Y Combinator has cut the number of startups it is funding and training this summer by about half compared to its winter program, a spokesperson confirmed, citing the current economic downturn and venture capital funding as the major cause in reducing its class size, The Information reports and verified by TechCrunch.
The Summer 2022 cohort of Y Combinator is currently operating with around 250 firms, down 40% from the Summer 2018 cohort’s total of 414 companies.
The decision means 250 companies will pitch themselves to potential investors in early September at Y Combinator’s virtual demo day, a biannual rite of passage that helped launch DoorDash and Coinbase. A smaller class could make it easier for graduates to raise money by lowering the competition for investor attention.
The downsizing also follows mounting criticism that Y Combinator had grown too large, damaging its reputation for churning out Silicon Valley’s best startups.
Y Combinator’s Head of Communications, Lindsay Amos, confirmed the reduction, saying that the batch size is still large “relative to the last five years of batches.”
The S22 batch is significantly smaller than our most recent batches. This was intentional.Lindsay Amos
Amos said that the economic downturn and changes to the venture funding environment caused YC to reduce the number of companies funded between W22 and S22.
Many investors have argued that pre-seed and seed-stage startups, the world where YC’s accelerator primarily exists, have been immune to macroeconomic tensions because of how removed the stage is from late-stage valuations.
This latest move by YC illustrates that such early-stage companies are not immune to the downturn’s effects.
Recall that in May, we reported that the famed Silicon Valley accelerator, in a letter to startup founders under its guidance, advised them to come up with new strategies to scale through the current economic downturn and challenges and raise funding or stay ‘Default Alive’.
One of the major advice it churned out to founders was to cut excess operational costs or every needless cost for that matter. This it stated had the ability to draw significantly on revenue.
What the cut in startup size means
The confirmation from today, which comes before a Demo Day in September, demonstrates how things have evolved.
We are constantly evaluating every aspect of our batches and the environment in which the companies will operate. As a result, the batch size has always varied from season to season and year to year.Lindsay Amos, Y Combinator’s Head of Communication
Future batches of Y Combinator also may or may not continue to function in a more concentrated manner.
In response to a question, Amos stated that YC had just begun collecting applications for the following batch and would choose the batch size after considering “every facet of our batch and the ecosystem in which the companies will be functioning.”
Over the years, many techies have complained that Y Combinator’s excessive size has undermined the opportunity for members to stand out.
Meanwhile, the organisation recently told tech blog Newcomer that it might see itself supporting 1,000 businesses at a time. For clarity, Amos stated that YC didn’t cut back as a result of complaints or the expense of its expanding check size.
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