprofitable ones. They fell like dominos. And this was in the public markets!
b) Any investor in a YC B2B company should ask the percentage of customers that are YC backed. It’s good for a cold start in sales, but ultimately see #1.
c) I hope hundreds of companies don’t want to talk to the SAME person at Apple. Otherwise, I agree.
It's obvious that there is some upper limit of companies per batch, past which it will be impossible for YC to source quality companies and advisors for batches. But why should we believe we've hit the point where the quality of advisors and peers decline as YC gets bigger? There are a lot more than 300 companies started per year...YC still only makes up a small fraction of the total. (And anecdotally just looking at this batch...I wouldn't care to bet that the quality of peers has decreased!)
> But why should we believe we've hit the point where the quality of advisors and peers decline as YC gets bigger?
We shouldn't, it's the exact opposite. As the network grows, the ecosystem of high quality advisors goes up, not just because better people join, but people are learning to become better advisors through being a part of the network. Not only that, but as the network grows so does the YC economy of potential partners. Instead of YC companies purchasing goods and services from outside the network (and thus bleeding valuation of the network) keeping money flowing in the YC economy only accelerates the value of the entire network. As this monetary flow through the network grows and accelerates so does the quality of the people managing the companies in the networks and thus potential future advisors to new companies joining the network.
You write like these are guaranteed outcomes, but organizations lose their ability to deliver value as they grow all the time, which is where startups come in...
Granted YC is probably more aware of these downfalls than most companies, and are trying to mitigate them, but to act like YC can only get better as it expands is really short sighted.
I'm sure every person on this board can think of dozens of companies that failed because they got too big and could no longer deliver value as well as smaller companies. The tech space is littered with them every year.
>but organizations lose their ability to deliver value as they grow all the time, which is where startups come in...
>I'm sure every person on this board can think of dozens of companies that failed because they got too big and could no longer deliver value as well as smaller companies. The tech space is littered with them every year.
Yes to both points. And so is the business (management) consulting and literature space littered with
stuff, a.k.a. work and talks and books and confs about all that. Throwing out a few words that give a flavor:
Disruption (ha!), Clayton Christensen, Tom Peters, reengineering, innovator's dilemma, the HP way, Lou Gerstner, Teaching Elephants to Dance, Jack Welch, the HP Way, the IBM Way, the Toyota Way, Made in America, Made in Japan, etc.
Tip of the iceberg.
So one mental model of what YC does is that it has social capital (e.g. prestige, connections). It gives some of that to its portfolio companies so they'll be more successful and so YC gets better yields.
If social capital is mostly fixed, then this is a zero-sum situation and increasing batch sizes is bad for each company, even if it's better for YC as a whole.
Another mental model is that social capital is generated by YC companies themselves, as they e.g. network with one another, trade advice and other resources, and otherwise collectively learn how to build better startups.
I'm not sure which mental model is correct, but if you think the value of the YC ecosystem scales at Θ(N²), then a bigger batch can better for each YC company, even if they're get less 'direct' support from YC itself.
I'm not sure which mental model is correct, but if you think the value of the YC ecosystem scales at Θ(N²)...
The correct scaling for social networks is almost always n log(n). See http://www.dtc.umn.edu/~odlyzko/doc/metcalfe.pdf for a collection of arguments using various measures that all conclude that that is the right scaling laws.
I've heard a few times that recent YC companies often find a lot of customers in previous YC companies. I have no idea how true it is, but if it's a substantial effect, increasing batch size could increase this as well.
It is just revenue kiting. Company A enters $20M deal with company B which enter a $19.975M deal with company C which enters a $19.970M deal with company A.
Ma, look at our revenue! Lets do another raise! Investors will eat it up!
It depends quite a bit on what type of product or service you are selling. For us, we expected to find customers in our batch, but when we did not we learned a valuable lesson: that it was larger companies that valued our offering more.
I'd love to hear from more companies on their take on this (especially any "repeat founders" who can contrast their recent experience to an earlier one).
They don't have to be 100%, and I did not say so. But there has to be some alignment, say 60 to 80%, or the whole YC biz model falls apart, for obvious reasons.
Good sales and profits, or being acquired for a good price, or a good IPO, etc.
I think YC has the companies best interests in mind because that's just who they are how they were built.
