Y Combinator founders raising less money signal a ‘vibe shift,’ VC says

Terrence Rohan, an investor with Otherwise Fund who’s been investing in Y Combinator since 2010, says he’s noticing a “vibe shift” from some founders in the current batch of the famed accelerator.

He described how one founder felt about it on X last week: “People used to climb Everest and they needed oxygen. Today, people climb it without oxygen. I want to summit Everest and use as little oxygen (VC) as possible.” 

This founder wasn’t just saying this because of lack of VC interest. The round was oversubscribed, Rohan said, meaning lots of VCs wanted in.

“Smart founder” was the reaction of Alexis Ohanian, the founder of VC firm Seven Seven Six and co-founder of Reddit.

Raising less means founders maintain a larger ownership stake of their companies. By doing that, founders give themselves more ongoing business, and perhaps eventually exit, options, Rohan told TechCrunch. It’s actually becoming more common for YC startups to raise less capital than was offered to them by investors, TechCrunch reported last year.

Less funding, big mistake?

But Parker Conrad, co-founder and CEO of Rippling, the HR tech startup with a $13.4 billion valuation, disagreed that having less capital will help a startup succeed.  

“The way this will play out is a competitor will raise a ton of financing, invest more deeply in R&D, build a better product, and absolutely crush this guy with sales and marketing. You have to play the game on the field,” he wrote on X.

While building a good product with a small engineering team may be possible, Conrad points out that having more funding can accelerate company growth.