Y Combinator accidentally let 15,000 people into an exclusive program — and now has decided to do it on purpose

When Y Combinator accidentally admitted 15,000 people to its 3,000-person Startup School online program last summer due to an almost funny technical glitch, it was an embarrassing moment for one of Silicon Valley’s marquee brands, and a rollercoaster of an experience for emotionally vulnerable startup founders.

The accepted founders should have been rejected. The rejected founders should have been accepted. Emails and texts were flying in fast.

“People were obviously and rightfully upset,” recalled Adora Cheung, a YC partner who huddled with colleagues in the corner of the Computer History Museum, as YC’s Demo Day unfolded steps away, that frenetic afternoon last August. “Someone brought up the crazy idea of: Why don’t we just accept everybody? We’ll figure it out. We always figure things out.”

Suffice it to say, mistakes like this don’t typically happen in the well-to-do, perfectly manicured world of Silicon Valley startups.

But this all offered a chance to test a big question: Does Silicon Valley only work if there is some exclusion, some selectivity, and some prestige? Or can access to what makes a startup a success — the right connections, the right money, the right know-how — be available to everyone who signs up?

The answer — in YC’s eyes — is: Yes, it can. So from the chaos of those accidental admissions and rejections, YC is now going to make this same “mistake” on purpose.

The accelerator program is discarding the application for its Startup School program, YC told Recode, effectively turning a selective program into a massive open online course. This is different from YC’s core accelerator program — the well-known training program that has birthed companies like Airbnb and Stripe — which remains selective for now.

But will it always? The new model potentially offers a window into the future of YC — and the entire world of startups. Once considered the crème de la crème of credentials on an aspiring entrepreneur’s résumé, YC has grown bigger and bigger — and in the eyes of its critics, less of a signal in the world of startup noise.

So this move in some ways exemplifies everything its admirers and detractors love or hate about the new YC as it scales: Yes, YC can touch more startups around the world than ever before. But that means even the worst founders can claim the YC branding, which might mean it no longer has the same value.

Here’s how one commenter on HackerNews, an online forum that is a town square in the startup world, memorably put it when YC decided how to handle the situation last year: “Letting everyone in makes it feel like YC is going from ‘Harvard’ to ‘Khan Academy.’ Both are noble endeavors, but completely different brands.”

Here’s the big question for YC: How does it maintain its luster while accomplishing its mission of being a meritocratic way for a founder in Ohio or South Carolina with a world-changing idea — but no connections — to realize their dreams?

“I personally don’t like the fact that we get the elitist, the Harvard tag. That’s nice and that’s good for branding,“ Cheung said. “But that kind of assumes that there’s a small fixed number of founders to fund every year. But I believe there are tens of thousands of good founders to fund.”

Startup School is a relatively new 10-week program run by YC in which founders watch online lectures, submit status reports on their companies, and participate in discussion groups with other entrepreneurs trying to make it. While YC has more work to do to diversify its core, highly selective accelerator program batches, Startup School draws about half of its participants from overseas.

YC thinks the new, bigger startup school program worked — at least if you look at the program’s completion rate. YC says that when 3,000 startups started the program in 2017, half of them completed it. And when 10,500 started the program in 2018, about half of them still completed it. So maybe Silicon Valley success does scale!

But then again, about 4,500 of the 15,000 people dropped out of the program this year before it even began.

“[I] mostly just decided the time and commitment for that particular program, given that I was actually rejected, didn’t feel worthwhile at the time,” said Clyde F. Smith, who never watched a single class.

YC coped with the surprise 10,500 participants by running two programs — assigning a successful startup founder to advise each of the 3,000 startups that it meant to accept, as it normally does, and then requiring the other 7,500 to nominate a leader internally to serve as the sherpa. The latter situation didn’t exactly always work, YC admits.

“Those groups were chaotic. Not a lot of people followed up or stayed engaged,” said Olive Allen, a startup CEO who was accidentally admitted. Her advising group of about a dozen dwindled to three by the end of the program, she said. “Then again, not much can be done to engage all 15,000 people. It’s always on you as an entrepreneur at the end of the day.”

Some of the 3,000 founders who were correctly admitted said their experience seemed pretty normal. But when 12,000 rejects are earning the same credential, that rubs some folks the wrong way.

“Before the snafu, getting invited to the adviser track carried quite a bit of positive weight; it was a boost of confidence that an outside entity with some prestige believed us,” said Sam Mueller, the CEO of a startup called Blink Labs, which was one of the 3,000 chosen startups. “After they announced that everyone would be accepted, the program lost some of its luster.”

Critics say the same thing about YC more generally. YC in the spring of 2018 had 132 startups in its batch, and now has 200 in this winter’s group (so big that the Demo Day competition had to move to a bigger venue). YC says its program isn’t getting any less selective — it’s just receiving more and more applications (a 30 percent increase for this winter over the previous batch). And it points to startups like Brex and Rappi as signs of its recent success.

YC thinks it’s getting a lot more applications for its accelerator program in part because of the quintupling of the size of Startup School. This is all fodder for YC’s critics, but YC sees it as an alright reality as it grows.

“I know that that criticism is out there, and I hear it all the time,” Cheung said, adding later: “I am of the camp that I think we can be much bigger.”