Demo Day Online

Our summer batch is big this year – approximately 85 startups will be presenting their products and services at our Demo Day next month.  We know that not everyone we’ve invited to Demo Day will be able to attend for the entire day (or at all), so we plan to put videos of the presentations online shortly after Demo Day so that invitees can watch any presentations they miss.  The videos will only be available to Demo Day invitees and password-protected, but ideally someday we can make Demo Day presentations available to a wider audience.

Diversity and Startups

Sexism in tech is real.  One of the most insidious things happening in the debate is people claiming versions of “other industries may have problems with sexism, but our industry doesn’t.”  Both men and women claim this, even though it keeps getting harder to do in the face of shocks like the Tinder texts.  We know there is a problem, especially when it comes to starting companies, and we think YC can do something about it.

I’m willing to believe it’s worse in other industries [1], but it’s still very bad in our own industry.  Debating how to fix it is important, but debating whether or not sexism actually exists trivializes the problem in a toxic way.  A lot of women may not experience sexism, a lot of women may experience it but not talk about it, and a lot of men aren’t sexist.  Saying “There isn’t any sexism in tech” in the face of a mountain of data hurts things in subtle and not-so-subtle ways.

Although the current debate is mostly focused on gender, and I think women face some of the worst discrimination in tech, they are certainly not the only group that faces discrimination.

We—the tech industry as a whole—need to fix this.  Most importantly, it’s an ethical issue.  And speaking for YC, it’s also in our best interest.  People who are not white males will start many of the best companies of the future, and we’d like to fund them.  (White men will start many of the best companies, and we’d like to fund those too.) 

We have continued to listen to the community and are trying to understand what we can do to help.  Realizing that it’s hard to speak with much authority here as a white guy, I’d still like to share some current data about YC and also talk about what we’ve been doing and will do to improve the situation.

We think YC can help drive real change, and we hope lots of other organizations will join.

Some YC diversity data

It’s hard to put exact numbers on this because we don’t have a precise definition for “technical” and we don’t ask for gender on the application form, but it appears we fund technical women that apply to YC at a slightly higher rate than technical men that apply to YC for at least the last few years. [2] However, a lower percentage of women than men that apply are technical.

We can get more precise number when we disregard background and just look at the gender of applicants (based on looking at the application videos)—19.5% of the startups we have funded this year have women on the founding team compared to approximately 24.3% of startups that applied, based on a random sample of a few hundred applications.

As a side note, even though it will break backwards compatibility, we are considering changing how we look at this to the percentage of all founders that are women instead of the percentage of companies with a female founder.  Encouragingly, the percentage of women applying continues to trend up year after year.

10% of our companies currently worth more than $100 million are now run by women.  These women aren’t just on the founding team—they’re the CEOs.  While this number is still much smaller than we’d like, and I believe we can do more to make it higher, it’s a big improvement from 0% a few years ago and well above the industry average.

39.6% of the founders in our current batch were not born in the US, representing  27 different countries.

We have four female full-time partners (and in addition to advising startups, to a large extent they run YC).

What we’re doing 

One of the most-repeated things we’ve heard from our founders and others is that in addition to holding focused events like the Female Founders Conference, it’s important to make sure we have women speaking at all of our conferences and during our batches, which we’ve been doing.  We’re also showcasing more women and people of different ages and races on our website.  Positive role models are wonderfully effective, and we have more and more successful women who can inspire the next generation of founders

We will continue to ask our successful female founders to spend some of their time telling their story and being role models.  They, and others, can also talk about the challenges women face running startups far more authoritatively than I ever can. 

One thing I’ve heard again and again is that the hardest challenges are not the obvious ones.  Yes, it’s awful to hear the horror stories of wildly inappropriate behavior from investors to the entrepreneurs pitching them. (Unfortunately, stories like these are not super rare, but because there’s a big cost to going public with them, most never get told.  My hope is that YC has enough leverage at this point to make it clear that this is unacceptable and we will not continue to work with investors who do it.)  The thing I didn’t appreciate until I spent a lot of time talking to female founders is that unlike the occasional terrible incidents, there are frequent minor incidents—to stick with the fundraising example, many women told stories of investors only talking to their male founders in the room.  And more generally, many just don’t feel like they belong in the startup culture.

We won’t be able to stop all bad behavior, of course, but I do think we’ll be able to help reduce it.

