If other accelerators compete with YC, entrepreneurs may choose to do business with an accelerator that selects smaller classes.
[1] https://www.villageglobal.vc/ https://www.villageglobal.vc/network-catalyst/
You’re right that it might be lower than average cost, otherwise batching wouldnt make sense.
I don't think that's true. For one, as an entrepreneur, you get access to a bunch of people going through the same things you are, but in totally different areas, so you get a greater diversity of opinion. And as for dilution, I don't think that's the case either. They have a lot more investors now, more than they can accommodate, so there is no shortage of attention.
It’s a market. YC isn’t the only accelerator out there, and if the proposition is returning less than before, then the correct solution is to not accept the YC deal.
Startups get a better experience, and Sam Altman learns the lesson about overextending. Eventually, the market will correct.
cue the problem solved song
If selection skill counts for nothing, sure, but by your logic why not fund all comers? Where do you draw the FOMO line?
For the entrepreneur, the larger class size dilutes you. Yes, the incubator can scale mentoring reasonably well, but the visibility and prestige of pitching at Demo Day is going down.
If YC is graduating 400 startups per year, it's fair to say hundreds of them will not lead to anything. I don't have a good solution for this, each actor is trying to maximize their self-interest.