Ben Hurley Reporter

Ben covers the property industry and has a keen interest in entrepreneurship and travel writing. He speaks Mandarin and previously covered housing and urban affairs for The Australian Financial Review.

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Incubator Y Combinator grew too fast

Published 04 December 2012 05:12, Updated 06 December 2012 09:59

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Incubator Y Combinator grew too fast

Y Combinator previously put more emphasis on predicting success, but now it is working on ways to predict failure .

Famed Silicon Valley incubator Y Combinator will be funding far fewer start-ups this coming year than in 2012.

Founder and start-up kingmaker Paul Graham says in a blog entry that his company “grew too fast” in taking on 84 hopefuls over the northern summer of 2012. After finishing interviews for the 2013 winter cycle, the number will probably be fewer than 50, he says.

The company had a greater than expected failure rate over the summer and he is trying to figure out why, he says.

“The reason we accepted fewer applications was that in summer 2012 we grew too fast,” Graham writes. “We had 66 companies in winter 2012, and that was fine, but for some reason more things than usual broke when we jumped from 66 to 84.”

“We’re still a bit mystified about what happened. Why was 66 OK and 84 not? Is there some kind of hard limit somewhere between those two numbers? Or will we be able to morph YC to get past that bottleneck, as we always have in the past?

“My guess is the latter. We’ll see. But we decided to buy ourselves more time to morph YC by decreasing the batch size.”

He says Y Combinator previously put more emphasis on predicting success, but now it is working on ways to predict failure, allowing it to “decrease the batch size by quite a lot without missing any Dropboxes or Airbnbs”.

“We’re figuring this out on the fly, like we always have,” he says.

Last week the start-up incubator said start-up founders would receive about half the amount of money they were previously given – $US80,000 down from $US150,000 – but would be better connected with notable investors.

Australian online fashion entrepreneur Nikki Durkin spent six months in Silicon Valley this year with the backing of Y Combinator.

“It was an amazing experience,” she says. “I understand why they want to scale back. It’s a decent chunk of money they give for really early-stage start-ups.”