But I don't think there has to be much alignment at all. One unicorn every couple of years is all that YC needs to "make their fund" since they don't have LPs to satisfy. And one every few years will also keep the applicants coming.
>One unicorn every couple of years is all that YC needs
True, but there is no ongoing guarantee of that, no matter how many times it has happened in the past, and no matter who claims it[1], be it a Midas-list VC or a serial founder or whoever.
Past performance is not a sure predictor of future performance. Just see any company's statutory annual report, and the ifs and buts in the legalese therein.
[1] If anyone claims that, just ask them to put their money where their mouth is. E.g. by paying the predicted unicorn future value for the stock, but now. And then see the disclaimers and caveats flowing fast and freely from their mouths.
Spray and pray has another name... venture capital. I think a lot of founders are waking up to the misalignment of interests between founders (growing a sustainable business) and VCs (dilution)
That has been happening for quite a while now, and has even been a topic on HN for some years now.
PG started YC partly because of that, in fact. See his early essays, including one called something like "A theory of VC suckage".
Edit: Found it:
Yes.
Although I would label it a bit differently, not plain "capital": human nature and group / organizational dynamics. That's the reason why many smart companies try to stay small, the reason for spinoffs, skunkworks, for creative destruction or reinvention a la HP (see the HP Way and other articles about them - of the time when they were in their prime decades ago, not now or recent).
And that is also the point of my comment in this other subthread, about the IBM, HP and Toyota Ways, Sam Walton / Walmart, Tom Peters, etc.:
Yes, but I was saying earlier that I didn't prefer the use of the word "capital", because it is abstract - a thing (money), not an actor. And I mentioned human nature i.e. people, who are real actors. Your use of the word "newcomers" (who are people, not money) says the same. Maybe just a matter of wording or interpretation.
That doesn't match what YC is doing at all. YC is trying to be a force multiplier to literally anyone in the world with an opportunity to create a great startup. Part of that involves expanding as rapidly as is feasible without breaking the system or diluting the effect. It is about creating wealth, not defending or maintaining it.
It has less to do with YC and more to do with the nature of success, network and accumulation of resources. What it has to do with the topic is that it has created an inequality where YC companies have an advantage through access to the network. You just have to look at OpenAI access model to understand how this creates a two tier environment. YC alum can pick up the phone and have access them same day just to fuck around and potentially make a new unicorn business. People on the outside? Good luck. Yes I understand that OpenAI isn’t a YC company but the same will apply to YC companies... OpenAI was just my personal most recent experience.
>misalignment of interests between founders (growing a sustainable business) and VCs (dilution)
Not all foundrrs are interested in growing a successful business. In fact, what with all the brainwashing that has been going on for years by VCs ("go big or go home", "10-bagger" - old, now it is "unicorn", or is there another more current mot du jour, ha ha?, "lifestyle business" passive-aggressive shaming, etc.), it's a wonder that anyone exposed to that shit still has the balls for doing a traditional business that relies on, you know, just honest sales, customers and profits. But there are still many who do (have the balls for it).
Who do you think bags the 10(x their investment)? VCs, not founders or emps.
I should have added: by VCs, to founders or prospective founders, for their own selfish vested interests, of course. The more dupes join the startup lottery, the more the "house"[1] (a.k.a. VCs) stands to gain, because it is a numbers game.
[1] Think Las Vegas.
In fact, top VC Fred Wilson wrote a blog post about this "lifestyle business" passive-aggressive shaming business a few years ago, and it had a ton of discussion in the comments. You can find it by a Google or blog search.
And this does not mean that I am advocating that no one should start or join a startup. I just mean, for your own sake, do your due diligence. It's not only companies or VCs who need to do that.
I see this as a natural progression of VC industry - the game is not about who can predict the winners and losers, but rather about capturing as much early stage equity on new business opportunities.
In this sense, YC acts as an index fund on startups. Traditionally the IPO process weeds out the fraudulent businesses, and YC's application process is supposed to function the same way (with obviously less diligence) so that the efficiency of passive index returns aren't exploited.
In the limit, YC would be essentially investing in the equity of the totality of the younger technology workforce (who have majority of their earnings and talent and capital lying in the future). This is a good investment.
Where it differs slightly from a "indexing" model is that YC is allowed to encourage portfolio companies to buy and sell from each other, much like how Berkshire Hathaway does the same for its portfolio companies.
