As you’re researching fundraising options, accelerator programs, and general educational resources, you'll likely notice that Y Combinator comes up often. So what exactly is YC, why is it such a big deal, and what should you know about getting in? We put together this guide to help you find your footing and make the best decision for your startup.
YC is a legend in the startup world for a reason. It’s launched more than 3,000 companies including world-changers like Airbnb, Coinbase, GitLab, Doordash, Dropbox, Cruise, Stripe, Gusto, OpenSea, and many others. It has one of the most vibrant, well-known, and close-knit founder communities — even better, YC has publicly expressed a commitment to diversity and inclusion and expanding the startup ecosystem to include people from all walks of life.
YC’s founding vision was to help more people start companies. Put simply, YC has a unique formula for money, advice, and connections to demystify the process of running a successful startup.
“Y Combinator represents the union of two ideas that had not previously been combined: the application of mass production techniques to startup funding. Funding startups in batches is not only more efficient, but also better for founders,” write YC’s founding team Paul Graham, Jessica Livingston, Robert Morris, and Trevor Blackwell about the accelerator’s founding principles.
“YC’s value is the number of startups we help, times how much we help them. Make both factors surprisingly big, and the product will be surprising squared.”
YC has a standard deal with all accepted for-profit startups: $500,000, in exchange for 7% equity and the participation right of up to 4% in new money securities in future funding rounds. Nonprofits receive a $100,000 donation without needing to give anything back to YC.
Beyond initial financing, the biggest benefit to joining YC is the support system. If you’re accepted to a YC cohort, you’ll join an ecosystem of founders, alumni, high performing talent, lawyers, and potential investors for future rounds. When you join YC, you’re a part of it for life — potentially beyond the tenure of your startup. You’ll also gain access to a talent pool of highly skilled people, which will make recruiting easier over time.
YC describes its program to be like a bootcamp.
One of the highlights of every Y Combinator is the Demo Day, in which the latest batch of YC funded founders present their companies to a room of specially selected investors and press.
A full list of benefits to joining YC is available here.
Once a company gets on its feet, establishes product-market-fit (PMF), and establishes a predictable stream of annual recurring revenue, that company puts itself in a position to explore alternative sources of funding in the future. When that happens, Capchase is a good place to look for non-dilutive ways to access growth capital.
As with all programs, YC isn’t for everyone. For instance, not every founder will benefit from participating in a structured program with a demo day, and not every company has a business that aligns with the VC business model.
That’s okay. Every company in the world can still access the library of resources that YC publishes, regardless of whether it makes sense to participate in the accelerator program.
There are many paths available to starting a company, so don’t be disappointed if you aren’t accepted into YC. After all, you’re facing a 1.5-2% acceptance rate with 10,000 startups applying to each cohort every six months.
If you don’t get into YC, remember that there are countless other accelerator programs, both in-person and remote, around the world.
Keep in mind that there is no cut-and-dry process for getting into YC — in the end, it’s all about luck and the investing interests of the evaluation team. For this reason, it’s important to make sure you follow the application process closely. You can start with this guide to the application process.
Just as the YC application review team is doing their due diligence, it’s important for you to do yours. Here are 5 resources to help you make an informed decision.
According to the team at HIVE Ventures, which has had 3 companies accepted into YC, there are 6 essentials for getting in:
This resource from Growth Mentor shares more than a dozen first-hand accounts of what it was like to get into YC. Each perspective offers a different story. Some highlights:
WebApp got into Y Combinator after applying twice.
“Looking back, the level of commitment to our business in the second application was a lot more apparent with both progress and preparation,” write co-founders Colin and Lyn. “We embodied the "success = preparation meets opportunity" mentality.”
Quality of life matters. Should you move to the San Francisco Bay Area?
Emily O’Brien, co-founder at Cherry, shares her experience moving to
San Francisco for YC in 2018. This provides extremely tactical resources to help with living in San Francisco and finding transportation. Keep in mind; however, that these tips are pre-COVID-19. Life in San Francisco will have likely changed.
Dropbox is one of Silicon Valley’s most successful companies. See how the founding team got their start with YC. If anything, this resource is an early piece of Silicon Valley history, so it will be an enjoyable read, regardless of whether you’re applying to YC.
You may be surprised to learn that Dropbox founder Drew Houston was rejected from YC the first time that he applied.
If you do a Google Search for “example Y Combinator applications,” you’ll come across more examples with analyses of them.
At the end of the day, YC is in the business of connecting humans with the resources that they need to be successful. Who are some of the people that YC has accepted over the years?
YC’s published roundup of application videos can help you answer that question. If you do a Google Search for “example y combinator application videos,” you’ll find a range of examples.
At the end of the day, remember that not everyone gets into YC. There simply aren’t enough spots for everyone. So if you get rejected from YC, don’t become discouraged. There are a lot of other options out there for you. There are a lot of companies that get rejected from YC that go on to be successful.
Here is a discussion forum thread about companies that have been rejected, for instance.
Are you in YC batch '22?
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This material has been prepared for educational purposes only. It is not intended to provide, and should not be relied upon for, investment, accounting, legal, or tax advice.