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Y Combinator

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This article is about the company named 'Y Combinator'. For the combinator called 'Y' in the theory of computation, see Fixed-point combinator § Fixed-point combinators in lambda calculus.
Y Combinator Management, LLC
Company typeLimited liability company
IndustryStartup accelerator
FoundedMarch 2005; 19 years ago (2005-03)
FoundersPaul Graham, Jessica Livingston, Robert Tappan Morris, Trevor Blackwell
Headquarters
Mountain View, California
,
United States
Number of locations
2 offices (2014)
Key people
Garry Tan (CEO)
Michael Seibel
Jared Friedman
ProductsVenture capital, investments
Websiteycombinator.com

Y Combinator Management, LLC (YC) is an American technology startup accelerator launched in March 2005.[1] It has been used to launch more than 4,000 companies,[2] including Airbnb, Coinbase, Cruise, DoorDash, Dropbox, Instacart, PagerDuty, Reddit, Stripe, Zepto[3][4] and Twitch.[5] The combined valuation of the top YC companies was more than $600 billion by January 2023.[6] The company's accelerator program started in Boston and Mountain View, expanded to San Francisco in 2019, and was entirely online during the COVID-19 pandemic.[7] Forbes characterized the company in 2012 as one of the most successful startup accelerators in Silicon Valley.[8]

History

Founded in 2005 by Paul Graham, Jessica Livingston, Robert Tappan Morris, and Trevor Blackwel,[9] Y Combinator (YC) initiated operations with concurrent programs in Cambridge, Massachusetts, and Mountain View, California. However, operational complexities arising from managing two programs prompted a consolidation in January 2009, resulting in the closing of the Cambridge program and the centralization of activities in Silicon Valley.[10]

In 2009, Y Combinator secured a $2 million investment led by Sequoia Capital, enabling increased annual funding for around 60 companies.[11] Sequoia further supported YC in 2010 through an $8.25 million funding round, bolstering the organization's capability to accommodate a growing number of startups.[12] Concurrently, Kirsty Nathoo joined the team, initially as an accountant, and subsequently as the Chief Financial Officer (CFO) in 2012.[13] In 2011, Yuri Milner and SV Angel offered every Y Combinator company a $150,000 convertible note investment.[14] The amount put into each company was changed to $80,000 when Start Fund was renewed.[15]

Advisory roles were assumed by Harj Taggar and Alexis Ohanian in 2010,[16] and Paul Buchheit and Harj Taggar were named partners in November.[17] Michael Seibel joined Y Combinator as part-time partner in January 2013 before becoming a full-time partner in 2014.[18] In September 2013, Y Combinator began funding nonprofit organizations that were accepted into the program after testing the concept with Watsi.[19] Sam Altman took part in Y Combinator's inaugural cohort in 2005 as a founder.[20] In 2014, Paul Graham appointed him as President.[21] Altman introduced a revised equity offering of $150,000 for a 7% stake.[22] Collaborations with Transcriptic and Bolt improved support for biotech and hardware startups.[23][24][non-primary source needed]

Global outreach became evident in 2016 as YC partners embarked on visits to 11 countries (Nigeria, Denmark, Portugal, Sweden, Germany, Russia, Argentina, Chile, Mexico, Israel, and India) to engage with founders and learn about international startup communities.[25] That summer, Altman returned to Y Combinator as a founder and worked on OpenAI.[26] Leadership responsibilities were delegated to Ali Rowghani and Michael Seibel for YC Continuity and YC Core programs, respectively.[27] Startup School, introduced in 2017, provided startups with online courses and personalized coaching. More than 1500 startups graduated from the program in its first year.[28]

In 2018, Y Combinator announced a new batch of startup schools. After a software glitch, all 15,000 startups that applied to the program were accepted, only to learn a few hours later that they had been rejected.[29] In response to the ensuing outcry, Y Combinator's accepted all 15,000 companies involved in the incident.[30][non-primary source needed] The same year, Qi Lu, a former CEO of Bing and Baidu, briefly assumed the role of CEO for YC China.[31] In November, YC announced Lu's departure and their decision to not pursue a program in China.[32] Geoff Ralston succeeded Altman as Y Combinator's President in 2019.[33][34]

Adapting to the COVID-19 pandemic, Y Combinator conducted its summer 2020 batch remotely.[35] In January 2022, a revised standard deal of $500,000 was introduced, comprising $125,000 for a 7% equity stake and an additional $375,000 via an uncapped safe mechanism incorporating a Most Favored Nation (MFN) clause.[36] The summer of 2022 saw a deliberate reduction in the startup intake by 40%, from 414 companies to 250.