> Traditionally the IPO process weeds out the fraudulent businesses, and YC's application process is supposed to function the same way (with obviously less diligence)
I wouldn't be so sure about that last part. YC has a small army of alumni and they're pretty clever, I would happily bet that their diligence capabilities far outshine anything applied to businesses during the IPO phase in all but the financial department.
They said the same thing to me about hackathons when we did 300, then 500, then 1000, then 2000. And I still think hackathons could scale more and benefit from doing so.
But it seems as if no one is bold enough to do so. YC is.
This quote from Sama echoes through my head constantly:
“The central learning of my career so far has been that you can and should scale up things that are working. The power of scale, and the emergent behavior that sometimes comes from it, is tremendous. I think about the potential energy of future scale for every investment I make. Most people seem terrible at this, so it’s another bug you can exploit.”
In my experience, hackathons don't scale. The value is lost when the resources are spread too thinly across hundreds or thousands of attendees. Mentors can't teach, and hackers can't get feedback. It becomes impossible for meaningful discussions to arise, and winners start optimizing for all the wrong things (i.e. fancy slideshows, needlessly complex designs, worthless ideas) because nobody ends up solving real problems. Worse yet, the hosts celebrate all the wrong metrics such as attendee count and lines of code written, as if those mean anything.
As a prospective YC applicant, I see every batch size increase as a dilution to the value of the incubator. Most of YC's content is already free online; the key value is the personalized insights from partners, access to a professional network, and co-experiencing starting a company with other early stage founders. These sorts of things scale linearly, at best.
In almost everyone's experience, almost everything doesn't scale. Figuring out how to make something scale is a rare event.
I say this having heard, while debating the potential of various startups, probably 10000 arguments for or against something being able to scale. In the end, no amount of wisdom makes you very good at predicting it. Everything doesn't scale until someone figures out how to make it scale. So you bet on smart, energetic founders to figure it out.
Often the scalable version looks different than the initial version. Maybe the million-person hackathon looks more like Repl.it than a room with laptops and teetering stacks of half-empty pizza boxes.
I take part in a decent number of game jams. A jam with 10-60 people is fun. A jam with 1000 people isn’t any different than just programming on your own, there are too many people to get a nice community vibe going. In small jams you make friends and chat constantly
Did the larger hackathons have any benefit, besides to prime the organizers for PM and "growth hacking" positions?
Thinking back to MHacks 2013, I know of more companies started by people who could have, but chose not to attend MHacks, than came out of the hackathon. And that's assuming company creation is even a good metric! I also don't know of _any_ company that thinks they have a good ROI on recruiting.
Perhaps no one is bold enough to do larger hackathons because they've realized hackathons are sham to inflate the organizers resumes.
Doesn't this presuppose that what works with n things will work equally well for 1000 * n things?
For example, the artisan workshops of Paris worked really well at making things but it turns out that they couldn't be scaled up to produce at an industrial scale.
The issue is a lack of leadership who're given adequate resources to reach a self-sustaining point - especially difficult as you're competing with relatively dumb money of the current status quo VC-finance industrial complex who're looking to maximize returns in 10 year periods, to pump and dump while putting as much pressure - extracting as much value as possible - from society.
If you extend the time horizon to 20-50 years with the right system, policy, and protocols in place to allow an exponential growth path - then you'll be "laughing to the bank;" Elon Musk is on this path because he understands the holistic, foundational principles, and the only limitation of how much he'll guide or lead success is his organizational and emotional regulation skills (stress management etc).
YC sees the path and has been working on organizational structures, created a great funnel for themselves. Elon similarly built up his nest egg through the work he's done and subsequent sales and paydays he's had - to then invest the substantial necessary investments into Tesla and SpaceX. It's really incredible to study to find the insights and nuances of how these seeds form and out of all the seeming chaos and pressures they can sprout, start blooming. The odds seem impossible, they however make it through the rigidity and conservation of the status quo - creativity seeming to lead the way for progress.
I wonder what this will mean for the 7% they take.
Quite a few people reduce that 7% to the price of the stage on demo day which I’m sure is less valuable if shared with many more people. I’m sure YC is happy with the same size chunk of more companies!
For the founders, is the YC network going to stay worth 7% of every company that joins it? Will founders get as much value from the network as before with much less spotlight?
