Oct 28, 2022 · 26m · y-combinator
The Truth About Y Combinator · Y Combinator
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In this Y Combinator post-batch reflection, Michael Seibel and Dalton Caldwell examine common startup misconceptions, clarify YC's actual structural support, and offer practical advice on navigating investor dynamics and fundraising.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. The partners hold 99.4% of the talking time here. How this is scored →
The partners as informed peer 8.2 Guest teaching 0.0 Guest disagreement 0.0 The partners pushing back 1.3
speaking balance: gold is the partners, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 5:07 Michael rejects the literal mafia framing
Michael playfully addresses the common accusation that YC behaves like a mafia, clarifying that while they do not break legs, the protective perks are real.
Hardest push from the partners ▶ 9:40 Dalton refutes the idea that late-stage preparation is superiorDalton explicitly rejects the premise that founders should delay applying until they raise pre-seed capital, contrasting clean cap tables with messy, over-diluted companies.
Biggest teaching moment ▶ 0:21 Michael shares direct founder feedback exposing YC blind spotsMichael recounts founders revealing that YC fails to clearly explain its follow-on funding and scaling support before application.
The partners hold their own ▶ 12:48 Michael presents concrete batch valuation dataMichael uses hard batch metrics to dismantle the prevailing media narrative of a seed-stage valuation crash, citing consistent $15M to $25M caps.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | The partners as informed peer | Guest teaching | Guest disagreement | The partners pushing back | Why |
|---|---|---|---|---|---|---|
| Founders' Initial Expectations vs. YC Reality | 8 | 0 | 0 | 1 | Michael and Dalton detail the structural realities of Y Combinator, dismantling misconceptions about it functioning like an academic lecture series rather than an evolving product. They reference specific founder feedback, acceptance call dynamics, and the secret platform resources available. | |
| Deconstructing the 'Mafia' Myth | 7 | 0 | 0 | 1 | The hosts playfully deconstruct the 'mafia' label often pinned on YC, explaining how protection and network privileges shield founders from predatory VCs. The dynamic between hosts is completely aligned and collaborative. | |
| The Role of Investors vs. Founder Execution | 9 | 0 | 0 | 2 | Dalton and Michael strongly push back against the myth that investors make companies great, pointing out that 40% of their batch starts with just an idea. Dalton illustrates how messy pre-seed cap tables and premature pivots severely handicap early startups. | |
| Core Value Propositions: Why To Do YC | 8 | 0 | 0 | 1 | The hosts outline the core value of YC's network and cite concrete recent batch data, showing valuations held steady at $15M to $25M despite macro doom-and-gloom talk. They caution founders against treating fundraising like an efficient public stock market. | |
| The Power of Running an Investor Auction | 8 | 0 | 0 | 1 | Michael explains how batch dynamics create an auction where investors cold email founders rather than founders begging for cash. Dalton introduces a parallel to the predatory Hollywood and music industries where early gatekeepers exploit newcomers. | |
| Investor Horror Stories Before YC | 9 | 0 | 0 | 2 | The hosts catalog predatory pre-YC investor tactics, including demanding 50% equity, charging $50k in legal fees for priced rounds, and demanding manufactured lead terms. Dalton underscores the foundational YC advice to build leverage with customers first before seeking VC capital. |
Statements from this episode (17)
Seibel: Y Combinator poorly communicates what the program actually offers to applicants
“I would argue this is something that YC does poorly, that they very clearly pointed out. They were like, when we applied to YC, we really didn't know what we were applying for.”
Caldwell: Y Combinator keeps proprietary startup data secret for batch participants
“And there's just a lot of data that we keep secret unless you're in YC and that is like gonna stay that way.”
Seibel argues that misconceptions about Y Combinator are deliberately designed attacks
“What are some of the other misconceptions that you saw that were, you know, obviously, I mean, I would argue like obviously designed to try to convince people to not do YC. Like these were like designed attacks on YC.”
Caldwell: Founders do all the work, investors do not build companies
“The way you build a company is not, you're not baking a cake where you sprinkle in three different investors and then a cake pops out. Like, that's like the stupidest thing I've ever heard. This is a really common misconception out there, which is like, I hate…”
Caldwell: People with strongest opinions on YC never did a batch
“I think another big misconception was just folks, a lot of folks that apparently have the strongest opinions of telling people about YC never actually were in a batch.”
Seibel says 40% of the Summer 2022 batch applied with only ideas
“Literally, 40% of the last batch came in with just an idea. Most of them were working when they applied, were at work, working jobs when they applied.”
Seibel: Investors who only attack competitors are just selling fear
“If you ever see someone making an argument that's 100% ripping something else down and zero percent explaining why their thing is good, if all of your talking points is the alternative is bad, you know, maybe all you're selling is fear because that's all you h…”
Seibel: YC Summer 2022 batch valuations held steady at $15M–$25M caps
“Prices are almost exactly the same as they were during the last batch when it was like VC heaven on earth and money was flowing like crazy. We saw. 15 to 25. Some companies raised at 30. Almost no change from the last batch.”
Seibel: S22 seed investors committed in 1–2 meetings without board demands
“Didn't see any change on speed. You know, we saw investors going from meeting to commitment within one to two meetings. Didn't see any difference on terms. Like, you know, investors weren't demanding board seats or weird craziness.”
Caldwell: Venture fundraising is not an efficient market and has distinct ecosystems
“Too many folks think fundraising is a market like the stock market. And that there's like graphs and charts you can have, and it all operates like an efficient market instead of what it actually is, which is like 10 different things, right, Michael? Like the Y…”
Seibel: Typical YC S22 Startup Received 10 to 70 Inbound Investor Emails
“Like, a typical company in this batch got between 10, and I've seen 60 or 70 investors cold emailing them. Wanting to learn about investing in their company.”
Caldwell warns that overly friendly industry networkers are often highly exploitative
“A lot of the folks who are most approachable when you are a first timer, or when you're just moving to the area, or you're trying to break into the industry, the friendly people that want to talk to you are often
The most exploitative, and they're the people …”
Seibel: A fake advisor took 2% equity and failed to raise our round
“I had a fake advisor who literally took.
Two percent of our company.
To help us fail at raising a round that was rescued by our existing inside investors.”
Seibel: Giving up massive equity early blocks later-stage funding
“And what they didn't tell that founder is that every subsequent investor would say to themselves, huh, this investor put in a relatively small amount of capital, bought so much of the company that the founders are going to get so diluted that they're not going…”
Seibel argues charging $50,000 for priced round legal fees is predatory
“It shouldn't cost 50,000 dollars to a price round. Like you're just ripping off founders, pure and simple ripping off founders.”
Caldwell: Starting a company by pitching VCs invites exploitation
“If your idea for how you start a startup is to first create a pitch deck and go pitch VCs, you're setting yourself up to get screwed. You're setting yourself up to get taken advantage of by people who are gonna have 20 different ways to rip you off, versus if …”