Y Combinator often backs startups that duplicate other YC companies, data shows — it’s not just AI code editors
23 November 2024
33 4 minutes read
The Silicon Valley dream is to build a tech startup that is such a unique idea it alters the commercial universe and turns its founders into billionaires. Participating in the Valley’s most famed startup factory, Y Combinator, is often part of that dream. Airbnb, Coinbase, and Stripe all got started there.
Yet, a deep dive into the data from all of the nearly 5,000 companies YC has backed to date reveals a surprising truth: YC startups don’t have to be unique. Far from it.
YC commonly accepts startups that are building similar or nearly identical products to previous YC grads. Some of them are direct competitors; others differ slightly by targeting a new geography (Asia or Latin America), or are a subset of a larger market (point-of-sale software for bars versus coffee shops).
Data analysis startup Deckmatch conducted the research, inspired to look at competing YC products after a controversy over a YC-backed startup called PearAI. Critics said that PearAI’s code editor product wasn’t much more than a cloned version of another YC product, called Continue — and PearAI’s founder essentially admitted it. There were more reasons that Pear found itself in hot water (including the bravado of its founders and how it handled the open source licensing). But the uproar concluded with Pear’s founders vowing to start over from scratch.
YC CEO Garry Tan defended the company, and the fact that YC accepted this behavior, by posting on X, “More choice is good, people building is good, if you don’t like it don’t use it.”
This is clearly more than lip service for Tan, who has himself, for instance, championed two police bodycam startups a few years apart: Flock Safety (Summer 2017 cohort) and Abel Police (Summer 2024). Along the same lines, more than a dozen startups building AI code editors went through the YC program between 2022 and 2024 — some in the same batch with the same YC partner.
When asked about its propensity to back competitors, a YC spokesperson said that the organization is more interested in the founders’ backgrounds than their business ideas. “YC invests in founders over ideas, focusing on individuals with the potential to build transformative companies — no matter the space they operate in. Our investment strategy focuses on backing the most promising founders with vision, resilience, and ability to execute, which is clear in our RFS process,” a spokesperson told TechCrunch.
One of YC’s big benefits is its cozy network, where startups often seek customers, partners, and the like. Consequently, some alums dislike competition if they feel another’s product mimics theirs, rather than differentiates. Around the time of the PearAI controversy, YC alum Bryan Onel, founder of security startup Oneleet, posted on X about his experience with this. A few others chimed in to commiserate. (Onel did not respond to our requests for comment.)
Then again, other YC alums think this kind of direct competition is good, especially when the same YC partner advises them. Restaurant PoS systems is one area that has been popular in YC, and YC alum Nick Evans, co-founder CEO of restaurant PoS Avocado, is fine with competitors.
He should know. Evans famously founded a device-tracking startup called Tile, which went crazy with crowdfunding, raised money from traditional VCs, took on Apple’s AirTags, then sold to Life360 in 2021 for $205 million.
“I think it’s stupid that most investors don’t invest in competing companies,” Evans told TechCrunch about YC competition. “I want investors that deeply understand my business and industry. How the hell would they know anything useful if they aren’t working with similar companies? Startups don’t die by murder; they die by suicide. You are not fighting against other startups. You are fighting against people not giving a s— about your product.”
Before diving into the specifics of the categories YC has particularly favored, it’s worth noting that Deckmatch is not a YC company and has never applied to be one, CEO Leo Gasteen tells TechCrunch.
Deckmatch was inspired to analyze YC products by the PearAI situation as a demo test for its new product AlphaLens. Deckmatch sells product analysis data on about 8 million startups to private market participants like investors, and corporate innovation and M&A teams.
It wants to do for product data what PitchBook did for company-level data, Gasteen says. Earlier this month, Deckmatch raised a $3.1 million seed round co-led by Alliance VC and Luminar Ventures, with participation from its pre-seed investors First Degree Capital and Skyfall Ventures. It’s raised $4.2 million to date, it says.
AlphaLens lets Deckmatch customers comb through its database to find unique and similar products, build scatter charts, cluster maps, and the like. But the results of the YC analysis, shared exclusively with TechCrunch, should be fascinating to any founder wondering what kinds of startups YC tends to accept.
According to this data, the current popular product categories, each with at least a dozen startups, include:
AI code editors: Beyond Continue and PearAI, another example is Void (another open source alternative to Cursor, the popular Andreessen Horowitz/OpenAI-backed startup). Then there’s EasyCode, Ellipsis, Cosine, Greptile, and more, each applying AI to various coding tasks.
Food/beverage/restaurant point of sale systems: Most of the PoS startups were accepted into the program between 2020 and 2023, including Avocado, Dripos, or Latin American startup Polo.
Business finance/payroll: With the success of YC alums Gusto and Rippling came many competitors, some aimed at different international markets. Examples include Warp and Zeal.
AI meeting assistants: Circleback, Onward, Sonnet, and Spinach AI are but a few examples.
AI legal assistants: Dioptra, Leya, and Tower are some examples.
Then again, several areas were popular but have been recently less so. These include:
Crypto trading platforms: Given the success of YC grad Coinbase, YC was gung ho on this for a while, with about a dozen grads, largely from 2014 to 2022.
E-commerce store platforms: In the wake of Shopify (not a YC alum) YC accepted about a dozen such companies since 2018, with the majority in the 2018 to 2022 time frame.
Corporate expense cards: After YC alum Brex came many others, mostly from 2018 to 2022.
