Y Combinator has decided to reduce the number of checks that it issues to late-stage firms, according to a statement that was made public on Monday, March 13, 2023.
As a result of this cutback, 17 team members, which represents around 20% of the accelerator’s workforce, have lost their jobs. The accelerator stated that the failure of Silicon Valley Bank was not a factor and that they had been strategizing about the transition “long before” the collapse; more than thirty percent of Y Combinator’s businesses have ties to SVB.
Read also: Meta to lay off 10,000 workers after laying off 11,000 in 2022
The CEO of Y Combinator’s Address
Garry Tan, the CEO of Y Combinator, wrote in the memo that the accelerator, which focuses mostly on early-stage investing, discovered that late-stage investing was a “distraction from our core mission.” He made this statement because Y Combinator is primarily concerned with early-stage investing.
Tan said in the message that there shouldn’t be any apparent effect on the companies that we’ve financed or on the way that we connect with alumni, “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.”
Tan has been active online over the past four days while SVB has been taken over by regulators following a historic bank run that appears to have been provoked by Twitter. SVB was previously the bank for more than half of the venture-backed businesses in the United States.
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Further Charge Made
According to a screenshot obtained from within the company early on, Tan advised young companies that were part of the Y Combinator that “anytime you hear problems of solvency at a bank, and it can be deemed credible, you should take it seriously and prioritize the interests of your startup by not exposing yourself to more than $250,000 of exposure this year.”
Twenty-four hours after he made the statement, Tan took to Twitter to remark that “this is an extinction level event for startups and will set startups and innovation back by 10 years or more. BIG TECH will not care about this. They have cash elsewhere. All little startups, tomorrow’s Google and Facebook, will be extinguished if we don’t find a fix.”
In addition to this, he drafted a petition that is currently supported by over 5,000 CEOs and founders of tech companies and asked the government to intervene and assist the entrepreneurial community.
Although Y Combinator refuses to acknowledge that today’s layoffs and exit from the growth stage are connected to the ongoing banking crisis, it is difficult not to see the news in the context of a tech reckoning, given the current economic climate.
The illustrious accelerator will be holding its semiannual Demo Day in just a few short weeks, and we will soon find out how Y Combinator, which recently shifted its focus to early stage, is navigating the challenging road ahead.