The title of this article is itself a contradiction. By definition, no ecosystem stands alone, and the broader startup and venture capital ecosystem is one of the most co-dependent in the world.

However, certain organizations, notably Y Combinator, Techstars, and certain well-respected venture funds, have created their own ecosystems designed to mentor, fund, and interconnect their own companies through several important stages of their life-cycle, and this has a crucial effect on both creating stronger portfolio returns and more impactful startups.

I started thinking about this when I considered the question: "aside from successful branding and name exits, what makes Y Combinator succeed so notably while so many accelerators fail, and others that have built successful brands and return capital effectively nonetheless still perform orders of magnitude worse?"

Y Combinator certainly has advantages over other acceleration programs that everyone knows about. It came first: the notion of wholesale acceleration and "startup classes" barely existed when Paul Graham conceived Y Combinator back in 2005. It has more notable successes and 'Unicorn' startups than any other acceleration program and it's not even reasonably close: Dropbox and Instacart, just to name two of the most famous. Its mentor network is by far the most heavy-hitting; only Techstars and Stanford's StartX could reasonably compare. It continues to innovate and have outstanding leadership, and its President, Sam Altman, is considered one of Silicon Valley's young visionaries.

And yet, I think it comes down to something else: mentorship and a sustainable, co-dependent, internal ecosystem.

Y Combinator is, more than anything else, a fraternity. Those companies that belong - and experience success - continue to get critical support through their lifecycle. From nearly-assured funding at demo-day, to an armada of investors willing to bridge the company through tough periods, to hundreds of fellow alumni companies to serve as introducers, customers, and acquirers, Y Combinator exists in its own self-sustaining bubble of growth generation.

Y Combinator certainly comes with some challenges. Recent classes have had a softer underbelly; as the organization takes on hundreds - rather than simply dozens - of companies a year, many are obvious duds. In just the last month, I have run across five recent graduate companies and found only one to be impressive. The organization has pushed higher valuations and more challenging deal styles - such as convertible equity - that are very advantageous to companies but can leave investors holding the whole bag for non-performance. Many graduates that have raised tens of millions of dollars have yet to build sustainable businesses that could survive without constant infusions of capital.

Nonetheless, the successes are there and the lesson in stand-alone ecosystem generation is one that I think anyone in venture can take notes from, and it is one I am trying to apply to my own syndicate network, Gaingels.

Gaingels funds LGBT entrepreneurs, so we have a bit of a leg-up in the area of ecosystem generation to start with because our investors share a unique motivation that binds us as a network. We are trying to build on that base by creating a wide-ranging network that can help portfolio companies in three key areas, the same Y Combinator appears to have identified and aced: starting and ongoing access to capital, mentorship in all the essential areas of startup development, and assistance with generating traction.

At Gaingels, we are endeavoring to take it a step further and created an ecosystem of interconnected locations and mentors: with chapters in New York, London, and Los Angeles now, and a half dozen others in the works, our members provide access to local capital ecosystems and large regional customers for business development to give our companies a critical leg up.

Ultimately, there is a long way to go. Even Y Combinator's story isn't fully written and Gaingels' is still in its early adolescence. But the lesson, even now, is clear: if your ecosystem is strong enough to build, develop, and nurture its own companies throughout the early-stages of their life-cycle, you will have a higher portfolio success rate, better returns, and much stronger collective success.

Published on: Oct 11, 2016