Exclusivity
or Strategy
Many people believe that a startup must be radically novel to get funded by Y Combinator.
But the truth might be far from this. Is originality dead in the startup industry? Let’s find out.
Story written and designed by Madhurima and Rakshit
Last year, out of 40,000 applications,
Y Combinator funded just 450 startups.
That is 2% acceptance rate, being one of the top most competitive incubators.
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The Strategy
So, what is the strategy?
Now we know that Y Combinator funds multiple startups with nearly identical ideas. It seems wasteful. Confusing. At first glance, it seems like a mistake—or at least inefficient. But what if there's business to it.
To understand this, let's look at 5 companies Y Combinator invested in the ‘payment gateway’ space.
What looks like redundancy is actually the only rational strategy in a hits-driven business.
YC knows that most investments will fail or return modest multiples. They're not trying to avoid failure—they're trying to ensure they're in the room when exponential success happens.
You don't need five wins. You need one Stripe, one Airbnb, one DoorDash. That single outlier will generate returns that make every loss, every write-off, every failed bet completely irrelevant.
That's why YC bets on similar ideas, back competing startups, and invest in spaces that look crowded. They're not hoping lightning strikes. They're buying enough lottery tickets to guarantee they're holding the winning number.
Paystack
Wave
Stripe
Magic
Bridgecard
-$125,000
-$125,000
+$50,000
+$30,000
-$125,000
-$125,000
YC’s investment
in total
~ $476 million
YC’s invests
$125,000 each
in 5 companies
Stripe becomes a unicorn. YC's $625K initial investment is now worth $476 million!
what is a unicorn?
Magic closed after failing to achieve PMF. YC writes down its $125K seed check to zero.
what is PMF?
Regulatory pressure forced Bridgecard to shut down, and YC’s $125K vanished when runway ended.
what is a runway?
YC invested $125,000 in each company for 7% equity. That's 5 bets on similar ideas.
what is equity?
Paystack gets acquired by another company but YC recovers about $50,000 from this acquisition.
what is acquisition?
Wave gets acquired too but YC recovers even lesser +$30,000 from this acquisition.
what is acquisition?
Y Combinator 726x-ed their return on investment!
what is roi?
Founder mindset
Who are these founders?
Let’s look at interviews from top YC founders to see what stands out and what that reveals about Y Combinator’s standards for acceptance.
founder mode
certainly get a co-founder
stressful times
product so good people tell friends
FAANG trap
conflict avoidance
sensible business model
talking to customers early
make something people want
strong culture
we’ll figure it out
conflict avoidance
enterprise sales
government relations
network effects
nearly went out of business
first version doesn't work
international expansion
100 customers who love you
frugality, focus, obsession and love
team first
optimists
technical founders
customer obsessed
hiring is culture
game recognized game
seek truth
infinite learner
write it down
plan at the start
one yes vs one no
action bias
loss aversion
product-market fit
long-term vision
skill match vs trust
losing control
have to unlearn
loneliness of founder
organic growth
data informed
what do you want to build?
build character
pruning the tree
build in public
intuitive
fire and hire
shotgun wedding
Leadership
design partners
lean vs fat startups
cockroaches
Challenges
Strategy
Growth
action bias
drop-out
pivot
awkward conversation
lifestyle inflation
yanking out requirements
The Conclusion
What are they missing?
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Credits
Story written and designed by Rakshit and Madhurima
Project advised by Karen Cheng
Sources
Y Combinator companies 2005-2024 from kaggle.com
Y Combinator data based from ycombinator.com
Videos from youtube.com