Startup incubator Y Combinator has just closed $8.25 million new fund led by Sequoia Capital with Ron Conway, Paul Buchheit, Aydin Senkut, XG Ventures, and Geoff Ralston participating.
The new fund is four times larger than $2 million fund raised last year. This is because it’s meant to be a long term fund and Y Combinator is planning to increase the number of startups the incubator funds. At least 35 (give or take) startups will join the summer 2010 funding cycle. The previous YC funding cycle, winter 2010, had 27 startups, with 20 of the companies hitting profitability or securing commitments for further funding.
Y Combinator has invested in over 207 startups since summer 2005 and until last year, only invested capital provided by its four founders: Paul Graham, Jessica Livingston, Trevor Blackwell and Robert Morris. The larger fund created last year was designed to expand their war chest to include more startups and investments. Investments are small ($5,000 + $5,000/founder) in exchange for around 6% of equity, and the startups are typically very early, usually idea stage.
Graham tells me that the incubator has expanded significantly since its first session, which has only 8 startups. In terms of scaling the model, Graham hasn’t run into a lot of problems thanks to having the right amount of full-time staff and a healthy group of part-time advisors. He adds that this raises should last the incubator for 2-3 years. The incubator is currently seeing 1,000 applications per session, so the expansion is good news for fledgling entrepreneurs.
There’s good reason for founders to be clamoring to be a part of the incubator. Many of its startups have seen considerable success, including DropBox, Posterous, Loopt, Justin.TV, and Scribd. And several of the startups have been acquired – Reddit (by Condé Nast), Omnisio (by YouTube), Zenter (by Google), ClickPass (by Synthasite) Auctomatic (by Communicate), DivvyShot by Facebook and others.
Y Combinator is a venture fund which focuses on seed investments to startup companies. It offers financing as well as business consulting along with other opportunities to 2-4 person companies looking to take an idea to a product. Y Combinator looks for companies with “good” ideas over companies with experience and a business model. The company made its first investments in Summer 2005. Y Combinator selects companies to finance and consult with twice a year. They are located in...
Sequoia Capital is a venture capital firm founded by Don Valentine in 1972. The Wall Street Journal has called Sequoia Capital “one of the highest-caliber venture firms” and noted that it is “one of Silicon Valley’s most influential venture-capital firms”. It invests between $100,000 and $1 million in seed stage, between $1 million and $10 million in early stage, and between $10 million and $100 million in growth stage. The firm has offices in the U.S., China, India and...
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