Why top VC firms secretly love YC but won't admit it

Executive overview

Top-tier VCs publicly downplay YC while quietly writing hundreds of checks into YC companies. The gap exists because firms want to be a founder's first and only call — YC disrupts that by making companies competitive and encouraging parallel fundraising.

YC solves a core VC problem: most startups are too early to invest in. By filtering 20,000 applicants down to ~200 companies, funding them, and improving their pitch and product, YC delivers pre-vetted, further-along deals. VCs get the filter work done for them.

If someone is aggressively advising you against YC but not offering to invest, discount their advice.

What the data shows

• A16Z: 234 investments in YC companies; Sequoia: 139; Founders Fund: 104.
• Every company on the YC top companies list was funded by major investors.
• Investors vote with capital — their behavior contradicts their public messaging.

Why VCs need the filter YC provides

• The average VC does 1–2 deals per year; a typical firm has 5–10 partners — very few slots.
• Primary rejection reason: "too early" — not enough signal to justify the bet.
• YC condenses 20,000 applications into ~200 companies with traction and momentum.
• YC also funds companies so they don't die waiting for a VC to say yes.
• Many top YC companies pivoted during the batch — VCs benefit from that optionality.

Why VCs publicly downplay YC

• VCs want to be first check — it's a non-competitive, lower-valuation conversation.
• Once a company does YC, it talks to many investors simultaneously, creating competition.
• VCs prefer founders to stay loyal to one firm and return every six months with updates.
• YC explicitly teaches founders to run parallel fundraising processes — the opposite of what VCs want.
• Board seat conflicts: early investment in one company can block them from backing a competitor later.

How seed funds differ

• Seed funds are even more directly threatened — their only chance to invest is the first round.
• Outside YC: a seed fund might pay $5–10M valuation. After demo day: $15–25M.
• Seed funds have written tens of thousands of checks into YC companies — but at higher prices.
• Unlike VCs, seed funds can't catch up at Series B or C if they miss the seed.

How to evaluate investor advice

• Ask one question: are they offering to invest right now?
• An investor offering money with a condition of skipping YC is making a real trade-off worth considering.
• An investor passing on you while advising you not to raise from others is running their own playbook, not yours.
• Understand that every party giving you advice about fundraising has their own business incentives.