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Inside Y Combinator’s ‘Boom Loop’: The
Startup Factory Goes Brasher, Leaner And
Meaner
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PHILIP PACHECO/BLOOMBERG
Mar 8, 2024, 06:30am EST
Former venture capitalist Garry Tan has slashed programs and
turned up the mics in a bid to restore the famed accelerator behind
Airbnb and Stripe to its full glory.
By Alex Konrad, Forbes Staff
n the summer of 2022, Garry Tan hopped on a plane from San Francisco headed
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I
for the Cotswolds, a quiet part of England about a two hour’s drive west of
London, to meet with his mentor, Y Combinator cofounder Paul Graham.
A veteran of the YC program as first a founder, then a partner, Tan had flown
the nest to launch his own venture capital firm with a colleague, Reddit
cofounder Alexis Ohanian. By the time of their meeting seven years later, Tan
had reached Silicon Valley’s ranks of power: sole leader of Initialized Capital
following Ohanian’s departure, fixture on the Forbes Midas List of top tech
investors, host of a YouTube channel with hundreds of thousands of subscribers.
But Graham — an influential dotcom era founder and essayist turned startup
whisperer, who’d retired to his home country with cofounder and spouse Jessica
Livingston and their children in 2016 — had a new mission for him: restore Y
Combinator to its full glory. “If you take this job, if we do this right, the future
will arrive sooner,” Graham, now 59, told Tan, now 42.
The gig was president and CEO of Y Combinator, the storied startup accelerator
that had incubated Airbnb ($106 billion market cap), Stripe ($65 billion) and
DoorDash ($53 billion), where Geoff Ralston, another longtime Graham
associate, planned to step down. Taking YC’s top job was a “one in 10 billion
lifetimes” opportunity to lead “the fountain of prosperity for innovation and
venture,” as Tan described it to Forbes when announcing his new role.
But after several years of Zoom-based batches that reached a record of more
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than 400 companies going through the program at one time, YC’s sterling
reputation had taken a few dents. At 7% equity for $125,000, with another
$375,000 that converts into a future funding round, participation in Y
Combinator isn’t cheap — especially since its educational materials are freely
available across the internet. And while some would-be rivals like Techstars
have pulled back, a newer wave, from the HF0 hacker house to Sequoia’s Arc,
are competing anew for talent. And some fledgling founders in buzzy categories
like generative AI forgo accelerators altogether in favor of raising vast sums on
day one.
When even the faintest perception of a wobble could prove devastating to YC’s
ambitions to stay relevant for hundreds of years, as Tan put it, he has appeared
the perfect change agent — an outsider who really wasn’t. And by January 2023,
he had become arguably the highest-profile VC firm leader to walk away from
their firm while still on top.
For an institution that had historically promoted from within, first with Sam
Altman, now CEO of OpenAI, then Ralston, the Tan era came as a shock. Within
YC, many staff had wanted Michael Seibel, the cofounder of Twitch and YC’s
longtime batch leader, to get the job. Multiple sources remembered longtime
partner Dalton Caldwell vocalizing what others were feeling, too: we’re all just
employees who work here, message received. Seibel, meanwhile, wrote a letter to
YC’s board to explain his disappointment at being passed over, despite broad
internal support. He vowed to support Tan moving forward, anyway. Caldwell
and Seibel declined to comment on those incidents through a YC spokesperson.
In the year-plus since, Tan has worked to win them over by reshaping YC in a
“return to roots,” as he describes it. That has meant reconfiguring its batches,
from admissions to groupings and social activities, to restore its status as a
mecca for earliest-stage, technical (mostly nerdy) founders to learn the basics of
company-building over three months. From a new headquarters in San
Francisco’s Dogpatch neighborhood, Tan is projecting YC’s influence within the
city like never before — alongside his own — through a push for more public
content and events, interspersed with Tan’s own local political activism.
“We can’t have Garry full-time on Twitter representing San Francisco,
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and full-time on Twitter representing YC.”
And by abruptly shutting down its Continuity fund, an eight-year-old growth-
stage focused group within YC which held large investments into many of its
brightest alumni companies, Tan took an unusual and decisive action.
