Graham explained that YC grew too fast and "more things than usual broke" after its Summer 2012 class jumped to 84 (its largest to date) from just 66 the previous Winter.
He wrote: "In the past we spent all our time thinking about the predictors of success...For the last several months we've focused on identifying predictors of failure, both by looking for qualities that were missing in the top start-ups we've funded, and by looking at things the failed start-ups had in common."
The post follows Graham's recent announcement that YC will slash the usual $150,000 in funding to $80,000 for its new batch of companies.
In the announcement, which appeared on YC's blog, he wrote that "$150k was more than the successful start-ups needed." He added, "...And it sometimes caused messy disputes in the unsuccessful ones." From now on, Yuri Milner, Andreessen Horowitz, General Catalyst, and Maverick Capital will each invest $20,000 in each start-up.
With alumni including Airbnb and Reddit, YC has provided seed funding and mentoring to more than 460 start-ups since 2005.
"Paul gives these kids money, but he also gives them a methodology and a value system," YC investor Fred Wilson said to Inc. about Graham. "I don't mean this in a negative way, but Y Combinator is more like a cult than a venture capital fund. And Paul is the cult leader."