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/ 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.
I think this is totally valid and for YC, scaling has obvious advantages (more chances of finding the next hit).
For founders, the reality is that the scaling of YC, fairly or not, does change the perception of being admitted into YC, in that having a larger class size gives off the impression (whether true or not), that the program is no longer as highly-selective/elite. For what it’s worth, I don’t think YC is at that stage and I don’t think the expansion dilutes the YC name (this isn’t like TEDx). There is a big gulf between admitting everyone and expanding class size the way they have been expanded now. Still, as I said, an increased class size can absolutely change the perception, amongst applicants, alumni, or outsiders, that the program is no longer as “elite.”
This isn’t unique to YC. Elite colleges and universities are often artificially limited in their admission figures (Harvard College has about 6600 undergrads whereas Harvard University has like 14,000 graduate students across the different schools and programs) and while some have attempted scale through either extension schools or online programs, there is a not insignificant social construct surrounding the idea of keeping something deemed “elite,” selective.
So everything you write is true. But it’s also true that the perception of scaling can be negative in some ways, even if the program isn’t actually diluted.
When you put it that way, to me it sounds like a great thing. YC has always sought to filter out the resume-padding sort of founder who sees YC as a step up the status ladder. Such founders are not up for the gruelling slog of really building a startup, and tend to bail not long after the batch since they've already gotten what they wanted out of it.
People should apply to YC because they believe it would them them build a successful startup, not because they want prestige. If expanding YC leads to a decrease in prestige (alongside an increase in real value to startups, as Jared explained above), that's a win for everybody: more business-builders get access to YC, YC gets to fund more successful companies, and status-seekers can find something else that will look better on their resume.
In this sense YC is very different from the elite colleges whose brand depends on their exclusiveness. The upper bound on YC's expansion is how much startup opportunity exists in the world.
I think status has as much value as what someone is willing to give you for it. If the YC “Badge” is a currency that opens doors based on its perceived status, that feels like a helpful bonus to founders. I agree that if someone is in YC for status, that trait alone is likely not sufficient to help them create a successful company. However if someone is able to get a meeting with a VC because of their enrollment in the program (or a PM with a larger company to discuss a partnership, etc) that seems helpful and worth preserving.
That being said, it’s not clear to me that YC is lowering it’s acceptance rate. By accepting companies from all around the world, it’s pool of potential applications exponentially increases. If YC accepts 100 more companies from 10,000 more applicants that still feels like a pretty exclusive acceptance rate.
What could be going on is that people are comparing the batch sizes now to the batch sizes in the past and assuming the same rate of company applications. I’m not sure if YC publishes their application data, but without it I think it’s tough to say based on batch size alone whether or not YC is statistically becoming easier to get into.
>> the network effects that make YC more valuable for companies when the batch is larger.
This is only part of the story though. THe size of the network doesn't mean nearly as much as the quality of the connection; i.e. edges over nodes.
Every other point is true to some extent but addresses the accidental vs. essential aspects of a startup. Collective bargaining for services? hiring pool? potential customers? These all seem like nice-to-haves vs. must-haves.
Call me jaded but I see a VC machine that hires it's friends, associates and good-but-not-great investments, and then needs to fuel the machine with startups at scale. This could work but I can't see how it's better than smaller batches for anyone but YC.
Love this comment - really insightful. We did YC ourselves, and I guess there are two points here where I think YC can help improve things further.
1) Regarding getting other YC companies as your customers, I don't think there is a really great mechanism for that yet. With a network of thousands of founders, it is hard to pitch your company to the YC network without it becoming spam.
2) I agree that we learned most from companies relatively similar to ours. But it is also clear now that there is a lot of direct competitors within the YC network. I don't see a way to avoid that, but it feels important to think about at this scale.
> there is a lot of direct competitors within the YC network
I would never view other small startups in the space as competitors. I would view them as 1) people that will help lower our r&d costs b/c you can watch them 2) potential companies that could acquire you if they turn out to be executing better 3) potential companies that you could acquire if you turn out to be executing better.
That depends on how fast they fail. A successful company should be around for years and will have lots of money to publicize itself; how long does it take the typical "failed" YC startup to fold?
I agree with most of this. However, (3) has issues:
a) NASDAQ in 2000 had a ton of companies selling to other VC backed companies. When the flow slowed, even profitable companies failed because they sold to unprofitable ones. They fell like dominos. And this was in the public markets!
b) Any investor in a YC B2B company should ask the percentage of customers that are YC backed. It’s good for a cold start in sales, but ultimately see #1.
c) I hope hundreds of companies don’t want to talk to the SAME person at Apple. Otherwise, I agree.
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/ 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.