What is Y Combinator now? Critics say the famed accelerator is having an identity crisis

In December, Y Combinator’s first-ever Fall batch got their own Demo Day. The Silicon Valley-based startup accelerator—which has produced big hits like Airbnb, Doordash, and Stripe—had doubled the number of startup classes that could enter its program. The showing was mixed: 87% were AI companies, and few have yet to publicly disclose their seeds.

Undoubtedly the most prestigious hub of Silicon Valley’s startup culture, YC’s outside critics have grown in their ranks. They have many sore spots to point to: increased batches, diminished seed rounds, more duplicate companies, less specialized training, and the list goes on. But, from the inside, it’s rare to hear a YC founder complain about their experience. The deal ($125,000 for 7% of the company, plus a $375,000 SAFE note, extensive mentorship, and physical office space) remains highly sought after. YC’s acceptance rate is still a mere 1%.

So, what’s with the shift in energy? It’s hard to tell—but the change has been immediate. “From the entrepreneur’s perspective, the core base of Y Combinator has diluted,” says Arpita Agnihotri, an associate professor of management at the Pennsylvania State University at Harrisburg. “The excitement has definitely reduced.”

‘It’s just so many companies’

Like a university, YC has its own specialized application process, where it chooses which startups to accept into its class (or “batch”). These batches are remarkably successful; where the average startup failure rate is around 90%, YC’s is an estimated 18%. 5.5% of YC startups become unicorns; the summed value of YC’s graduates is over $600 billion.

In YC’s early days, there were only two batches a year, and they remained small. In 2009, when Airbnb and Stripe went through, YC’s two cohorts hosted a summed 42 companies. But then things got out of hand; the 2022 winter batch had 400 companies. New CEO Garry Tan took action to reduce batch sizes, though they remain relatively large. He also introduced two additional cohorts in the fall and spring, creating a more distributed schedule. But this reconfiguration comes with its own challenges: Two more classes of entrepreneurs for investors to consider, and two more Demo Days for them to attend.

Masha Bucher, CEO of Day One Ventures, has invested in 35 companies out of YC within the past six years. Eight of those companies have been acquired. She slowed her investments during the COVID-19 pandemic, when she saw the quality of YC’s choice in firms go down. But she’s been happy under Garry Tan—even if she wishes he’d cut down the number of participating firms.

“I want batches to be smaller, because it’s a bit overwhelming,” Bucher says. “It’s just so many companies and, as a result of it, you dedicate less time for every single opportunity.”

At one recent Demo Day, Bucher noticed that many more founders were surrounded by angel investors than venture capitalists, a sign that valuations have gotten too high for VC firms and left founders reliant on smaller-dollar investors. To Bucher, greater exclusivity could be the solution. While smaller (or fewer) cohorts would saddle YC with more risk, it could also coax back these VCs, proving that the high valuations are worth it.

“This change makes it easier for YC to support founders when they’re ready, instead of making them wait for the next application cycle,” a YC spokesperson wrote in an email to Fast Company. “The batch sizes are smaller now—about half the size of the old cohorts. So even with more cohorts, the total number of startups we fund each year stays the same.”

‘Not everybody is hopeful of being the star’

AI startup Artisan sparked outrage in 2024 for its provocative San Francisco ads: “Stop Hiring Humans.” But, among the YC heads, Artisan is a golden child. They’re one of the biggest raisers among the winter 2024 batch, having collected around $12 million in seed funding. The company’s CEO, Jaspar Carmichael-Jack, was confident in his ability to court investors far before he joined YC, but credits the accelerator with bringing “brand awareness.”

Artisan’s $12 million seed ranks them among the declining number of YC firms who aim for bigger seeds. Among its cohort, AI-powered legal software Leya was the only other firm to publicly break $10 million. Some others made it around $5 million; more landed closer to $2 million or below. For many, it looks like the seed rounds of YC-stamped firms are in decline.

“A lot of people end up raising $2-3 million and sometimes that’s enough, but sometimes it’s not,” says Amy Cheetham, a partner at Costanoa Ventures who estimates that 10–15% of the companies that come across her desk are from YC. “What I always tell people is to make sure that they’re really thoughtful about not under capitalizing their business coming out of [YC].”

For those rare big raisers, it’s common to bring big investors on board before even applying for YC. Artisan collected $2.3 million in pre-seed funding. Lumen Orbit, a space datacenter startup that now boasts a staggering $11 million seed, amassed $2.4 million beforehand. Its CEO Philip Johnston says he thinks of the seed as a “small Series A,” and claims that the big raise was necessary because of the company’s hardware focus.

Taking on gobs of money out of YC may not be the best move for founders. At a minimum, it lessens the chances for future catastrophic down rounds. YC has also been a haven for “little tech,” the smaller, more technically oriented companies that are not looking to be the next Airbnb or Stripe. Saurabh Bhattacharya, a reader in digital marketing at Newcastle University Business School, notes the importance of these companies: “Not everybody is hopeful of being the star startup.”

