Y Combinator Shuffles Portfolio, Lays Off 20% Amidst Late-Stage Investment Pullback
Accelerator refocuses on core values, scales back late-stage investments
17 March 2023
The decision to scale back on late-stage investing was made by Y Combinator CEO Garry Tan, who explained that it had become a "distraction from core values" for the accelerator.
The collapse of Silicon Valley Bank last week was not the reason behind the recent development, according to the US-based startup accelerator.
Tan asked US regulators to save the startup ecosystem, calling the collapse of SVB an 'extinction-level event' last week.
Y Combinator, a US-based early stage startup accelerator, has laid off around 20% of its workforce, which amounts to 17 employees, on Tuesday (March 14). The accelerator has made this decision to scale back late-stage investments which were distracting it from its core values. The CEO of Y Combinator, Garry Tan, has stated in a blog post that late-stage investments had become a "distraction from core values" for the accelerator, which led to the decision of scaling back these investments.
“Seventeen of our teammates are impacted today. As we make this change in strategy, we want to acknowledge and express our appreciation for their substantial contributions,” Tan added in the statement.
The Y Combinator CEO added, “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.”
Y Combinator has issued a separate statement, which was given to TechCrunch, clarifying that the decision to move its portfolio from Silicon Valley Bank (SVB) was not a consequence of SVB's collapse last week. The accelerator made it clear that it had been working on this move prior to the collapse of SVB.
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Over 30% of Y Combinator’s startups, which amounts to thousands of startups, are exposed to SVB. SVB's collapse has been referred to as an "extinction-level event" by Tan, who has urged US regulators to intervene and save the startup ecosystem.
Tan warned YC startups about potential solvency problems at SVB and advised them to not have an exposure of over $250K in a bank if they heard credible news about the same. Additionally, he wrote a petition signed by over 5,000 tech CEOs and founders to the US Congress, seeking support for the startup ecosystem in the country.
The Federal Deposit Insurance Corporation (FDIC) stepped in to protect all depositors' funds, stating that they would have access to their funds from Monday (March 13). Y Combinator has supported some of India's biggest tech startups, such as Meesho, Razorpay, Zepto, Groww, Khatabook, Cashfree Payments, FamPay and Karbon Card, and regularly features multiple Indian startups in its biannual cohorts, the latest of which had 19 Indian startups.