In a conversation at the GMIC mobile conference this week, Y Combinator co-founder Paul Graham gave the most recent stats on the seed stage incubator. Of the 511 companies that had passed through YC prior to its most recent Summer 2013 class, 306 had valuations tied to them. The total value of those companies is now $13.7 billion, up $2 billion since Graham’s last update on the number in June.
So what’s happened in the past couple of months that would juice the total valuation so much? Is the it due to growth among many YC startups, or concentrated at the top?
A Rising Tide
There are likely several reasons for the increase in valuation. For one thing, as more Y Combinator companies raise their first rounds, their valuations get added to the pool. The aggregate valuation also increases each time it sees an alumni company get acquired. And, of course, later-stage companies raising their rounds at higher valuations will also drive that number up.
Of course, not every YC startup ends up raising money or getting funded right after demo day. And many that do initially get seed funding do so with convertible notes rather than through priced rounds, so you can’t really peg down a valuation as such.
But for those you can calculate — either because they died, got acquired, or sold stock at a specific valuation — the value of the YC portfolio has jumped considerably.
Some of the growth can be attributed to an increase in the number of companies funded. At the 500 Startups PreMoney conference in June, Graham told me that there were 285 YC companies with post-money valuations, compared to 306 now. (Check out the video below.) At that time, the total amount that YC companies had raised was $1.7 billion.
A number of YC companies have also raised additional rounds of funding in the past several months. Twitch (formerly Justin.tv) raised $20 million, E La Carte raised $13.5 million, Clustrix raised $10 million, and Instacart brought on $8.5 million, among others.
Major Changes At The Top?
But the bulk of the increase probably comes from a major change at the top. Like many private equity investors, the lion’s share of Y Combinator’s investment value is concentrated in just a few high-flying startups. Back in June, Graham told me that the top 10 companies accounted for $8.6 billion of its $11.6 billion total valuation.
Y Combinator wouldn’t break out what the valuation of that top 10 is right now, but it seems likely that some major change in the value of those companies is the biggest reason for the increase. That could mean a revaluation among one or more of the ten, perhaps triggered by an equity sale that has closed but hasn’t yet been announced.
For the conspiracy theorists out there, it’s very possible that YC wouldn’t share this data because a company (or companies) doesn’t want that information to be public. After all, saying that the top 10 now accounted for $10 billion of the $13.6 billion total valuation — and note, YC did not say this, but if it did — that would mean that somebody just got a big boost in funding, or perhaps saw shares revalued through a secondary sale.
Ignoring the fact that we don’t actually know this to be true but assuming this is the case,* which of the ten was it?
Well, there was that big Airbnb funding round that was never quite announced.** It’s possible it took forever to get done, and didn’t actually close until the summer. Or maybe Stripe has raised money that we just haven’t heard about yet. It’s become a sort of poster child for Y Combinator success, after all. Or perhaps Drew Houston & Co. have sold off some secondary shares in Dropbox.
Or maybe, maybe, none of the above.
For newshounds like me, the fun is in figuring it out.
* And full well knowing the dangers of making an ass out of u and me
** Shameless plug: Can’t wait to ask Airbnb co-founder Nate Blecharczyk about this at TC Disrupt Europe next Monday around Noon CET.