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It’s like the banner ad economy of the late 90’s. Every startup making money by selling banner ads to other startups. What could go wrong?

It is just revenue kiting. Company A enters $20M deal with company B which enter a $19.975M deal with company C which enters a $19.970M deal with company A.

Ma, look at our revenue! Lets do another raise! Investors will eat it up!

It depends quite a bit on what type of product or service you are selling. For us, we expected to find customers in our batch, but when we did not we learned a valuable lesson: that it was larger companies that valued our offering more.

Indeed and that was mentioned explicitly in the article as a benefit of having larger batches.

That sounds like a ponzi scheme.

It sounds like every B2B company. It's only a Ponzi scheme if YC companies are all B2B and primarily sell to each other.

They're well on their to that. 46% of companies in the last batch were B2B [0].

[0] https://blog.ycombinator.com/w21-batch-stats/