Y Combinator has announced a minimization of the start-ups admitted into its summer 2022 batch accelerator program. The previous cohort had about 414 start-ups, but reports on the summer 2022 cohort which is in session currently is that admitted start-ups have now shrink by 40% to 250 companies.
Although the recent announcement is a significant reduction from last year, it is still substantial when compared to the past five years according to Lindsay Amos, the communications manager of Y Combinator. The communications Manager confirmed that the current downturn in the economy, and the instability of the venture capital funding environment forced Y Combinator to fund less companies between W22 and S22. The small size of the S22 batch is therefore completely intentional.
The general opinion about the world of early stage and pre-seed companies is that they are protected from macro stress because they operate at a safe distance from late valuations. Since Y Combinator operates in this same arena, the readjustment the company is currently implementing is a testament to the fact that such start-ups are also susceptible to the effects of the recession.
Y Combinator had in May charged portfolio founders to brace up for the worst. The idea is to at least stay alive, and be in business as companies may significantly grow their market share during a recession. This advice was contained in an internal email to founders in the accelerator program. The email also contained 10 suggestions to assist businesses to survive the economy, and the overwhelming technology slowing down the economy. The email remarked that “no one can predict how bad the economy will get, but things don’t look good.”
The tone of this email marked a clear deviation from the ambience some weeks ago during the Demo Day. Start-ups under Y Combinator having raised their venture capital presented themselves publicly. These companies received a $500,000 check from Y Combinator, and were seriously pursuing international opportunities. But Y Combinator has now remarked that the current downturn will also affect international business disproportionately.
The announcement underscores a significant shift, and is coming before a proposed September Demo day.
It is left to Y Combinator to evaluate the business environment, and other factors within which these businesses will operate to determine the adjustments to be made. Realities change, and this dynamism will always be reflected in the lot sizes for all seasons and cohorts.
Y Combinator’s future mode of operation remains unpredictable since the business environment will play a determining factor. Communications Manager Lindsay Amos again echoed this sentiment while commenting on the current acceptance, and assessment of applications for the next cohort. “All aspects of our batch and the environment in which the businesses will operate to determine the size of the batch,” the manager retorted.
The conversation among techies bordering on the constantly increasing lot size of Y Combinator’s program has been going on for years. While some criticize the high numbers as an impediment on the capacity of participants to express themselves convincingly, the accelerators insist on the effectiveness of the program, and even fancies raising about 1000 start-ups per batch soon. The reduction in cohort size is therefore not just due to criticism or the obvious higher running cost.
The upside of this very recent development may support the critics of the program as less competition due to fewer participants will help the participants in the current cohort distinguish themselves easily. Y Combinator also seems to be working tirelessly to give these start-ups more visibility.