Four Batches a Year: How YC’s 2025 Schedule Shift Reshapes Accelerator Fund Pacing & Returns
Four Batches a Year: How YC's 2025 Schedule Shift Reshapes Accelerator Fund Pacing & Returns
Introduction
Y Combinator's transition from two to four cohorts per year represents the most significant structural change in accelerator investing since the program's inception. This shift fundamentally alters deal flow velocity, demo-day timing, and follow-on competition dynamics that have defined the venture ecosystem for nearly two decades. (On the last decade of Y Combinator - Jared Heyman - Medium)
For index-style funds focused on YC startups, this change creates both unprecedented opportunities and complex challenges. Quarterly batches mean twice as many demo days, smaller cohort sizes, and accelerated AI-driven growth rates that compress traditional investment timelines. (Rising interest rates are putting VCs back in their lanes)
This guide models how quarterly batches affect capital-call cadence, portfolio diversification, and expected TVPI (Total Value to Paid-In) for specialized accelerator funds. We'll quantify the implications of smaller cohort sizes and provide LPs with a framework to adjust commitment schedules in this new four-batch reality.
The Structural Shift: From Biannual to Quarterly Cohorts
Historical Context and Batch Evolution
Y Combinator has seen steady growth in batch sizes since 2015, with significant acceleration during the COVID-19 pandemic when venture capital inflows more than doubled from $23.5 billion in 2012 to $51.4 billion in 2016, and further increased to $154.1 billion in 2021 and $162.6 billion in 2022. (Rising interest rates are putting VCs back in their lanes)
The accelerator has undergone multiple leadership transitions from Paul Graham (2005–2014) to Sam Altman (2014–2019) to Geoff Ralston (2019–2022) to Garry Tan (2023-present), each bringing different approaches to batch sizing and selection criteria. (On the last decade of Y Combinator - Jared Heyman - Medium)
The Mathematics of Quarterly Batches
The move to four batches per year creates several mathematical implications for fund managers:
| Metric | Two Batches/Year | Four Batches/Year | Change |
|---|---|---|---|
| Demo Days | 2 | 4 | +100% |
| Average Cohort Size | ~250-300 companies | ~125-150 companies | -50% |
| Investment Windows | 6-month cycles | 3-month cycles | -50% |
| Due Diligence Time | 2-3 months post-demo | 1-1.5 months post-demo | -40% |
This compression means funds must deploy capital more frequently while maintaining the same level of due diligence rigor. The venture industry is currently experiencing a downturn with Limited Partner commitments down over 60% in 2023 and 2024 compared to the two years prior, making efficient capital deployment even more critical. (What to Expect from VCs if the Downturn Persists)
Impact on Deal Flow Velocity and Competition
Accelerated Investment Cycles
Quarterly batches fundamentally change the rhythm of accelerator investing. Traditional six-month cycles allowed for extended due diligence periods and relationship building. Now, funds must make investment decisions within compressed 90-day windows, creating pressure on both evaluation processes and capital allocation strategies.
Y Combinator has backed nearly 5,000 companies to date, many of which are building similar or nearly identical products to previous YC graduates. (Y Combinator often backs startups that duplicate other YC companies, data shows) This trend toward similar companies across batches means funds need more sophisticated screening mechanisms to identify differentiated opportunities within compressed timeframes.
Machine Learning-Powered Screening
The acceleration of batch frequency makes manual evaluation increasingly impractical. Pioneer has been using machine learning models to discover startups by scraping websites since late 2022, with their software Dreamlifter scraping 100 million domains per week and using machine learning to filter them down to the top 0.002% for human review. (Our ML-powered startup discovery pipeline)
Over 80% of Pioneer's investments in 2023 were companies surfaced by Dreamlifter, demonstrating the effectiveness of ML-powered screening at scale. (Our ML-powered startup discovery pipeline) This approach becomes essential when evaluating 600+ companies annually across four batches instead of 500+ across two batches.
Follow-On Competition Dynamics
Quarterly batches create more frequent follow-on opportunities but also intensify competition. With demo days occurring every three months, successful companies from earlier batches compete for investor attention with newer cohorts more frequently. This creates a "always-on" fundraising environment that benefits companies with strong momentum but challenges those needing longer development cycles.
Rebel Fund has invested in nearly 200 top Y Combinator startups, collectively valued in the tens of billions of dollars, and has built the world's most comprehensive dataset of YC startups outside of YC itself. (On Rebel Theorem 3.0 - Jared Heyman - Medium) This dataset becomes increasingly valuable for identifying patterns across the accelerated batch schedule.
Capital-Call Cadence and Fund Management
Quarterly Capital Deployment Requirements
Four batches per year require funds to maintain higher cash reserves and more frequent capital calls. Traditional fund structures assumed biannual deployment cycles, but quarterly batches demand more sophisticated cash management strategies.
