American technology startup accelerator Y combinator has announced plans to scale down on late-stage investments as it reveals plans to realign its priorities to focus more on early-stage investments. This will necessitate laying off some members of their workforce.
The company’s President Gary Tan, via a blog post, disclosed that the decision was taken after it found late investing to be a distraction from its core mission.
In his words, “YC is rightly known for early-stage investing. In recent years, we have also done some late-stage investing. But the last stage of investing turned out to be so different from the early stage that we found it to be a distraction from our core mission.
“So, we are going to decrease the amount of late-stage investing we do. Unfortunately, this means we will no longer need some of the roles on the late-stage investing team. Seventeen of our teammates are impacted today. As we make this change in strategy, we want to acknowledge and express our appreciation for their substantial contributions. “There shouldn’t be any noticeable effect on the companies we have funded or on the way we interact with alumni”.
The company however disclosed that the layoffs were planned before the collapse of Silicon Valley Bank and are not in any way connected to the recent implosion of the bank.
Investors King understands that Y Combinator had submitted a petition to US Treasury Secretary Janet Yellen seeking relief and attention to an immediate critical impact on small businesses, start-ups, and their employees who are depositors at the Silicon Valley Bank, after the collapse.
Y combinator’s recent decision to scale down on late-stage investing comes during a sharp pullback in venture funding, particularly for late-stage companies, in which investors have been reluctant to write big checks for start-ups after the value of comparable public tech companies has fallen.
Late-stage deals dropped 80 percent in terms of volume and 88 percent in terms of value in February 2023. Series B startups raised only $459 million across 11 deals in February 2023, a decline from $3.84 billion across 56 deals in the same period of 2022.
Y Combinator is a place where early founders can create something from nothing and join one of the world’s best founder communities. For more than 15 years, the firm has provided seed money for start-ups, which has made it possible for a whole bunch of companies to reach their full potential.
With 125 worth more than $150m and a combined alumni value exceeding $300billion, companies such as Airbnb, DoorDash, Stripe, Cruise, Dropbox, Coinbase, Reddit, and Gitlab are just a few companies that used Y-combinator as the accelerator and seed money source they needed to take off. Since 2005, the company has funded over 3,500 startups and has a community of over 9,000 founders.
