Hi, I work at YC. I think this article is a bit misleading, so I wanted to take the opportunity to give you some of the data. I'm happy to answer any questions on this topic.
1) YC's acceptance rate for applications has remained basically constant since 2015 (< 2%). This batch is not bigger because we accepted a higher percentage, but because we got way more applications. The primary reason we got more applications is that over 15K companies participated in our startupschool.org program and many of them applied to YC. Our general policy at YC is to grow the batch size proportional with the number of good applications we get, and this larger batch is just a natural consequence of that policy.
2) We have been wanting to move demo day to a new larger venue for a long time now. The reason is not that there are too many startups, but that there are too many investors who want to come. We have enough demand from investors to fill the previous demo day auditorium several times over, and this new space means we can allow many more investors to come, which is better for the companies.
3) As the batch at YC has grown, we've grown the number of partners proportionally and plan to continue to do that. The ratio of companies to partners is actually lower now than it was a few years ago, and we've increased the amount of time we spend per company.
4) I think the ultimate measure founders should care about - and certainly the one we do - is the success rate of YC companies on average. If we grew the YC batch and the success rate went down, that would be bad. So this is something we track extremely carefully to make sure that does not happen. And so far, it hasn't. Based on the last 1-2 years of companies, the success rate of YC companies is the highest it's ever been.
Also for general background, I'd really recommend reading a great short statement Paul Graham wrote about why we think growing YC is better for both us and the founders: https://www.ycombinator.com/atyc/#size
Thank you for taking the time to write this. I appreciate the info, and while this is not meant as a criticism I am curious how you measure for success.
> 4) I think the ultimate measure founders should care about - and certainly the one we do - is the success rate of YC companies on average. If we grew the YC batch and the success rate went down, that would be bad. So this is something we track extremely carefully to make sure that does not happen. And so far, it hasn't. Based on the last 1-2 years of companies, the success rate of YC companies is the highest it's ever been.
If fundraising at a higher valuation is one of the components used to determine success, I wonder how much the frothier market could contribute to being misleading here? Obviously a smaller cohort wouldn't necessarily solve this and I realize we can't really control for macroeconomic factors, but I could see it skewing the data (depending on how you measure it). Of course, if success is measured simply by liquid ROI my point is moot.
You guys have all the data and know way more than I do, but it seems YC has moved away from funding scrappier startups that might survive an economic setback whereas the much more growth-at-any-cost companies may not survive a hiccup in funding quite so easily.
Again, this is just a thought and you have all the data, so I don't pretend to be as informed as you.
> Based on the last 1-2 years of companies, the success rate of YC companies is the highest it's ever been.
But what constitutes a “successful” outcome? I assume it is not merely a monetary measure, because as we know, just because something is financially successful doesn’t mean it’s good for us or for the planet. These days it’s even debatable if Facebook should be considered a success (for anyone except Mark Zuckerberg).
So what is the measure of success? And can you really make an estimation of that 1-2 years after founding, as you have done?
I have no opinion or interest in the size of YC batches. But just wanted to point out that this:
>The primary reason we got more applications is that over 15K companies participated in our startupschool.org program
Comes across as insincere and hurts the credibility of the rest of your response. It’s just not plausible that a brief online course made a major difference in the number of YC worthy companies out there. Just go with the real reason. (Eg. We have more money and partners, we happened to get a strong application batch, etc.)
Related/meta question: despite the increase in YC cohort sizes, has anyone else noticed a sharp drop in the number of Launch HNs / YC Startup Launch Announcements on HN?
#standardSQL
SELECT TIMESTAMP_TRUNC(timestamp, MONTH) as month_posted,
COUNT(*) as num_posts_gte_5
FROM `bigquery-public-data.hacker_news.full`
WHERE REGEXP_CONTAINS(title, 'YC [S|W][0-9]{2}')
AND score >= 5
AND timestamp >= '2015-01-01'
GROUP BY 1
ORDER BY 1
I think that's because there are a lot more bio/hard science startups now, and fewer pure software plays. Pure software plays are great for a Launch HN, but the bio and hard science ones probably don't see the benefit, and also have longer cycles to launch.
I also added a tab tabulating YC Job posts on HN; surprisingly they're downtrending too, although not as seasonal as the YC Launches (which makes sense).
