Long term I think the big question is how much of the success of YC companies is directly related to the external benefits of being YC companies. There's no question they tend to get far more attention on every front (VC/valuations/press/bizdev/hiring, etc) than they otherwise would.
In a few years when there are 1000 YC companies it will start to mean a lot less to all those people who have been helping YC companies succeed to date. It probably already means a lot less to a VC to hear you're a YC company, because they've met 300 of them.
If it's the YC halo effect that's driving high returns it will be a big problem if it starts to wear off.
>In a few years when there are 1000 YC companies it will start to mean a lot less to all those people who have been helping YC companies succeed to date.
Harvard, Yale, MIT, Stanford, etc. seem to be doing rather well, as far as higher education goes.
And I would imagine those that have partnered with them are doing okay too.
Quality matters.
>It probably already means a lot less to a VC to hear you're a YC company, because they've met 300 of them.
I doubt that. A VC is just trying to pick the next Google. Or the next Google founder(s).
Right on. I think as long as the quality of YC companies remains high, the presence of imitators will of course increase the value of the original, just as in higher ed.
Startup incubators may in some ways be easier to replace than universities (Harvard, Brown, etc. are still going strong after 200+ years), but they are subject to similar dynamics, insofar as there is team loyalty and networking benefits (as there obviously are). Personally, I would accept 10% dilution of my company simply to be an YCombinator alumnus since I think the benefits are and will remain that high.
Harvard, Yale, MIT, Stanford, etc. seem to be doing rather well, as far as higher education goes.
Not a good example. These schools increase their enrollment very slowly, while other schools have grown massively. As a percentage of total college grads, these schools are more exclusive than they used to be.
But the general idea is correct: the value of the YC brand is getting diluted, of course (imagine what it would mean if YC funded just one company per cycle!), but the total value of the brand keeps going up.
The difference is that startups have a much shorter time horizon on which you can measure success, and their success is measured in different ways. While notoriously difficult to precisely compute, because of the length of time necessary to judge the impact of an 'XYZ Degree,' thorough studies show relatively small or, for many cohorts, almost nonexistent benefits to these kinds of Ivy League educations.
For, as in the case of YC, the success is first and foremost attributable to the participants - and whatever other value there may be is easily confounded and exaggerated. The only fair way to establish a comparison is to consider those who were accepted to YC, but chose not to enroll, for whatever reason. This is reasonably clear when X is 1300 students a year, harder when it's less than 100 startups.
Anyway, a rather belabored way of saying that the higher education comparison may be accurate... but not necessarily in the way that you think!
We've already expanded a lot and empirically there has not been any dilution so far. If anything the brand value of being funded by YC seems to increase with the number of startups we fund, not decrease.
"It probably already means a lot less to a VC to hear you're a YC company, because they've met 300 of them."
Another way to look at it is that the total number of YC startups over the least six years is less than the number of deals the typical VC sees each week.
I'm curious: why do you think more YC companies will dilute YC's value or brand? What data leads you to that assertion?
Personally, I'd think the opposite is possible. (And likely if YC companies continue to be considered "successful".) A stronger YC network and a large portfolio of successful companies should only strengthen the brand.
A large portion of what YC effect is the selection bias/filter it provides. If YC is good at picking and nurturing winners, that becomes their brand equity. If they lose this ability while scaling, then their brand loses value.
I think the value and prestige of being a YC company can only grow from here. Reason being is not for the hype aspect, but rather the education and attention you know the company received. People who really understand this industry expect quality. With 1000+ companies under their wing, it's assumed that after years of experience the YC team will have developed an excellent picture of the ideal startup/company and be able to impart that knowledge to the startups they've selected.
If the track record remains good, the brand will on mean more after 1000 not less.
A better question would be:
With all the 'me too' incubators out there, how much can YC scale horizontally? YC has been eating the Angel's lunch, but there will be more people at the table every year. How much of the market can YC grab without growth hurting their per-startup performance?
It might be the opposite. Many internet businesses are winner-take-all and YC companies clearly have a "leg up" in terms of having been vetted, having an attractive culture and getting superior mentorship. Investors could very well fixate even more on YC graduates
In a few years when there are 1000 YC companies it will start to mean a lot less to all those people who have been helping YC companies succeed to date. It probably already means a lot less to a VC to hear you're a YC company, because they've met 300 of them.
If it's the YC halo effect that's driving high returns it will be a big problem if it starts to wear off.