YC Graveyard: 821 inactive Y Combinator startups
213 comments
·January 26, 2025jll29
AbstractH24
Worse than becoming lifestyle company is becoming a zombie startup.
Zombie is when founders get rid of almost everyone except what they need to give the impression of effort, do little work, but draw an income and slowly spend down the money they raised until it’s gone.
I was one of the very few survivors at a startup that turned into a zombie in 2020 (went from 100+ employees to 10 in a matter of weeks).
In some ways it was a cushy job and a privilege, just wish I realized the founders didn’t truly care about success. Cause then I could have shared the mindset and better prepared myself and my skills for life after.
pavlov
IMO that’s not a zombie because it has an expiration date (when the money raised runs out).
A proper zombie is a lifestyle company without the lifestyle — enough revenue to maintain an eternal startup crunch and trying to make a product work, but without the resources to actually grow. Doesn’t die, doesn’t quite live.
AbstractH24
I’m honestly not sure what it is.
Hindsight is 20\20, the company probably would have been better off thawing itself until lockdown ended then going right back to what it was doing (that’s what their main competitor did, and while rumors of the demise always abound, externally they’ve grown and raised more rounds).
One of the founders is a niche big-shot in the VC world. I assume eventually they’ll be acquired for an undisclosed amount of $0. It’s been a year since I left and until this post I’ve been shocked it’s yet to happen. Now I wonder if they are waiting until they payed out all the money they raised as salary to play that card because otherwise they need to give it up.
vasco
Nothing stops them from selling you back their share at close to zero if they really want to right it off.
paulsutter
That does happen, but not for taxes. They do it to close out the fund which has (usually) a ten year life.
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immibis
They might have to prove to the IRS the share was actually worth that. Whereas if the business is bankrupt, it's obvious.
orionsbelt
No - that’s true if you are trying to determine if you can write it off, but if you actually sell it back for $1, you can take the loss.
bliteben
how many vc investors are in the class of people that get audited by the IRS?
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persnicker
"Investors' worst nightmare" seems very off. Most SAFE notes give you dividends that are on par with how corporations issue dividends. Assuming there is cash flow, you should be getting dividends.
If the dividends are so low that you will never be reasonably paid back you can often negotiate to get out in some form. Very low cash flow only with no growth seems to be the only exception...which I'd guess would only exist if something such as high revenue or some unique IP existed to make the equity very valuable and therefore the company worth running.
With a convertible note as opposed to a SAFE, you either need to extend the maturity date or get paid back your note with interest.
Both SAFEs and convertible notes seems to have a path to exit in some reasonable form.
The only time I've seen "nightmare" situations occur is when the investor themselves makes it a nightmare i.e. https://www.cnbc.com/2025/01/07/tech-investor-denis-grosz-or...
...and that's a nightmare for the company, not the investor.
slashdev
If there’s enough money to pay the founders salaries, but not so much for dividends, this doesn’t help.
There are two direct ways to return money to the founders - salaries and dividends. In the U.S. there is a tax advantage to dividends, over an amount anyway. This is not true of all countries.
persnicker
Neat edge case! Perhaps SAFE notes or other dividend-paying instruments should account for this by capping executive salaries or trigger dividend payouts at a certain salary dollar amount. Though, admittedly, I've never heard of a founder or executive using their salary instead of taking dividends as an end run around paying everyone their fair share of dividends. It seems possible though.
rvba
> Very low cash flow only with no growth seems to be the only exception..
That's not an exception. That's the norm. Most start-ups fail.
They literally burn down the investors' money and that's it.
jbverschoor
That’s not what a lifestyle business is. Unless your lifestyle is eating ramen
smallerfish
Sure it is. If your business nets 3 million a year, it takes 5 people to run it, and your customer base is steady, that's lifestyle. Sucks for investors, pretty nice for you if you can keep it running.
idlewords
In other sectors that's just called a "small business" and celebrated as the fullest expression of the American dream. I've always found it funny that tech treats the idea of a going concern with such distaste.
Lerc
I thought that was called sustainable.
tptacek
Any startup investment that doesn't return, I don't know, like 5-10x "sucks" in the sense that it's not making the portfolio successful, but that's most investments in the portfolio. Beyond that: what sucks about this outcome? If your business has just 5 employees, chances are your investor doesn't have a board seat; it's not costing them much, they can just hang around on the off chance that you turn the knobs right and find a breakout success down the line.
