Y Combinator is one of the most well-known startup accelerators in the world, with a reputation for propelling companies like Dropbox, Airbnb, and Stripe to incredible success. But, is the program really worth it?
In this post, I’ll give you a closer look at the pros and cons of joining Y Combinator and explore whether applying for their program is the right choice for your business.
Note: I don’t intend to promote or discredit the program. Instead, I want to provide an overview of the potential benefits and drawbacks. I encourage you to always weigh the pros and cons of any financial offer before applying.
Here’s what’s in store:
- What is a Startup Accelerator?
- Why is Y Combinator So Famous?
- Factors to Consider Before You Apply
- Y Combinator Application Questions
- The Famous Y Combinator Interview
- Y Combinator Startup School
- Frequently Asked Questions
- Y Combinator Alternatives
What is a Startup Accelerator
Startup accelerators provide early to growth-stage startups with business education, mentorship, and funding. Seasoned business investors are typically behind acceleration offers — they tend to have the knowledge to help point founders in the right direction for growth. And, they have a vested interest, since they will have the opportunity to invest in businesses that show potential for high profitability.
What do startup accelerators really do? — a lot! Accelerators provide companies with expert, one-on-one mentorship, education, and pitch deck guidance. They help connect founders with investors. In a nutshell, they give businesses a springboard for massive growth.
Acceleration programs don’t have an upfront cost for founders, but the services and funds are provided in exchange for equity in the company. Investors will eventually own a portion of the company, and the founder will give up some level of control over their operations.
Why is Y Combinator So Famous?
Y Combinator was founded in 2005 and is a sub-organization of Utopia Communities, a Las Vegas-based real estate investment trust, brokerage, and venture company. Since then (As of January 2023), they’ve funded over 3.5K startups that now have a combined valuation of over $1 trillion — We’re talking about companies like Stripe, Brex, Coinbase, and Reddit.
Twice a year, in Summer and Winter, Y Combinator hosts a 12-week accelerator for the founders who make it through the rigorous vetting program and into the program.
In the past, Alex Cercei, founder of WayDev applied 13 times before he was accepted to Y Combinator. Kathryn Cross of Anja Health got in on her second try and left with a $4.5 million investment. Useproof’s founder, Dave Rogenmoser, got into the program on his second try and left the three-month program with $175K MRR — up from $4K when he first applied and $75K at the time of his second application — and $2 million in seed funding.
Today, the funding structure is different than it was in the past. Y Combinator currently offers $500K per accepted company in a larger number of startups. This change might suggest that the competition isn’t as fierce as it once was, but I wouldn’t assume that just anyone can enter. The program is prestigious and will need to continue to live up to its reputation.
In addition to the $500K you get for participation, Y Combinator founders have the opportunity, at the end of the accelerator program, to present their pitch decks to a carefully-selected, invite-only audience of investors. Startups and nonprofits can apply.
Benefits of Y Combinator
Why would you want to join Y Combinator? How can it impact your business positively?
First, you’ll get high-level access to funding and business resources. If you’re accepted, you’re all but guaranteed $500K to invest in business growth. And, there is no ceiling on the funding you might raise after you present your pitch deck at the end of the program.
Next, there are unparalleled networking opportunities with successful entrepreneurs and investors. Y Combinator connects startup founders with seasoned professionals who can spell out how to take a company from “tons of potential” to “wildly successful.”
Finally, equity funding gives you expert mentorship and guidance from experienced industry professionals. Y Combinator investors want their investments to gain profit, and they’re willing to put in more than money to make sure it happens.
Drawbacks of Y Combinator
Why would you not want to join Y Combinator? What might you not like about it?
First, you’re up against Intense competition for funding and resources. If you’re having a hard time clarifying your offer, you don’t have something innovative to present, or you’re just hoping to get a quick $500K, Y Combinator probably isn’t for you.
