Y Combinator cuts nearly 20% of staff, scales back growth stage investments

Y Combinator
Y Combinator

Y Combinator will be writing fewer checks for late-stage companies, a scale back that also cost 17 team members — or roughly 20% of the accelerator’s employees — their jobs, according to a statement released on Monday.

The accelerator told TechCrunch that Silicon Valley Bank’s failure was not a factor and that they have been strategizing about the shift “well before” the collapse; over 30% of Y Combinator’s startups are exposed to SVB.

YC CEO Garry Tan wrote in the memo that the accelerator, which is largely focused on early-stage investing, found late-stage investing to be a “distraction from our core mission.”

“There shouldn’t be any noticeable effect on the companies we’ve funded or on the way we interact with alumni, but if any companies or alumni have questions, I’m here and the YC group partners are here — as always, to help you make something people want,” Tan wrote in the memo.

Tan has been active online over the past four days as SVB, which once banked over half of U.S. venture-backed startups, was taken over by regulators following a historical, seemingly Twitter-induced bank run. Early on, Tan told YC companies that “anytime you hear problems of solvency at a bank, and it can be deemed credible, you should take it seriously and prioritize the interests of your startup by not exposing yourself to more than $250,000 of exposure this year,” according to an internal screenshot seen by TechCrunch.

Twenty-four hours after he said that, Tan took to Twitter to say that “this is an extinction level event for startups and will set startups and innovation back by 10 years or more. BIG TECH will not care about this. They have cash elsewhere. All little startups, tomorrow’s Google and Facebooks, will be extinguished if we don’t find a fix.” He also penned a petition, now signed by over 5,000 tech CEOs and founders, asking congress to step in and support the entrepreneurial community.

While YC refused to admit that today’s layoffs and departure from growth stage is related to the banking crisis, it’s hard not to see the news amid the backdrop of a tech reckoning. We’ll know soon how a YC, refocused on early stage, is navigating the tough road ahead: The storied accelerator is having its biannual Demo Day in just a few short weeks.

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