On the shifting landscape of YC batches
On the fundraising road for Rebel, one of the questions I’m asked most often is “What trends do you see in Y Combinator startups?”
While the most exciting trend is the steady rise in the quality of YC startups (yes, despite growing batch sizes) it’s also been interesting to observe shifts in the types of companies YC admits over time.
After sitting through almost every Demo Day since my YC batch in 2013, I had already noticed some shifts anecdotally, but decided to measure them quantitatively with data pulled from the fantastic YCDB project by our friends at Snappr.
Here is the result, showing the composition of every YC batch by technology sector from 2005 to present:
If you study the data, a few interesting trends emerge:
- YC is much less entertaining — From 2005 to 2009, entertainment startups represented a whopping 46% of all YC startups. In 2018 and 2019, just 11%. The dramatic decline of this sector is probably the most noticeable long-term trend and reflective of the tech industry overall.
- YC was never that consumer-focused (you just think it was) — A common misconception, perhaps bolstered by the fame of early YC successes like Reddit and Airbnb, is that YC favors consumer startups. But if you look at the data, consumer has always trailed other sectors in popularity and represents just 16% of YC startups overall.
- Everything old is new again— The most exciting trend IMO is the rise of startups disrupting ‘old school’ industries like finance, agriculture, transport, real estate, and especially healthcare. These industries tend to be heavily regulated which may have scared off some founders and investors, but the massive size of these markets could not be ignored forever.
An important thing to note is that YC, much like Rebel, does not enter each investing batch with a preconceived notion of what sectors it should favor.
Sometimes people think Y Combinator has big ideas about themes. But really, we just fund the best startups. ~Sam Altman
Great investors don’t try to prognosticate the future, they just follow the best founders. These trends don’t represent shifts in the strategic thinking of YC partners, they represent shifts in what attracts the passion and opportunism of the world’s best startup founders.