French VC Raises $12M Fund for Y Combinator Startups

A Focused Investment Strategy: Lobster Capital and Y Combinator

Within the venture capital landscape, numerous investors assert their ability to identify the next groundbreaking innovation. However, Gabriel Jarrosson, a French engineer who transitioned into the roles of YouTuber and investor, has established a distinct investment philosophy for his VC firm. He exclusively invests in companies that have been through the Y Combinator accelerator program.

This focused approach propelled Jarrosson from creating venture capital explainers in Paris to managing assets exceeding $12 million at Lobster Capital. A larger second fund is currently being prepared, as indicated by recent SEC filings. His rationale is straightforward: he maintains that Y Combinator’s proven history of fostering billion-dollar companies surpasses the pursuit of startups outside of its network.

From YouTube Channel to Angel Syndicate

In 2017, encountering difficulties in accessing promising French startups, Jarrosson initiated a YouTube channel to document his investment experiences in French.

The channel rapidly gained a dedicated audience and subsequently evolved into one of Europe’s most prominent angel syndicates. Since 2020, this syndicate has invested $36 million in startups, predominantly Y Combinator alumni. This success facilitated the creation of Lobster Capital, which secured $12 million for its initial fund, exceeding its $8 million goal.

The Probability of Success with Y Combinator

Jarrosson’s decision to exclusively back Y Combinator startups is rooted in statistical probability. Data suggests that approximately 4.5% of YC companies achieve unicorn status, a significantly higher rate than the 2.5% observed among other venture-backed, seed-stage startups. Furthermore, around 45% of YC companies proceed to raise a Series A funding round, compared to an average of 33%.

With Y Combinator having funded over 90 unicorns, and roughly a quarter of those becoming decacorns, Jarrosson believes the potential for high returns justifies the premium often associated with YC deals at the seed stage.

“When evaluating VC investments and potential returns, exceptional outcomes are crucial for portfolio performance. As investors, we must assess whether a company has the potential to become a unicorn,” Jarrosson explained in an interview with TechCrunch. “If that potential exists, investing even at a slightly elevated valuation is often justifiable – perhaps $20 million, $30 million, or even $40 million. Some investors may decline, and that’s acceptable, but I choose to invest.”

Leveraging the AI Trend and Content as a Competitive Advantage

Lobster Capital, mirroring many early-stage investors, has capitalized on the recent surge in AI-focused startups emerging from Y Combinator batches. Jarrosson notes that three consecutive cohorts have achieved record-breaking revenue growth within the accelerator, with companies reaching millions in ARR within a matter of months.

While acknowledging reports of potentially inflated ARR figures due to pilot programs or high churn rates, Jarrosson maintains that achieving early revenue remains a significant challenge, and retention issues can often be addressed.

However, a primary challenge to Jarrosson’s strategy lies in access, as YC Demo Days attract numerous funds competing for the same companies.

Jarrosson attributes his success in securing allocations to his established reputation within the Y Combinator network, the visibility gained through his content creation, and his personal experience as a founder. He highlights that YC founders provide ratings for investors on Bookface, YC’s internal platform, and his positive reviews contribute to his access.

His podcast, featuring YC founders, and his LinkedIn presence with over 40,000 followers, where he shares insights on Y Combinator and his investment journey, also serve as effective marketing tools.

“I prioritize building strong relationships with founders. My firm’s visibility on social media, coupled with my background as a founder, assures them that I can provide valuable support, as many funds are led by individuals without operational experience,” Jarrosson stated, referencing his previous startup ventures and exits as detailed on his LinkedIn profile.

Building a Brand and a Community

Jarrosson is among a growing number of investors who are building funds around their personal brands. He cites Harry Stebbings, founder of the 20VC podcast who raised a $400 million fund, and Garry Tan, co-founder of Initialized Capital and current CEO of Y Combinator, as sources of inspiration.

Like these investors, Jarrosson utilizes social media, YouTube, and podcasting as community-building tools and deal-sourcing mechanisms. This content strategy also attracts limited partners who often discover him through his videos or podcasts before reviewing a fund prospectus.

Through his syndicate and Lobster Capital’s first fund, launched in 2023, Jarrosson has made over 100 investments in B2B SaaS, fintech infrastructure, and AI tools.

His portfolio includes two unicorns and several promising “soonicorns,” such as Jeeves, Baubap, FlutterFlow, Metriport, Alinea, and Jiga.

“Y Combinator has a proven track record, spanning over two decades. They consistently back and cultivate the most promising founders,” Jarrosson concluded. “The future results from YC are likely to be even more impressive. However, even maintaining their current performance represents a compelling investment opportunity.”

The strategy of exclusively investing in Y Combinator-backed companies is not unprecedented. Other VC firms, including Initialized, Pioneer Fund, Phosphor Capital, and Rebel Fund, have also adopted this approach.