If the value of YC goes down, it should be clear soon, because the valuation of YC startups on demo day will go down. That hasn’t been the case at all though - since 2010 when I first went through YC the typical valuations have pretty clearly been trending up.
I hope YC can keep scaling, because the number of startups is not fixed. I would like to live in a world where a startup is going public every day, where YC funds tens of thousands of startups every year. Maybe we can get there.
That would definitely be a misleading measure of this change’s success. Valuations have been rising steadily across VC, significantly so. I’m sure it would at YC regardless of this change as well. Founders will be speaking about how useful it is soon and we’ll most likely trust them. Hope they keep quality because it is awesome to have it be more inclusive!
>For the founders, is the YC network going to stay worth 7% of every company that joins it?
That 7% is not at all a single number. Effectively, it is 7% of the valuation of each company in YC, which can vary from very low, zero or maybe even negative, to Dropbox-like highs.
GP is talking about the equity cost to join the YC network, not how much money YC is able to get for that equity way down the line.
The question is whether increased participation will dilute the pool of VCs who come to demo day with their checkbooks, or if the network effects will scale.
Yes, I was quite aware of, and was referring to, that (the first clause of your first sentence), but also something more.
Maybe I did not make it clear. Will try to restate it better tomorrow.
Actually, now I think that your GP's question itself (to which I replied above) is not very clear or meaningful, or at least not clearly worded. Mea culpa, maybe. So won't add more.
From the sidelines it seems like "scaling YC" is similar to "scaling MIT/Harvard/Stanford degrees". Pretty good for the masses who can access it, but bad for alumni.
The early value of YC as I recall (I got rejected from the first three batches IIRC) was that it pulled back the curtain on the VC ecosystem, and transferred some power from the VCs to fledgling entrepreneurs.
Over time the value has shifted to 1) signalling credibility and 2) membership in a powerful network. That is very similar to something like and MBA from Harvard - you definitely learn tons, but the value of Harvard versus other mechanisms to learn the material.
Seems it's the exact opposite scenario? The value of VC was close mentorship and network building and with a mass of companies this will likely be diluted. Companies already out of YC have presumably found product-market fit and secured funding so their YC cachet is already less important. If the actual value of YC is name brand recognition maybe that brings up an important question about its utility.
More companies means less attention for the 7% you are giving away.
There are also more YC advisors. When I first went through YC in 2010, it was Paul Graham giving advice to everyone. Nowadays it's more like each company has a few partners that are focused on their industry, along with some generic advice from the weekly events. I actually think each startup gets more attention now, since there are more people giving out attention.
Maybe in Plato's Academy every student could be taught by Plato himself. But a modern college gives you a much better education by hiring many educators with different areas of specialty. Things have to change as they scale, but if YC scales right, things can actually get better.
Looking outside, YC has also been a key indicator that a startup might have higher chance to succeed than a typical startup. When scaling to hundreds/thousands of companies per batch, I feel like that indicator will no longer be as valid.
It would be very easy for us to expand the YC batch by being less selective in the companies we accept. However, we wouldn't knowingly do this because it would run directly against our own financial incentives, and also degrade the quality of the experience for founders.
The hard thing is to increase the batch size while also keeping the quality of companies the same or better. To do that, we need to attract more great applications every batch. That's what we need to do.
For a lot of people, it's hard to imagine how that would be possible, but actually YC still funds only a modest percentage of all the successful companies started every year, so there is a lot of room to grow.
It seems that we're doing it. By every metric we can measure, the YC companies we fund today seem more successful on average than in previous years. They're more likely to raise a Series A, more likely to make $1M / year in revenue, more likely to be worth $1B, etc.
Many people outside YC for years have thought that because we are growing, we must be becoming less selective. But actually within YC, we're more concerned about the opposite: that we risk becoming too selective and need to constantly fight against that.
> The hard thing is to increase the batch size while also keeping the quality of companies the same or better. To do that, we need to attract more great applications every batch. That's what we need to do.
You need to illustrate the path from tech employee -> founder for more people in some sort of go to resource. Why should an intelligent, capable person drop their $300k TC career when it looks like their chances of failing are 90%, and an opportunity cost of at least $1M, even if one gets into YC? What is one in for: hours, health insurance, managing employees, difficulty competing against entrenched companies, etc?