Nearly all of the women I’ve spoken to feel that Hacker News has improved a great deal—and even when jerks write nasty comments, they usually get a lot of responses of the type we like to see.  But there is still more we can do, even though we’ll probably never be able to rid ourselves of Internet trolls completely.  Specifically, we’d like the community to help by downvoting comments that make HN an unwelcoming place to anyone.  We made a significant change to the downvoting algorithm a few months ago.  When we see comments that are threatening or worse, we ban the accounts and say on the thread that we don’t tolerate the behavior.  We are also working on new guidelines for HN comments.

We’re encouraging our startups to get HR infrastructure in place earlier.  Many startups wait until they have 50 or so employees before thinking about this; our sense is that many will benefit by doing it earlier.  Traditionally, startups have thought of HR as a drag on moving fast and openness, but a well-running team is one of the best assets a company can ever have.  We’re working on some projects here but aren’t ready to share details yet.

Another thing that we’ve heard is a belief that YC prefers companies with technical talent on the founding team.  This is true.  Based on all the data we’ve seen, it seems like a smart thing to prefer.  We’ll make exceptions—not every company needs complex technology to win, and not all leaders have to be expert coders.  But this is part of our DNA, and what makes us work—it’s a challenge to have a software company without at least one cofounder who can write software and evaluate and attract other coders.  This isn’t unique to tech; movie people should probably run movie companies.

Even if founders don’t code day-to-day—I didn’t after the first couple of years of my startup—a deep understanding of technology is still very valuable for leaders of technology companies.

So we’re especially excited by efforts to make learning to code more accessible.  Teaching people to code is not the only thing we need to do.  In addition to taking a long time to effect change, there are other problems in the industry like the attrition rate of women and minorities in tech that we need to fix.  But anyone who wants to learn to code should be able, with lots of encouragement along the way (this goes for any sort of engineering, of course.)  It’s an important long-term step to take.

Not everyone wants to learn to code—there are plenty of other interesting things to learn, and plenty of other ways to contribute value to a startup—but our sense is that a lot more people would be interested in it if they thought software development was a viable career path.

Google’s recent work here is great, as is the work of YC companies like Hacker School, Codecademy and MakeGamesWithUs.  YC also funds companies that help people learn to code, and we are especially interested in funding non-profits trying to help make STEM education more available and the tech world more inclusive.  We also try to host, judge, and help fundraise for hackathons and other tech events designed to broaden the community.

Teaching people who want to learn to code how to do so, ideally at a young age, is one of the most important things the world can do to increase the pool of potential startup founders, even though this will take a very long time to produce change.  Teaching people about startups is probably less important than teaching people how to code, but still a valuable thing to do.  We’re planning to put more resources online to help people learn how to start startups.  More good startups will be good for everyone. 

We—the industry as a whole—still have a huge amount of work to do, and we need a lot of organizations to be involved.  We hope what we’re doing will help.  This will be an ongoing process for YC, and as always please keep sharing your feedback.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         

 


[1] My mom is a doctor.  When I was maybe 12 years old, I went with her on a Saturday to the hospital and we went into the doctor’s lounge.  My mom pointed out to me there was a men’s bathroom but no women’s bathroom.  I thought (and still think) my mom was the best doctor ever.  I remember being incensed by this in the weeks after and the image is still very clear in my mind.

This was the late 1990s in Missouri, which is certainly different than the 2010s in California but not wildly so.    

[2] My guess for the explanation here is that it’s easier to start a startup as a man than a woman, and so the talent pool is more concentrated on the side of women who start startups.

Welcome Scott, Dalton, Adora, Brett, Nicole, Alexis, and Qasar

We have a bunch of new additions to the YC team to announce.

Scott Bell is joining the YC software team.  He was a co-founder of Skysheet from YC W09. He’s coming to YC from Houston where he was doing consulting and Lisp hacking.

Dalton Caldwell is becoming a partner.  He was the cofounder and CEO of imeem (acquired by MySpace in 2009), and the cofounder and CEO of App.net.  He has a BS in Symbolic Systems and a BA in Psychology from Stanford University.

Adora Cheung is joining as a part-time partner.  She is the cofounder and CEO of Homejoy.  Previously, she studied computer science at Clemson University and was the cofounder of Task.FM.

Brett Gibson is joining the YC software team.  He was cofounder of Slinkset and Posterous, both funded by Y Combinator in 2008 with the latter acquired by Twitter in 2012. He later founded Posthaven with fellow Posterous cofounder Garry Tan.

