Investing in Y Combinator startups can result in significant returns to traders.
“When you have a look at the information: 6% of YC firms develop into unicorns, and of that 6% 1 / 4 develop into decacorns,” Kulveer Taggar instructed TechCrunch. Taggar is a two-time YC alum finest identified for founding Zeus Dwelling, a property administration startup that raised over $150 million in funding.
Taggar is so assured within the persevering with return potential provided by the famed accelerator that he established Phosphor Capital, a enterprise agency devoted solely to investing in YC firms. Since launching final yr, Phosphor has raised $34 million in capital throughout two funds.
Whereas Phosphor isn’t the one enterprise capital agency targeted on YC startups—Pioneer Fund and Insurgent Fund make use of comparable methods—the agency is the one devoted YC fund led by a solo Normal Companion. And due to Taggar’s lengthy relationship with YC, he additionally nabbed YC CEO Garry Tan as an investor within the fund, he says.
Taggar’s relationship with Y Combinator started in 2007 when he, his cousin Harj Taggar, and future Stripe founders Patrick and John Collison, introduced their startup, Auctomatic, via this system. Though Auctomatic was offered only a yr later, that have was key to forging a powerful reference to the highest accelerator.
He went via Y Combinator in 2011, this time with Zeus Dwelling, a startup that purchased properties to supply furnished lodging with versatile phrases for enterprise and private journey. Initialized Capital, co-founded by present YC chief Garry Tan, led Zeus Dwelling’s Sequence A funding and joined its board.
At its peak, the startup was valued at over $200 million and had an annual income run charge of about $120 million, based on Taggar.
Nonetheless, Zeus encountered vital headwinds when rates of interest surged earlier this decade and the startup was offered to competitor Blueground in late 2023 for undisclosed phrases.
Taggar launched Phosphor mere months after leaving Zeus. He instructed TechCrunch he was significantly excited by the chance to spend money on younger AI startups and by Garry Tan’s management of the distinguished accelerator. “You could possibly view this as a guess on Garry. I feel he’s taking Y Combinator to new ranges,” Taggar stated.
In contrast to many rising managers, Taggar had a comparatively straightforward time elevating capital. Past Tan, he says his different LPs embody Zeus’s traders. “I had a relationship with them and a observe file, in order that they knew me, they usually knew how arduous I work,” he stated.
Others embody household workplaces and a big asset supervisor who’re taking a guess on Taggar largely due to his deep connection and long-standing ties to Y Combinator.
“Kulveer is what you would possibly name an OG alum from the early days of YC,” stated YC associate Jared Friedman. “He’s near me and to lots of the people who now run YC.”
Taggar’s background as a YC alum and a founder was additionally part of the draw to Phosphor for LPs. “Zeus was a extremely arduous firm to run. He has an incredible variety of battle scars from doing this difficult factor within the bodily world,” Friedman stated. “I hear this from founders that he has unbelievable empathy for what they’re going via, as a result of he went via all of it himself.”
Phosphor writes checks starting from $100 million to $500 million. The agency has already backed over 200 YC firms, with a number of happening to boost Sequence A funding, together with workflow automation platform Gumloop and AI assembly supervisor Circleback.