YCombinator, a startup accelerator with headquarters in San Francisco, has unveiled the revenue rankings of its top 50 alumni companies for the very first time.
The well-respected accelerator is famous for ranking firms according to their valuations.
Wave, a mobile money app based in Senegal, is the only African company that is represented among the firms that are publicly traded. Airbnb, Dropbox, Coinbase, and Reddit are some of the other featured startups in this article.
YCombinator has been emphasising to founders ever since the beginning of the VC slump in early 2022 the necessity of shifting away from a “growth at all costs” approach and instead establishing business models that show a path to profitability. Is the beginning of the accelerator’s shift towards bottom-line growth signalled by the recent tendency of emphasising revenue as a primary indicator in measuring alumni’s success?
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Impacts of YCombinator’s change
Ato Bentsi-Enchill, head of special purpose vehicles (SPVs) at Microtraction, a Nigerian early stage VC firm, believes that the list should push African entrepreneurs to target measures such as revenue rather than growth at all costs. He says this will help the startups become more sustainable.
Bentsi-Enchill tells entrepreneurs that beyond focusing on revenue, it is crucial for them to think of tackling challenges that extend beyond only Africa. This is because VC money continue to be a unicorn, which means they are difficult to find. The next wave will be focused on developing economically viable and environmentally responsible strategies for the resolution of global problems.
Regardless of the motivations behind YCombinator’s decision to publish a list of investors for the very first time, the presence of such a prominent international investor is an indication that a wind of change is blowing through the venture capital business. Whether African companies like it or not, they will be required to adjust to the new standard operating procedure.
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Remarks from some Executives
CEO of the venture capital firm Kalon Ventures, which has its headquarters in Johannesburg, is of the opinion that this marks the beginning of not only YCombinator’s push for bottom-line growth in its cohorts, but also the push for bottom-line growth in the VC business in general.
“In a downturn, every investor is going to be frugal with their funds because they are so hard to come by, so it’s not surprising to see YCombinator insisting on the importance of revenue as a growth metric. Of course revenue is still a topline metric so I think eventually, we will see them maybe sharing a Top 50 most profitable startups list,” he said.
“Maybe this is a way to encourage startups who perhaps want to apply to YCombinator by showing them the revenue-making abilities of some of their alumni. At the same time, maybe its a subtle reminder to founders that at the end of the day, you’re building a business and business is about making money, and for anyone to invest in your business,”Ato Bentsi-Enchill remarked.
“[At Microtraction], we are also thinking through refining our thesis to make sure that we’re investing in founders whose businesses have applications both on the continent, but can also be expandable across the world and address far-reaching problems,” he added.