Y Combinator trumps TechStars in start-up funding stakes

Experts say you shouldn’t compare start-up incubators based on capital raising figures alone, after new data revealed US incubator Y Combinator has funded companies as its rival TechStars.

New data by CrunchBase, revealed on US news site TechCrunch, shows Y Combinator trumps TechStars in almost every way, including the amounts raised by its companies.

The two programs have been operating for roughly the same time – Y Combinator since 2005 and TechStars since 2006.

The data reveals Y Combinator has funded 135 companies to date, while TechStars has funded 72.

“Y Combinator is growing the size of its classes almost every year… [but] quantity does not necessarily reflect in the quality of the portfolios,” TechCrunch contributor Edmar Ferreira writes.

With regard to the total amount of money raised by all its companies, Y Combinator sits at $627 million, compared to $61 million for TechStars.

“Raising a lot of money… [is] a good indication of the health of a start-up in a lot of cases. Y Combinator companies, as a whole, raised ten times more money than TechStars companies.”

“[However,] the ability to raise rounds of funding shows they’re both doing about the same. While Y Combinator has more total rounds raised (231 compared to 131), it also has more start-ups.”

In order to compare the performances of two “average” companies, which go through Y Combinator and TechStars, CrunchBase looked at another metric: the median amount raised by companies in the subsequent round after the acceleration process.

“Half the Y Combinator companies raised more than $800,000 in the next round and half raised less. Half of TechStars [companies] raised more than $500,000, half less.”

“In other words, Y Combinator companies appear to be valued more highly than TechStars by early-stage investors.”

Ferreira says while Y Combinator beat TechStars in many of the metrics used, “none of these translates to which is the best fit for your start-up”.

Mick Liubinskas, co-founder of Australian tech seed fund Pollenizer, says the same can be said of Pollenizer and Startmate, which are often lumped together.

Whereas Startmate is a seed fund for technical founders looking for business advice, Pollenizer is a seed fund for business founders looking for technical know-how.

Liubinskas says Pollenizer takes a particularly hands-on approach by attempting to get the first version of a product to customers within the first four weeks.

“Until the business succeeds or fails, we are in it together. Our level of operational interaction will change… but we do whatever it takes to make it a success,” he says.