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What Y Combinator’s data tells us about tech trends

Y Combinator has invested in over 4,000 startups, including DoorDash, Coinbase, and Airbnb. Their startups have a combined valuation of over $600 billion.


On its website, the accelerator has the Startup Directory that shows stats regarding all of YC portfolio companies: their industries, regions, sizes, diversity, and more. This data can tell us a lot about the startup market.


Deals


Even though Y Combinator has been active since 2005, it has closed half of its investment deals over the last four years. The accelerator was the most active in 2021.


This aligns with the global trend: 2021 was a record year for venture funding, but things cooled down in 2022 and plummeted in 2023.


For reference: Global venture funding totaled $18.6 billion in July 2023, which is down 38% compared to the $29.8 billion invested during the same month last year, according to Crunchbase data.


Industries


Y Combinator's top industries for investing include B2B software and services, consumer, fintech, and health care.


In recent years, according to the tags in the directory, the number of YC’s deals has been the fastest growing in AI, B2B, SaaS, devtools, and fintech.


B2B vs. consumer


Most of Y Combinator's early investments were in consumer. However, in 2010-2019, a new leader emerged — B2B. During those years, YC invested at least 1.5 times more often in B2B than in consumer.


In 2020–2022, Y Combinator supported up to four times more B2B than consumer companies (nearly 13 times more in 2023!). Currently, 45% of YC's investment deals are with B2B startups, with consumer coming in second place at 17%.


The accelerator's preferences seem to align with the global trend: In 2020, 61% of super startups worldwide provided business solutions, according to Statista.


Fintech


YC invested in its first fintech startup in 2005, during the accelerator's inaugural year. The startup was TextPayMe, a U.S.-based SMS payment service (which was later acquired by Amazon in 2006).


The accelerator began to notably expand its fintech portfolio in 2017, consistently investing in a minimum of 20 fintech startups per year. In 2022, they supported 140 fintech startups.


Fintech comprises 12.3% of YC's portfolio.


Health care


YC made its initial investment in a health care company in 2009, with a startup called SSovereign. In 2021, the accelerator achieved a record number of deals with health care startups (106).


Health care comprises 12% of YC's portfolio.


Edtech


Y Combinator made its initial investment in an edtech startup in 2009, supporting Lingt, a U.S. platform for language learning. Today, the edtech sector represents 4.2% of the accelerator's portfolio. However, there was a year when YC invested in as many as 77 edtech startups.


In 2016, YC made its first-ever acquisition by absorbing the edtech accelerator Imagine K12 and established a separate program for education startups. During that year, YC closed its highest number of deals with edtech startups within one batch.


Since then, YC and Imagine K12 haven't surpassed that record. The global edtech market is projected to grow by 16.5% annually from 2022 to 2030, according to Forbes.


AI and machine learning


It comes as no surprise that AI-powered startups have been rapidly proliferating and attracting investors' attention lately.


In the YC directory, out of all its startups, approximately 735 have an AI- or machine learning-related tag*, accounting for up to 17%. Over 70% of these startups received YC's funding between 2020 and 2023.


In 2023, Y Combinator's support for AI companies has doubled compared to 2022; it's four times higher than in 2020. Nearly 50% of all companies from the 2023 batches report using AI (244). Impressive!


Y Combinator made its first investment in an AI startup in 2008. This startup was JustSpotted, a Denmark-based real-time search engine (acquired by Google in 2011).


Government tech


Thus far, Y Combinator has largely avoided government tech, which makes up just 0.5% of its portfolio (about 20 startups).


Its initial foray into this sector occurred in 2014 when YC invested in the U.S. company GovPredict. It specializes in offering research, analytics, and actionable intelligence for successful public affairs campaigns.


Between 2020 and 2023, YC has only supported three government tech startups.


