#13. Y Combinator in Emerging Markets
The ones who made it, the bigger absents and a source for the Latin American startup ecosystem.
Welcome! Issue #13 of Emerging Markets explorer ðŸ§Â covers stories of startups from Emerging Markets that made it into Y Combinator: the ones who made it, the big absent at the party, and a source for the Latin American startup scene
If you wonder what Emerging Markets explorer ðŸ§Â is, start here.
Y Combinator in Emerging Markets
Y Combinator is a Silicon-Valley-based startup accelerator for startups at seed stage. Founded in 2005, it is one of the most prestigious accelerators in the world.
Y Combinator invests a cash funding of $125,000 in return for a 7% equity stake using a post-money SAFE. They run 2 yearly cohorts, which last for 3 months, offering bi-weekly office hours and weekly talks. Cohorts conclude with Demo Day, where participants pitch for global investors.
Y Combinator has invested in 2821 companies in 16 years of operation, 78% of which are American-based companies, but more than 350 Emerging Market startups took part in their cohorts.
Y Combinator in EM: the participant stats
Asia:
213 Asian startups as of 2021, 131 of which from Southern Asia, mostly Indian.
The first Asian startup in Y Combinator was Anywhere.FM (S07), a Japanese startup for music streaming and sharing, which got acquired in 2008.
In Emerging Market explorer we have profiled Tech In Asia (W15), the Asian startup news site; as well as Sidra Qasim, the founder of Atoms (S15), the Pakistani leather shoe manufacturer.
Biggest participation: W21, with 53 Asian startups.
Latin America:
115 Latin American startups, most of which come from Mexico, Brazil, and Colombia.
The first was Platzi, the edtech from Colombia, participating in W15.
In Emerging Markets explorer there are stories from Rappi (W16), the delivery Unicorn which former workers participated in later cohorts, and Alana (S19), the recruiting software.Â
Biggest participation: W21, with 20 Latin American startups.
Africa:
49 African startups admitted up to 2021, 37 of which are sub-Saharan. Only 3 African participants are inactive.
The first one was the Nigerian marketing agency PetaSales (W09), which shut down years later. It wasn’t until the S15 cohort where African incumbents reappeared.
The most remarkable are Flutterwave (S16), the Nigerian fintech valued at $1BN, and Paystack (W16), a Nigerian fintech that got acquired by Stripe (S09).
Biggest participation: W20, with 12 African startups.
Y Combinator in EM: the stars
Y Combinator has a ranking of their Top Companies by valuation and top exits, including Airbnb (W09), or DoorDash (S13). As of January 2021, there are 10 Emerging Market companies in their Top 100 startups:
From Latin America, #10 in their ranking is Rappi, the Colombian delivery startup. Member of W16, it became the first Colombian Unicorn in 2018 and is currently valued at $3.5BN.Â
From Asia, in the remaining of the top 100, there are 5 Indian companies, including Meesho (S16), Razorpay (W15), and 4 Indonesian companies, including Xendit (S15) and Shipper (W19).
Y Combinator goes remote - and it is a win for EM startups
Most of the Emerging Market startups have participated during the past year. There is an enabling factor: Y Combinator went remote in 2020 as a response to the COVID-19 pandemic, and increased participants number by 50%, admitting 291 participants in W21.
This is a benefit for startups in Emerging Markets: their presence increased x6: from 13 in S18 to 81 in W21. On top of more opportunities, participants from EM quoted the following advantages of remote Y Combinator:
Remaining close to their target market, allowing them to make the sales necessary to impress at Demo Day
Lower expenses of traveling, which means a lot for a nascent startup
Ability to contact Y Combinator partners at any time for counseling
Investors new openness to invest without meeting in person
A remote Y Combinator evened the arena from American startups with the rest of the world and opened the door for more Emerging Market startup incumbents. Will a remote style of business and investing make for a more globally decentralized startup ecosystem?
Failure story: Chinese startups Y Combinator
An easy one would have been failed startups statistic, but I chose not to for 2 reasons:
You learn more from the story than from a number, since the reason they failed might not be industry or country-related
Most of the startups from EM joining Y Combinator have taken part recently, meaning they haven’t had a lot of time to do an exit/shut down.
When researching the Asian startups in Y Combinator, I was surprised by the high number of Indian participants. Good for them, but then I remembered this tweet:
So the question came: where is China?
Well… turns out, from 2005-2018 Chinese startups had been underrepresented: only 10 Chinese companies participated in those cohorts.
Aware of the talent they were missing out on in China, Y Combinator decided to take action: they gave a conference in Beijing in spring 2018 named Startup School Beijing, where they invited star graduates like Airbnb and Stripe; and had the goal to attract more Chinese applicants.
Taking their efforts one step further, they launched Y Combinator China in summer 2018, a local accelerator to serve the local talent and local investors. For this, they hired Qi Lu, a former Baidu exec, to set it up and organize their first cohort in the Beijing Tsinghua University.
The first cohort went well, however, but in August 2019 Y Combinator announced it would shut down its Chinese operations, alleging a change of leadership and strategy. Qi Lu took over and created MiraclePlus, a more Chinese-focused accelerator, and Y Combinator cut ties, while still welcoming Chinese startups to future cohorts.
Source: Startupeable
Startupeable is a Latin American source with educational resources about the Latin American startup scene.
They have created a comprehensive site of content, from a startup glossary to a startup directory, including a blog on startup stories of Latin American startups as well as a podcast. They have also mapped the 115 Latin American startups that have participated in Y Combinator until 2021, including each of them and their offerings.
They are on a mission: democratize the access to knowledge, advice, and capital for Latin American Investors.
They send out a weekly newsletter including the best picks from their site. You can subscribe here.