The new YC: As it tries to scale from 200 to 2,000 companies

http://www.businessinsider.com/sam-altman-paul-buchheit-ali-roghawni-on-revamped-y-combinator-2016-2

by julianpye • 10 years ago

84 59 10 years ago

julianpye• 10 years ago

The first batch of YC founders photo is a bit heartbreaking. Aaron next to Sam next to pg and Jessica on the left. The latter batches benefited from the learnings, but this batch must have been so much more personal.

dineshp2• 10 years ago

Agreed. The personal touch would likely have been lost as YC funds more companies.

And seeing Aaron in his entrepreneurial days, still makes me tear up. It makes me wonder what might have been possible if not for the tragic ending.

"Apparently the world is a ridiculous place".

doctorcroc3• 10 years ago

Agreed, and the lack of diversity is also a bit heartbreaking. No women, and no under-represented minorities (as far as I can tell). I'm sure YC has tried to fix that in present classes, but still funny that the stereotype of silicon valley is grounded in real life.

jacquesm3• 10 years ago

You could only make that claim if you knew who applied to YC that first batch and was rejected. Do you actually know or is this simply a way of harping on a subject that is dear to you and is there someone / some group that you feel got left out on purpose?

ameyamk• 10 years ago

Why does YC needs to grow into 2000 companies/ year program? I feel they should tackle it like a University. Stanford does not try to grow 10x from 20k students to 200k students.

Part of the appeal is exclusivity (besides of course its hard to scale).

I'd rather see YC at 200-300 companies a year - and ensuring these companies continue to grow/ succeed after the batch is over rather than churning out 1000 more.

akshatpradhan• 10 years ago

Part of the appeal is exclusivity

There are too many complex problems in the world that need to be solved for the desire of exclusivity to exist.

I think 2000 companies/year is too few. There are so many good problems that need to be solved and they just need a little bit of midas's touch. This sounds pretty reasonable to me.

ThomPete4• 10 years ago

There are indeed. But is YC really going after those?

As far as I understand they are def interested in research etc. But I have still to see any real complex or hard problems they are trying to solve. Or am I missing something?

sedachv2• 10 years ago

I think 2000 companies/year is too few.

Between NYSE and Nasdaq there are about 3,700 publicly traded companies in the United States total right now. The current funding paradigm will have to change to accommodate that many companies (more IPOs? long-term private funds? who knows).

tim3332• 10 years ago

"build something people want"

Do people want 2000 different new tech things each year?

wslh2• 10 years ago

Since nobody can accurately predict which companies will succeed, putting more companies in the pipeline will give you , generally speaking, more companies at the end.

stfu• 10 years ago

But in the end they are not able to pay the same amount of attention to 2000 startups vs 200. Or having really a hard time providing the same quality team.

Does that in the end mean that it doesn't really matter for the success of a YCombinator startup that they can just walk randomly into Paul Graham's office and ask for advice?

paulsutter2• 10 years ago

Apparently exclusivity isn't one of their goals.

What's the practical value of exclusivity? Would you ever choose exclusivity over effectiveness?

smt883• 10 years ago

Exclusivity has so much practical value than the entire university system in the US is built around it. If you participate in a program that's considered to be exclusive, you will have an easier time standing out when competing in the future. It applies to people, and it applies to companies.

salmonet• 10 years ago

Force-fitting their old model into today doesn't make sense. YC has different core competencies now and the startup landscape is different. The separate early-stage fellowship won't dilute the brand at all, YC Core will still be as prestigious as it always was because it will still be exclusive.

jacquesm3• 10 years ago

Because if they don't expand acceptance with the number of applications being done for every class they would end up being a program that you have almost no chance of getting into if you apply. They might miss out on quality that way, there is most likely a fairly fixed relationship between #applicants and #accepts in order to make the formula work.

danieltillett2• 10 years ago

Yes Jacques this is a very good point. If YC is perceived to be a total lottery then nobody with any talent will bother applying.

Personally I think this problem is best solved by making the selection criteria narrower. Rather than expanding, YC should be narrowing its focus. Of course this requires that they narrow to the right area which is very hard problem.

prawn• 10 years ago

Why 200-300? Why not 20-30 so they can really focus?

And if the answer is 200-300 because it seems like something they could realistically support, then what's against them scaling to support 2000-3000? Especially with their inclusion of overseas companies likely to tackle broader markets.

crdb• 10 years ago

Because angel investing is a numbers game, and extending funding beyond those who traditionally have access to it has always been YC's edge (whether or not they saw it as such). You can fund 1,000 companies for 30k and if one becomes Uber [3] and all the others fail your 7% stake might be worth as much as 145x your initial investment. 30 million is only a half dozen Yahoo parties, many countries have wasted multiples of that on fancy "entrepreneurship encouraging" offices.

When Georges Doriot financed DEC in 1957 [1], he got 70% for his $70,000 ($600,000 in 2016 [2]). These were proven scientists with a track record of successful research. It was considered a landmark deal because it was not blue chip, and the founders were not connected. How many smart people languished in corporate or government labs instead of starting another DEC or Microsoft? What was the opportunity cost of the lack of capital availability?