Unless you want to specifically filter out all candidates with a hint of risk-averseness or something else not explicit...
Aren’t the cited measures all lagging indicators? It might be that the batch size has now increased past the sweet spot but the impact won’t show up until they look to raise Series A.
On the other hand, the companies YC are funding today seem less impactful than the Reddits and Airbnbs of the past.
This is harder to measure, but that's the impression.
A few oppositions to this view. 1) Reddit and AirBnB were viewed to have very little impact when they started. Nobody wanted to stay on somebody elses couch, and we had Digg instead of Reddit. 2) YC is investing in more hard-tech companies.
I agree, there are lots of things where you say "why would YC invest in that??" particularly with so many SAAS companies, but then they take a flying leap on things like Boom, Flirty, Coinbase, etc etc.
YC started in the early-ish days of the internet, so most of the outlier successes were in the internet space. The major internet companies have probably already been founded, so YC needs to focus on what's next. It seems to me their straddling both sides, like most VCs are attempting to do.
I don't accept this premise. What data are you relying on to suggest YC participation is an indicator, much less a key indicator, of a higher chance of success than a "typical" startup?
Why not? Looks like the majority of the companies are international now so it makes perfect sense that the quality of the batch is still quite good, unless you think only SV folks are the smart good ones or something. It’s amazing to know that companies in Asia and Africa can essentially get the same footing as someone in SF.
We ran a summer camp program for college students for several years. It started with 40 college students and each year we started adding more people. What was interesting was that each year believed that it's group size was perfect, and that any bigger would just be too big. They said that at 40, 70, 120, 300 and beyond. I've never been able to fully understand why that is. But the fact that you get that at hackathons, summer camps and incubators alike, is really cool
Curious why YC hasn't added a third batch per year. Seems like a good way to scale faster along with increasing batch sizes. Eventually you could even have overlapping batches.
We've definitely talked about it. One of the downsides is that it's logistically quite complex to have overlapping batches. But it's still something we might do in the future.
There has to be space for a YC like company which lends similar credentials, but provides more personalized support.
I feel like this is backwards. Back in 2010 Paul Graham could advise every YC company himself. But if anything that was less personalized. Back then YC didn't have experts in biotechnology, in hardware, or in the Latin American market. Nowadays there are many more YC partners, with different areas of specialty, so you can get more personalized support for your company.
Caltech is smaller and just as prestigious. Amherst College is really small for the reputation it carries. In India, the IITs are big, but IISc has a small intake + equivalent cachet. For design, you have RISD vs USC/CMU and Juilliard vs Berklee for performing arts.
As someone who lost out big on a previous startup situation because I wouldn’t move to San Francisco, this stings a little. In retrospect, SF really would have been the best place at the time, but I don’t believe it was the only place to do a startup like it was portrayed.
COVID really forced a shakeup of the status quo with remote work. We all saw that coming.
What I didn’t see coming was the massive amount of capital floating around in this COVID economy. Investors previously had the upper hand because they controlled a scarce resource, but now they’re all fighting to get allocations in interesting startups. Investors have to branch out of the usual startup cities to find deals.
Should be interesting for the startup world. I don’t see SF declining as a startup hotspot, but at least it’s no longer the only acceptable option.
>What I didn’t see coming was the massive amount of capital floating around in this COVID economy
This is not a new phenomenon and certainly not caused by COVID. For years now you could raise a few million by having Stanford/MIT/Berkeley/etc somewhere on your resume and a half baked idea about AI or Blockchain
COVID forced so many things, including an acceleration of a trend toward distributed advice. It's entirely possible (probable?) SF was the best place to start a company. It probably still is 2-10x better than the next startup hub for a complete outsider to break into startups. However, what I think is changing is that for insiders, ie ex big tech employees, or former founders, SF / SFBA at large are no longer requisite.
YC always required teams to move to the bay to maximize their success chances. But if almost everyone in tech is remote, then they aren’t losing ground compared to other companies working remote. It’s similar to saying “you have to be on site if you want to get promoted faster” when almost everyone is on site and you are the only remote person. When everyone is remote, the equation changes.
