What 227 Y Combinator pitches will teach you about startups.

In some ways, Y Combinator’s biannual Demo Day is somewhat predictable: There will be Stanford dropouts, last-minute pivots, and, as always, promises of near-term profitability. We even made a bingo board about it. 

But one thing I can never guess ahead of time is the exact priorities of the season’s batch. Y Combinator stands by the fact that it backs people, not ideas, so its Demo Day technically unveils two things: who the accelerator bet on and what they decided to prioritize. This year was different for myriad reasons. First, YC Summer 2022 is the second batch to receive a $500,000 check instead of $125,000, as part of the accelerator’s expanded check size. Second, the batch was smaller than usual (see previous versions of this column here and here; it’s a different tone altogether) — a narrowing of focus the accelerator says was due to the downturn. And finally, it was the first batch where we saw a bifurcation; over 60% of batch founders were in the Bay Area during the three-month accelerator, while others remained scattered across the world.

All those tensions are great for story ideas. So, this week when covering YC’s latest batch, we set out to give readers a better understanding of the problems that startups are prioritizing during the downturn and how YC’s shake-up has impacted the firm’s focus in certain areas and geographies versus others.

This in mind, as in tradition, I want to leave you with a few takeaways I had after listening to hundreds of pitches. Here’s what 277 Combinator pitches taught me, and now maybe you, about startups:

  1. Ideas, then people or people then ideas: There’s two camps of investing in startups, the check writers who invest in disruptive ideas and then the various groups of people trying to make those same ideas a reality; and the check writers who invest in people and then support those same people in whatever disruptive idea they swing at. Y Combinator asserts that it’s more of the latter not the former. But, data says differently. Last batch, 29% were accepted with only an idea; this batch, 43% were accepted with only an idea. It means that over time, YC is getting more comfortable backing founders who have an idea; not necessarily less. Something to think about when looking at trends and how one of the most well-known accelerators thinks about breakdowns.
  1. It’s a fintech accelerator, first: Whoops, my bias is showing. YC feels more and more like a fintech and crypto accelerator than it does a consumer and biotech accelerator; you can tell that based on the breakdown of startups within each batch but even from the format of Demo Day. It’s hard to tell a biotech or climate story with one slide in one minute while the format actually helps a startup trying to make financial services easier.
  2. The moonshots aren’t going anywhere: One theory I had going into the batch is if bigger checks, even despite a downturn, will lead to bigger swings in the batch. We weren’t disappointed. Moonshots include faux fish, alternative investing in athletes and another ambitious play in the world of DTC healthcare.
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In this week’s digest, we’ll get into some startup consolidation, Kim Kardashian and the latest on layoffs. Make sure to read the whole piece as I’ve snuck in a TC+ discount code, especially for Startups Weekly readers, in the post.

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Startups, get scooped

We don’t talk about liquidity enough here, and I partially blame the fact that the M&A market has felt quite dry over the past few months. Thankfully, we have a few of note to mention this week.

Amazon bought Cloosertermans, a mechatronics specialist that will help it beef up its robotics arm. TC’s Ingrid Lunden reports that the startup has been ”building technology to move and stack heavy palettes and totes, and robotics used to package products for customer orders.” The attention from Amazon isn’t new: Amazon has been a Cloostermans customer since 2019, but the acquisition makes things a lot more formal.

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There’s also an acquisition from Instacart, which has been busy ahead of its impending public market debut. The grocery delivery company announced that it acquired Rosie. It will widen the company’s footprint for local and independent retailers.

And, to end the week, we have online grocery company Misfits Market announcing it will acquire Imperfect Foods. I love when Misfits and Imperfects team together.

Here’s why it’s important: More consolidation gives us some much-needed signals on how the exit environment is doing these days. For early-stage startups, especially those that are struggling to raise another round, the future could look like becoming acquisition fodder (and that’s not bad news).

I’m proud of how we executed despite all the iPhone news. We wrote about how YC’s fintech founders are returning to the neobank train and crypto continues to be an area of bullishness. We dug into artificial intelligence standouts and creator economy knockouts. And before I start sounding like an especially nerdy rendition of Dr. Seuss, we looked into a geography focus from a macro scale and a retreat on a micro scale.