“YC encourages founders to raise only the capital they need,” a YC spokesperson wrote. “With advancements in AI, startups are increasingly able to achieve more significant milestones with less funding. This approach not only enables rapid progress but also minimizes founder dilution, allowing them to retain more control of their companies.”

‘Multiple horses in the same race’

When Demo Day arrives, a founder’s success often hinges on their company’s individuality. But as YC continues to accept similar startups—some of which directly overlap—standing out has become increasingly difficult.

Concerns about company duplication flared up in fall 2024 when an AI code-editing scandal shook the accelerator. New YC inductee Pear AI, which promised to create “VSCode for The New Age of AI,” came under fire for altering the open-source license of Continue—another YC-backed startup. Many saw it as a blatant case of copying. (Pear AI did not respond to an interview request.)

Even when direct imitation isn’t an issue, many startups find themselves with near-identical counterparts within the accelerator. Using the AlphaLens tool, Léopold Gasteen analyzed 4,938 YC startups and identified numerous look-alikes. “[YC] conducts a whole bunch of concurrent experiments,” Gasteen says. “What’s clear to me is that they don’t mind having multiple horses in the same race.”

Are founders uncomfortable with having a duplicate within YC? Fast Company reached out to several of them; only two were willing to speak on the record. Cossi Achille Arouko, founder of Africa-based Bujeti, doesn’t mind sharing space with Middle East-based Alaan, which also runs a corporate expense management platform. He’s “spent so much time [with the Alaan team] that we are all friends,” he says. Similarly, Flock Safety and Abel Police were flagged as look-alikes for their AI-driven crime footage uploads, but Abel CEO Daniel Francis dismisses concerns. They’re not a “competing product,” he says; if anything, Flock Safety has only helped his business.

YC maintains that it prioritizes “founders over ideas” and sees competition as an unavoidable byproduct of innovation. But Artisan CEO Carmichael-Jack admits he only applied to YC because his company filled a niche within the accelerator.

“If I was doing an HR platform, dealing with [YC companies] Gusto and Rippling, I probably wouldn’t do YC,” he says. “Because, are you really going to become the category leader over them?”

‘A whole bunch of B2B SaaS businesses’

YC only has one guiding principle for companies: “Make something people want.” But, on the inside, the types of companies that succeed within the accelerator’s walls may be more unified.

“One of the criticisms of YC is that it’s turned into a whole bunch of B2B SaaS businesses sitting around selling their stuff to each other,” says Ryan Wardell, the cofounder of StartupSauce, a digital community of SaaS entrepreneurs. “How much help are you actually getting to move outside into the real world and sell to actual companies that are outside the YC ecosystem?”

Fast Company asked every YC founder interviewed for this piece whether there was a certain “type” of company that succeeds within the accelerator. Most demurred, citing a low fail rate or positive personal experiences. Lumen Orbit’s Johnson acknowledged the stereotype that YC was built for “young B2B SaaS founders,” but insisted that YC’s advantages move in “waves and trends.”

Artisan’s Carmichael-Jack, though, was unusually blunt. “I wouldn’t do Y Combinator if we were a consumer company,” he says. “The value that we got from YC was specifically from being a B2B company.”

‘How much value does the actual accelerator program provide?’

When YC was founded in 2005, Silicon Valley was a smaller, more insular community. For tech founders, the accelerator’s mentorship provided a crucial entry point—offering access to the right investors and influential networks. Twenty years later, the landscape has changed. Capital is more accessible, and any startup generating revenue can find a seat at the table. This shift raises a pressing question: Is YC’s training still worth it?

“How much value does the actual accelerator program provide?” Wardell asks. “If Y Combinator just picked out the top 1.5% of startups and said, ‘We think these ones are good, you should invest in them,’ and then they got out of the way, I think their success or failure rate would probably be identical to what it is now.”

While YC continues to thrive, the accelerator space has encountered some turbulence. Newchip, once an Austin-based competitor to YC, filed for bankruptcy in 2023. Meanwhile, Techstars closed its Boulder, Seattle, and Austin operations. Those hiccups have led some to speculate that accelerators might eventually drop or reduce their mentorship programs. YC’s value, they argue, might lie primarily in its stamp of approval; guidance would take a secondary role. Agnihotri, the Penn State professor, sees the diminished training as a trade-off with the high number of companies. What startups gain from a wider network, they lose in mentorship. “When you have large batch sizes, then you cannot have customized solutions to the problems that startups are facing,” she says.

Y Combinator, for its part, insists its 21 full-time and visiting partners can adequately mentor the founders they take on. “Founders are getting just as much, if not more, support than ever,” a YC representative wrote.