More Money (for Y Combinator) Means More Startups

Y Combinator was already a popular accelerator program for young start-ups, but with Yuri Milner and Ron Conway offering $150,000 to all YC companies, it has boosted applications by 40 percent for the upcoming class, said Harj Taggar, the newest partner at Y Combinator during an interview at the Wired Business Conference in New York.

Taggar said the promise of more money has boosted applications and also brought in a more diverse mix of applicants. He said he’s seen a significant increase in older and more experienced entrepreneurs as well as non-technical MBAs, looking to give life to new ideas. He said Y Combinator just completed the final review process for the upcoming summer class and is in the process of notifying the start-ups about their inclusion in the new class, which starts later this month. YC doesn’t disclose how many submissions it gets but Taggar said the program is now becoming more attractive to a wider audience as its brand grows.

“People had this view of a YC company as a nerdy CS guy who just hacks away, but we’re now getting a lot of successful CEOs who have had good exits come back. It’s a very diverse group now. Y Combinator used to be the only funding source for a lot of companies but now a lot more people who have credible options are putting them off [in order] to work with YC,” Taggar said.

There were 43 companies in YC’s last class, which were unveiled at demo days in March. Taggar said the classes have been growing by 20 percent on average, and he said that will continue with this upcoming class, which means we’ll see about 50 companies this time. In addition to the $150,000 offered by Milner and Conway’s SV Angel fund, YC also offers about $15,000-$25,000 per startup. Taggar said the additional money, though bemoaned by some angel investors, has only provided positives to YC start-ups, providing them with a hedge that allows them to work on their products and strategy without having to worry about survival or taking more money immediately. If there’s one downside, it’s just meant more work for Taggar and the other YC partners reviewing applications; YC continues to select about 2.5-3 percent of all submissions. Taggar said YC has the capacity to handle many more companies in its program. And it’s bringing on more YC graduates as advisors such as Sam Altman of Loopt and Justin Kan of

Taggar said he’s not worried about the impact of the extra money for YC start-ups. He said it’s still very hard for any start-up to get off the ground and fight through the challenges of funding, hiring and finding momentum with customers. But he said it’s still hardly a bubble for the tech world and if it is, it’s a self-correcting one. And it’s also mostly confined to the seed stage where it’s unlikely to hurt a lot of people, he said.

“I’m just a strong believer that pushing out a lot of start-ups is good for the world. This is not a pyramid scheme; these companies still have to get revenue, get users, hire people, all these problems still exist. And this is not huge amounts of money here. This won’t collapse anything. I generally believe that the market corrects itself so if valuations are too high now, it will correct itself. “