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We are trying to scale. We funded 8 startups in summer 2005, and 26 this summer. We just have to scale gradually, so that we have time to fix the bottlenecks as we find them.

Also: http://www.paulgraham.com/angelinvesting.html#f2n

The chances of a startup succeeding are dismal at best, and YC is already selecting the best of the best. Increasing the startup pool isn't necessarily a smart decision, from a business perspective.

The value of YC and a book that lists lawyers and how to incorporate are light years apart. Google, networking, and a quick Amazon purchase will find you this information tomorrow.

Speaking out of ignorance here, but I would imagine that the fact that only 3/4 are heading YC, and ultimately capping the amount of startups they can accept, makes for more personal encounters between pg, guest speakers and those accepted, and among the actual class. Plus at a certain point it becomes more like a startup factory than an art gallery. And some art is often sold more than any factory produced item.