Top Silicon Valley accelerator Y Combinator has produced an army of super successful startups.
Think peer-to-peer market for home sharing Airbnb (valued at $2.5 billion), storage startup Dropbox (valued at $4 billion), and social news site Reddit (valued at around $400 million).
Each YC cycle culminates with Demo Day, where startups pitch their products to an audience of roughly 450 investors and journalists.
But the excitement from some investors seems to be fading, Nathaniel Rich of The New York Times reports.
At YC’s Demo Day in March, one investor told Rich that it “used to be a can’t-miss event, but that’s not so anymore. It’s a different vibe. Some major investors are starting to skip it.”
One investor said that it used to be a “feeding frenzy,” but that’s just not the case anymore.
Another common complaint Rich heard was that the entrepreneurs are too powerful. Since YC has created a standard investment contract, investors can’t easily take advantage of a first-time founder’s naivety.
But YC founder Paul Graham isn’t fazed by those criticisms. If anything, it’s a testament to the success he’s helped young startups attain. Graham says there are two things people complain about that are actually compliments to YC.
The first is that YC startups are overvalued.
“The only way for a company to be overvalued is if there’s someone willing to pay that price,” Graham told the NYT. “So what they’re saying is: Going through Y.C. causes companies to raise money on better terms than they would have otherwise. We wouldn’t have the barefacedness to make that claim ourselves!”
Another common complaint, Graham says, is that investors can’t easily determine which startups are good.
“Well, it’s not because the good start-ups look bad,” Graham says. “It’s because the bad start-ups look good! Which means we’re doing our job.”
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