Comment by justin

Most YC companies sell their initial product to other YC companies (whether it is consumer or enterprise) because that is what everyone does when they start out: sell to people in their personal social circles -- that's who you have access to as a nobody with no sales force that is just initially developing a product. This is hardly a conspiracy; as with all products sold to friends and family, the initial customer set will give the product a shot, but won't continue to use it long just because a friend sold it to them. YC companies that are successful break out of this initial customer base and sell to people outside the YC network. This is a must for any company that wants to grow past its founders.

The YC brand has improved over time drastically despite the increase in companies. When I started in the first YC batch, there were only 8 companies but the only angels that could bother to show up to demo day were just some of PG's friends. Now, demo day is a who's who of SV investors, even though they have to sit through 5x as many presentations!