Past and Future Trends of Startups in Y Combinator’s Data
What does eight years’ worth of anonymized application data tell us about trends in startup technology?

This post was originally published on The Macro and is reprinted with permission. You can read the original here.

Reading applications to Y Combinator is like having access to a crystal ball.

Twice per year — once in the winter and once in the spring — thousands of men and women apply to Y Combinator. Each of these bright minds has his or her own vision of the future of technology. They pitch ideas related to Bitcoin, drones, new drugs, virtual reality, and nearly every other topic you could imagine.

Since 2008, we’ve received tens of thousands of these applications. Collectively, they provide insights into the ideas smart people are working on and how it’s changed over time. We’ve never talked about these publicly before.

But recently, we commissioned Priceonomics (YC W12) and their data studio to analyze eight years’ worth of our anonymized application data. After breaking the applications down into keywords, they calculated the percentage of applicants that mentioned any given term.

So let’s review the data, starting with a simple example.

There’s a question on the Y Combinator application “Who are your competitors? Who are you most afraid of?”. Looking at the answers to this question, we can see what companies founders have on their minds.

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When Twitter was new and rapidly growing in 2010, there were many startups doing Twitter-like apps and tools for Twitter users, who were appropriately concerned that Twitter might compete with them. Very few applications mention Microsoft – Paul Graham has written about why that may be before.

Some startups are now making the top lists of competitors too. Uber and Airbnb are more than halfway to Google by number of mentions.

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Other companies have completely dropped off the grid. Remember MySpace?

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The rest of these graphs are based on the answer to the question “What is your company going to make?”. Let’s look at what this can tell about the platform shift from websites to apps.

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While the trend in this graph is old news, it’s not obvious that it would take until 2016 for apps to overtake websites.

Within mobile devices, the iPad was mentioned specifically very often after it first came out. Now it’s mentioned rarely—probably not because people don’t build apps for iPads anymore, but instead because it’s simply so obvious that you will support iPads that people don’t even mention it. Interest in the Kindle was never very strong.

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In the early days of Y Combinator, founders often pitched free and ad-supported business models. Throughout the startup world, that business model has become less common, replaced with companies charging customers directly. We always suspected this, and you can see it in this graph.

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The term “SaaS” (Software-as-a-Service, aka, people pay for it) has increased in usage by 400% since 2008, while “Advertising” has decreased by more than 60%.

Startups related to blogging used to be very fashionable — many applications suggested tools for bloggers, better blogging sites, or search engines for blogs. This space is no longer popular.

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There are still a lot of ideas aimed at improving or disrupting email, but not as many as there used to be. Messaging is now more popular.

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Buried in the above chart is the exploding popularity of the messaging service, Slack.

Let’s take a closer look at Slack’s ascension by comparing it to the number of applications that mention other popular enterprise terms like “GitHub” and “Docker”:

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Many startups believe that Slack has created an unmatched distribution opportunity. The interest in Slack-related concepts, mostly bots and concierge services, has exploded in the last year.

Next, let’s take a look at how has Bitcoin fared over the years.

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Bitcoin-related ideas were briefly very popular, but fell off rapidly. These days, building things on top of the underlying blockchain is on the rise, and seems set to surpass bitcoin itself.

Hardware and biotech are all increasingly popular. Some of this reflects changes in the mix of startups applying to Y Combinator. Y Combinator originally focused on software companies but in the last few years has expanded to fund companies in every space. The rest of it reflects the overall hardware renaissance, and the surge of interest in biotech now that lab work is so much more accessible to startups.

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Within hardware, smartwatches and other wearables remain popular, though they have plateaued now.

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Other hardware items have not fared as well. Mentions of tablets and e-readers have sharply declined in YC applications in recent years.

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Not surprisingly, VR is hot and getting hotter. We recently tweeted a call for more VR applications and got a great response.

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But the biggest trend in the last couple of batches has been the surge in interest in applying AI to everything. Even these graphs understate the extent to which AI is now playing a role in many companies’ ideas.

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To conclude, we’ve compiled many of the more popular terms mentioned in this post on one table, where you can compare them with one another. This list ranks terms by the percentage of applications that mention them. All companies mentioned have been highlighted in orange for reference.

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Though on the decline, Facebook (4.2%) and Google (4%) are still the most-cited companies in YC applications. Newcomers — particularly Uber (2.6%) and Airbnb (2.1%), and Slack (1.1%) — are rapidly on the rise.

What this table doesn’t show us is which terms are on the rise or declining. So lastly, we’ve broken down the technologies and companies that are losing favor with applicants, as well as those which are ascending the fastest. We limited this list to terms that were mentioned in at least 0.5% of all 2016 applications (and rounded each figure to the nearest tenth of a percent).

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As we touched on, the term Bitcoin has not fared well in YC application mentions over the past year — to the tune of a 61% decline in mentions. Also of note, Bluetooth, Crowdfunding, and Websites are in similar decline.

Of every term we included in this article, one stood far above the rest in terms of popularity: Slack. Over the past year, the company has experienced an 850% increase in YC application mentions.

 

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