Then you have YC v1.0, which invested $20k for 7%... which we easily forget today was a non-controlling stake, and thus groundbreaking (or at least trend-setting). YC set the terms for the rest of the world to follow (slowly - I still meet, here in Singapore, angels who want complete control from the seed round onwards). Founders could actually still control their company after taking outside money!

Of course there were the ancillary benefits of the network and so on, but to me the really groundbreaking idea was also that significant expansion of the number of companies that could get funded. Working class scholar at MIT whose daddy doesn't know Tim Draper? No worries, you just need to fill in the form, YC will get in touch.

Competition, and inflation (both general inflation, and of opportunity cost from the two tech booms) drove that up to $120k, still for 7% - which even today is a very good deal for a pre-product company, and allowed thousands of founders to have access to a much better deal than they would otherwise.

Who is left out at this point? Pre-product companies that need money to get the MVP done, and foreign companies where seed investment is done on much worse terms than in the US for a variety of reasons that are regularly discussed here. They don't need much; as has been amply written about you can get ramen profitable on 20-50k with many ideas, and this is literally years of living costs in much of the world. But that capital is just not available because wealth is concentrated in (often foreign) land, bonds and blue chip companies. 1.5% is laughably small, doubly so when you consider this is basically free money unless you become a fairly decent success.

YC is not the only company who understands this. The very idea of 500 Startups - "if you have an angel, you're eligible" - is about numbers over any attempt at reading the future.

I can't wait to see how it works out. And how people will copy it. And I love the philosophy of it: YC is expressly saying that no, not all talent is concentrated at "Stanford" - that there are many variables in life (such as geographical location or social background) that will impede a large number of talented people from having access to the resources necessary to capitalise on that talent.

[1] https://en.wikipedia.org/wiki/Digital_Equipment_Corporation#...

[2] http://www.dollartimes.com/inflation/inflation.php?amount=70...

[3] http://www.bloomberg.com/news/articles/2015-12-03/uber-raise...

briantmaurer• 10 years ago

The important part of exclusivity is not in number, but in quality.

nzoschke2• 10 years ago

YC offers funding, advice, and a network.

This can scale to 2000 companies. If YC does they will make more money and have more global impact.

They don't build your business, team or really do anything to guarantee your growth or success.

Success has to come from founders.

johnm1019• 10 years ago

I think it's great that YC is thinking big and taking a risk by doing something no one has done before. The US economy wins whether they succeed or fail at this experiment, and the value creation if they succeed will be huge.

dillchen• 10 years ago

I feel they should tackle it like a University. Stanford...

YC is still an order of a magnitude smaller than YC. 200 startups per year, so maybe 600 founders at the max. Even if YC is trying to build in exclusivity, there's much to be gained before they hit Stanford's scale.

Also, I don't think it will be that hard to scale advice for their startups. All that's needed is to add more partners. Although this might complicate their org/management structure.

timrpeterson• 10 years ago

Is the success scaling? My gut says no.

elliotec2• 10 years ago

It seems like market saturation of YC companies will dilute their brand. Better for everyone else I guess.

andrewchambers• 10 years ago

Maybe, but they control who they accept, so if quality drops it is entirely due to the selection process, not due to the number of accepted companies.

jacquesm3• 10 years ago

It could drop too if the applications drop in quality and YC continues to accept companies into their program. The best way to analyze this is to figure out if the ratio of big hits to applicants is dropping relative to the ratio of big hits in a given 6 month period.

Animats• 10 years ago

Are there that many good ideas?

SwellJoe• 10 years ago

How many technology companies are there in the world?

ProAm• 10 years ago

That's a completely different question

Scarblac• 10 years ago

What percentage of those would be helped by VC investment?

The vast majority of tech companies are better off staying small and being normal companies.

smt883• 10 years ago

There are many, many more than 2,000 good ideas per year. The problem is that navigating human organizations (societies, markets, etc.) is very difficult. A good idea doesn't turn into a good business without the right combination of talent, timing, location, funding, etc.

So the issue isn't that there aren't enough good ideas. The issue is that there may not be enough teams matched with the right circumstances to fill out a successful cohort.

But the business model of venture capital isn't to come even close to getting are return from 100% of investments, so the question of whether there are 2,000 good companies a year is totally irrelevant. All YC needs to generate a return is to have 1 or 2.

jcoffland• 10 years ago

It's not really about good ideas anyway. Ideas are cheap. It's about great teams who can execute and those are much more rare.

dschiptsov• 10 years ago

Technological and manpower dark pool operator.)

Findeton• 10 years ago

This is great!

rejschaap• 10 years ago

It is slightly depressing, but on some level it makes sense to increase quantity when quality is going down. There are just too many me-too startups and a lot of time, money and effort is wasted around startups that revolve around marketing and advertising. Probably on fintech too. Playing the number games around those can certainly work.

A local start-up incubator is just about finished constructing a second building with a lot of facilities and laboritories for bio-tech start-ups. I feel that is an interesting approach and could be interesting for YCR also.

tim3332• 10 years ago

I wonder how demo day/funding will work. It'd be a bit mind numbing for VCs to watch 2000 presentations.

The new YC: As it tries to scale from 200 to 2,000 companies

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