Y Combinator made an important move towards financing startups by making its first completely stablecoin-backed investment. The accelerator transferred 500,000 USDC to prediction markets startup Totalis using the Solana network. This is a landmark in the use of venture capital, which suggests a growth shift towards blockchain-based financial rails instead of traditional ones.
The buying and selling of the coins were carried out in three on-chain transfers, namely, a test transaction of $1, followed by a payment of $124,999 and $375,000. The money is stored on Ramp, and it allows the startup to conduct both fiat and crypto activities without any difficulties.
According to Totalis, the move was a minor yet significant change in funding startup operations, emphasizing that it would utilize stablecoins to cover operational costs, such as paying through credit systems built into its platform.
The choice of USDC indicates the necessity to have a stable price when financing operations and to avoid the volatility of cryptocurrencies. Meanwhile, the infrastructure of Solana provides high-speed settlements with minimal transaction costs, which is why it is suitable for the transfer of large amounts.
A visiting partner of YC, Nemil Dalal, in February said that YC is open to funding startups in USDC across major blockchain networks, including Ethereum, Base, and Solana.
The transactions with stablecoins are usually cheaper than one cent and take less than a second to complete, whereas international wire transfers can cost tens of dollars and take days to complete. This efficiency gives startups quicker access to capital and minimizes friction in funding across borders.
On Monday, Garry Tan, president and CEO of Y Combinator, wrote on X that the accelerator will invest in any YC-funded startup in stablecoins. "The new financial rails of the revolution will not be over ACH (automated clearing house) or wire," Tan said.
Y Combinator has been supporting innovation in the crypto ecosystem, and since its initial investment in Coinbase in 2012, it has funded almost 100 crypto startups. The company is still experimenting with opportunities in stablecoins, tokenization, and on-chain capital formation, which is representative of trends in the industry.
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The relocation highlights a shift towards quicker, open, and borderless funding processes. Stablecoins serve as an interface between the traditional financial and digital worlds, allowing a direct transfer without any intermediaries.
However, challenges remain. The regulatory understanding of digital assets remains in its developmental phase and issues related to security (either vulnerabilities of smart contracts or wallet security) should be taken into consideration to enable a broader adoption.