Celebrated by some as a prudent strategy, it stunned others in its coldness,
leaving some founders — usually YC’s most prized assets and advocates — still
disgruntled to this day.
If that’s not enough: YC isn’t even the only historic institution Tan wants to
reinvigorate. He’s simultaneously working to restore San Francisco, the city it
now calls home, to a prosperity that Tan, a Bay Area native, believes it’s lost.
Even as Tan works to streamline Y Combinator’s programs and raise its public
profile, he’s also been spearheading a campaign to reform the city's government
under moderate Democrat leadership that’s made him a hero to some (mostly
other techies) and has others wishing he’d focus more on his day job. (Full-on
detractors don’t see any of it: they’ve been blocked.) As one YC alumni founder
put it: “We can’t have Garry full-time on Twitter representing San Francisco, and
full-time on Twitter representing YC.”
Tan, of course, disagrees. Forbes spoke to him at length, and more than two
dozen current and former employees and founders, investors and peers to
explore his reign so far. There are a lot of strong opinions.
One founder, who said they were speaking only because they still cared about
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YC’s mission, warned that Tan was taking YC down a more politicized and
belligerent path. Others, like Brian Chesky, the Airbnb cofounder and CEO and a
YC board director since 2022, said they see in Tan — and his social media tussles
— the spirit of Graham, known to many as just “PG”: “Garry’s properly
intellectual in a good way that’s built around curiosity,” Chesky said. “He’s a
great storyteller. He’s a real champion of founders, and a true believer. Founders
gravitate to him.”
Even OpenAI’s Altman, whose initiatives as YC president Tan is now unwinding,
said he supported Tan’s “refocus” campaign as part of the “constant
experimentation” of the place. Altman quoted a batch founder he’d recently
asked for an early verdict: “YC feels very much back.”
Y Combinator cofounders Paul Graham and Jessica Livingston held
court for its entire founder batch in February, answering questions on
arti�cial general intelligence and how college dropout founders could
make their parents proud. Y COMBINATOR
On a Tuesday afternoon in February, a group of startup founders who have Tan
as their investor and mentor (“group partner” in YC speak) during this quarter’s
YC batch congregate in the accelerator’s original Mountain View building, for
office hours. Sitting in a circle around Tan and four other YC group partners, the
17 (all male) founders take turns rattling off the latest two-sentence pitch of their
businesses, a “unique insight” that’s driving their work and a status report. Tan
and four other partners have heard thousands of these before; they deconstruct
and rebuild them better effortlessly.
“If the number is true, you should just say it,” Tan tells one founder who was
nervous that quantifying his market opportunity might sound presumptuously
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large. “A sentence about traction has three ways to go: better, faster or cheaper,”
Tan warns another about a vague description of why people are trying their
tools. When a third says he’s struggling to close a key trial customer in Atlanta,
group partner Brad Flora tells him to get on a plane — that night. The founder
thinks he’s joking at first. “Do some LinkedIn spelunking and socially engineer it
so you’re there,” Tan replies. “Do the work and make it there in person. It helps.”
The other partners, all former founders, nod. “At this stage, they’re buying you
more than the product,” Flora adds.
“I’ve funded 1,000 companies. It’s like I’m a large language model
that’s been trained on all this data.”
Tan says that such exchanges are YC working at its best. “We’re teaching
engineers how to sell,” he explains later. Take mostly technical people with big
ideas, and you can teach them the blocking and tackling. “Am I working on the
right thing? What do people want? How do I work with my cofounder? How do I
get users? It’s basic stuff,” Caldwell told Forbes. “I’ve funded 1,000 companies. It’s
like I’m a large language model that’s been trained on all this data.”
Two batches of 25 companies a year, every year, per partner: It’s a lot of startups
to juggle. And with applications swelling into the many thousands, Caldwell in
2015 started an admissions team to screen and interview applicants. By 2021,
that team had grown to five and was using software to analyze founder
responses to handle the volume of 30,000-plus applicants. That year, despite the
COVID lockdown, YC admitted a record 748 companies across its batches — who
received $125,000 each, a smaller check amount than pre-pandemic cohorts who
had, until 2020, received $150,000.
