Silicon Valley's dream is to build technology startups with unique ideas that change the world of commerce and make their founders millionaires. Joining Y Combinator, the Valley's most famous startup factory, is often part of that dream. Airbnb, Coinbase, and Stripe all started there.
But when you dig deeper into the data for all the nearly 5,000 companies YC has supported over the years, a surprising truth emerges. That means YC startups don't have to be unique. Far from it.
YC typically accepts startups that are building similar or nearly identical products to previous YC alumni. Some of them are direct competitors. Others vary slightly by targeting new geographies (Asia or Latin America) or targeting a subset of a larger market (POS software for bars and coffee shops).
Data analytics startup Deckmatch conducted this study after the controversy surrounding a YC-backed startup called PearAI inspired them to focus on competing YC products. Critics have said that PearAI's code editor product is nothing more than a cloned version of another YC product called Continue, and PearAI's founder basically acknowledged that. There were other reasons for Pear's troubles (including the founder's bravado and the way they handled open source licenses). But the turmoil ended with Pear's founders vowing to start over from scratch.
YC CEO Garry Tan said in a post on X that the company and YC accepted the move, saying, “More options are good, nurturing people is good, and if you don't like it, don't use it.'' defended the facts.
This is clearly more than just lip service from Mr Tan himself. Tan himself, for example, champions two police body cam startups several years apart: Flock Safety (summer 2017 cohort) and Abel Police (summer 2024). Similarly, more than a dozen startups developing AI code editors passed through the YC program from 2022 to 2024. Some of them were from the same batch of the same YC partners.
When asked about its tendency to back competitors, a YC spokesperson said the organization is more interested in the founder's background than the business idea. “YC invests in founders over ideas, focusing on individuals with the potential to build innovative companies, regardless of their business domain. Our investment strategy is based on vision, resilience, and execution. “We are focused on backing the most promising founders with the capabilities, and this is evident in our RFS process,” a spokesperson told TechCrunch.
Some founders prefer the YC approach
One of YC's big advantages is its welcoming network, where startups often look for customers, partners, and more. As a result, some graduates dislike competition if they feel that others' products imitate theirs rather than differentiate it. Around the time of the PearAI controversy, Brian Onell, a YC alumnus and founder of security startup Oneleet, posted on X about his experience with this. Several others also chimed in to sympathize. (Mr. Onell did not respond to a request for comment.)
Again, other YC alumni think this kind of direct competition is a good thing, especially when advised by the same YC partner. Restaurant PoS systems are one of YC's favorite areas, and Nick Evans, YC alumnus and co-founder CEO of restaurant PoS Avocado, has no problem with the competition.
He should know. Evans famously founded a device tracking startup called Tile, which has gone crazy with crowdfunding, raised money from traditional venture capital, acquired Apple's AirTags, and invested 205 million in Life360 in 2021. Sold for $1,000,000.
“I think most investors would be foolish not to invest in competing companies,” Evans told TechCrunch about YC's competition. “I want investors who have a deep understanding of my business and industry. How can I learn useful information if I haven't worked with similar companies? Startups don't die by murder. No. They die by suicide. You're not fighting other startups. You're fighting people who don't give you anything about your product.”
A deep dive inspired by the PearAI controversy
Before we get into the specifics of the categories YC particularly likes, it's worth noting that Deckmatch is not a YC company and has never applied to one, CEO Leo Gasteen told TechCrunch.
Deckmatch was inspired to analyze YC products in the context of PearAI as a demo test for their new product, AlphaLens. Deckmatch sells product analytics data on approximately 8 million startups to private market participants such as investors and corporate innovation and M&A teams.
Gusteen says he wants to do for product data what PitchBook did for enterprise-level data. Earlier this month, Deckmatch raised $3.1 million in a seed round co-led by Alliance VC and Luminar Ventures, with participation from pre-seed investors First Degree Capital and Skyfall Ventures. It has raised $4.2 million so far.
With AlphaLens, Deckmatch customers can explore the database to find unique similar products, create scatter plots, cluster maps, and more. But the results of the YC analysis, shared exclusively with TechCrunch, should be of interest to founders wondering what kind of startups YC tends to accept.
What types of products do YCs love, according to data?
According to this data, each currently popular product category has at least 12 startups.
AI code editor: Besides Continue and PearAI, another example is Void, an open source alternative to Cursor and a popular startup backed by Andreessen Horowitz and OpenAI. Additionally, there are companies like EasyCode, Ellipsis, Cosine, and Greptile, each of which applies AI to various coding tasks.
Food/Beverage/Restaurant Point of Sale Systems: Most PoS startups joined the program between 2020 and 2023, such as Avocado, Dripos, or Latin American startup Polo.
Business Finance/Payroll: The success of YC alumni Gusto and Rippling led to the emergence of a number of competitors, some targeting various international markets. Examples include Warp and Zeal.
AI sales and customer relationship management. This is a very hot development area for large companies (Salesforce, Microsoft) and startups. YC alumni include Apten, Persana AI, and Topo.
AI meeting assistants: Circleback, Onward, Sonnet, and Spinach AI are just a few examples.
AI legal assistants: Dioptra, Leya, and Tower are some examples.
Also, some areas used to be popular but have become less popular these days. These include:
Cryptocurrency Trading Platform: YC Alumni Following the success of Coinbase, YC has been working hard on this for some time, mainly from 2014 to 2022, with about 12 alumni.
Following e-commerce store platform: Shopify (not a YC alumnus), YC has welcomed about a dozen such companies since 2018, the majority of which were in the 2018-2022 period.
Corporate Expense Card: A lot of YC alumni came after Brexit, mainly from 2018 to 2022.