Y Combinator narrows current cohort size by 40%, citing downturn and funding environment – TechCrunch

Y Combinator says it has intentionally shrunk the number of startups within its accelerator for the Summer 2022 batch. As first reported by The Information and independently verified by TechCrunch, Y Combinator’s Summer 2022 cohort — currently in action — boasts nearly 250 companies, down 40% from the previous cohort, which landed at 414 companies.

Y Combinator’s head of communications, Lindsay Amos, confirmed the reduction over text message, saying that the batch is still large “relative to the last five years of batches.”

“The S22 batch is significantly smaller than our most recent batches. This was intentional,” the statement reads. Amos said that the economic downturn and changes to the venture funding environment caused YC to reduce the number of companies funded between W22 and S22. Many investors have argued that pre-seed and seed-stage startups, the world where YC’s accelerator primarily exists, has been immune to macroeconomic tensions because of how removed the stage is from late-stage valuations. This latest move by YC illustrates that such early-stage companies are not immune to the effects of the downturn.

In May, the accelerator advised its portfolio founders to “plan for the worst.”

“You can often pick up significant market share in an economic downturn by just staying alive,” top startup accelerator Y Combinator wrote in an internal e-mail to its founders this week. The advice was one of 10 bullet points in a memo meant to help companies navigate the economic downturn crushing tech. Other stand-out quotes include “no one can predict how bad the economy will get, but things don’t look good.”

The email was a vibe shift from just a few weeks prior, when hundreds of Y Combinator startups — many of which already raised venture funding — presented themselves to the public on Demo Day. The startups were the first to receive Y Combinator’s new $500,000 standard check and were aggressively focused on international opportunity. Now, YC is saying that “this slowdown will have a disproportionate impact on international companies,” among others.

Today’s confirmation, ahead of an upcoming Demo Day in September, shows how things have changed.

“We are constantly evaluating every aspect of our batches and the environment in which the companies will be operating, and as a result, the batch size has always varied from season to season and year to year,” Amos continued over text message.

It is unclear if Y Combinator will continue to operate in a more focused capacity in future batches. When asked, Amos said that YC just started accepting applications for the next batch and will evaluate “every aspect of our batch and the environment in which the companies will be operating to determine the batch size.”

Over the years, Y Combinator’s ever-growing batch size has become a common — if not cliche — conversation among techies. Some say that Y Combinator’s bloated size has watered down the ability for participants to stand out. The institution, meanwhile, last told tech blog Newcomer that it could see itself powering 1,000 startups per batch one day.  Amos said that YC did not scale back due to critiques or the cost of its growing check size.

The move will certainly help those within the current cohort stand out, simply due to lack of competition. It’s another way YC is, even if unintentionally, helping its startups get better marketing. A few weeks ago, Y Combinator announced Launch YC, a platform where people can sort accelerator startups by industry, batch and launch date to discover new products.

As I wrote at the time, Launch YC feels like Y Combinator’s strategically sound answer to one of the loudest critiques of its model in recent years: As its cohort size has bloated, standing out within a batch is harder than ever. Today’s news, depending on how you view it, could be another response to questions around YC’s distribution efficacy.

Current Y Combinator cohort participants can contact Natasha Mascarenhas by e-mail at natasha.m@techcrunch.com or on Signal, a secure encrypted messaging app, at 925 271 0912.