It was a new direction: In 2020, Seibel — then CEO of the accelerator unit, now
the managing director overseeing the batch — said he hoped YC would resemble
“a large and successful state university system as opposed to an Ivy League
network.” After all, a fully remote YC could back more international companies
and ignore constraints like physical space. Ralston closed 2021 by saying he
envisioned a future of 1,000 companies per batch, provided its quality control
could keep up.
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But those controls were already wobbling. Founders from those outsized remote
batches like Matt Donahue, CEO of Kodex, which helps businesses manage
government document requests, and Hellosaurus founder James Ruben, who
sold his educational video platform in 2022, said they enjoyed their experience
and would still recommend YC. Being part of one of the largest batches ever at
YC, however, “dilutes the significance in a way,” Donahue said. “If I could change
anything about my YC experience, it would be the feeling that, as a one-person
company, I was still important in this huge ecosystem,” said Ruben.
Among the wider tech community, a perception of an adrift YC picked up in
those years, punctuated by the shift of its in-person Demo Day online. “The
brand was a little bit damaged. People would say the quality wasn’t as dense,”
said one investor who has backed a number of YC startups. “Those times were
tough for them,” said a YC founder in the current batch who went through the
program twice before. Added a former employee: “PG felt we’d strayed too far
off the path.”
Were swollen batch sizes the sickness, or just a symptom? In an email, Ralston
told Forbes that batch sizes were already reduced during his last year in charge,
in 2022. Simplifying the batch process, at the least — from partners’ roles in
admissions to organization to how YC keeps tabs on founders afterward — were
top selling points for Tan before he joined, and featured prominently in his first
strategy meeting with YC’s board last January, said Chesky. YC conducted a data
analysis of Series A founders to break down the characteristics it should look
for, and study why some did or didn’t apply.
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“Garry was really thorough whenever we missed a company,” Chesky said.
“What did we learn? And were we providing good service? Because YC is almost
a customer service business, where the customers are the entrepreneurs.”
Tan settled upon a few major fixes: group partners would lead admissions again,
with the same partner serving as point-person for a company throughout its
tenure from initial interview to IPO (hopefully). And YC would retreat from
backing too many later-stage companies that had already raised funding and
started making revenue, as well as non-software businesses.
Within the batch, Tan added Launch Bookface Live, a Friday night demo session
for founders looking to soft-launch a product to the program. Such reveals have
happened for years, but previously only over Bookface itself, the software
directory and message board that serves as a digital town square for anyone
who has passed through YC (the first version of which Tan built more than a
decade ago). This new version comes with a celebratory trip to a nearby
watering hole after.
And to make still-larger batches feel more intimate, Tan formalized “The
Sharding” (a term borrowed from database engineering), which partitions YC’s
groups on parallel tracks. Groups already spent more time together than with
others, especially in the remote years. Besides imposing more nerd speech on
the program, “sharding” the founders formalized them in tracks, with dedicated
individual dinners and events, meaning Pinterest cofounder Ben Silbermann
could be addressing founders on one floor, GitLab CEO Sid Sijbrandij on another.
A record 27,000 companies applied for the most recent batch. Among the 260
companies accepted, founders — some identified by Y Combinator, some
contacted directly by Forbes — generally said they were happy with their
experience at the halfway point. Ka Ling Wu, cofounder and CEO of analytics
startup Upsolve AI, moved temporarily from London to participate; she may stay
in San Francisco now, however, after finding a community among its founders
past and present. “Some of these ex-YC companies, I love them,” she said. “And I
was like, ‘holy shit,’ because I have them now on my WhatsApp to randomly
ping for advice.”
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Umur Cubukcu sold his previous company to Microsoft, and has served as a YC
visiting partner advising others twice. Now, he’s back with cloud infrastructure
startup Ubicloud. The program is still the best place for founders to forge an
early product together, he said, even if the fundamentals of business formation
don’t change. Then there’s the ability for many YC founders to turn to their
batchmates as initial customers. Between them, partners and alumni, “there’s
tens of millions of dollars of potential,” Cubukcu said.
