YC’s Startup Strategy: Why Repeating Bets on Similar Companies Works
Silicon Valley’s entrepreneurial dream often involves building a groundbreaking startup that reshapes industries and creates billionaires. For many, participation in Y Combinator (YC) — the prestigious accelerator behind Airbnb, Coinbase, and Stripe — is a crucial step toward that vision.
But a surprising trend emerges from data on YC’s nearly 5,000 portfolio companies: uniqueness isn’t a prerequisite for acceptance. In fact, YC frequently backs startups with strikingly similar products to its existing alumni.
The Competitive Landscape Within YC
Research by data analysis firm Deckmatch reveals that YC regularly funds:
- Direct compe*****s in identical markets
- Geographic variants (e.g., Latin American or Asian versions)
- Niche adaptations (like POS systems tailored for bars vs. coffee shops)
This pattern gained attention during the PearAI controversy, where a YC-backed AI code editor faced criticism for closely resembling another YC graduate, Continue. While PearAI ultimately pledged to rebuild its product, the incident highlighted YC’s tolerance for similar ventures.
YC CEO Garry Tan defended this approach on X: “More choice is good, people building is good, if you don’t like it don’t use it.” Tan himself has supported multiple startups in identical spaces, including two police bodycam companies (Flock Safety and Abel Police) years apart.
YC’s Founder-First Philosophy
When questioned about backing compe*****s, a YC spokesperson explained:
“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.”
This philosophy manifests in YC’s Request for Startups (RFS) process, where exceptional founders can receive funding regardless of market saturation.
Divided Opinions Among YC Alumni
The Critics:
- Some founders resent competition from “copycat” products within the YC network
- Security startup founder Bryan Onel voiced frustrations during the PearAI controversy
The Supporters:
- Nick Evans, Avocado POS CEO and Tile founder, champions the approach: > “Startups don’t die by murder; they die by *******. You’re not fighting other startups — you’re fighting consumer apathy.”
- Evans argues that investors gain valuable market insights by backing multiple similar companies
The Data Behind YC’s Pattern
Deckmatch’s analysis (conducted via their AlphaLens product) examined YC’s portfolio trends. Key findings include:
Currently Hot Categories (12+ startups each):
- AI Code Editors: Continue, PearAI, Void, EasyCode, Ellipsis
- Restaurant POS Systems: Avocado, Dripos, Polo (Latin America focus)
- Business Finance/Payroll: Warp, Zeal (international variants of Gusto/Rippling)
- AI Sales/CRM Tools: Apten, Persana AI, Topo
- AI Meeting Assistants: Circleback, Onward, Sonnet
- AI Legal Tech: Dioptra, Leya, Tower
Cooling Trends:
- Crypto Trading Platforms: Dozen+ graduates (2014-2022)
- E-commerce Platforms: Majority funded 2018-2022
- Corporate Expense Cards: Post-Brex surge (2018-2022)
Why This Strategy Works
- Market Validation: Multiple startups in a space confirm demand
- Founder Quality: Exceptional teams can succeed even in crowded markets
- Network Effects: YC’s ecosystem benefits from diverse approaches to similar problems
While controversial, YC’s willingness to back similar ventures reflects Silicon Valley’s core belief: execution often matters more than originality.
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