
Y Combinator’s latest batch of startups is too big for one Demo Day stage - laurex
https://techcrunch.com/2019/02/11/y-combinators-latest-batch-of-startups-is-too-big-for-one-demo-day-stage/
======
snowmaker
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](https://www.ycombinator.com/atyc/#size)

~~~
rajacombinator
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.)

~~~
snowmaker
It actually did. It surprised us too!

We can track this directly so there's no uncertainty over the result. We're
not entirely sure why it worked so well, though.

~~~
edoceo
Brand Indoctrination. They went to your school, then applied to the next step
after a few months of getting your message.

------
minimaxir
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?

EDIT: Checked the data and yep, there's a drop:
[https://docs.google.com/spreadsheets/d/1EBcI3Jm2I9Kj_JMGyRnN...](https://docs.google.com/spreadsheets/d/1EBcI3Jm2I9Kj_JMGyRnNIWZ89EfFscZA5RKVQuGVVV4/edit?usp=sharing)

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

~~~
kozikow
What'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.

~~~
threeseed
Exactly.

It was even talked about a lot from YC about how they are seeing more and more
people who reapply year after year and how that is seen as a "positive
signal".

And I saw this first hand from our StartupSchool batch. The only people who
made it through were ones who had already had significant numbers of
customers.

~~~
sandslash
That's actually untrue - almost half of the Startup School companies that we
ended up funding for the W2019 batch were unlaunched.

~~~
threeseed
I never said that all Startup School companies had customers.

My point was that it seems like the needle has shifted towards companies who
do have some level of product market fit. Has the percentage of companies who
were unlaunched changed over time ?

------
alain94040
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.

~~~
prickledpear
This is only true to the extent that YC is a monopoly.

If other accelerators compete with YC, entrepreneurs may choose to do business
with an accelerator that selects smaller classes.

~~~
alexpetralia
Are there any other accelerators that have the same cachet as Y Combinator
however? The only other one I've really heard of is TechStars.

~~~
capocannoniere
Erik Torenberg's Village Global [1] was started fairly recently and is already
extremely highly regarded in the start-up community. Much more so than
Techstars or any other non-YC accelerator in my impression.

[1] [https://www.villageglobal.vc/](https://www.villageglobal.vc/)
[https://www.villageglobal.vc/network-
catalyst/](https://www.villageglobal.vc/network-catalyst/)

------
jedberg
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.

Seems like an advantage for everyone.

------
temp1928384
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.

~~~
kozikow
For 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.

~~~
nostrademons
Liquidation 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
Would love to see something like a "YC ETF" where an investor could invest,
say, $50k, in a portfolio of YC startups.

~~~
zhoujianfu
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!

~~~
brandnewlow
I 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!

~~~
aaronblohowiak
Here’s a neat article you may like
[https://www.forbes.com/sites/alexknapp/2013/03/22/computer-s...](https://www.forbes.com/sites/alexknapp/2013/03/22/computer-
simulation-suggests-that-the-best-investment-strategy-is-a-random-
one/#7af78e035136)

------
mrnobody_67
Series a funding is flat last 5 years... just funding more failures.

~~~
pvarangot
You'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
FWIW I remember this question being posed about our batch (Summer 2012) which
had ~80 companies in it.

~~~
Kye
That 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.

------
diego
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.

~~~
supermw
Too 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
“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
That'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.

------
an4rchy
I'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
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).

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...](https://techcrunch.com/video/behind-the-scenes-at-yc-demo-day-where-
the-hottest-new-startups-pitch-their-companies/)

------
plaidfuji
Typo in the first sentence: that’d be _pole_ position

~~~
Hydraulix989
Yeah, 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.

------
crispytx
Just change the name to "Demo Week." Problem solved.

------
ykevinator
What's the yc deal $100k for 10% or something like that?

~~~
ngokevin
$150K for 7%.

------
jotto
What'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

~~~
minimaxir
This 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...](https://techcrunch.com/2019/02/11/y-combinators-latest-batch-of-
startups-is-too-big-for-one-demo-day-stage/)

~~~
dang
Changed from [https://techcrunch.com/2019/02/16/startups-weekly-is-y-
combi...](https://techcrunch.com/2019/02/16/startups-weekly-is-y-combinators-
latest-cohort-too-big/). Thanks!

------
ukyrgf
I'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
The 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).

------
supermw
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...

~~~
kkarakk
[https://techcrunch.com/2018/08/20/here-are-
the-63-startups-t...](https://techcrunch.com/2018/08/20/here-are-
the-63-startups-that-launched-today-at-y-combinators-s18-demo-day-1/)

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)

