In most industries, there isn’t always a huge advantage in being the first kid on the block but the technology accelerator industry seems to be different.
Y-Combinator (YC), the creator of the accelerator model as we know it, has maintained global dominance for 10 years. And it doesn’t look like the accelerator, situated round the corner from Google's headquarters in Mountain View, is going to slow down anytime soon.
Since 2005, YC has backed over 840 startups, including billion dollar companies like Dropbox, Airbnb, Stripe and Reddit. Like most accelerators, it makes its money by taking equity (typically percent) in the businesses it supports.
When it comes to support, YC offers the standard funding and office space that every accelerator provides. But what sets it apart is the callibre of its mentors and its relationships with Silicon Valley venture capitalists. The company writes the following on its website:
"The most important thing we do is work with startups on their ideas. We’re hackers ourselves, and we’ve spent a lot of time figuring out how to make things people want. So we can usually see fairly quickly the direction in which a small idea should be expanded, or the point at which to begin attacking a large but vague one.
In comparison to other accelerators, YC has been phenomenally successful. It's has had $2.3 billion of exits compared to the next best at $400 million (AngelPad) and even on average raised per a startup, YC outstrips other big names like TechStars; YC’s $6.6 million to TechStars’ $2.5 million.
In the last few years there has been a boom in the number of accelerators cropping up in the UK, with recent estimates suggesting there are now over 60, two thirds of which didn’t exist before 2010. Many of these are yet to prove themselves but they'll no doubt be looking to YC for tips.
YC startup insight
Business leaders at Unbabel, a web translation service that combines crowdsourced human translation with machine learning, try to explain what YC's secret sauce is.
Vasco Pedro (cofounder and CEO of Unbabel)
Y-Combinator is all about the relentless pursuit of growth, and what differentiates YC from other programs is that their focus is on helping companies prioritise their customers and product. Our goal throughout YC was to concentrate on building the customer base and creating something that the customers want. The philosophy is that if the customers and product are taken care of, everything else will fall in place. This was something completely new to us and opened us up to a new way of thinking about our business. I remember that during the interview process, we didn't even need to prepare a powerpoint presentation. The idea being that all of our time should be focused on our business, customers, and product.
Y-Combinator is a really strong brand, and that had a positive impact on our ability to find customers and investors. In terms of customers, because we sell to online companies, at least 50 percent are located in Silicon Valley, and they recognise the YC brand. Being a Y-Combinator backed company has gotten our foot-in-the-door on numerous occasions.
In addition to being a strong brand, YC has a strong community that improved the way we networked and who we connected with. A great example of this is our relationship with some of our largest customers. A member of the YC community would tell someone about Unbabel and how great we could be for their business. They would email us about setting up a meeting, becoming a customer, and often introduced us to other potential customers. A positive circle of trust started. Being part of the YC community truly helped us grow beyond what we could have expected.
Sofia Pessanha (cofounder and CMO of Unbabel)
For me, Y-Combinator changed my personal life. I'm originally from Lisbon, Portugal and moved to San Francisco in 2014 for YC. Personally, it has been an incredible journey being in San Francisco. YC has become a huge part of my life in every way. I share an office with four other YC companies and all of my friends in San Francisco are some how related to YC.
The move has been both challenging and rewarding to be able to live in a city that is basically inventing the future. People are building new tech, business models, and new ways to live, which is less prevalent in Europe. It is like living in Florence during the Renaissance, everything arts and business is happening here.
Doing business in America is also a huge change and always a learning opportunity. Both Vasco and myself have worked with companies in the US and Europe, and there is a significant difference in the way that business is conducted. I find it rewarding to be able to build trust and a relationship with vendors and suppliers, which is something I value when doing business in the US.