The world’s most influential startup incubator is broadening it’s offering through a product targeting more established businesses who are facing issues in the next stage of their evolution. Y Combinator has created a new program focused on businesses who have existing capital but are experiencing growing pains and are having problems scaling.
Statistics show that most entrepreneurs – quite rightly – consider first stage investment to be the most significant issue they need to handle. However, once a critical mass of investment has been achieved, those same start-up entrepreneurs need to evolve into business people and allocate those funds effectively – something that many start-up executives are ill-equipped to handle. Y Combinator aims to provide a more sustainable solution for start-ups, beyond hiring in, “smart people.”
Many start-up executives are forced out of their business after allowing too many people to eat from the trough and Y Combinator has seen its fair share of start-ups being swallowed up by venture capitalists. The aim of this new program is to build a personalised scaling model, that can be adjusted and improved as circumstances change. Part of this will be understanding what types of employees need to be hired, and when it is time to re-evaluate existing capital. The outcome will be entrepreneurs leaving the traditional Y Combinator incubator, with a plan in place as to what to do next.
This will not be music to the ears of strategic investors and venture capitalists who have preyed on the young, successful and naïve for many years. In fact, many investment businesses have been built on the sweat of entrepreneurs who ended up with a full bank account, and little else to show for their years of hard work.
Y Combinator CEO Sam Altman has been conscious of shortfalls in the start-up ecosystem for many years, and has, along with other members of the senior management team at Y Combinator, been trying to find sensible and strategic ways in which they could assist growing businesses, beyond the traditional incubator period.
There will be no charge to businesses accepted into the new program – Y Combinator traditionally takes around 7% equity in businesses – and entry will not be limited to former incubator members.