Regarding class size, the incentives are not aligned between the incubator and the startups. For the incubator, the marginal cost of adding one more startup is almost zero, but the chance that you might miss out on the next unicorn is big. So you grow your class size.
For the entrepreneur, the larger class size dilutes you. Yes, the incubator can scale mentoring reasonably well, but the visibility and prestige of pitching at Demo Day is going down.
If YC is graduating 400 startups per year, it's fair to say hundreds of them will not lead to anything. I don't have a good solution for this, each actor is trying to maximize their self-interest.
There are new funding models that have popped up just in the last month or so e.g. Earnest Capital and TinySeed. I suspect for many of these companies they would be better served by those models, which vary but are essentially designed with no expectation that the company must march toward "Unicorn" status to be considered a success.
The marginal cost of an additional startup through YC is definitely not zero. Just look at how many more partners there are now compared to when batch sizes were smaller.
You’re right that it might be lower than average cost, otherwise batching wouldnt make sense.
> For the entrepreneur, the larger class size dilutes you. Yes, the incubator can scale mentoring reasonably well, but the visibility and prestige of pitching at Demo Day is going down.
I don't think that's true. For one, as an entrepreneur, you get access to a bunch of people going through the same things you are, but in totally different areas, so you get a greater diversity of opinion. And as for dilution, I don't think that's the case either. They have a lot more investors now, more than they can accommodate, so there is no shortage of attention.
The value YC sells for $120k and 7% (the standard YC deal) is “exposure”. It’s been YC’s justification for this staggeringly expensive proposition for over a decade. Having more companies in the cohort, means less exposure, and thus even less upside.
It’s a market. YC isn’t the only accelerator out there, and if the proposition is returning less than before, then the correct solution is to not accept the YC deal.
Startups get a better experience, and Sam Altman learns the lesson about overextending. Eventually, the market will correct.
As someone who has sat through a bunch of demo days: No I don't think it's too big. It's a lot more diverse now. Back in the day, everything was a software startup. Now they have a bunch of bio and hard science and bigger startups that have longer cycles.
Not every investor will invest in every space they cover, so having two stages probably won't be that big a deal. Even if a firm invests in multiple categories, they probably have partners that specialize in different areas and will go to their respective stages.
From what it looks like from the outside, they are basically running multiple parallel tracks that get the added benefit of sharing a timeline and having founders in totally different areas to talk to as well as founders in their own area.
Maybe this is partially a personality thing, but my biggest fear with starting a VC-backed co is that you're effectively trapped as soon as you accept money even if your company goes nowhere. If your burn rate is low, you could just exist for years without accomplishing much of anything.
I actually have essentially such a thing.. I started it last class, I completely randomly select 10 YC companies and invest $50K in each at their current demo day terms. All accepted the investment last time so it should actually be a valid random sampling. If you’re an accredited investor and possibly interested in joining this “lucky fund” for W19 (I’m doing it again), PM me!
While a pure YC ETF doesn't exist, there are several YC demo day funds that approximate it. Both FundersClub and AngelList run funds you can invest in every batch that invest in many of the YC companies.
Too big for what? Without some qualification, the question doesn't make sense. Is it too big for it to be worthwhile to YC itself? YC obviously doesn't think so. Is too big for startups to feel like they are getting a good deal? You'd have to poll the startups themselves and find out. Is it too big for investors? No, investors like having a big funnel.
As an investor, having 200 startups to comb through is similar to being an employer with 200 resumes to choose from. 200 resumes is better than 100. It's your job to filter and choose the ones you're interested in.
Unfortunately we can't open the video stream to the public because many of the companies share confidential information that they don't want to be publicly accessible (in particular, visible to their competitors).
The age of prestigious incubators and accelerators is coming to an end IMO.
As we wrap up the 2010s, I feel that a lot of the entrepreneurial wave in this decade was catalyzed by the founding of mobile app stores, the network effects of expanding social medias and cloud services making software deployments easier than ever.
Incubators seemed well poised to help this flood of new entrepreneurs navigate the changing landscapes and get exposure to investors, but by now people have become more savvy and this is mostly a solved problem.
Investors are also well aware by now that incubators do not magically produce unicorns or even great companies, and are looking for better returns elsewhere. Demo Days are mostly a lazy way to sit and listen to a bunch of pitches without really giving a fuck. I know at one demo day a couple of investors spent most of their time talking in the hallway while founders pitched on. Investors know all your tricks to make your company seem more appetizing: fake appointments in your calendars, strategically chosen metrics, name dropping, paper trails, etc...
