My relatively uninformed hunch is that, per hour of time expended, YC is not nearly as profitable as traditional venture capital. YC probably gets a much better

My relatively uninformed hunch is that, per hour of time expended, YC is not nearly as profitable as traditional venture capital. YC probably gets a much better nominal return-on-investment, but a more modest return-on-effort. YC has to provide mentoring in addition to capital, which means that there's an inherent bottleneck in the amount of business it can do. I suspect Paul Graham is running Y Combinator not because he wants to maximize his profits, but because he enjoys mentoring bright young entrepreneurs. So although his return-on-effort is lower than it would be in traditional VC, this isn't problematic, because the utility of said effort is positive, and YC is presumably more than profitable enough.