Nicole Lazar is joining YC as our first batch manager.  She’ll be responsible for helping the founders in the current batch and making sure everything runs smoothly.  Previously, she worked at Andreessen Horowitz.

Alexis Ohanian is becoming a partner.  Alexis cofounded reddit, which was funded by Y Combinator in 2005 acquired by Condé Nast in 2006 and he's now on the Board of Directors. He then launched hipmunk (YC 2010) and ran marketing + PR until leaving to fight SOPA & PIPA.  He has a BA in history and BS in commerce from University of Virginia.

Qasar Younis is becoming a partner.  He was the founder and CEO of TalkBin, which was funded by Y Combinator and acquired by Google. At Google, Qasar went on to be the product lead for business facing product.  He has a BS in Mechanical Engineering from Kettering University and a MBA from Harvard. 

Welcome to the team!

(Dalton and Qasar were already part-time partners, and Alexis was our ambassador to the east.)

YC Portfolio Stats

We get asked a lot for statistics on the YC portfolio.  Even though some of these aren’t that helpful [1], here is the latest update on the numbers we get asked about the most.  As always, all the credit goes to the founders. 

Total market cap of all YC companies: >$30 billion

Total money raised by all YC companies: >$3 billion

Number of YC companies worth more than $1 billion: 3 [2]

Number of YC companies worth more than $100 million: >20 [3]

Number of companies funded by YC so far: 716

Number of companies in the current batch: 85

Acceptance rate of the current batch: <3%

Number of nuclear energy companies in the current batch: 2


[1] Intermediate valuations aren’t worth very much, for example.  But we don’t keep statistics on total revenue or jobs created, though I expect both numbers would be impressive.

 [2] This is how many companies are currently worth over $1 billion, but even if we never funded another company I think it would at least double and probably triple or quadruple.

 [3] Similar to the note above, this number should go up a lot just from our current portfolio—it generally takes companies a few years to get above this threshold.

New RFS: One Million Jobs

We want to fund companies that have the potential to create a million jobs.  There are a lot of areas where it makes sense to divide labor between humans and computers—we are very good at some things computers are terrible at and vice versa—and some of these require huge amounts of human resources.

This is both good for the world and likely a good business strategy—as existing jobs go away, a company that creates a lot of new jobs should be able to get a lot of talented people.

(We aren't looking for companies that plan to have a million employees.  Probably the easiest way to do this is to create a platform that lets a million people create their own jobs.  Uber may do this, for example.  Healthcare or education platforms that let people provide services are other examples of what might work.)

View other Requests for Startups.

The YC Board of Overseers

I’m delighted to announce the new Board of Overseers for Y Combinator.

The members are: Brian Chesky, Adora Cheung, John Collison, Patrick Collison, Drew Houston, Jessica Livingston, David Rusenko, Emmett Shear, and me.

I’ve worked with everyone on this list.  They are all great and care deeply about YC—we're very lucky to have them.  They'll help ensure YC thrives for a long time.

The Board will be responsible for hiring and firing the YC President, and occasionally helping with strategic direction.  Hopefully it doesn’t have to meet very often.

Quora in the next YC batch

This month, YC will be participating in Quora's most recent investment round and Quora will be joining this summer's YC batch.  This is a new experiment for us; we've funded later-stage companies before, but none close to Quora's stage.  Our hope is that both the company and the YC community will get a lot of value out of this.

We're not sure if it's something we'll do again; some of our experiments have worked and some of them haven't.  But Adam D'Angelo is awesome, and we're big Quora fans, so we're very excited to welcome Quora to the YC community.

Since it seems out of character for us, we thought we should say something about it.  Also, we won’t count Quora when we periodically announce stats on the YC portfolio.  Although they’re participating in the batch like any other company, they’re already so far along it doesn’t seem fair to include them.

The New Deal

We have a new standard deal at YC—we’ll invest $120k for 7%.  While we may deviate from this in exceptional cases, it will still be the case for almost all of the companies we fund.

This replaces our previous standard deal of on average $17k for 7%, plus a safe that converted at the terms of the next money raised for another $80k.

The investment will come in two chunks, which together will represent a flat 7% of the company.  Although YC itself continues to have no LPs (and that way we have the flexibility to do things like fund non-profits), a portion of the investment is from a fund YC manages that does have LPs. 

Most people don’t do YC for the financial investment—they do it because they want the advice, the help of the network, the benefits of the program, etc. But still, more money for less equity is definitely better.