[+] [-] snowmaker|7 years ago|reply
1) YC's acceptance rate for applications has remained basically constant since 2015 (< 2%). This batch is not bigger because we accepted a higher percentage, but because we got way more applications. The primary reason we got more applications is that over 15K companies participated in our startupschool.org program and many of them applied to YC. Our general policy at YC is to grow the batch size proportional with the number of good applications we get, and this larger batch is just a natural consequence of that policy.
2) We have been wanting to move demo day to a new larger venue for a long time now. The reason is not that there are too many startups, but that there are too many investors who want to come. We have enough demand from investors to fill the previous demo day auditorium several times over, and this new space means we can allow many more investors to come, which is better for the companies.
3) As the batch at YC has grown, we've grown the number of partners proportionally and plan to continue to do that. The ratio of companies to partners is actually lower now than it was a few years ago, and we've increased the amount of time we spend per company.
4) I think the ultimate measure founders should care about - and certainly the one we do - is the success rate of YC companies on average. If we grew the YC batch and the success rate went down, that would be bad. So this is something we track extremely carefully to make sure that does not happen. And so far, it hasn't. Based on the last 1-2 years of companies, the success rate of YC companies is the highest it's ever been.
Also for general background, I'd really recommend reading a great short statement Paul Graham wrote about why we think growing YC is better for both us and the founders: https://www.ycombinator.com/atyc/#size
[+] [-] Judgmentality|7 years ago|reply
Thank you for taking the time to write this. I appreciate the info, and while this is not meant as a criticism I am curious how you measure for success.
> 4) I think the ultimate measure founders should care about - and certainly the one we do - is the success rate of YC companies on average. If we grew the YC batch and the success rate went down, that would be bad. So this is something we track extremely carefully to make sure that does not happen. And so far, it hasn't. Based on the last 1-2 years of companies, the success rate of YC companies is the highest it's ever been.
If fundraising at a higher valuation is one of the components used to determine success, I wonder how much the frothier market could contribute to being misleading here? Obviously a smaller cohort wouldn't necessarily solve this and I realize we can't really control for macroeconomic factors, but I could see it skewing the data (depending on how you measure it). Of course, if success is measured simply by liquid ROI my point is moot.
You guys have all the data and know way more than I do, but it seems YC has moved away from funding scrappier startups that might survive an economic setback whereas the much more growth-at-any-cost companies may not survive a hiccup in funding quite so easily.
Again, this is just a thought and you have all the data, so I don't pretend to be as informed as you.
[+] [-] paulcole|7 years ago|reply
[+] [-] unknown|7 years ago|reply
[deleted]
[+] [-] ferrelty|7 years ago|reply
But what constitutes a “successful” outcome? I assume it is not merely a monetary measure, because as we know, just because something is financially successful doesn’t mean it’s good for us or for the planet. These days it’s even debatable if Facebook should be considered a success (for anyone except Mark Zuckerberg).
So what is the measure of success? And can you really make an estimation of that 1-2 years after founding, as you have done?
[+] [-] rajacombinator|7 years ago|reply
>The primary reason we got more applications is that over 15K companies participated in our startupschool.org program
Comes across as insincere and hurts the credibility of the rest of your response. It’s just not plausible that a brief online course made a major difference in the number of YC worthy companies out there. Just go with the real reason. (Eg. We have more money and partners, we happened to get a strong application batch, etc.)
[+] [-] minimaxir|7 years ago|reply
EDIT: Checked the data and yep, there's a drop: https://docs.google.com/spreadsheets/d/1EBcI3Jm2I9Kj_JMGyRnN...
BigQuery:
[+] [-] jedberg|7 years ago|reply
[+] [-] kozikow|7 years ago|reply
It's not unusual now to see companies well past launch or even product market fit prior to YC.
[+] [-] minimaxir|7 years ago|reply
[+] [-] toomuchtodo|7 years ago|reply
[+] [-] unknown|7 years ago|reply
[deleted]
[+] [-] alain94040|7 years ago|reply
For the entrepreneur, the larger class size dilutes you. Yes, the incubator can scale mentoring reasonably well, but the visibility and prestige of pitching at Demo Day is going down.
If YC is graduating 400 startups per year, it's fair to say hundreds of them will not lead to anything. I don't have a good solution for this, each actor is trying to maximize their self-interest.
