The Silicon Valley dream of building a groundbreaking, unique startup that disrupts an industry is often linked to participating in the prestigious Y Combinator accelerator program. Companies like Airbnb, Coinbase, and Stripe have all emerged from YC’s hallowed halls. However, a closer examination of YC’s investment portfolio tells a different story.
Data analysis by startup research firm Deckmatch reveals that Y Combinator frequently backs startups that are building products remarkably similar or even identical to previous YC graduates. From AI code editors to restaurant point-of-sale systems, YC seems to have a penchant for funding startups that directly compete with one another.
The controversy surrounding YC-backed startup PearAI earlier this year shed light on this trend. Critics argued that PearAI’s code editor was essentially a clone of another YC company, Continue. While the PearAI founders eventually promised to start over, the incident highlighted a broader pattern within Y Combinator’s investment strategy.
Y Combinator’s CEO, Garry Tan, has defended this approach, stating that “more choice is good, people building is good.” However, the data shows that this strategy goes beyond just AI code editors. In recent years, YC has funded dozens of startups in categories like food/beverage/restaurant point-of-sale systems, business finance/payroll, AI sales and CRM, and even AI legal assistants – all of which have direct competitors within the YC portfolio.
Some YC alumni, like security startup founder Bryan Onel, have expressed frustration with this model, feeling that their products are being undermined by nearly identical competitors. Others, like Avocado co-founder Nick Evans, view it as an advantage, arguing that investors who deeply understand an industry are better equipped to support their startups.
Ultimately, the question remains: is Y Combinator’s propensity for backing similar startups a recipe for success or a hindrance to true innovation? As the startup accelerator continues to shape the tech landscape, this unique approach may have far-reaching implications for the startup ecosystem as a whole.