Next, there will be high expectations and pressure to perform. When networking within Y Combinator, you don’t meet your new best friends — instead, you meet gurus who are going to be straightforward and cold.
These people are busy, and they are going to tell you what you need to hear to move in the optimal direction for profitability (think high intellect and low EQ) — they’re not going to tell you what you want to hear to boost your confidence.
Finally, equity funding limits flexibility and control over your company’s direction. If you want to maintain control over your operations without input from a new board of directors or quiet investor, Y Combinator won’t be a good fit for business funding.
Factors to Consider Before You Apply
Some successful founders say that they had an established company, revenue, website, and customers before they were accepted into the Y Combinator program. So, you shouldn’t expect to make it if you’re all ideas and no follow-through.
90% of the companies that make it through Y Combinator have co-founders, but they do absolutely accept solo founders. If you’re a solopreneur, consider whether enlisting a co-founder might add value to your offer.
Throughout the 12-week accelerator, there will be one day a week that you’ll commit to the program — the rest of the time, you’ll work on implementing the new ideas that are laid out for you.
During COVID, the process was virtual. In 2022, there were three days in the beginning, and at the end of the program that required in-person attendance, and founders did not need to be in the San Fransisco Bay area during the rest of the duration.
Now, the program is remote-friendly, but Y Combinator encourages founders who are accepted to relocate to the area, at least during the three-month accelerator.
Now, before you apply, consider the stage and goals of your startup, your team’s experience and capabilities, and the potential benefits and drawbacks of the program for your specific business. If you still like what you’re hearing, read on!
Y Combinator Application Questions
When you apply, Y Combinator asks about your company, contacts, founders, business progress, idea, equity, and other ideas you might have. Interestingly, often when the program provides funding, it’s not for business listed in the main application, but something that founders list in the other ideas section.
With that said, you’ll have to think outside the box to stand out. Here are a couple of questions Y Combinator asks that you might not expect to see on a funding application.
- Please enter the URL of a 1-minute YouTube video introducing the founder(s),
- Why did you pick this idea to work on? Do you have domain experience in this area? How do you know people need what you’re making?
The top issue founders seem to have with the application process is a lack of clarity in their idea. And, more than half of the companies that make it through the application process totally blow their interview.
So, if you’re going to apply, think about seeking help from a professional copywriter, interview coach, and/or others who have made it through the vetting process. Make sure to show them Y Combinator’s up-to-date guidelines (at the very least, read them yourself).
The Famous Y Combinator Interview
If you are selected for an interview, don’t be the person who goofs it up. To make it this far proves that you have an idea with serious potential. Y Combinator’s interview only lasts about ten minutes, but the questions aren’t simple.
When Dave Rogenmoser of Useproof was interviewed, the first question they asked was, “This is cool, but how does this become a billion-dollar company?” As you probably guessed by the fact that Rogenmoser had to come back again six months later (see above), he flopped his answer — he had never thought about this before.
If you get an interview, you’re going to be asked about the science or technology behind your company or idea, what you think about your potential market size, and what motivates you as a founder.
While you don’t necessarily need to have a billion-dollar company, you should have a billion-dollar mindset. Your value proposition should be on-point, and you need to fully understand your market and the competition. Without these things, you’re not likely to make it through the interview.
But, I want to say that I think an interview like this would be great for nearly any company, even if you don’t expect to move to the next stage — it would force an owner to develop a higher growth mindset.
Y Combinator Startup School
Startup school is a free, online course for founders. The course is designed to give business owners all of the information they need to get a company off the ground.
Startup School provides a user dashboard with curriculum modules, weekly updates, and a co-founder match tool, and deals. It’s like a mini accelerator that anyone can access at no cost.