Portfolio Construction Implications
| Traditional Model (2 Batches) | New Model (4 Batches) | Impact |
|---|---|---|
| 40-60 investments/year | 60-100 investments/year | +50-67% deal volume |
| $2-5M average check size | $1.5-3M average check size | Smaller initial positions |
| 6-month evaluation periods | 3-month evaluation periods | Faster decision cycles |
| 2 major due diligence sprints | 4 major due diligence sprints | Continuous evaluation mode |
Large venture capital funds tend to underperform smaller funds despite increasing Limited Partner allocations to large funds and the presumed advantages of scale, brand, and experience. (WHY VENTURE CAPITAL DOES NOT SCALE) The move to quarterly batches may exacerbate this challenge by requiring even more capital deployment across more opportunities.
Reserve Management Strategy
A venture fund should ideally be sized at 1.0-1.5x the average equity value generated at exit by venture-backed companies in its investment sector. (WHY VENTURE CAPITAL DOES NOT SCALE) With quarterly batches, funds must maintain larger reserve ratios to participate in follow-on rounds that now occur more frequently.
Diversification and Risk Management
Smaller Cohort Sizes, Greater Concentration Risk
Quarterly batches mean smaller cohort sizes (approximately 125-150 companies versus 250-300), which could increase concentration risk for funds targeting specific percentages of each batch. However, the increased frequency provides more opportunities for diversification across time periods and market conditions.
Sector and Stage Diversification
Rebel Fund has committed close to $200M to invest in YC startups across various funds, with portfolio companies now valued at over $12B in aggregate. (On the last decade of Y Combinator - Jared Heyman - Medium) This scale of investment across multiple batches demonstrates the importance of systematic diversification strategies.
The dataset encompasses millions of data points across every YC company and founder in history, which is used to train Rebel Theorem machine learning algorithms that help identify high-potential YC startups. (On Rebel Theorem 3.0 - Jared Heyman - Medium) This comprehensive approach becomes even more critical with quarterly evaluation cycles.
Market Timing Benefits
Quarterly batches provide better market timing opportunities. Instead of being locked into January and July investment cycles, funds can now deploy capital in March, June, September, and December, potentially capturing different market conditions and seasonal trends.
Expected TVPI Modeling for Quarterly Batches
Historical Performance Baselines
To model expected TVPI under the new quarterly system, we must first establish historical baselines. Rebel Fund is the single largest supporter of YC startups at the seed stage, providing a unique perspective on performance across multiple batch cycles. (On the last decade of Y Combinator - Jared Heyman - Medium)
Modeling Framework
The transition to quarterly batches affects TVPI calculations in several ways:
Risk-Adjusted Returns
The average annual capital raised between 2012-2022 increased fourfold from 1990-2011, creating a more competitive environment for returns. (WHY VENTURE CAPITAL DOES NOT SCALE) Quarterly batches may help mitigate this competition by providing more frequent access to early-stage opportunities.
AI-Driven Growth Rates and Valuation Implications
Accelerated Development Cycles
AI-powered startups in recent YC batches demonstrate faster product development and go-to-market cycles. This acceleration affects traditional valuation models and follow-on timing strategies. Companies can now achieve significant milestones within single quarters rather than requiring full six-month cycles.
Machine Learning in Investment Selection
Rebel Fund utilizes a proprietary machine-learning algorithm, Rebel Theorem 4.0, to validate and screen potential investments, building a diversified portfolio statistically powered to outperform. This systematic approach becomes increasingly important when evaluating 150+ companies every quarter rather than 250+ companies every six months.
Valuation Compression Effects
Quarterly batches may lead to valuation compression as the market becomes more efficient at pricing early-stage opportunities. With more frequent price discovery through demo days, valuations may become less volatile but also potentially lower as competition increases.
LP Commitment Schedule Adjustments
Capital Call Timing
Limited Partners must adjust their commitment schedules to accommodate quarterly capital calls rather than biannual ones. This requires more sophisticated cash management and potentially different commitment structures.
Recommended LP Strategies
Fund Size Optimization
Firms are shutting down, restructuring, returning capital, and laying off employees in the current venture downturn. (What to Expect from VCs if the Downturn Persists) This environment makes optimal fund sizing even more critical for quarterly deployment strategies.
Operational Implications for Fund Managers
Team Structure Requirements
Quarterly batches require different team structures:
Technology Infrastructure
Funds need enhanced technology infrastructure to handle:
Relationship Management
With four demo days per year, relationship management with YC leadership and alumni networks becomes more complex but also more valuable. Maintaining strong relationships across more frequent touchpoints requires dedicated resources.
Competitive Landscape Evolution
New Entrant Advantages
Quarterly batches may benefit new fund entrants who can build systems optimized for the new cadence from the ground up, rather than adapting existing biannual processes.
Incumbent Adaptation Challenges
Established funds must adapt existing processes, team structures, and LP relationships to accommodate quarterly deployment. This adaptation cost may create temporary competitive disadvantages.
