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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 thro

• emmett 6y ago
  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!)
  • hi 6y ago
    > 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.
    • nend 6y ago
      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.
      • vram22 6y ago
        >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.
    • robotresearcher 6y ago
      ... until every person in the world is simultaneously an advisor and a peer and total value of being in the network is maximized for each individual. Really?
• smallnamespace 6y ago
  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.
  • duxup 6y ago
    If there are more companies wouldn't the quality of those companies get watered down and so would the value of networking? Even just 'networking' doesn't always have value.
    • deleted 6y ago
      [deleted]
  • afarrell 6y ago
    Social Capital is not fixed, but Dunbar's number does provide an upper bound to it.
  • btilly 6y ago
    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 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.
• rorykoehler 6y ago
  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)
  • vram22 6y ago
    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: A Unified Theory of VC Suckage March 2005 http://www.paulgraham.com/venturecapital.html http://www.paulgraham.com/venturecapital.html Got to love the title, like the grand unified theory of everything that is physics's holy grail.
    • rorykoehler 6y ago
      It’s interesting that natural organisational entropy made them become who they replaced. Arguably it’s just the nature of capital itself.
      • vram22 6y ago
        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.: https://news.ycombinator.com/item?id=26558308 https://news.ycombinator.com/item?id=26558308
        • rorykoehler 6y ago
          Capital creates a power dynamic when it starts to consolidate. The newcomers then change from innovation to defence as to maintain their wealth.
• Zababa 6y ago
  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.
  • patentatt 6y ago
    It’s like the banner ad economy of the late 90’s. Every startup making money by selling banner ads to other startups. What could go wrong?
  • frakkingcylons 6y ago
    Indeed and that was mentioned explicitly in the article as a benefit of having larger batches.
  • Judgmentality 6y ago
    That sounds like a ponzi scheme.
    • cheriot 6y ago
      It sounds like every B2B company. It's only a Ponzi scheme if YC companies are all B2B and primarily sell to each other.
      • ZephyrBlu 6y ago
        They're well on their to that. 46% of companies in the last batch were B2B [0]. [0] https://blog.ycombinator.com/w21-batch-stats/ https://blog.ycombinator.com/w21-batch-stats/
  • notyourday 6y ago
    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!
  • 6y ago
• vram22 6y ago
  >This seems to be good for YC, bad for companies in YC. If it is bad for those companies, isn't it bad for YC too? Those companies are how YC makes its money, right?
  • tshaddox 6y ago
    It seems unrealistic to suppose that the incentives of YC and YC companies are 100% aligned.
    • vram22 6y ago
      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.
      • jedberg 6y ago
        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.
        • skeeter2020 6y ago
          >> I think YC has the companies best interests in mind because that's just who they are how they were built. Serious question: "Who" exactly are they? I could have told you 10 or even 5 years ago, but now? There are a lot more hands in the cookie jar.
          • jedberg 6y ago
            There really aren't all that many more hands in the cookie jar. You can see them all here: https://www.ycombinator.com/people/ https://www.ycombinator.com/people/ All the group partners and management are people who have been with YC for many many years.
• deleted 6y ago
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• snowmaker 6y ago
  (I work at YC) 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/ 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.
• deleted 6y ago
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• rkagerer 6y ago
  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).