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Garry Tan says founders ‘have to be in San Francisco’ as Y Combinator ditches Mountain View headquarters for the big city

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Ever since Garry Tan came on as Y Combinator CEO last year, there have been changes. 

Last March, Tan cut its late-stage investing and laid off 17 investors, and he shrank the size of YC’s batches. Less known is that the startup accelerator also moved its headquarters. After spending 17 years operating out of Mountain View, Y Combinator moved its operations up north to the Dogpatch neighborhood in San Francisco and into Pier 70, according to city records reviewed by Fortune and confirmed by Y Combinator. 

In an interview, Y Combinator CEO Garry Tan said it was important to him that YC be as close to the cutting edge of artificial intelligence innovation as possible (OpenAI and Anthropic and “a lot of the top talent” in artificial intelligence are in San Francisco versus Silicon Valley, he says). Not to mention—the majority of Y Combinator partners, including himself, live in San Francisco, he adds.

These days, “you sort of have to be in San Francisco,” Tan says, noting the importance of the accidental run-ins that happen when people are out and about. “Chances are the people around you are thinking about and talking about technology, and especially A.I. That’s really special,” Tan says. He also pointed out that YC data shows that startups that were built in San Francisco were more likely to succeed than their peers.


The move from Mountain View, which happened in the spring, right before YC welcomed its summer batch of startups, is also part of Y Combinator’s broader effort to bring its program back to being fully in-person post-COVID. Y Combinator started doing so in Summer 2022, though its demo days have still been remote. (YC says its next Demo Day will be partially in-person at Pier 70, though presentations will still be online) 

Tan doesn’t just want founders back in the Bay Area: He wants them very close by. The Y Combinator CEO says the accelerator is highly encouraging founders to get places in the Dogpatch or Potrero Hill, or at least nearby. “I think it’s actually going to be really good that people know to be in walking distance of each other, and I think the connections between the founders are just going to be that much stronger,” he said, noting that he hopes Y Combinator upping its check size to $500,000 in 2022, up from $125,000, will help founders be able to afford the high rent.

The changes come as Tan continues to get more involved in San Francisco politics: Donating to local elections, hosting gatherings, and, of course his ongoing slew of social media posts about what he describes as “San Francisco’s corrupt political machine.” 

Tan is not one to pull punches: “I’m ready for him to leave public office,” he says of Dean Preston, a San Francisco Supervisor, who is running for re-election. “He certainly hasn’t been serving the needs of tech. On the other hand, I don’t even think that’s the reason to get rid of him. His hatred of tech covers up all the things that cause San Francisco to be so derelict in its responsibility to the citizens of all classes.” (In a statement, Supervisor Preston said that he was proud of his record “fighting for tenants, affordable housing, unions, food security, and an equitable San Francisco” and said that some of his strongest supporters were people who work in tech.)

While Tan may be very critical of San Francisco’s current political leadership, in typical Silicon Valley fashion, he says he is optimistic about the years ahead, particularly with upcoming elections this March and November. And he says that he has personally witnessed the tech community rallying together right now: “We’re coming together. We’re organizing. We’re actually creating our own media,” he said. “When you go to dinners, that’s one of the things we talk about now, and like two, three years ago in tech, I don’t think that that was something we were doing.” 

I asked whether Tan would ever consider running for some kind of office himself.

“Maybe in 20 years,” he told me, adding later: “On the other hand, my wife said that she’ll divorce me if I run for Mayor, so I don’t think anytime soon.”

More unicorn news…Discord has laid off 17% of its staff—170 people, according to a memo CEO Jason Citron sent to staff that was seen by The Verge. The announcement was made yesterday. “We have to face some hard truths,” Citron wrote in the memo, according to The Verge. “We grew quickly and expanded our workforce even faster, increasing by 5x since 2020. As a result, we took on more projects and became less efficient in how we operated.”

An important programming note…With an ever-changing array of emotions, I wanted to let readers know that I will no longer be writing Term Sheet as of the end of this month. Don’t worry: I’m not leaving Fortune—just pivoting into a new role where I’ll be writing more venture capital and startup features, scoops, and investigations for our tech desk, outside this newsletter (though I imagine some of my work will still be featured in here every so often!). I’m fortunate to be able to leave you in the more-than-capable hands of Allie Garfinkle, who you’ve already gotten to know over this week. She is knowledgeable, curious, relentless, and an absolute joy. We’re lucky to have her here, and so are you. Don’t worry: I won’t get all sentimental just yet. You’re still stuck with me for another two weeks.

Please note that Term Sheet is taking Monday off in observance of Martin Luther King Jr. Day. We’ll be back in your inboxes on Tuesday.

Until then,

Jessica Mathews
Twitter: @jessicakmathews
Email: jessica.mathews@fortune.com
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Joe Abrams curated the deals section of today’s newsletter.

VENTURE DEALS

Second Dinner, an Irvine, Calif.-based game development studio, raised $100 million in Series B funding. Griffin Gaming Partners led the round and was joined by others. 