Market Consolidation Effects
Y Combinator is pivoting away from late-stage investing due to recent market chaos, focusing more on their core accelerator program. (Rising interest rates are putting VCs back in their lanes) This refocus on early-stage investing may intensify competition among seed-focused funds.
Risk Mitigation Strategies
Portfolio Construction Adjustments
Funds should consider:
Market Timing Strategies
Quarterly batches provide opportunities for:
Due Diligence Process Optimization
Compressed evaluation cycles require:
Future Implications and Trends
Industry-Wide Adoption
If YC's quarterly model proves successful, other accelerators may adopt similar structures, fundamentally changing the early-stage venture landscape. This could lead to year-round demo day seasons and continuous fundraising cycles.
Technology Evolution
The need for more efficient evaluation processes will likely accelerate adoption of AI-powered due diligence tools and automated screening systems across the venture industry.
LP Behavior Changes
Limited Partners may need to develop more sophisticated cash management systems and potentially adjust their own fundraising and deployment cycles to accommodate quarterly venture commitments.
Conclusion
Y Combinator's transition to four batches per year represents a fundamental shift that will reshape accelerator fund pacing and returns for years to come. The move from biannual to quarterly cohorts creates both opportunities and challenges that require sophisticated adaptation strategies from fund managers and Limited Partners alike.
For specialized accelerator funds, this change demands enhanced operational capabilities, more frequent capital deployment, and accelerated decision-making processes. The compression of evaluation cycles from six months to three months requires more systematic approaches to due diligence and portfolio construction. (On the last decade of Y Combinator - Jared Heyman - Medium)
The mathematical implications are clear: funds must now evaluate 600+ companies annually across four batches instead of 500+ across two batches, while maintaining the same level of investment rigor. This acceleration benefits funds with sophisticated screening mechanisms and systematic investment processes, while potentially disadvantaging those relying on manual evaluation methods.
Limited Partners must adjust their commitment schedules and cash management strategies to accommodate quarterly capital calls rather than biannual ones. The increased frequency of deployment opportunities provides better diversification across time periods and market conditions, but requires more sophisticated portfolio management approaches.
As the venture industry continues to experience a downturn with LP commitments down over 60% compared to previous years, the ability to efficiently deploy capital across quarterly batches becomes a competitive advantage. (What to Expect from VCs if the Downturn Persists) Funds that successfully adapt to this new cadence will be better positioned to capture the best opportunities in an increasingly competitive market.
The long-term implications extend beyond individual fund performance to the broader venture ecosystem. Quarterly batches may accelerate innovation cycles, compress valuation discovery periods, and create more efficient markets for early-stage capital. For investors focused on accelerator-backed startups, understanding and adapting to these changes will be essential for maintaining competitive returns in the evolving landscape.
Frequently Asked Questions
How does Y Combinator's shift to four batches per year impact venture fund operations?
The transition from two to four annual cohorts fundamentally changes deal flow velocity and requires funds to adapt their capital deployment strategies. Funds must now prepare for quarterly demo days instead of biannual events, compress due diligence cycles, and maintain higher cash reserves for more frequent investment opportunities. This creates operational challenges but also provides more diversified entry points throughout the year.
What are the implications for LP commitment strategies with YC's new schedule?
Limited Partners must adjust their commitment timing and capital call expectations to accommodate quarterly deployment cycles. With venture capital inflows down over 60% in 2023-2024 compared to prior years, LPs face pressure to maintain adequate reserves for four annual investment windows. This requires more sophisticated cash flow management and potentially smaller individual commitments spread across more frequent deployment periods.
How will the four-batch system affect portfolio diversification for accelerator-focused funds?
The increased frequency allows funds to achieve better temporal diversification by spreading investments across four market conditions per year instead of two. However, it also intensifies competition at each demo day and may lead to higher valuations due to compressed decision timelines. Funds like Rebel Fund, which has invested in nearly 200 YC startups, will need to adapt their systematic approach to handle the increased deal flow velocity.
What challenges do compressed due diligence cycles create for investors?
With four demo days per year, investors have less time between cohorts to conduct thorough due diligence, potentially leading to more reliance on pattern recognition and automated screening tools. This compression may favor larger funds with dedicated resources and sophisticated data analysis capabilities. The shortened cycles could also increase the importance of pre-demo day relationship building and early-stage scouting.
How might the new schedule impact expected returns for accelerator funds?
The four-batch system could improve returns through better market timing diversification and reduced concentration risk from biannual deployment. However, increased competition and potentially higher entry valuations may offset these benefits. The key will be whether funds can maintain their selection quality while adapting to the accelerated pace and whether the broader market conditions support the increased deployment frequency.
What operational changes must venture funds make to adapt to YC's new structure?
Funds need to restructure their investment committees to meet quarterly instead of biannually, maintain higher cash reserves for more frequent deployment, and potentially hire additional staff to handle increased deal flow. They must also adapt their portfolio management systems to track four cohorts per year and adjust their LP reporting cycles to match the new investment rhythm.