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Y Combinator’s latest batch of startups is too big for one Demo Day stage
- aabajian 8y agoYes
- jotto 8y agoWhat's going on with Techcrunch's format here? * Headline * Hero image * Sales pitch for TechCrunch premium * 98 words (598 characters) for this article * seemingly non-sequitur into next article
- deleted 8y ago[deleted]
- minimaxir 8y agoThis particular article link is a TC weekly summary (not unusual for tech blogs). A better URL for this submission is: https://techcrunch.com/2019/02/11/y-combinators-latest-batch-of-startups-is-too-big-for-one-demo-day-stage/ https://techcrunch.com/2019/02/11/y-combinators-latest-batch...
- i_cant_speel 8y agoAre the mods able to change the link? This one is much better.
- dang 8y agoChanged from https://techcrunch.com/2019/02/16/startups-weekly-is-y-combinators-latest-cohort-too-big/ https://techcrunch.com/2019/02/16/startups-weekly-is-y-combi.... Thanks!
- vb6lives 8y agoThey got a click. Mission accomplished.
- Dylan16807 8y agoAll five news topics are one article.
- Hydraulix989 8y agoThis is what happens when you over-optimize for metrics (premium conversions, article clicks)
- minimaxir 8y agoRelated/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? EDIT: Checked the data and yep, there's a drop: https://docs.google.com/spreadsheets/d/1EBcI3Jm2I9Kj_JMGyRnNIWZ89EfFscZA5RKVQuGVVV4/edit?usp=sharing https://docs.google.com/spreadsheets/d/1EBcI3Jm2I9Kj_JMGyRnN... BigQuery: #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
- toomuchtodo 8y agoI appreciate that you took the time to do the math.
- jedberg 8y agoI 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.
- godzillabrennus 8y agoTruth. I’m doing a life science startup and our medical validation will likely take 18 months.
- ska 8y agoFor what it's worth, in my experience 18 months is ambitious.
- deleted 8y ago[deleted]
- kozikow 8y agoWhat's more, it's also probably because companies at YC are generally later stage now. It's not unusual now to see companies well past launch or even product market fit prior to YC.
- alain94040 8y agoRegarding 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.
- jedberg 8y ago> 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.
- jonathankoren 8y agoThe 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. cue the problem solved song
- rhizome 8y agobut the chance that you might miss out on the next unicorn is big If selection skill counts for nothing, sure, but by your logic why not fund all comers? Where do you draw the FOMO line?
- 8y ago
- mrnobody_67 8y agoSeries a funding is flat last 5 years... just funding more failures.
- pvarangot 8y agoYou'd need to see if there's a rise in acquhire, that your expensive capital intensive long term biotech project got acquired by a big company is usually not a failure for anyone. Not the investors, founder, or even the project itself.
- georgek 8y agoFWIW I remember this question being posed about our batch (Summer 2012) which had ~80 companies in it.
- Kye 8y agoThat was only ~3 years after the economy came out of a deep free fall caused by bad investments. It was a reasonable concern in context.
- jedberg 8y agoAs 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. Seems like an advantage for everyone.
- supermw 8y agoThe 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...
- kkarakk 8y agohttps://techcrunch.com/2018/08/20/here-are-the-63-startups-that-launched-today-at-y-combinators-s18-demo-day-1/ https://techcrunch.com/2018/08/20/here-are-the-63-startups-t... if you just look at a sampling of these startups, i think you're wrong - entrepreneurship has always been about applying technologies in disruptive ways and the companies are following the trends - IoT, alternative reality and disrupting traditionally non-tech spaces like assisted living. you may be right about the rest but then again entrepreneurship is becoming a more mature market and investors actually have more people on their team to "guide" them about what a "hot" startup looks like(hence them seeming bored at pitches that aren't going to predictively skyrocket imo)
- diego 8y agoToo 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.
- supermw 8y agoToo big to be interesting. As the cohorts grow in size, the returns begin to mirror the returns of the entire startup market. It's the difference between having a large index fund, and having a portfolio of 5-10 good companies. Basically it's like they're not even trying to filter much anymore.
