The accelerator that hit the brakes: Why are Y Combinator's India startup picks shrinking
Of the 213 India-linked startups backed since YC’s first local cohort in summer 2012, only about 20 have gone on to raise a Series A funding or beyond. So far this year, the accelerator has not disclosed any new India selections yet.
Bengaluru: Once a prized springboard for Indian founders, Y Combinator (YC) is facing headwinds in the country. The San Francisco-based startup accelerator has seen its India cohorts shrink by over 70% in recent cycles, weighed down by limited success in Series A funding, regulatory hurdles from foreign holding structures that complicate local fundraising and exits, and a string of startup shutdowns.
Numbers from data intelligence platform Tracxn show that of 213 India-linked startups backed since YC’s first cohort in the country in the summer of 2012, only about 20 have gone on to raise a Series A—the first round of funding after the seed stage—or beyond. Another 20-odd firms have either shut down or are remain inactive, indicating operations have ceased or revenues have paused.
Funding roadblocks
In July, YC-backed artificial intelligence (AI) services startup CodeParrot shut down, citing cash burn and limited investor interest for follow-on funding rounds. Earlier, vehicle rental platform Drivezy closed in 2021 and was sold to Yamaha Motor Co. after it failed to raise fresh capital.
YC’s own directory currently lists several India-linked companies—including Toolify, Kisan Network, Fello, Wuri and DocTalk, GoDutch—as inactive, suggesting they are not operational or generating revenue.
Y Combinator does not have a dedicated India team. There was no response to Mint's emailed queries to the accelerator's communications team till press time.
Y Combinator selected only four India-linked startups in 2024, down sharply from a high of 65 in 2021 and 43 in 2022—years that coincided with heightened venture capital flows into early-stage deals. In 2025, the accelerator has not disclosed any new India selections on its directory yet.
Investors and other accelerator operators, including All In Capital, Cornerstone Ventures and IIMA Ventures, that Mint spoke with attribute YC's shrinking Indian startup list to multiple factors. Many point to its long-standing preference for foreign holding structures that complicate domestic follow-on rounds and eventual flipping of the domicile back to India.
Others cite easier access to early capital in India and accelerator programmes that offer faster decisions and founder-friendly terms, often at higher valuations than YC’s standard entry economics, reducing the accelerator’s relative advantage for Indian founders.
Terms lose appeal
Devendra Agrawal, founder of Dexter Capital Advisors said YC’s standard 7% dilution for an equity funding of $125,000 is viewed as “punitive" now, since he characterizes this as a very low implied valuation.
“These deal terms were acceptable a decade ago but not today. Apart from this, YC’s own follow-on funding comes only after founders are able to secure another large investor in its future rounds…Technically, they (YC) are not underwriting their own company, they typically take that risk only when another investor is involved," added Agrawal.
Abhishek Prasad, managing partner of Cornerstone Ventures said YC’s offering of a seed stage valuation of $1-2 million is not attractive to Indian founders any longer. He believes that competing India-based programmes offer better valuations, lower dilution, and ability to be domiciled in India, making them more appealing for founders focused on India.
As pointed out earlier, raising money from YC requires Indian founders to register the startup in places like Delaware, creating several complications. According to Prasad, when the same founders try to raise funds in India through a complicated ownership setup, the deal structure gets skewed.
“A lot of the Indian funds that are registered with the Startup India initiative require startups to have a registered entity in India without subsidiaries… So, that becomes a challenge for alternative investment funds such as VCs and other funds," added Prasad of Cornerstone.
Apart from this, YC’s historic edge—alumni community, US investor access, instant branding—has been somewhat blunted by Indian alternatives like local founder networks, active angel syndicates, and scout programmes operated by VC funds.
Local rivals rise
Investors say that the practical benefits YC once offered to Indian founders are now available domestically without restrictive terms of mandatory registration in the US.
“India now has 100-plus micro VC funds ready to cut smaller cheque sizes at more attractive terms compared to YC. Apart from this, nearly every VC fund in India has launched a YC competitor… Sequoia has launched Surge, Accel has launched Accel Atom, and Kalaari Capital has K-Start, which all compete with YC in India," added Agrawal of Dexter Capital.
As pointed out earlier, YC’s Series A progression in India has been weak by historical standards, and several investors say that too has likely fed into the decision to scale down India cohorts.
With YC-backed India startups seeing only about 20 Series A outcomes out of 213, the conversion rate is near 9%. Agrawal of Dexter Capital said top-tier early-stage strategies target far higher, at around 50% progression on comparable deal counts. Prasad of Cornerstone added that 9% is low for a platform of YC’s scale in India, citing 30% as a reasonable cross-portfolio benchmark.
“A 9-10% conversion to Series A is low. I would have expected at least 25% to average Series A for anyone backing early-stage startups, which means that YC conversations rate to Series A is not that great in India," said Kushal Bhagia, founding partner, All In Capital.
Despite the low Series A conversion, YC’s India portfolio counts four unicorns—Razorpay, Zepto, Meesho and Groww. All four have outlined plans to list in India.
“YC’s India portfolio lacks large realized IPO exits yet, but the upcoming listings (Meesho, Groww, Razorpay) could validate returns. YC could still cover a lot of losses if these listings do well," added Bhagia.
A co-founder of a YC-backed startup that shut shop a few years ago said the accelerator’s recent tilt toward AI services—targeting both consumer and enterprise use cases—has reduced its engagement with India-focused opportunities.
“Earlier, hype cycles saw YC fund India-first plays in food delivery and lending. With AI services, you’re up against global competition from day one... and it isn’t like food or grocery delivery or lending that can be built primarily for India. If you’re building AI in India, you’re competing worldwide," the founder said.
Reset moment
The founder added that a spike in startup shutdowns and layoffs, apart from fewer growth-stage deals, likely also influenced YC’s decision to cut batch sizes for India.
Over 28,000 startups shut shop in the past two years, 15,921 in 2023 and 12,717 in 2024, according to data published by Tracxn. That’s a more than 12-fold jump from the 2,300 shutdowns seen during 2019–2022.
The accelerator has had its own share of problems as well. In early 2023, it had said it will shut down its late-stage Continuity Fund and lay off staff as part of a refocus on core early-stage funding, following a broader reset in growth investing. The Continuity Fund had participated in follow‑on rounds for India standouts such as Groww and Razorpay.
Y Combinator was founded in 2005 by Paul Graham, Jessica Livingston, Robert Tappan Morris and Trevor Blackwell, and has backed global breakouts such as Airbnb, Stripe, Coinbase, Dropbox, DoorDash, Reddit, Instacart and Twitch.
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