A bit of history—in 2011 Yuri Milner and SV Angel started offering $150k to every startup we invested in on an uncapped convertible note. This went through a number of iterations in terms of structure and partners, and eventually we renamed it YCVC.  Among other changes, we reduced it to $80k on top of our $17k—the $150k extra was enough to cause real problems for the companies around founder breakups, for example. Also, the partners making the investment have changed over time, and for the last batch were Andreessen Horowitz, General Catalyst, Maverick Capital, and Khosla Ventures.

$97k was about right at the time, but the cost of living in the Bay Area has gone up substantially. So we’re increasing the total to $120k, which we hope is enough for the founders to run their business and pay their living expenses for at least 6 months, and sometimes longer.

This also marks the end of the automatic investments from the four firms mentioned above.  As YC has become a larger and larger part of the startup ecosystem, we had to deal with things like signaling risk (e.g. a YCVC investor not making a follow on investment in a company caused some other investors to think the company may not be good) and information issues.  All of these issues were issues of perception—the YCVC investors are great firms that always behaved really well, and we’re going to continue to work with them very closely. But we hate complication, and we hate anything that causes issues for our startups, even if it’s just an issue of perception. This should help level the playing field. 

Speaking of hating complexity, we’ve tried to make the new structure really simple. The convertible notes and safes we used got complicated in terms of how they got priced, and complexity often causes unintended consequences. It was hard for founders to actually predict how much total dilution they were looking at.

Our new investment structure should be very simple—$120k for 7% equity (regardless of the number of founders). We hope that it will help the companies we fund.

For non-profits, I’m delighted to announce that Teespring has agreed to give each non-profit we fund $50k.  This will be on top of $50k from us for $100k total.  Thanks, Evan and Walker!

Finally, it’s sometimes hard to compare offers from different accelerators. Just to be clear, we don’t charge any fees to the companies to be part of YC. We understand the complex reasons around LPs and tax issues that cause some accelerators to charge a fee to the companies they invest in, and while we don’t think it’s bad behavior, obviously companies should deduct those fees from the investment when they’re thinking about those offers. We also try hard to avoid any “gotcha” terms like low caps in certain situations, weird anti-dilution terms, etc.

Welcome Kat, Yuri, Patrick and Elizabeth

I’m delighted to announce a promotion and three additions to the YC team.

Kat Manalac has been our director of outreach since 2013.  She’s done an incredible job, and we’re making her a partner.  In addition to regular partner responsibilities, she’ll continue to be responsible for outreach to prospective founders and for our PR.  Before she joined YC, she was Alexis Ohanian’s chief of staff.

Yuri Sagalov joined us as a part-time partner last September, but we never got around to announcing it. Yuri is the cofounder and CEO of AeroFS, which he started in 2010.  Yuri will be especially helpful to enterprise companies we fund, which is not an area we’ve historically had much expertise in.  Several founders from the most recent batch went out of their way to tell me how much they’ve liked working with him.

Patrick Collison is joining us as part-time partner.  Patrick is the cofounder and CEO of Stripe.  He knows a lot about every part of running a startup, but he thinks about hiring and company culture better than anyone else I know.  Previously, he cofounded Auctomatic.

Elizabeth Iorns is also joining us as a part-time partner.  She’s the cofounder and CEO of Science Exchange.  She has a Ph.D. in cancer biology and knows a great deal about life sciences, which is very helpful given that we’re starting to get a lot of interesting biotechnology companies applying that we’re currently unqualified to judge.  She’s been an informal advisor to a number of Y Combinator companies, and they all praise her startup expertise. 

Welcome to the team!

Two New YC Partners: Justin Kan and Aaron Harris

I'm delighted to announce that Justin Kan and Aaron Harris are joining Y Combinator as Partners.

Justin was in the very first YC batch with me in the summer of 2005, and has been a part-time partner since 2011. Justin founded Kiko, Justin.tv/Twitch.tv, Socialcam, and Exec. He took the "do what it takes" directive of startups unusually far with Justin.tv, when he wore a webcam on his head and broadcast his entire life for 8 months, 24 hours a day.

For some time now, Justin has been who we send startups to with questions about growth and marketing. But he knows a ton about nearly every part of startups.

Aaron was in the YC Winter 2011 batch doing Tutorspree, which moved back to New York after their batch. He’s actually been a partner since October 2013—sometimes it takes us a while to get around to announcing things.

Aaron will also advise startups on all topics, but he’s especially good with anything related to finance.

We're all very happy to have both of them on the team.