Party Like it's 2009!
Y Combinator is celebrating the recession by expanding. We're so convinced recessions are good times to invest in startups that we're increasing the number we fund, and we're raising $2 million from Sequoia Capital and several prominent angels to help us do it.
It's a big step for us to raise outside money. Till now we'd only used our own. But we didn't want to let the bad economy make us conservative. Instead of hunkering down to wait out the recession, we want to expand to take advantage of it.
We'd been funding about 40 startups per year. We hope to get that up to 60. It depends how many good groups apply, but we intend to accept a larger percentage of applicants. Partly because we want to take more risks, and partly because groups starting startups now will be better.
The startups that get started this year will do great things. It takes courage to start your own company in a recession, and people with that kind of courage make the best founders. And the companies they start will benefit from the distraction of existing competitors. While existing companies contract, the next generation will expand.
It may be gloomy everywhere else, but for the next couple years there's going to be more activity than ever in our little corner of Silicon Valley. So meet us halfway. If you're ready to start a startup, now's the time, because we're ready to fund it.
How do startups apply for funding?
By filling out an application form on our site.
What will Sequoia and the angel investors get in return?
A percentage of the returns from the startups funded with this money. They will not get a right of first refusal to invest in the startups' future rounds.
Is this related to YC switching to Silicon Valley year-round?
Partly. It's easier to expand in Silicon Valley, because the startup community is so much larger here. Part of our model is to bring in outside experts to advise the startups, and there are just so many more of these people in Silicon Valley than anywhere else.
YC alumni are now a significant subset of this community. The 118 startups we've funded so far have about 300 founders between them, most of whom live in the Bay Area. They are a uniquely valuable resource, because they're particularly committed to helping other YC startups. They tell the new startups things they can only learn from their peers.
Are you looking for a different type of startup because of the recession?
Not really. The best startups grow organically out of the founders' own experiences and ideas. You don't want to let external factors like economic conditions influence your plans too much.
What changes in a recession are the tactics you use. If there's an expensive way to do the startup and a cheap way, take the cheap way. And if you're making something that has twice the power per dollar as what it replaces, you may be better off describing it as half as expensive rather than twice as powerful.