YC Graveyard: 821 inactive Y Combinator startups

Original Article ↗ Hacker News Discussion ↗

Perceived usefulness vs startup success

  • Commenters note that “sounding useful” doesn’t predict success; many “obviously useful” products fail.
  • Stripe and Airbnb are used as examples: both entered markets that already had solutions (payments, accommodation) and didn’t sound obviously huge to many early observers.
  • Airbnb’s eventual success is tied to later emergence of commercial/“unlicensed hotel” hosts, which founders likely didn’t fully foresee.
  • Some argue that products that don’t sound useful may face less competition and become winner‑take‑all if a new market appears.

YC failure rate, “inactive” definition, and zombies

  • Using ~4,000 YC startups and 821 marked “inactive” on YC’s own site gives ~20%, but many think this understates failures.
  • Reasons: companies rarely announce shutdowns; some are zombies (small, long‑running, not growing); recent cohorts haven’t had time to fail.
  • Acquihires and low‑value exits often look like wins but can still be financial losses for YC.
  • Methodology of the graveyard: filter YC’s company list by “Inactive,” so it’s a lower bound and misses some known dead startups.
  • Several users point out errors: active or acquired companies misclassified; some failed ones missing.

Founder outcomes and founder pay

  • Post‑failure paths include: regular jobs, joining later‑stage startups, big tech roles, or continuing as high‑paid founders of “zombie” companies.
  • Debate over founders paying themselves $200k+ at pre‑product‑market‑fit startups:
    • Some see it as irresponsible or misaligned with “ramen profitability” ideals.
    • Others argue high cost of living, debt, and health care justify it; investors accept these terms in competitive markets.

YC, incentives, and capital structure

  • Some see YC as the best of a generally weak incubator landscape, with strong brand and founder funnel.
  • Others criticize a shift toward hype, AI‑heavy, SF‑centric, young‑founder cohorts and a more predatory, self‑interested stance.
  • Discussion centers on SAFEs, preferred shares, liquidation preferences:
    • Investors seek downside protection; employees and common shareholders often bear more risk.
    • Tension between YC’s “founder‑friendly” narrative and standard investor protections is highlighted.

Lifestyle businesses, zombies, and investor preferences

  • Distinction made between:
    • Lifestyle/small businesses that earn healthy, steady profits but don’t scale.
    • Zombies that barely sustain founders and staff, can’t grow, and slowly burn remaining capital.
  • VCs prefer big wins or clear failures they can write off; steady but modest outcomes can trap capital for years.
  • Some argue traditional “small business” success is undervalued in tech culture despite being a rational goal for founders.