"pushing out 80 companies a batch “demanding” that each of those raises a seed round at 10m pre is just wrong and unsustainable"<p>I see these types of comments all the time from people who <i>did not go through Y Combinator</i>. They are incredibly frustrating because anyone who has done YC knows that the partners constantly hammer home the message that founders should NOT optimize for valuation but instead look for great investors who really understand the market and will add value to your company in the long term.<p>The fact that many YC companies do raise at high valuations is a function of investor interest, not because they are being driven to do so with a stick by YC.
"First Round Capital, A16Z, NEA, KPCB, Sequoia and Khosla all raised new funds very recently for a total of several billion dollars. Early seed stage doesn’t look bad either with 500 Startups, Lowercase Capital, etc. all raising new capital."<p>I think OP hit the nail. I'm no expert or angel investor. But availability of capital is not a problem. May be the market for uncapped notes and massive seed rounds has stabilized.
I think one thing thats often missed in posts like this is the memetic effect if Y-Combinator were to stop growing its class size. Its irrelevant whether or not YC's continued growth is reasonable or not because they don't have a choice in the matter at this point.<p>YC is for a very large portion of people an indicator of the health of the industry. Were YC to cease growing, or worse reverse its class size, dozens of articles would appear about how this means the "popping of the bubble".<p>Regardless whether thats the actual reason, it would have a detrimental effect on the startup world as a whole. I'm pretty sure PG is aware of this fact.
Being at a startup in 2001 when funds went tragically south right after 9/11, there is no way the current market is even close to this.<p>Things were BAD. Unless you had a hint of profitability and located in the valley, it was almost impossible to get funds. Investors literally said they weren't going to invest for at least 6 months and see how the economy fairs (and it didn't fair well). Everyone was gun shy because they had lost a ton of money on insane valuations already, so even legitimate businesses were getting overlooked.<p>Really, the (first) tech bubble pop set the entire industry back for probably close to a decade. I often wonder how many great ideas went unfunded and dissolved because investors were just too guarded.
Subsidiary point in the post, but I strongly disagree with OP that YC has been diluting it's brand / average quality of companies by accepting more companies. Having seen the vast majority of YC companies, it's obvious that the average quality of companies in YC has only risen over the years. More companies are being accepted because more good companies are applying, not because YC has relaxed its standards. If anything, it's probably harder to get into YC now than it was before.
<i>"...those funds know that internet companies are still valuable, there is no tech bubble and by building a long-lasting company that creates value well-timing its IPO, you can make incredible returns"</i><p>It occurs to me that part of the issue surrounding the controversy of bubble vs. no bubble may boil down to semantics. A "bubble", after all, is a fairly arbitrary construct. Whether or not we are approaching the peak of a J or S-curve may be subject to debate - but there is no doubt we are approaching a temporary peak.<p>Funding <i>will</i> begin to dry up as general perception sours vis a vis tech in general and Internet startups specifically. A fair amount of publicity surrounding the Facebook IPO was directed at monetization (or lack thereof). Frankly, this criticism is <i>legitimate</i>. The widespread lack of sustainable business models among Internet ventures should be a source of concern to investors. Expecting "value" to simply materialize serendipitously is wishful thinking at best - and at worst, the telltale sign of a bubble.