Looks like this perception that has recently come about is accurate then:
> Has Y Combinator lost its way when the latest company is a Mac only widget? (March 11, 2021) [0]
> Y Combinator has lost its soul: A YC founder's perspective (8 months ago) [1]
Seems like by scaling YC, the brand itself becomes diluted. I am not sure whether companies like Airbnb, Dropbox etc will still be able to come out of YC except by mere chance that is not greater than the probability of coming out of other VC funds. And then at that point, why choose YC anymore?
This implies that YC will continue to offer a remote option: "In a post-COVID world many of the changes we were forced to implement will live on just as several pre-pandemic experiences will return."
Is that what this is saying? Or is YC saying that they are going back to on-site after the summer batch?
sounds like once again, YC is choosing to dilute the quality of their offering in order to capture more of the VC pie. I suppose this inevitable for any entity in a competitive space, but it's still disappointing to see.
nevertheless, everytime YC does this, it makes every other accelerator program out there more valuable comparatively.
Crazy to think it’s dilution now that more atypical companies are funded? I also have genuine concerns with the quality of evaluation in bio fields but when we make criticism that can also be explained by bias then we critics have a burden to clarify if we gave enough thought to that possibility that we are just offended by the new.
> This admissions team is solely focused on the all-important problem of sifting through the mountain of inbound applicants to determine who we should fund each batch and ensure we don’t overlook incredible founders.
I would rather they did overlook incredible founders. Getting a rejection shouldn't mean you were judged not to be ready. It was also nice when there could be only a couple Launch HN's a week, at most.
> It was also nice when there could be only a couple Launch HN's a week, at most
Ah, you've touched on something that I've been worrying about. Jared's made a great case (https://news.ycombinator.com/item?id=26557978) about how YC can grow the resources it provides to startups, but HN front page space is one resource with a hard limit. That means that as YC batches continue to expand, the percentage of YC startups who do a Launch HN is going to have to decrease.
When are we going to hit that point? We've probably hit it already. During W21 we've been allowing two YC startups to launch on most days—but I think that's too much. My gut feeling is that 2 launches a day is ok during the run up to Demo Day (i.e. a week or two before), but not during the entire batch. The question is what the criteria should be for deciding which startups get a Launch HN. In the past it was simply "email the mods and they'll schedule you". Now that (edit: close to) 150 startups are doing that in a batch, we need something else to narrow it down.
How are you scaling the editorial work you do for these? I saw the internal threads for Fly, and the work you put in was significant, and you can see what looks like similar guidance in a lot of the good Launch posts. You have to be aware of how valuable that work is. Have you thought about building it out?
Is there a difference between Launch HN and Show HN? I love how you have "Show HN" setup. Anytime I want some positivity in my life I just hop on over there. It's very inspiring to see people always building new things.
Well, when we first tried remote companies, it was ten years ago. Remote tools have come a long way - zoom and slack didn't exist back then.
Also, honestly, we didn't try hard enough before covid forced us to really invest in building a great remote experience. After covid started, we put all of YC's resources behind this, and built custom software and redesigned the whole batch experience to work well remotely. That's what it took.
Thanks for the honest reflection. It's interesting to consider how long YC might have continued to dismiss the remote option if Covid-19 had not appeared. Maybe another decade?
It's also interesting to consider other areas where the cost-benefit ratio fluctuates depending on the level of effort - and that changes over time. For example, the US Air Force would probably say that drone aircraft are becoming important, but that the war in Afghanistan shows the US still needs aircraft with a pilot in the cockpit. However, if you gave the Air Force an ultimatum and said that in 12 months it had to fight a mock battle with only unmanned aircraft - and all officers would be demoted if they lost - then the US might develop a fighting capability far in excess of its current ability.
It's vastly easier to build it and make it successful when there is sudden demand due to external market forces than to try to plead with people to try it when people aren't interested.
Why should prestige matter?
Too many Corporate Ladder Climbers have used YC as a resume point to get that next promotion at a corporation b/c they view it as more prestigious than things like a graduate degree.
That's not a positive for YC, it's a negative. Corporate Ladder Climbers block out those that actually want to do a startup.
As long as the quality of the program remains high, and that is entirely dependent on the quality of the partners, then the program can scale.
Seen people list on linkedin, twitter, and others places the batch they are in without listing the company it was with. Who cares what we tried to build look I was in Ycombinator!
TLDR Going virtual has allowed YC to scale beyond physical limitations and fund more companies than ever before without sacrificing execution and value delivery.