Of course, AI founders looking to start a business straight out of Anthropic,
Google or OpenAI can raise millions before leaving their jobs; they’ll still be
unlikely to apply, even to the new YC. But such “obvious founders” have never
been its bread-and-butter, said Liz Wessel, a partner at First Round, founder
alum and recent YC visiting partner. “By going earlier-stage, and potentially
younger, I think YC is now getting just as high-quality founders as when it
started,” she claimed.
“This isn’t McDonald’s. This is actually The French Laundry.”
Now that Tan’s batch tweaks are in place, YC will face the temptation to re-raise
its numbers, too. It’s already looking for more group partners, according to
Chesky, who — if typical numbers held — could add capacity for dozens more
participants. YC has no fixed formula for capping its batch size, said Caldwell,
who dismissed the age-old batch-size question as “a tedious debate.” But others,
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including Graham, are already lamenting the program’s current record-low
acceptance rate. “You should just accept every sufficiently good startup,” he said.
“If you don’t have enough partners, they’re just going to have to really work.”
For his part, Tan said he understood the appeal of Metcalfe’s Law and the notion
that the bigger YC’s network, the better. But reminded about Seibel’s state
university comparison, Tan rejected the idea out of hand. “This isn’t McDonald’s.
This is actually The French Laundry,” he said, invoking the exclusive Napa Valley
restaurant opened by seven Michelin star-holding chef Thomas Keller. “What
I’m trying to do with each group partner is help them realize, there are 14
French Laundries, and each one of them is their own version of Thomas Keller.”
YC'S TOP TEN
Y Combinator's alumni list still starts with Airbnb and Stripe. But more recent
graduates like Brex and Deel are moving up its all-time highest-valued ranks.
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Among some alumni founders backed by Y Combinator’s growth fund, however,
there’s far less enthusiasm for Tan’s signature changes. His moves to reprioritize
the batch and consolidate power around group partners helped precipitate the
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abrupt lay-off of a number of non-core staff last year, including YC’s admissions,
investing and research teams.
Facing what he said was pressure that the news would leak (it did eventually
appear in The Information), Tan took Chesky’s advice to handle the cuts swiftly
and decisively. In March 2023, Y Combinator’s growth fund Continuity and its
related programs were all shut down. Seventeen people — about 20% of its full-
time staff — were laid off in what Tan said was a shift in strategy, not
performance.
Ali Rowghani, the fund’s leader with partner Anu Hariharan, informed staff over
Zoom, alongside a human resources employee. (The pair had made a last-ditch
effort to spin out the fund, four sources said; such ideas were quickly shot down
as impractical and the fund leaders also departed.) Tan did not attend the Zoom,
and most employees never heard from him directly, the sources said, as their
emails were turned off before his company-wide note about the move went out.
More damaging to YC’s golden reputation was the reaction of some of the 20-odd
companies that suddenly found themselves missing a board director. As
reported at the time, founders from some of YC’s most prominent recent alumni
including Brex, Deel, Monzo, Rappi and Whatnot signed a letter to YC’s board to
condemn the move and call for YC to reconsider or at least keep Rowghani and
Hariharan on their boards. They were unsuccessful. Rowghani declined to
comment. Hariharan did not respond to a comment request.
“I would be upset about that, too,” Tan said now. “YC supports Anu and Ali in
their next things, and fully expects to collaborate with them on an ongoing
basis.”
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One Continuity-backed founder said the way the move and its aftermath were
handled shook their faith in Tan’s ability to lead such a significant organization.
“It felt like he under-estimated the sentiment and blowback, or he was under
pressure from someone else,” they said. That founder wasn’t alone in suggesting
that the move smacked of Graham’s influence. Until 2022, YC had operated a
board of overseers, playfully called BOO, that had largely left Altman and
Ralston alone, one source with knowledge said, aside from the occasional email
from Graham. But Tan was Graham’s chosen leader, multiple sources with
knowledge claimed, approved by a board of him, Livingston, longtime partner
Carolynn Levy, Chesky and the outgoing CEO Ralston that had formed just
months before.
