Id guess that YC has a much greater competitive moat in the former. It's much "easier" to do late stage investing - a few big transactions instead of many many small ones, and everyone's working with the same information.

Very few places have the infrastructure to deal with large volumes of start-ups + a lead flow of small companies trying to join YC, so there's no acquisition costs. Add to that, YC's experience with small start-ups compounds - they can probably predict start-up success way better than competitors at this point. That's almost certainly not true for late stage investing.

There's virtually no similarity between the two. They are completely different games.

Early stage investing – low cost, high risk of failure, high multiple return, you'll need to make a lot of bets so can cast a wide net, longer term (could be up to a decade or more before you see returns), no established business, so you are betting entirely on the founders.

Late stage investing – high cost, low risk of failure, low multiple return, you can only make a small number of bets so have to be more selective, shorter term, company already has a well-established business, and your decision will primarily be based on how well it is doing.

Not privy to special information w.r.t. this change, but I can think of a few:

1. Breaking focus / competing on multiple fronts. Lots of firms specialize in A-stage or later. By investing in seed and later rather than just seed, the later stage firms see you as a "competitor" for, rather than a "supplier" of, early stage startups. You have that many more competitive relationships rather than cooperative ones.

2. LP fundraising. LPs have to make choices as to who to fund, especially in this economy. Later stage vetting, returns, etc are different than early stage. May not be worth the heavy lift of competing for LPs.

3. Specialization. Once you get into later stages, you get firms that specialize by industry vertical. Not just business (marketplace, fintech, hardware) but even within software (SaaS, dev tools, consumer, enterprise, etc). Might make it harder to make deals. You now have a multi-front problem where each potential counter-bidder for the deal lead has hyper specialization to the startup, whereas YC is a generalist by nature.

4. Competition for deal terms. Most of the time, the deal lead sets the terms. If you can't aggressively bid to lead deals, they may not get the best economy for each of the deals since the lead may have other priorities. This may produce less optimal returns vs just putting more money into seed.

5. Partner / investor preference. VCs compete for partners / investors. If partners in the late stage at YC are limited to only YC companies vs the whole late-stage market (or have other limitations), it may not work for them vs going to a firm with less terms.

Ultimately as a generalist investor, pre-seed/seed/A-and-later are very different markets. With interest rates this high and everyone being more picky, it becomes harder to outperform unless you can operate in that market independently. I suspect YC looked at a model for their returns and came to this conclusion.

My pithy observation - Early stage investors are fantastic at extrapolating from minimal data points. Late stage investors are fantastic at extrapolating from many noisy data points. They screw up because the methods for each of their extrapolation functions are entirely different, so much so that they manifest as cultural differences in investment firms.

I am not VC but I think this is kinda apparent from the get go.

In early stage you are betting on and nurturing a small team with a full-of-hope business plan. They need relatively small bits of help that can go a along way. So both "who you are chosing among" and "how you are helping them" is very specific.

With bigger companies, the team and the business plan is more proven and they need help navigating size and scaling their offering - a very different set of people you are chosing from and what they need from you.

I am sure there's a lot of additional nuance.

> is so different that the success of YC in early stages doesn't translate

that's not a claim made in the article. It just said the late state was different enough to be a distraction from their core mission of being an early stage investor. A company with just an idea and 2 founders and nothing more is obviously very different from a company with many employees, a revenue stream and a long list of customers. It should be obvious how different that is.

All of Y Combinator startups try follow the same playbook: successfull exit, or successful IPO. YCombinator benefits from both.

Since most YCombinator startups never see any profit, late stage investment becomes a risky proposition since even "top YCombinator startups" lose billions of dollars a year, for years, with no path to profitability or recouping investments.

> how and why late stage investing is so different

It requires due diligence and knowing how to invest instead of throwing darts and celebrating the occasional bullseye as proof of your acumen.

Well, for one, I imagine the "network" provided by YC is less valuable to late stage companies than it is to early stage, so YC probably found they were not able to bring as much value.

Second, the amount of capital needed to invest in later stages is much higher, and with companies delaying IPO, they would be tying up capital for much longer than they probably expected originally.

I have no insight into YC, this is just my guess as to how it is different.

They have the absolute advantage in early stage, from marketing to skills and focus. Surely everyone thinks YC first. Not true in late stage.

Focus. Much easier to have the entire company focused on one thing.

Specialisation of labour. Become experts, make sure nobody catches you.

When you start diluting your goal you trade off focus and specialisation, potentially reducing your advantages.

Now I’m wondering how to apply that to myself. The answer seems obvious but I like being a generalist.

It costs a lot more to invest in a late stage startup than an early stage one.

In the current economic climate they probably can't afford (or just don't want to risk) to invest large sums, while on the contrary can "take advantage" of early stage startups which will struggle more to get funding.

More upside on the table if you get in early. It’s probably just not an efficient use of their time since the returns from gettin in early are so outsized.

Prices were higher, and upside was lower.