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Y Combinator shrinks current cohort size by 40%, citing downturn and funding environment – londonbusinessblog.com

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Y Combinator say it has intentionally reduced the number of startups in its accelerator for the summer 2022 batch. As first reported by The Information and independently verified by londonbusinessblog.com, Y Combinator’s Summer 2022 cohort – currently in action – counts nearly 250 companies, a 40% drop from the previous cohort, which landed at 414 companies.

Y Combinator’s head of communications, Lindsay Amos, confirmed the reduction via text message, saying the batch is still large “versus the last five years of batches.”

“The S22 batch is significantly smaller than our most recent batches. This was intentional,” the statement read. Amos said the economic downturn and changes in the risk finance environment have caused YC to reduce the number of companies financed between W22 and S22. Many investors have argued that pre-seed and seed-stage startups, the world where YC’s accelerator primarily resides, has been immune to macroeconomic tensions due to the distance the stage has from late-stage valuations. This latest move from YC illustrates that such early-stage companies are not immune to the effects of the downturn.

In May, the accelerator advised portfolio founders to “plan for the worst.”

“You can often pick up significant market share in an economic downturn just by staying alive,” top startup accelerator Y Combinator wrote in an internal email to its founders this week. The advice was one of ten points in a memo designed to help companies navigate the shattering technology of the economic downturn. Other notable quotes include, “No one can predict how bad the economy is going to get, but things don’t look good.”

The email was a mood change from just a few weeks earlier, when hundreds of Y Combinator startups — many of which had already raised venture capital — presented themselves to the public on Demo Day. The startups were the first to receive Y Combinator’s new $500,000 standard check and aggressively targeted international opportunities. Now YC says that “this slowdown will have a disproportionate impact on international companies, among other things.”

Today’s confirmation, ahead of an upcoming demo day in September, shows how things have changed.

“We are constantly evaluating every aspect of our batches and the environment the businesses will operate in, and as a result, batch size has always changed from season to season and year to year,” Amos continued via text message.

It is unclear whether Y Combinator will continue to operate in a more targeted capacity in future batches. When asked, Amos said YC has just started accepting applications for the next batch and will “evaluate every aspect of our batch and the environment the companies will operate in to determine batch size.”

Over the years, Y Combinator’s ever-expanding batch size has become a common — if not cliché — conversation among techies. Some say Y Combinator’s inflated size has weakened contestants’ ability to stand out. The institution, meanwhile, last told tech blog Newcomer that: it could power itself 1,000 startups per batch in a day. Amos said YC did not scale back because of criticism or the cost of growing check size.

The move will certainly help those within the current cohort stand out, simply because of a lack of competition. It’s another way YC, even if unintentionally, helps its startups get better marketing. A few weeks ago, Y Combinator announced launch YCa platform where people can sort accelerator startups by industry, batch and launch date to discover new products.

As I wrote at the time, Launch YC feels like Y Combinator’s strategically sound answer to one of the loudest criticisms of its model in recent years: Since cohort size has inflated, it’s harder than ever to stand out in a batch. Today’s news, depending on how you look at it, may be another answer to questions about YC’s distribution efficiency.

Current participants in the Y Combinator cohort can contact Natasha Mascarenhas via email at [email protected] or on Signal, a secure encrypted messaging app, at 925 271 0912.

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