It's true that investors aren't going to invest in your startup if you tell them that your likely outcome is a healthy, stable 3MM/year. And it would be unethical to tell an investor you were swinging for the fences when your true intention was to bank the money and bunt. But if you really do take a big swing, and end up settling in a comfortable spot, how pissed do you think investors are really? You swung, you missed, that's life in the National Football League.
anovikov
But in a case like that eventually (once the business has become "sustainable") we will be speaking of 1.5 founders (some full-time founder and some guy who just holds some stock because they started together/knows some know-how) and 3.5 Indians/Ukrainians at $40 an hour. With like 60% of cash going to the main guy, domicile in some tax haven and probably that principal founder living in some tax haven, too, pocketing some 1.5M a year after all (minuscule) taxes. Good lifestyle!
YetAnotherNick
3 million a year for 5 person is something like 400k/person after corporate tax. Which is pretty high and low at the same time(unless it is just freelancing). High in the sense that there would be competition and the other company will have more budget to reduce the price and make the entire segment unprofitable till you die. Low in the sense that you would likely make the same or higher in corporate if you are that skilled to net 3 million/year.
that_guy_iain
Enough money to keep going doesn't mean just enough money to cover the costs. It means being able to continue paying yourself and all your employees their salaries, meet costs and make a small minimum profit.
normie3000
Aren't salaries considered to be part of the costs?
CPLX
You have to add “and return initial capital” to that list. That’s usually what’s at issue here.
sebmellen
I personally know the founders of three YC startups that are functionally dead (raised capital, not developing anything, basically laid off everyone but the founder(s)) but are not on this list. I'd bet it's at least twice that number.
chipotle_coyote
I can think of at least one YC startup -- one that was relatively high-profile, for a hot minute, at least in the developer space -- that just shut down, period, that doesn't seem to be on the list, because I worked there. One extra irony point for its absence: it was basically across the street from Y Combinator's office in Mountain View at the time. :)
satvikpendem
I'm curious, what do ex-founders generally do after their startup is dead? For me I just got a job after my first few ones died, until I was able to succeed at my current ones, but I'm sure many might just continue working a job indefinitely.
sebmellen
I know some (YC and others) who float around doing nothing on $200k a year in salary because no investor cares enough, or has the legal right, to get their money back. Not sure what their long-term game plan is.
The others end up at another Series B+ startup or go to a MANGA company if they can grind leetcode for a bit and get an interview.
tinco
They pay themselves 200k/y in a pre-market fit startup? That's insane and I guess on the investors for going over the traditional preseed amounts.
Or do you mean that they're zombie startups that make enough to pay the founder 200k/year?
chrisjj
> some (YC and others) who float around doing nothing on $200k a year in salary
So, not "functionally dead" then. ;)
noduerme
I don't think a lot of founders actually write code, but I did, I just realized my startup was probably going to be illegal soon and also that it wasn't going to get the funding it needed. I just kept writing code for whoever wanted to pay. It's fairly lucrative.
Looking back, maybe I should have just done the illegal thing and gotten pardoned.
netsharc
Gotta love the jumping on the criminality bandwagon... Louis Brandeis says hello.
kiney
now I'm curious about the illegal thing
chasely
I know a similar number but they were "acquihired" to essentially return money to investors and get the founders promotions at their former companies. So an exit on paper even if it's not necessarily so in practice.
choppaface
Need to also consider the ones that had a qualified exit event and then the product got axed (e.g. aquihire or just customer acquisition). It’s a very different graveyard but in many cases has similar impact on the non-Founders (especially the IC SWEs).
zenyc
I love seeing the 'YC Graveyard' project. It’s a great reminder of the incredible ideas and effort behind each startup, even if things didn’t pan out. We’ve been working on giving some of these inactive startups a second chance by acquiring them and exploring ways to repurpose or revive their tech.
If anyone’s been involved with an inactive YC project and wants to chat about what’s possible, I’d love to connect.
ungreased0675
I’d love to read more about this.
Looking through the list, my reaction to some was “of course that OpenAI wrapper failed” but others sounded compelling. It’s logical that some of those failed companies have a viable product but failed for other reasons. Maybe combining the IP of similar companies could breed a winner. It’s an interesting concept and I’m curious if it works.
zoogeny
Sometimes the right idea is tried at the wrong time. It is a decent idea to at least keep an eye on these.
iceman_w
I've also been tracking the 'path to graveyard' for the startups from the last 3 years here https://pivots.fyi/
ExxKA
It was interesting to dig through and consider if it was the idea, the timing or the execution that lead to the failure.
moontear
And all inventory of the defunct startups goes here: https://svdisposition.com/auctions
robocat
I'm onehundertpercent pissed off with YC:
* The modal win for a founder is $0.00
* PG makes big talk about winner's average returns... Yayyyyy..... However YC gets preferential shares; YC is not aligned with the common shareholders (founders; builders). YC builds a story that they support creators however YC doesn't sit on the same table-side as creators.