In January 2023, Garry Tan assumed the positions of president and CEO, succeeding Geoff Ralston.[37][38][39] Tan's leadership marked the discontinuation of the YC Continuity growth fund.[40]

Paul Graham talking about Prototype Day at Y Combinator Summer 2009

Programs

Y Combinator interviews and selects two batches of companies per year. The companies receive a total of $500,000 in seed money as well as advice, and connections. The $500,000 in funding is made up of $125,000 on a post-money SAFE in return for 7% equity and $375,000 on an uncapped SAFE with a "most favored nation" ("MFN") provision (i.e.: "we get the same best terms you give anyone else in the next round").[41] Non-profits receive a $100,000 donation.[42] The program includes "office hours", where startup founders meet individually and participate in group meetings. Founders also participate in weekly meetups where guests from the Silicon Valley ecosystem (successful entrepreneurs, venture capitalists, etc.) speak to the founders.[citation needed]

Y Combinator's program is designed to teach founders how to market their product, refine their teams and business models, achieve product/market fit, and scale the startup into a high growth business, etc. The program ends with "Demo Day", where startups present their business and technology prototypes to potential investors.[43][non-primary source needed]

Y Combinator operates additional programs and a fund designed to support and invest in startups which have already graduated from the main accelerator program. The Series A Program, YC Post-A Program, and YC Growth Program are operated by the same team and focus on helping fast growing YC startups, and startups raising their Series B funding of $20 million to $100 million.[44][45][non-primary source needed]

Y Combinator has introduced additional programs since 2015, including:

  • In July 2015, Y Combinator introduced the YC Fellowship Program aimed at companies at an earlier stage than the main program.[46] The first batch of YC Fellowship included 32 companies that received an equity-free grant instead of an investment.[6] In January 2016, YC changed the program, with participating companies receiving $20k investment for a 1.5 percent equity stake. The equity stake is structured as a convertible security that converts into shares only if a company has an initial public offering (IPO), or a funding event or acquisition that values the company at $100 million or more.[47] The fellowship was discontinued in 2017.[48]
  • In October 2015, Y Combinator introduced the now-defunct YC Continuity Fund. The fund allowed Y Combinator to make pro rata investments in their alumni companies. The program was shut down, and staff were laid off in March 2023.[49]
  • Nonprofit research lab YC Research was announced in October 2015. Researchers are paid as full-time employees and can receive equity in Y Combinator.[50][51][52] OpenAI was the first project undertaken by YC Research, and in January 2016 a second study on basic income was also announced.[53] Another project is research on new cities.[54] Australian quantum physicist Michael Nielsen is a research fellow at YC Research since 2017.[55]
  • In October 2015, YC introduced YC Research to fund long-term fundamental research. Altman donated $10m.[50][non-primary source needed]
  • During 2017–2019, YC launched Startup School, the Series A program, the YC Growth program, Work at a Startup, and YC China.[56][non-primary source needed]
  • In March 2019, it was reported that Y Combinator was moving headquarters to San Francisco.[57]

As of late 2023, Y Combinator had invested in over 4,000 companies,[2] most of which are for-profit with a holding a combined valuation of $600 billion.[58] Non-profit organizations can also participate in the main YC program.[59] Few non-profits have been accepted in the last years, among them Watsi, Women Who Code, New Story, SIRUM, Zidisha, 80,000 Hours, and Our World in Data.[60]

Open Research project

The Human Advancement Research Community (HARC) project was set up with the "mission to ensure human wisdom exceeds human power".[61][62] The project was inspired by a conversation between Sam Altman and Alan Kay.[63] Its projects include modelling, visualizing and teaching software, as well as programming languages. Members included Alan Kay, Bret Victor, and Vi Hart. Patrick Scaglia was chair of HARC and was listed as an advisor in 2017.[64][65] YC Research disaffiliated with Y Combinator and now operates as Open Research.[66][67]

See also

References

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  2. ^ a b "Y Combinator Companies List". Archived from the original on November 12, 2019. Retrieved November 11, 2019.
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  4. ^ "Y COMBINATOR TO LAYOFF 20% STAFF, DECREASE LATE-STAGE INVESTING".
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  65. ^ "Members". November 26, 2017. Archived from the original on November 26, 2017.
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  67. ^ "OpenResearch". openresearchlab.org. Archived from the original on May 19, 2022. Retrieved May 19, 2022.
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