On the rapid internationalization of Y Combinator startups

In my last post On Y Combinator batch quality at scale we looked at the dramatic increase in the number of YC startups over the years and how batch quality has held up. Anyone who has been to YC Demo Days in recent years has probably noticed as well how international YC startups have become.

In my YC batch in Winter 2013, there were only two startups from outside the US or Canada. In contrast, in the most recent Winter 2022 batch, nearly half of the companies were international.

Since Rebel is a heavily data-driven venture fund, we’ll share some statistics on how YC batches have evolved in terms of startup geography, and some interesting insights on how international YC startups compare to their North American counterparts in terms of outcomes.

The chart below shows the location of YC startups by year:

As you’ll see, there were few YC startups from outside the US or Canada until around 2015, at which point the number of international YC startups started to rise rapidly.

Fast forward to the most recent 2021-2022 vintages, and about 45% of YC startups are from outside North America — primarily emerging markets like South Asia, Latin America, Southeast Asia, and Africa.

The most underrepresented areas seem to be the Middle East & North Africa (notably Israel), China and Europe, at least relative to their proportions of world GDP and technology innovation. I think it’s because these regions have their own robust venture capital and technology accelerator ecosystems, so their startups are less likely to apply to a US accelerator.

At Rebel, we’ve noticed anecdotally that the YC startups from emerging markets tend to be further along than their North American peers, and often have more experienced and accomplished founders. We suspect it’s because YC acceptance is more coveted in these regions, and thus YC can afford to hold these startups to a higher standard.

Some investors may be dismayed that despite the recent explosion in the number of international YC startups, the Top Companies list ($150M+ valuations) that YC publishes is still dominated by North American companies, which represent 83% of all Top Companies. Is it because the US and Canada simply produce better startups?

We don’t think so.

If we look at the ratio of US/Canada startups by batch that make the Top Companies list vs international startups, the international startups are actually more likely to make the list on average.

Examining the batches from 2015–2018 (chosen because YC only started admitting international startups in earnest in 2015 and startups founded after 2018 haven’t yet matured enough to measure) we found that 14% of the US/Canada startups made the list vs 16% of the international startups.

So, the international startups are certainly holding their own, and we suspect a lot more of them will make the Top Companies list once YC’s 2019 and later vintages have matured.

We also found that some international regions are much more likely to produce Top Companies and unicorns than others. We won’t tell you which ones because we consider it a trade secret, but you can keep an eye on Rebel’s investment portfolio to find out :)