top of page

Equity in access for startups: Are we making progress for diversity?

YCombinator, a premier U.S. seed money startup accelerator in San Francisco, just posted data on its YC Winter 2023 Batch, 282 companies that received funding at the end of the session (out of 20,000 applications from founders around the world).


The data from YC's Winter 2023 Batch offers valuable insights into the state of equity in access to capital for underrepresented founders. While progress has been made in providing opportunities for early-stage startups and fostering a technology-driven ecosystem, there are still significant disparities to address. The geographical concentration of venture capital, the limited representation of underrepresented groups, and the dominance of certain industries call for a concerted effort to level the playing field.


Forgive the “inside baseball” about startup accelerators below, but I was struck by what this report says and what it means about so many of the equity and access issues we are working on as part of the Wild Accelerator, which is now completing its Season 3 with five amazing graduating companies.


1. The data says: You can start with only an idea

· 52% of the batch were accepted with only an idea

· 77% of the batch had zero revenue before YC

· 2% had more than $50k of monthly revenue when accepted


It means: You can start with only an idea. Okay! But we know it had better be a good one that lends itself to scalable revenue models.


2. The data says: It helps if you’ve done this before, especially If you are in the Bay Area

· 59% of the batch applied more than once

· 28% of the batch raised money before YC

· 86% of W23 founders lived in the Bay Area


It means: The data reveals the significant advantage of being located in the Bay Area, highlighting how the venture capital market is an insider game. Our work has shown that, unless you are surrounded by other startups in the ecosystem, founders often don't have the invaluable opportunities to learn and develop a mindset for thinking big and identifying scalable ideas through osmosis that the Bay Area offers


3. The data says: This is still all about technology, e.g., the most common themes of this batch were open source, dev tools, and AI, and company verticals broke down as follows:

· 54% in B2B/Enterprise SaaS

· 17% in DevTools

· 12% in Fintech

· 7% in Healthcare

· 5% in Consumer

· 3% in Proptech

· 2% in Climate, Energy, or Sustainability

· 1% in Aerospace


It means: Initiatives like "frontier tech,” or investments in carbon removal from the earth’s atmosphere, which was launched as a priority of YC back in 2018 per this blog from Sam Alman who worked there then, aren’t gaining traction. Only 2% of YC's 2023 winter class is climate, energy or sustainability related. If anyone would have a window into viable startups working on climate change solutions, I would think YC would be a top player.


4. The data says: YC is working to be very, very mindful about diversity in the founders it supports. Here is the demographic breakdown data of the companies funded in this batch:

· 13% Asian

· 2% Black

· 5% Hispanic or Latino

· 3% Middle Eastern or North African

· 8% Multiracial

· 15% South Asian

· 29% White

· Additionally, 17% of the companies have a woman founder and 8% of the founders are women.


It means: Black and brown founders are still significantly underrepresented and women, well, that 8% is not progress worth getting excited about.


To achieve more equitable access to capital, it is crucial for startup accelerators, venture capitalists, and the entrepreneurial community as a whole to actively work towards dismantling systemic barriers. By providing support, mentorship, and resources to founders from diverse backgrounds and industries, we can foster an ecosystem that encourages innovation and empowers underrepresented entrepreneurs. Only through collective action can we make meaningful progress and ensure that everyone has an equal opportunity to succeed in the startup world.

6 views

Comments


bottom of page