Comment by pexabit

What happened is adverse selection due to a stubbornly low valuation that doesn't even try to keep up, in the midst of a growing number of alternatives, worsened by a formal and therefore somewhat gameable process of getting in. The kind of person who really has an idea they are going to pursue regardless that he's actually committed to isn't going to part with his equity at the low prices a YC would offer. Instead what you get is people creating companies explicitly with the intention of applying for VC, which removes an important filter reflecting founder buy-in, and therefore average quality; and there's no way you can really tell one from the other.