* I actually believe YC is worthwhile, but I wonder if Ize just been brainwashed?
(reëdited for clarity)
morgante
> However YC gets preferential shares; YC is not aligned with the common shareholders (founders; builders).
YC invests on a SAFE, the terms are public.[0]
For most companies, pre-seed SAFEs don't end up much above common.
jasode
>However YC gets preferential shares;
It's not that YC specifically gets "preferred shares" -- it's that investors in general insist on liquidation preferences when buying non-liquid shares in unproven private companies.
How would an alternative scenario of investors buying common shares of illiquid stock in a private company actually be realistic? Maybe the startup founders could hypothetically insist on selling only common shares and never preferred shares as a condition of investment?!? But what investors (other than family relatives) would put in money in that case?
Or put another way, let's say we create a brand new VC fund to invest in startups and one of the novel concepts is that the fund only buys common shares to be more "founder friendly". The problem is that hypothetical VC fund will attract no rational limited partners with money because they know that startup founders can just take their invested dollars with no payback protection. Such a VC fund with no investors and no money to invest would be a moot point. The general partner of such a VC fund would be considered a "financial idiot" for buying common shares in startups.
In the end, the "preferred shares" is the market's "risk premium" that investors charge as an offsetting factor for losing 100% of their money. If startup founders can't find a way to convince investors to accept illiquid common stock instead of preferred shares, they need to avoid investors altogether and self-fund via bootstrapping.
AbstractH24
Why is the risk being taken by investors greater than the one being taken by employees and founders?
If anything, employees are taking a greater risk because you can replace money far more easily than years of your life.
epistasis
One is risking money, one time, and the money is what could possibly get paid back.
If you can find money that doesn't insist on preferred liquidation, good on you. But those with the money tend to have a lot of say on giving it away.
nradov
The level of risk is irrelevant. What matters in access to capital is negotiating power. This isn't a charity. If employees want lower risk then they can go work somewhere else.
derangedHorse
He didn’t claim YC does this where others don’t, his gripe is with the narrative YC pushes and how they seem incongruent to how they currently operate.
dustingetz
preferred shares prevent cookie cutter founder fraud. Founder raises $1M at 10 post. Founder decides to sell 6 months later for 2 mil. Investors get 200k back founder gets 1.8 mil. Now run this math for AI unicorns.
ultrasaurus
Or to make it even more obvious: Founder raises $1MM then immediately sells the company for $900k :)
Some terms are going to need to exist to prevent that, so the investor shares will always be preferred. Beyond that there are in fact a lot of other terms that are in some deals but not others (2x preference, pro rata, etc..)
AbstractH24
This is a valid concern. But shifting risk entirely to those without preferential shares (typically employees) is also unfair.
pockmarked19
> The problem is that hypothetical VC fund will attract no rational limited partners with money because they know that startup founders can just take their invested dollars with no payback protection.
YC famously claims it is not a VC fund because it invests their own money, they wouldn’t have this problem.
jasode
>YC famously claims it is not a VC fund because it invests their own money,
Th label "VC fund" can be imprecise because YC itself has changed its structure over the years.
The original 2005 YCombinator where Paul Graham & Friends used some of their personal Yahoo wealth from selling ViaWeb ... instead of raising outside money from "limited partners" ... was the period when they were more like "angel investors".
Today, YC is more institutionalized and has different funds that raise money from outside investors as limited partners -- very much like traditional VC funds. (https://www.google.com/search?q=YC+new+funds+raise+billions)
But YC still doesn't do all the typical "vc fund" procedures such as take a board seat or negotiate a different % with each startup founder on a case-by-case basis. The VC funds like Sequoia/a16z/etc will require a board seat and negotiate different ownership percentages.
So today's YC is a "semi" VC fund depending which aspects are salient to you.
dmbche
Check the Principal-Agent problem in game theory, that's what's going on
aswegs8
Welcome to capitalism. Of course there is an asymmetry between individual founders and one of the, if not the most famous VC firm on the planet. It's an individual decision to determine whether YC is worthwhile. If it wouldn't be, it wouldn't work.
