Last fall, YC ran an 8 week experiment called The Fellowship to fund and work with startups at the idea or prototype stage. The goal was to see if we could create a program that could help more early-stage startups at scale. The experiment went well and I have a few annoucements about its future.

We’re going to do it again. In fact, we’ve already picked the companies for the second batch and we’re opening up applications for the third batch starting today.

We’re going to make it possible to apply to both the Fellowship and YC core program via one application.

We’re iterating quickly on the format and so the second and third batches will have a very different experience from the first.

We’re going to be taking equity.

I’m going to address these in reverse order.

Equity

From this point forward, we’re going to provide more money per team and take some equity in exchange. However, we’re going to try something we’ve never done before.

The new terms for the Fellowship are as follows: We’re going to provide $20K for 1.5%. Instead of taking our equity up front, we’re going to be issuing a convertible security that only converts into shares when the company 1) has an IPO or 2) has a funding event or acquisition that values the company at $100M or higher.

Basically, YC only wins if you win big. I’m pretty excited about this because it’s both founder friendly and pushes us to build a program for the long term—not just one that is a lightweight version of our traditional model.

New format

Like any good startup, we’re doing our best to iterate quickly and will continue to evolve the program as we go. We’re going to be updating the Fellowship website in the next few days with more information, but here are the highlights:

It will be primarily experienced remotely. This is so teams can spend as much time on product and customer development as possible. Office hours will be done over Skype or phone. We will bring all the teams together once, but only at the beginning of the cycle for an all day Kickoff Conference that will combine many of the workshops we provide our startups in the core batch into a single day. Fellowship teams will have a dedicated YC partner following their progress throughout the program. We’ll also be visiting areas where multiple teams are located. For example, I’ll be meeting teams in the Bay Area, Philadelphia, New York and Austin for the second batch. We’re going to host weekly talks with speakers that we stream live to companies online. This will allow us to invite speakers that can’t come to YC in person. At the end of the program, the startups will be able to present their progress at a Virtual Demo Day to investors. If a Fellowship team decides to apply to the YC Core program, we’ll provide early decision information about their interview status.

Single application

We were surprised at how popular the program would be. We gave very little notice up front for the first iteration and only opened up applications for a single week, but we got nearly the same number of applications for YC Core—over 6K!

Once we realized we were going to do the Fellowship program again, we decided it would not be efficient for us to have separate application cycles and reading periods for the YC Core and for the Fellowship.

Since that test went well, we’re going to make it possible to apply to both or either program through a single application. When you apply, you’ll see a question on the application that’ll let you apply to both or either program. If you’re at a stage that is prior to product market fit, we recommend just applying to both.

Doing it again

After our experiment finished in the fall, 22 of the 32 startups that participated in the first Fellowship batch elected to apply to YC Core program and 6 of those companies are now part of the current Winter 2016 batch.

To test out our single application idea, we used the last application cycle to identify and invite teams that would be a good fit for the Fellowship to join the second batch. We ended up accepting 31 companies and they’ll be going through the new format starting February 1st. If all goes well, we hope to scale it up quickly on the next iteration.

Speaking of which, applications are now open today for both the third Fellowship batch and the YC Summer 2016 batch. If you’re interested, apply here.