Y Combinator is back to bet on the Bay Area

Y Combinator, the startup accelerator that has launched the likes of Instacart, Stripe and Airbnb, has broadened its investing lens in recent years, backing companies all over Africa and India, and beyond. As the tech downturn has continued, though, Y Combinator has shrunk its cohort size, stepped back from late-stage investing and brought on a new chief executive: entrepreneur and co-founder of Initialized Capital, Garry Tan.

In many ways, it’s a new era — but in some, it’s a return to the accelerator’s former geographic roots.

Y Combinator’s winter 2023 batch has 282 startups — and 86% of the founders lived in San Francisco for the duration of the batch. This compares to 53% of founders based in SF last batch, 30% of founders who moved, and 23% who were already based there.

“Hayes Valley truly became Cerebral Valley this year — San Francisco will continue to play a big role in the future of technology and will continue to bring together some of the smartest minds in the world,” Tan said, kicking off Y Combinator’s newest Demo Day. “The SF Bay Area is still a place for dreamers and doers to try their hand at their own future, and we have so much work to do.” The firm is throwing a summer conference later this June in Palo Alto, and conducted a series of dinners — as well as a kick-off event — across the Bay Area for this cohort. 

Tan declined an interview request by TechCrunch.

The accelerator says it is still remote-friendly — for example, it still only has a virtual demo day — but the return to the Bay Area also means a step back from international investments. Just 21% of publicly announced startups in the winter 2023 batch are based internationally, compared to 42% in the batch prior. While this is the first batch that is launching on Demo Day with Tan at the helm, the accelerator says founders were interviewed months before his first day.

This is the first year in the recent past that YC hasn’t flexed the geographic breakdown of its startups in its blog post. Last batch, India topped the charts as the most represented country within the cohort, home to 21 companies, beyond the United States. This batch, India’s presence has nearly been cut in half, with only 11 publicly announced companies coming from the country. There are only three known startups from Africa in this batch, down 88% from a year ago, and continuing a retreat that began last year.

The Bay Area’s philosophical return as a startup hub has partially been chalked up to its emergence as an artificial intelligence hot spot. Thanks to hacker homes and word of mouth, Hayes Valley has been dubbed by entrepreneurs and investors alike as “Cerebral Valley,” which many see as the convergence of aspiration and opportunity (too much, even).

The accelerator’s return to the Bay Area is likely not disconnected to AI’s boom: A third of the companies in this cohort are building in AI, and a fifth — or 54 total — are specifically building generative AI startups.

Y Combinator isn’t alone in its refocus on Silicon Valley. 500 Global just brought back Demo Day to San Francisco, although its class of startups came from all over the world. Techstars, one of the largest pre-seed investors in the world, just launched a new accelerator in Oakland, California. And earlier this week, Amazon announced a generative AI accelerator, with a demo day culminating in San Francisco.

If you have a juicy tip or lead about startup happenings at Y Combinator, you can reach Natasha Mascarenhas on Twitter @nmasc_ or on Signal at +1 925 271 0912. Anonymity requests will be respected.