Regions


Y Combinator focuses its investments primarily in several key regions: the United States, Europe (with a particular emphasis on the U.K., France, and Germany), South Asia (with a focus on India), and Latin America (with an emphasis on Mexico, Brazil, and Colombia).


About two-thirds of YC-backed companies are based in the U.S.


European startups make up about 10% of YC's portfolio. The accelerator's initial European investment was in Infogami, a U.K.-based business intelligence platform, in 2005. The first investment in a continental European startup took place in 2006, with Snipshot, a Bulgarian online photo editor**. Both of these companies are no longer active. YC began actively supporting European startups in 2018***.


South Asian companies make up around 7% of YC's portfolio. The first startup from this group was Markupwand, an Indian design devtool (now inactive), in 2012. However, it wasn't until 2019 that Y Combinator began actively supporting South Asian companies.


Latin American startups make up 5% of YC's portfolio. In 2013, YC invested in its first two LATAM startups: the Brazilian e-commerce platform Glio (now inactive) and the Mexican fintech platform Arcus (acquired by Mastercard in 2021). From 2019 onward, Y Combinator has been more active in backing LATAM startups.


About 12% of YC's portfolio consists of startups from Canada, Southeast and East Asia, the Middle East, Africa, and Oceania; YC has been more active in these countries/regions since 2016.


Diversity


Y Combinator’s portfolio isn’t very diverse. There are not many startups with female, Hispanic/Latino, or black founders. But things have improved over the last 10 years.


Female-founded startups


Up to 15% of Y Combinator's startups have at least one woman founder (about 644 companies).


While this percentage may still seem limited, it represents a notable improvement compared to a decade ago. From 2005 to 2010, YC supported only three female-founded companies.


In 2019, there was a significant increase in the number of female-founded startups backed by YC, with the accelerator supporting 72 such companies.


From 2020 to 2023, among new deals, approximately every sixth YC portfolio startup had a female founder.


Hispanic & Latino-founded startups


Up to 10% of Y Combinator's startups have at least one founder of Hispanic or Latino origin (about 424 companies).


The historical trend in this area shows significant progress. In the period from 2005 to 2010, there were no Hispanic and Latino-founded startups in YC's portfolio. However, starting in 2011 with one deal and continuing with 47 deals in 2019, the situation began to improve.


From 2020 to 2023, among new deals, approximately one in every eight YC portfolio startups had a founder of Hispanic or Latino origin.


Black-founded startups


Up to 6% of Y Combinator's startups have at least one black founder, which totals approximately 246 companies.


The historical trend demonstrates gradual improvement in this aspect. From 2005 to 2010, Y Combinator supported only one black-founded startup. However, in 2019, there was a significant increase with 29 new black-founded startups added to the YC portfolio.


Between 2020 and 2023, among new deals, one in every 16 YC portfolio startups had a black founder.


Failed ventures, exits


Approximately 15% of the startups backed by Y Combinator have closed.


The accelerator has achieved successful exits with 12% of the startups in its portfolio, comprising 512 acquisitions and 16 initial public offerings. Notable exits from YC's portfolio include Airbnb, Dropbox, Carvana, Reddit, Twitch, and Coinbase.


Follow F1V on LinkedIn, where we publish advice, insights, and news about our portfolio companies.


Disclaimer: I last checked Y Combinator's data on Aug. 31. YC regularly updates its database and alters startup tags. I've cross-verified data with Crunchbase and other sources and rounded figures for clarity.


* To count the AI-related startups backed by Y Combinator, we used tags from the accelerator's directory: Artificial Intelligence, Machine Learning, AI, Generative AI, AIOps, AI Assistant, AI-powered drug discovery, AI-Enhanced Learning, and Conversational AI. There is no distinct industry section for AI and ML in the directory.


**YC didn’t have a “region” tag in its database for this company. It’s Bulgarian, according to Crunchbase.


*** The phrase “more actively supporting” in this story means investing in at least 20 companies.


Photo by Mario Gogh on Unsplash.



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