The Y Combinator Approach: Ideas, Capital and Networks

The Y Combinator Approach: Ideas, Capital and Networks

What makes Y Combinator one of the world’s top-tier accelerators?

If Silicon Valley were to have a shrine, it would be 335 Pioneer Way, Mountain View. For startups across the world, the Y Combinator (YC) headquarters is where the magic really happens.

YC is one of the world’s pioneers in startup acceleration, holding nothing short of celebrity status. It is seen as one of the world’s most prestigious acceleration programs for young companies who want to find themselves among the crème de la crème of the entrepreneurial world.

What Is Y Combinator?

Founded in 2005 by Paul Graham (lionized as PG by fans), Trevor Blackwell, Jessica Livingston and Robert Morris, the accelerator has churned out over 2000 startups through its biannual three-month program so far, 18 of which are unicorns, the accelerator says on its website.

Though concentrated in North America, YC has touchpoints with startups across the world, and has been focusing on emerging markets of late.

It’s a well-known fact that YC pivoted the course of startup legends Airbnb, Stripe, DoorDash, Cruise, and Coinbase. Alumni are often in the news for global recognition–a number of them are on the 2020 Forbes 30 Under 30 list, and YC companies Meesho, Brex and Hopper are three of Fast Company’s Top 50 Most Innovative Companies 2020.

The Y Combinator Approach

What makes the YC approach stand out, according to Graham, is that the accelerator program focuses on telling founders the fundamentals that they might know but still ignore.

“We tell people the counterintuitive stuff, not the obvious stuff,” PG told YC President Geoff Ralston in a 2018 interview.

The YC process is extremely intensive. David Rogenmoser, Co-Founder and CEO of YC alumnus Proof, blogs that the very process of filling out the application form for the program led to greater clarity on his business. In the blog post, he notes that YC helped not only in terms of scaling the company, but also benefited his thought process as a founder.

Oleg Rogynskyy, Founder and CEO at People.ai–another YC alumnus–used his startup’s artificial intelligence tool to chart the change in the number of hours YC founders put into their startups before and during the program. He wrote that the hours put into the program “ranged from 150% to a truly earth-shattering 400% of our previous peaks before taking part in YC.”

YC turbocharges growth through its network of investors, access to capital, and the mere mention of the YC brand. In fact, Founder and CEO of Airhelp Henrik Zillmer says these are the top three reasons why a startup should apply to YC.

In an interview with Hub, Zillmer mentions that anywhere between 500 to 1000 high-profile investors turn up on Demo Day to invest in YC startups, and negotiations carry on for weeks afterwards.

Along with $150K from YC in exchange for a 7% stake, each YC batch raises around $250K in seed capital after Demo Day, according to the accelerator. In In 2018 alone, YC companies raised nearly $1 billion collectively in Series As.

In addition to opportunities with investors, YC also opens up its alumni network–startups can ask for feedback from alumni, or even partner up with them.

The larger short term payoff, however, is the brand. The YC tag acts as a ticket into high-profile circles and media opportunities that startups may otherwise not have access to, particularly in the United States. Zillmer notes in the interview that as a YC startup, his company has been featured by media heavyweights such as The Wall Street Journal and TechCrunch.

Towards A Bigger Vision

The first YC batch in 2005 had around 11 startups participating. Its first 2020 batch (which recently conducted its Demo Day online due to COVID-19) had nearly 200 from 32 countries. It’s a good thing that YC wants to keep growing; startups cannot seem to get enough.

The accelerator has a reputation for being futuristic. YC evidently wants its startups to be pioneers of coming-of-age technologies–it is keen on receiving applications from artificial intelligence, fintech, energy, clean meat, and virtual and augmented reality startups.

In fact, its Request for Startups list, that outlines technologies YC is interested in, neatly characterizes what looks like the accelerator’s contemporary vision–growing toward the technologies of tomorrow, with a firm grasp on those of today.

Header image courtesy of Y Combinator.

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