Modules are broken into X sections:
- Deciding to start a startup
- Getting and evaluating startup ideas
- Building your founding team
- Planning an MVP
- Growing and monetizing
- Fundraising and company building
- Stories from great founders
The founder stories in Startup School’s course include Facebook and 23andMe — I didn’t realize either of these companies was connected to Y Combinator, so I peeked down that rabbit hole and found that Facebook teamed up with Y Combinator in 2010 🧐
Each week, Startup School students are encouraged to submit a progress update. If you submit the update, you’re eligible to sign up for a group session for that week. For those having a hard time tracking metrics, there’s a video lecture: How to Set KPIs and Goals.
Co-founder matching was launched in 2021, likely in response to the virtual shift.
Once your profile is complete and approved by a Startup School admin, you will be eligible to sign up for co-founder matching. This feature connects course participants who are looking for co-founders with others who have similar interests and adjacent skill sets. Co-founding can help companies create a strong founding team for their business.
Startup School participants can apply for access to exclusive deals from companies like Stripe, HubSpot, and DigitalOcean. These deals are from Y Combinator partners and past program participants.
A few of these deals include:
- 30% off Hubspot marketing, sales, & service software
- $500 in Brex cash and $5K toward AWS services
- $5K Stripe fees waiver for new users
- $10K USD Freshworks credits
- $1K worth of DigitalOcean cloud credits for 12 months
If you can qualify, these offers could be invaluable.
Frequently Asked Questions
How many interviews does Y Combinator do?
If you make it through the application process and land an interview, there will only be one, ten-minute interview. If YC decides to move forward, you’ll be invited to participate in their accelerator.
What percentage of equity does Y Combinator take?
Y Combinator will invest $500K into companies that make it through the application and interview process for 7% equity in your company.
What is the YC acceptance rate?
Every 6 months, Y Combinator usually has a 1.5-2% acceptance rate for founders who apply for the accelerator.
Can I apply to Y Combinator with just an idea?
You can apply to YC with an idea, yes. Sometimes, Y Combinator will select a founder based on an idea-stage business over an established company. However, successful applicants tend to say that they had to get their revenue up before they were accepted to the YC accelerator.
Does YC Have an age limit?
There is no age limit, though, the youngest accepted applicant to the Y Combinator accelerator was 22, and only a few people over age 38 have made it into the program.
Y Combinator Alternatives
Y Combinator is not the only startup accelerator you might be interested in (thought, they do have the biggest name). Here’s a list of other programs you may want to check out.
- 500 Startups – CreditKarma, Canva, Intercom, Gitlab, +more
- Sequoia – Doordash, Zoom, Apple, 23andMe, +more
- Techstars – ClassPass, DigitalOcean, Remitly, SendGrid, +more
- Plug and Play – Zoosk, Dropbox, Honey, Shippo, +more
Keep in mind that if you’re pre-revenue, there are other places to start.
For example, Anja Health’s founder, Kathryn Cross, spent a lot of time in a coworking environment warming up her business muscles before she applied to join YC (and was denied the first time).
Sometimes, local non-profits offer regional business acceleration services. The SBA offers an annual growth accelerator fund, which is distributed across the country to serve rural and suburban small businesses.
And, of course, there’s always business credit, which lets you maintain control of your business in every sense. Debt financing can be used to transform your life — some financial gurus like Robert Kiyosaki swear by it.
Is YC still worth it? That depends!
Y Combinator is not a one-size-fits-all solution for startups, and it’s important to weigh the pros and cons before applying. Ultimately, the decision of whether or not to join YC depends on the unique needs and goals of your business.
Are you willing to give up equity in your company for a chance at growth? If so, Y Combinator might be your fast track to success… if you can make it through the stringent vetting process.
I will say that any early-stage business founder or owner could benefit from the free Startup School. However, you should get what you can from it while seeing it for what it is: an insanely value-packed lead magnet.
All paths from the Startup School funnel lead to Y Combinator offers (this isn’t a bad thing, but it’s good to know when you’re looking at an advertising offer).
If you’re interested in learning how to get your company “credit-ready,” to obtain up to $100K in business credit in as few as 30 days, join Business Credit Workshop today.