Which is the same generally for the Bay Area VC circuit.
Same VCs that a year ago "didn't feel like [they] could provide value" to remote companies, are suddenly flooding your inbox saying they only believe in remote companies going forward...
Adding too many users, too quickly, led to painful outages and failures I won’t ever forget.
One of the things you see with gifted kids -- and this goes double with twice exceptional kids -- is that they tend to find their limits by metaphorically crashing into a wall at a hundred miles per hour. There is a cost to that and it leaves a lot of scars and results in a lot of baggage.
The reason they do that is because their abilities are so far outside the norm that pushing it to the point of failure is the only meaningful test for what their abilities and the limits of those abilities really are. Finding those limits can be enormously valuable.
If very talented kids only do as much as most people predict is possible based on averages, then those kids leave a lot on the table, so to speak, and they tend to have very frustrating lives. They long for more and they tend to become a case of "idle hands are the devil's workshop." They miss out on opportunities by underestimating themselves and their own capacity and end up, instead, aggravating the hell out of people around them and directing their brilliance and energies into petty and often unconstructive pursuits out of boredom.
But catastrophic failure can leave permanent limits that are more impairing than underestimating themselves. It can do so much harm that the person never really recovers and they will leave a wide berth around X because they never want to be that badly burned again.
So the challenge -- and this was something I was good at as a parent -- is finding ways to help extraordinary kids hit their own natural point of failure without it being catastrophic.
Metaphorically, you can think of it as putting a net below the high wire act. There's something to catch you when you fall. You learn from the fall instead of being broken and crippled because of it.
So startups, which grow rapidly, are kind of the business world equivalent of that and what I see in reading about how YC manages its own growth is that, most likely, they are doing for businesses what I did as a parent: Helping people with extraordinary potential to find their limits while avoiding catastrophic failure and mitigating the costs involved in actually finding their limits.
Learning to "Fail fast" but not catastrophically. To have smaller failures that teach you where you need to quit.
There's a book called Seeing like a state and it talks about recipes that say "Heat it until the smoke point" which means "heat it until just before it would burn" and this implicitly means you've burned it a few times. You know where the smoke point is and what that looks like without it actually burning because you have gone too far at some point.
Being too afraid of failure is actively problematic in designing functional systems. Being not afraid enough of the consequences of catastrophic failure can result in the business going bankrupt, never recovering and simply dying.
It's actually really, really hard to help people learn how to fail well. It's hard to teach people how valuable failure is to comprehending real world limits -- what flies and what doesn't -- while simultaneously helping them not learn that at such a high cost that they will never try again or never succeed again if they do screw up their courage to try.
For many people, having that modeled for them will, itself, be enormously valuable and it's something that is likely implicitly taught by example more than explicitly taught. I say that because the fact that I do that well as a parent is one of the reasons I began blogging and I've never really felt that any of my parenting blogs gelled and they didn't gel in part because people don't know how to measure the disasters that didn't happen, so if you tell people "I did X and I did it brilliantly well and the evidence is the lack of catastrophes." people respond to that dismissively. They don't give you credit for mitigating the catastrophes that should have happened but didn't.
I imagine that factors into why some people seem so willing to scoff at YC and be dismissive. Yes, you can succeed at a business without going through YC and if you can pull that off, you may even be better off having not given up any equity, etc.
But lots of people aren't going to succeed on their own efforts with no mentoring and it's the mentoring more than the money that is the make or break for a lot of YC companies.
Because I don't need it. Unless you're in an industry which is fundamentally capital intensive, or you absolutely need to hire staff very early on, capital limitations are actually a good thing. My first startup (which failed) was funded, but now I find I make better decisions on a shoestring budget. You really are forced to be creative and cut the fat to make things work. It's also a natural inhibitor to growing too fast. I find my thinking is clearer when I know I cannot spend more than I earn.
True "networking" is done on the basis of trust, merit, and warmth of the intro, not on having more people in your batch to spam. This article gave the example of finding a contact at Apple to get something done. But the larger the batch size, the less warm the intro you can get/offer. Why should I provide an intro to a random other YC member whom I have no relationship with? At some point it becomes about as valuable as LinkedIn.
If I actually felt that getting into YC would help me grow faster or better, or I really needed access to capital, then I would do it. But so far I feel like it would just be a distraction.