Y Combinator and its Suppliers

I’ve settled on calling what I’ve been writing about the “Incubator Industry” since it’s catchy and captures my intent to describe the group of companies that help create other companies. 

Like I mentioned in my last post, Y Combinator is an accelerator, so it grow already existing startups and invests in them.  It gets a lot of attention, but for good reason!  Started in 2005, it was the first company to achieve great success with selecting startups, scaling them up through mentoring and investments, and then profiting when the startup became profitable.  It has helped bring us household names such as AirBnB, DoorDash, Coinbase, Instacart, Dropbox, Twitch, and Reddit, and these are just the most well-known of the thousands of other companies they have helped launch.

Looking at Y Combinator using Porter’s Five Force Analysis, specifically the “bargaining power of suppliers,” yields some interesting conclusions.  “Suppliers” in Y Combinator’s case refers to the people with industry expertise brought in by the company to grow startups and the people who supply the venture capital used. 

Expertise is not something that a lot of people have, same goes for the money needed to invest in a startup that could crash and burn.  So, since only a tiny fraction of the population is capable of supplying Y Combinator’s “product,” Y Combinator’s success is determined by its ability to bring in talented people willing to invest, so they must actively promote themselves as THE place to be doing this.