With each cohort that graduates from Y Combinator, the same debate emerges: How can such early-stage startups justify such high valuations?
According to YC President Garry Tan, 75% of the current summer cohort is pre-revenue and 81% are looking at raising their first external capital. Many of the founders will have entered the accelerator without much more than an idea.
Despite this, YC has developed a reputation for launching startups into the investment market at eye-watering prices. This is particularly striking in H2 2023, coming off a real downturn for startup fundraising. Investor Erik Bruckner has reported $15 million post-money caps as the most common terms among the sample of startups he’s met from this batch, at a time when the median U.S. pre-seed valuation is closer to $8.7 million.
How can YC justify promoting these terms to a more conservative venture market?