[+] [-] temp1928384|7 years ago|reply
[+] [-] prickledpear|7 years ago|reply
If other accelerators compete with YC, entrepreneurs may choose to do business with an accelerator that selects smaller classes.
[+] [-] seizethecheese|7 years ago|reply
You’re right that it might be lower than average cost, otherwise batching wouldnt make sense.
[+] [-] jedberg|7 years ago|reply
I don't think that's true. For one, as an entrepreneur, you get access to a bunch of people going through the same things you are, but in totally different areas, so you get a greater diversity of opinion. And as for dilution, I don't think that's the case either. They have a lot more investors now, more than they can accommodate, so there is no shortage of attention.
[+] [-] jonathankoren|7 years ago|reply
It’s a market. YC isn’t the only accelerator out there, and if the proposition is returning less than before, then the correct solution is to not accept the YC deal.
Startups get a better experience, and Sam Altman learns the lesson about overextending. Eventually, the market will correct.
cue the problem solved song
[+] [-] rhizome|7 years ago|reply
If selection skill counts for nothing, sure, but by your logic why not fund all comers? Where do you draw the FOMO line?
[+] [-] jedberg|7 years ago|reply
Not every investor will invest in every space they cover, so having two stages probably won't be that big a deal. Even if a firm invests in multiple categories, they probably have partners that specialize in different areas and will go to their respective stages.
From what it looks like from the outside, they are basically running multiple parallel tracks that get the added benefit of sharing a timeline and having founders in totally different areas to talk to as well as founders in their own area.
Seems like an advantage for everyone.
[+] [-] temp1928384|7 years ago|reply
[+] [-] kozikow|7 years ago|reply
So lingering for many years is not so great of an option.
[+] [-] temp1928384|7 years ago|reply
[+] [-] zhoujianfu|7 years ago|reply
[+] [-] snowmaker|7 years ago|reply
[+] [-] mrnobody_67|7 years ago|reply
[+] [-] georgek|7 years ago|reply
[+] [-] Kye|7 years ago|reply
[+] [-] diego|7 years ago|reply
As an investor, having 200 startups to comb through is similar to being an employer with 200 resumes to choose from. 200 resumes is better than 100. It's your job to filter and choose the ones you're interested in.
[+] [-] an4rchy|7 years ago|reply
With this change, would it be possible to get a live stream or even a post-event Youtube video for the rest of the community?
If not, would appreciate any insights into if/why this is a bad idea.
[+] [-] snowmaker|7 years ago|reply
If you want to see what it's like, this TC video does an excellent job of that: https://techcrunch.com/video/behind-the-scenes-at-yc-demo-da...
[+] [-] plaidfuji|7 years ago|reply
[+] [-] crispytx|7 years ago|reply
[+] [-] ykevinator|7 years ago|reply
[+] [-] ngokevin|7 years ago|reply
[+] [-] jotto|7 years ago|reply
[+] [-] minimaxir|7 years ago|reply
A better URL for this submission is: https://techcrunch.com/2019/02/11/y-combinators-latest-batch...
[+] [-] vb6lives|7 years ago|reply
[+] [-] Hydraulix989|7 years ago|reply
[+] [-] unknown|7 years ago|reply
[deleted]
[+] [-] Dylan16807|7 years ago|reply
[+] [-] ukyrgf|7 years ago|reply
Right now the title is "Y Combinator’s latest batch of startups is too big for one Demo Day stage".
[+] [-] aabajian|7 years ago|reply
[deleted]
[+] [-] supermw|7 years ago|reply
As we wrap up the 2010s, I feel that a lot of the entrepreneurial wave in this decade was catalyzed by the founding of mobile app stores, the network effects of expanding social medias and cloud services making software deployments easier than ever.
Incubators seemed well poised to help this flood of new entrepreneurs navigate the changing landscapes and get exposure to investors, but by now people have become more savvy and this is mostly a solved problem.
Investors are also well aware by now that incubators do not magically produce unicorns or even great companies, and are looking for better returns elsewhere. Demo Days are mostly a lazy way to sit and listen to a bunch of pitches without really giving a fuck. I know at one demo day a couple of investors spent most of their time talking in the hallway while founders pitched on. Investors know all your tricks to make your company seem more appetizing: fake appointments in your calendars, strategically chosen metrics, name dropping, paper trails, etc...