Changes at YC

Not privy to special information w.r.t. this change, but I can think of a few:

1. Breaking focus / competing on multiple fronts. Lots of firms specialize in A-stage or later. By investing in seed and later rather than just seed, the later stage firms see you as a "competitor" for, rather than a "supplier" of, early stage startups. You have that many more competitive relationships rather than cooperative ones.

2. LP fundraising. LPs have to make choices as to who to fund, especially in this economy. Later stage vetting, returns, etc are different than early stage. May not be worth the heavy lift of competing for LPs.

3. Specialization. Once you get into later stages, you get firms that specialize by industry vertical. Not just business (marketplace, fintech, hardware) but even within software (SaaS, dev tools, consumer, enterprise, etc). Might make it harder to make deals. You now have a multi-front problem where each potential counter-bidder for the deal lead has hyper specialization to the startup, whereas YC is a generalist by nature.

4. Competition for deal terms. Most of the time, the deal lead sets the terms. If you can't aggressively bid to lead deals, they may not get the best economy for each of the deals since the lead may have other priorities. This may produce less optimal returns vs just putting more money into seed.

5. Partner / investor preference. VCs compete for partners / investors. If partners in the late stage at YC are limited to only YC companies vs the whole late-stage market (or have other limitations), it may not work for them vs going to a firm with less terms.

Ultimately as a generalist investor, pre-seed/seed/A-and-later are very different markets. With interest rates this high and everyone being more picky, it becomes harder to outperform unless you can operate in that market independently. I suspect YC looked at a model for their returns and came to this conclusion.

All of Y Combinator startups try follow the same playbook: successfull exit, or successful IPO. YCombinator benefits from both.

Since most YCombinator startups never see any profit, late stage investment becomes a risky proposition since even "top YCombinator startups" lose billions of dollars a year, for years, with no path to profitability or recouping investments.

In case you are wondering, that is about 20% of the staff.

https://techcrunch.com/2023/03/13/y-combinator-cuts-nearly-2...

>"It doesn't seems like something malicious."

No it seems like weaselicious to me.

I wish there were some publicly available numbers to analyze here, but it seems likely that YC's late stage funds have lost a lot of money (on paper) doing late-stage investments at sky-high valuations over the years leading up to 2022 that are now down significantly as a result of the current startup downturn.

Folks who are thinking about these YC changes as a layoff are missing the point -- YC is exiting what had been a major part of their business (especially if measured by total dollars invested).

And from the outside it seems likely that the reason for the layoff is probably less that YC is in troubled financial straights and needs to cut costs on its operations, but because their late-stage investing business was losing money and YC has decided to give up on it and no longer has work for specialists in that work.