AbstractH24
Is it still? Or was that true 10 years ago.
Not sure if I’ve changed or the landscape has.
rchaud
Silicon Valley is not capitalism, it's financier-ism. It isn't about finding a gap in the market and providing a profitable service, but bandwagoning behind the latest trends so as to chase "scalability" and later using financial/political muscle to weaken regulations so as to better "disrupt" the market. Profits? That's a problem for whoever they manage to dump their shares on.
saulpw
What do you think capitalism is, if not that? "Those with capital use their money to make the rules so they make more money."
Many people think capitalism is simply a market economy. It's not. You can have a market economy without "capital" (investors) having special privileges that make all the money flow to them.
rvz
The quality bar for YC has been at an all time low. Hence why lots of “startups” are getting accepted into YC in 2024 screaming about AI and some that compete against each other over the same idea, but “open source”.
> I actually believe YC is worthwhile, but I wonder if Ize just been brainwashed?
Ask yourself, if you really need VC money in the first place.
The moment you go to YC, they become your new boss and always win and you get to laugh at all of us HNers in this secret club called bookface [0]. (Yes, that hidden version of HN and part of YC)
Very unlikely to change anytime soon, but the SVB collapse should have taught us something.
nradov
The quality bar of pretty much all seed stage investors has always been extremely low. That is simply the nature of the business. At that stage the signal-to-noise ratio is very low. There just isn't enough data to make reliable determinations, hence the emphasis on quantity of deals over quality.
There is nothing to learn from the SVB collapse. They mismanaged interest rate risk and overextended. So what.
rvz
> The quality bar of pretty much all seed stage investors has always been extremely low. That is simply the nature of the business.
Of course it is. That is why I said the quality bar it is at an "all time low".
> There is nothing to learn from the SVB collapse. They mismanaged interest rate risk and overextended. So what.
Ah yes, why not tell those same so-called "AI startups" to repeat that same mistakes again in 2023 and also continue to burn lots of that money and we'll see yet again widespread massive panic, downrounds on this site like we did before.
The startups that got complacent over believing that VCs will just throw money into their startup forever (until they don't) are the ones that will be added into that inactive directory unfortunately.
So as soon as this AI bubble collapses with a new surprise catalyst, I won't be surprised to see YC directly caught in the contagion because they threw themselves into hundreds of low-quality startups, unable to make money and they are cloned and raced to zero.
riffraff
Since you probably already have this information, it would be interesting to have the "death date", with a link to the announcement or however you gathered the information.
vector_spaces
There's not really such a thing as a concrete "date of death" in many cases, and very rarely will there be a public one -- I'm familiar with a few names on this list that never actually made a formal public announcement and kept the website running for months to well over a year after everyone was laid off
The methodology of the aggregator might have been as simple as "ping every YC company's listed website, check the response" with some light hand curation, which suggests that the number presented is just a lower bound on the number of dead YC startups
n2d4
The methodology is just this list filtered for companies tagged "Inactive": https://www.ycombinator.com/companies
SALCKIN
Reply
cushychicken
Scrolling through this quickly, I notice that I have not heard of a single one of these companies.
I’m not sure I can assign any meaning to that. Just my immediate observation.
zdenham
Damn my dead YC startup didn’t even make it into the graveyard
ttoinou
Where does the money go ? Especially for startups dead 6 months after investing
bodegajed
To other YC companies via premium subscriptions
toomuchtodo
All about capital recycling and consolidation within the ecosystem.
jjcob
Salaries and rent, probably.
threeseed
YC and an average Seed round only gives you enough money for a small team for 18 months.
Anyone who is half-decent is going to be expensive.
bodegajed
Is it common for landlords to invest in YC companies?
LightBug1
Hookers and blow.
DonHopkins
1980 called and said they're now selling OnlyFans subscriptions and ketamine.
ipsum2
Many founders realize its not for them, and return the remaining money.
There are not just startups that become unicorns and startups that fold.
Investors' worst nightmare is if you just make enough money to keep going, but you don't grow ("lifestyle business" as they use it is a derogatory term).
That's because they prefer a sudden death where they can write down the investment and deduct their loss from taxes than an investment where they never see any money again.
And then there are "acquisitions" that are really "acui-hires" dressed up as acquisitions to get the people (more common) or to buy an asset in a limited shell package (less common) after things did/may have (but people were to tempted to take the offer) or did not pan/panned out. Some people consider anything <$50m as a "failure", because that's roughly the sum that many corporations can spend without calling the bigshots for a board meeting to decide.