1X, a Moss, Norway-based developer of androids designed to work alongside humans in various sectors, raised $100 million in Series B funding from EQT Investors and others.

hyperexponential, a London, U.K.-based pricing decision intelligence platform for insurers, raised $73 million in Series B funding. Battery Ventures led the round and was joined by a16z and existing investor Highland Europe.

Overmoon, a San Francisco-based vacation rental platform, raised $10 million in seed funding from NFX, Khosla Ventures, Camber Creek, 1Sharpe, Sunsar Capital, and others.

Sway, a Los Angeles, Calif.-based customer-focused delivery and returns platform for retailers, raised $19.5 million in Series A funding. 7GC led the round and was joined by Blackhorn Ventures, Lightshed Ventures, Rise of the Rest Revolution, and others. 

Korr, a New York City-based provider of claims processing and policy administration technology for the insurance industry, raised $3.2 million in seed funding. Motive Ventures led the round and was joined by Tokio Marine Future Fund

PRIVATE EQUITY

Edison Partners acquired a majority stake in 120Water, a Zionsville, Ind.-based water management and testing system, for $43 million. 

Appearance Technology Group, a portfolio company of MPE Partners, acquired P&S Detail Products, a Hayward, Calif.-based designer and manufacturer of branded, consumable car care liquid chemicals. Financial terms were not disclosed. 

First Insight, backed by Updata Partners, acquired SnapRetail, a Pittsburgh, Penn.-based developer of email marketing and social media campaign software for retailers. Financial terms were not disclosed. 

Crimson Phoenix, backed by Godspeed Capital, acquired Cyberspace Solutions, a Herndon, Va.-based provider of analytic and cyber solutions to US intelligence agencies and defense partners. Financial terms were not disclosed. 

JMI Equity acquired a minority stake in Safe Software, a Surrey, B.C.-based enterprise integration platform. Financial terms were not disclosed. 

Riskonnect, backed by TA Associates, acquired Ventiv Technology, an Atlanta, Ga.-based provider of risk, insurance and underwriting technology solutions. Financial terms were not disclosed. 

Rokt, backed by Pavilion Capital, agreed to acquire AfterSell, a Vancouver, Canada-based app designed to help e-commerce merchants upsell their products. Financial terms were not disclosed.  

Transtar Holding Company, backed by Blue Point Capital Partners, acquired Arch Auto Parts, a Hollis, N.Y.-based auto parts provider. Financial terms were not disclosed. 

EXITS

Patrick Industries agreed to acquire Sportech, an Elk River, Minn.-based manufacturer of cab components and systems for the powersports, golf and turf, industrial and agricultural end markets, from Monomoy Capital Partners.

OTHER

Hightower Advisors acquired Capital Management Group of New York, a Pearl River, N.Y.-based wealth management and financial planning firm. Financial terms were not disclosed. 

Maersk Tankers acquired Penfield Marine, a Southport, Conn.-based tanker operator. Financial terms were not disclosed. 

IPOS

Smith Douglas Homes, a Woodstock, Ga.-based private homebuilder, raised $161.7 million in an offering of 7.7 million shares priced at $21. Founder Fund and GSB Holdings back the company. 

Circle Internet Financial, a Boston, Mass.-based controller of the USDC stablecoin, confidentially filed to go public. The company last claimed it was worth $9 billion in 2022 amid a failed SPAC deal. 

FUNDS + FUNDS OF FUNDS

Vintage Investment Partners, a Herzliya, Israel-based venture capital firm, raised $200 million for its fourth fund focused on growth-stage technology startups.

PEOPLE

Calibrate Ventures, a Pasadena, Calif.-based venture capital firm, hired Katie Vasquez as an investor. Formerly, she was with MTech Capital

Google Ventures, one of Google’s corporate-funded venture arms, promoted Karthik Ardhanareeswaran, Sherry Chao, and KJ Sidberry to investing partners.

HCI Equity Partners, a Washington, D.C.-based private equity firm, promoted Dave Venker to principal, portfolio operations and Andrew Carraway to principal.

New Enterprise Associates, a Menlo Park, Calif.-based venture capital investment firm, hired Tiffany Luck as a partner. Formerly, she was with GGV Capital.

Northleaf Capital Partners, a Toronto, Canada-based private equity firm, promoted Brad Blowes, Kamal Mahant, Megan McLeese, Tom Petty, and Stella Vranes to managing director. 

Transformation Capital, a Boston, Mass.-based growth equity firm, promoted Vinay Shah to partner. 

TSG Consumer Partners, a San Francisco-based private equity firm, promoted Alec Fogarty to principal (San Francisco), Alex Gilmore to senior vice president (London), Kelly Pease to senior vice president (New York), Alex DiFelice to vice president (New York), Josh Ronson to vice president (London), Gaurish Gwalani to senior associate (San Francisco), Christian Pavlakos to senior associate (New York), Jordan Phelan to senior associate (San Francisco), and Phoebe Wallwork to senior associate (London).

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