- mikekij 8y ago“Basically it's like they're not even trying to filter much anymore.” I believe their acceptance rate this batch was still <<2%. That’s still a pretty fine filter IMHO.
- kerng 8y agoThat's not unexpected, with the popularity more companies apply - even some who would have never done it in past. So, I'd assume applications will continue to grow and acceptance rate should be going down. If the acceptance rate stays the same, I guess YC is lowering the bar. This likely happened already given the top ranking post from a YC member saying that acceptance is same still even though many more apply.
- temp1928384 8y agoMaybe 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.
- kozikow 8y agoFor most startup founders, there is an alternative cost of well over $100K salary as an employee, especially for technical founders in the Bay Area. So lingering for many years is not so great of an option.
- temp1928384 8y agoI'm looking at https://yclist.com/ https://yclist.com/ (no idea how updated or accurate it is) and seeing a lot of companies are have been around for years and not dead or acquired that I've never heard of. I'm mostly referring to cos that have raised another seed or series A for a few mil and then just sort of lingered. I do not know of every 100 cos how many successfully raise another seed or series A beyond what YC provides (I would assume many do)
- nostrademons 8y agoLiquidation preferences can dramatically change the math on how big an acquisition needs to be to be profitable for the founders. Say you've got 3 founders who each want to make at least $2M for a startup they've been toiling away at for 5 years which has built something kinda-sorta useful but not a huge hit (that's roughly equalling what they would've made at Google/Facebook). If they took a $5M Series A at $15M post with 1x participating preferred, they need to sell for ~$17M to hit their target (the VC gets their $5M back, then $4M of the remaining $12M for their for their 33%, then 20% goes to the employees from the option pool, then the founders split the remaining $6M). If they took no funding, they need to sell for $6M. If they took just angel/seed funding for 25% of the company, $8M. It's generally a lot easier to get acquihired for $1-2M/head than for $5M/head.
- temp1928384 8y agoWould love to see something like a "YC ETF" where an investor could invest, say, $50k, in a portfolio of YC startups.
- snowmaker 8y agoWhile 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.
- brandnewlow 8y agoI run one of these funds. Happy to chat with anyone who has questions about them! Email is in my profile.
- zhoujianfu 8y agoI 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!
- taytus 8y agoCan't find your email. Mine is on my bio. Thank you.
- brandnewlow 8y agoI run one of the YC Demo Day funds on Angel List (not sure if it's an SEC violation to link to it) and therefore spend weeks assessing founders and startups in each batch to make about 15 investments. It'd be very very interesting to compare our returns and outcomes to see if your approach destroys mine or not. Will send you a note!
- 8y ago
- ukyrgf 8y agoI'm guessing the title was changed after many of these comments were posted? Can anyone fill me in on what it was? Right now the title is "Y Combinator’s latest batch of startups is too big for one Demo Day stage".
- sctb 8y agoThe original article's title was “Is Y Combinator’s latest cohort too big?”: https://news.ycombinator.com/item?id=19186238 https://news.ycombinator.com/item?id=19186238.
- snowmaker 8y agoHi, 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 https://www.ycombinator.com/atyc/#size
- deleted 8y ago[deleted]
- Judgmentality 8y agoHi Jared, 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.
- ykevinator 8y agoWhat's the yc deal $100k for 10% or something like that?
- ngokevin 8y ago$150K for 7%.
- crispytx 8y agoJust change the name to "Demo Week." Problem solved.
- plaidfuji 8y agoTypo in the first sentence: that’d be pole position
- Hydraulix989 8y agoYeah, that's a motorsports (NASCAR) reference that is more familiar to us HN readers from the midwest. Surprised this one was missed because track racing is big in the VC world.
- an4rchy 8y agoI've always been curious about what YC demo days are like but since it's been limited to VCs/investors, figured I wouldn't be able to attend. 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 8y agoUnfortunately 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). 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-day-where-the-hottest-new-startups-pitch-their-companies/ https://techcrunch.com/video/behind-the-scenes-at-yc-demo-da...