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Start-up factory Y Combinator notched its first IPO with Dropbox, and others are on the horizon

  • Founded in 2005, Y Combinator is one of the most influential early-stage tech investors.
  • YC has helped to launch highly-valued companies including Airbnb, Stripe, Instacart and Coinbase.
  • Dropbox was the first YC portfolio company to go public.

Y Combinator, the influential start-up accelerator, almost passed on a chance to invest in Dropbox because it had misgivings about bringing on a solo entrepreneur.

After Drew Houston, the creator of Dropbox, scrambled to find a co-founder in time for his in-person interview, the company was admitted into YC in 2007. Four years later, venture capitalists poured money into Dropbox at a $4 billion valuation.

YC has since become a power player in Silicon Valley, helping spawn numerous companies valued at over $1 billion today including Stripe, Airbnb, Instacart and Coinbase. It also backed Twitch, which Amazon acquired in 2014 for about $970 million, and the self-driving tech start-up Cruise, which GM bought in 2016 for over $1 billion.

But in its 13-year history, YC had yet to see any of its companies go public until Dropbox's stock market debut on Friday. Shares of the cloud file storage company surged 36 percent to $28.48 in their first day of trading, giving the company a market value of over $11 billion.

Dropbox co-founders Drew Houston and Arash Ferdowsi with Adena Friedman.
Source: Nasdaq
Dropbox co-founders Drew Houston and Arash Ferdowsi with Adena Friedman.

Houston is now worth over $3 billion and co-founder Arash Ferdowsi owns shares valued at more than $1 billion. According to estimates from Pitchbook, Y Combinator bought shares in Dropbox for 3 cents, though it's not disclosing how many it owns. Over the past 11 years, Dropbox took money from at least 95 different investors (including some who obtained shares via secondary sales), according to AngelList.

While the Dropbox IPO marks a watershed moment for Y Combinator, it probably won't change much about the way the fund and organization operate. YC has been in a years-long process of scaling, investing in a wider variety of founders and technologies, and providing start-ups with help through various stages of growth.

Y Combinator president Sam Altman said founders should study the fundraising approach employed by Dropbox.

"They did a great job of managing their dilution — most of what they raised, they raised after the company was worth a lot," he said. "That's in contrast to startups today who are raising very large seed rounds and selling a lot of their companies at a low price."

YC has plenty more IPOs to look forward to in the future, but it could take a while. Airbnb has said it could debut as early as next year and Stripe's CEO said in late 2017 that an offering for his company was "years away," according to The Information.

WATCH: Careful buying Dropbox