Y Combinator is already known as one of the most successful startup incubators in the tech industry. But just how successful is YC? And how successful are the 316 companies that have gone through the program?
According to co-founder Paul Graham, very successful. The combined value of the top 21 startups that have graduated from the program is $4.7 billion.
Of course, success can be tracked a number of different ways: the amount of money raised and the valuation of the companies, for example. In the case of the former, YC is doing well on that account too. Even before the announcement earlier this year that 100% of YC’s startups would raise funding, thanks to the $150,000 offer to each startup from Ron Conway and Yuri Milner.
But even before this, the vast majority of YC startups were successful in their fundraising efforts. Of the summer 2010 class, 94.4% either raised money or didn’t need to as they were already profitable. “That number is about as high as I’d want it to be,” writes Graham. “If it were 100%, I’d worry we were being too conservative in who we funded.”
Graham notes that funding, while easy to measure, isn’t necessarily the best way to gauge the success of the program’s startups. “Getting funded is not success. It’s just something that makes success more likely.” But if the standard measurement for success is value, and if value is measured by exits, then the 6 years of YC’s existence isn’t quite long enough to adequately assess this. Of the 300-plus startups, “just” 25 YC companies have been acquired, 5 of them for over $10 million, and Graham says that he’s estimated the values of the rest of the companies based on these acquisition figures in order to gauge that the average value of companies Y Combinator has funded to be roughly $22 million.
But coming up with an adequate measurement for success isn’t really the point, says Graham. “The real lesson here though is how long it takes to measure performance in this business. We’re 6 years in, and we could easily be off by 3x in either direction. Startup outcomes are unpredictable, and the outcomes of their investors doubly so, because it’s hard to say whether the big successes are repeatable, or if the investors just got lucky. Even 6 years in, all we can say is that the numbers look encouraging so far.”