Asked about those events, Tan said he alone bore responsibility. In a separate
interview, Graham and Livingston said they supported Tan’s decision as a
necessary shift for YC to stop acting like a venture capital firm. “The kind of
questions a VC ‘cares’ about, I can’t even say that without scare quotes, because
it’s so boring,” Graham said. “If you get into that business, you start to be like
those people. And they’re very different people.”
“The boom loop begins.”
On Wednesday, Tan took to X, the site formerly known as Twitter, to celebrate as
moderate candidates backed by non-profit GrowSF dominated party elections in
San Francisco. A board director at GrowSF, which was founded by Sachin
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Agarwal, Tan’s cofounder in his YC-backed startup 15 years ago, Tan had spent
the previous few days in a flurry of posts and reposts sharing his support of its
efforts to his 422,000 followers, and amplifying voices criticizing its opponents.
“We are winning,” Tan wrote alongside a photo of himself and Agarwal from
2009. “The boom loop begins.”
For anyone perplexed by a “boom loop”: it’s the natural opposite of a “doom
loop,” which has become a sarcastic shorthand for San Francisco’s crime,
education and housing problems. On one side, there’s pro “abundance” and
growth-minded “YIMBYs,” and on the other, San Francisco’s progressive
“NIMBYs,” as Tan and allies consider them, whom they believe hold the city back
from building more housing and tackling other issues like crime. Such views
overlap with, but are separate from, “e/acc” (short for effective accelerationism),
a self-described recent movement to which Tan subscribes, which believes that
“technology has a capability to remake society and create abundance,” he
explained on Monday. Some in the movement, Tan is quick to note, believe in
“extremist totalitarianism” and a robot-first future. Not Tan, who prefers
humans.
Public brand-building, particularly on YouTube, played a big part in raising the
profile of Initialized, his VC firm. He’s now running the same playbook across YC.
“The more you are yourself on social media, the more it works,” he said. In its
golden years, founders discovered YC through Graham’s popular essays, Tan
said, and the halo effect from its shared startup how-tos. For the X era, YC’s new
touchpoints are video podcasts, such as a recent series called Lightcone, in
which Tan and three other partners talk about new tech trends (the first two
episodes covered AI and Apple’s Vision Pro release). Explained Tan: “I have a
brand, but I want there to be 14 PGs at YC.”
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But Tan’s own brand hasn’t avoided controversy. His personal posts may only
take a few minutes per day, but when they blow up — he once apologized for
and deleted a message that told local political opponents to “die slow
motherfuckers,” borrowing Tupac lyrics — it’s still the president and CEO of Y
Combinator making headlines, even after-hours. In another incident, Tan
accused the leader of another accelerator called Neo of “slander” for saying it
had a preferable mentor ratio to YC, leading to a public fight on X.
That’s given at least some in the YC community pause; a few said they no longer
felt comfortable posting dissenting opinions on Bookface, where they might get
mass downvoted by Tan loyalists, or on X, where Tan blocked an alumni founder
from Gaza who questioned his resharing of what they felt were pro-Israel, anti-
Palestinian posts (he later unblocked him). Y Combinator’s official account,
another founder noted, had posted only in support of its Israeli-tied members; a
request by founders for the organization to share similar sentiment for the
Palestinian community to Tan went unanswered, two sources with knowledge
said. Y Combinator spokesperson Lindsay Amos declined to comment.
“I don’t think Garry being very vocal on such matters is beneficial to the brand,
and to the YC name,” one founder said. “I’m still a huge believer in YC,” added
another. “But my ideal would be for Garry to pause the politics and focus on
making YC better.”
Tan called such arguments “useful feedback,” but said he had no immediate
plans to heed it, even though he insisted he’s not motivated by personal fame or
a future run for office, which he said would cost him his marriage — where he
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draws the line. “I don’t want it to be about me, but if it must be, then that’s fine,”
he said. “I’ll do it. I’m down for the cause.”
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