Y Combinator alum launched a new $34M fund dedicated to YC startups, backed by Garry Tan

Investing in Y Combinator (YC) startups has proven to be a lucrative venture for investors, with data showing that 6% of these companies achieve unicorn status, and a quarter of those transform into decacorns. Kulveer Taggar, a two-time YC alum and founder of Zeus Living, shared these insights with TechCrunch, emphasizing the ongoing potential for high returns within this renowned accelerator. Confident in the future success of YC startups, Taggar founded Phosphor Capital, a new venture firm exclusively focused on investing in these companies. Since its inception last year, Phosphor has successfully raised $34 million across two funds. While other firms like Pioneer Fund and Rebel Fund also target YC startups, Phosphor stands out as the only fund led by a solo General Partner. Taggar has leveraged his long-standing relationship with Y Combinator to attract notable investors, including YC CEO Garry Tan. His journey with Y Combinator began in 2007 when he, along with his cousin Harj Taggar and future Stripe founders Patrick and John Collison, participated in the program with their startup Auctomatic. Although Auctomatic was sold within a year, this experience strengthened his ties to the accelerator. In 2011, Taggar returned to YC with Zeus Living, a startup focused on providing furnished homes for business and personal travel. Initialized Capital, co-founded by Garry Tan, led the Series A funding for Zeus Living, which, at its peak, boasted a valuation exceeding $200 million and an annual revenue run rate of approximately $120 million. However, the startup faced challenges when interest rates rose, leading to its acquisition by competitor Blueground in late 2023. Shortly after departing from Zeus, Taggar launched Phosphor, expressing enthusiasm for investing in emerging AI startups and confidence in Garry Tan's leadership at YC. "You could view this as a bet on Garry. I think he is taking Y Combinator to new levels," he remarked. Unlike many new managers, Taggar found it relatively easy to secure funding, partly due to his established relationships with Zeus's investors. He mentioned that his track record and strong work ethic helped him gain the trust of family offices and a major asset manager as well. Jared Friedman, a YC partner, noted Taggar's status as an early alum and his close connections within the YC community, which further bolstered his credibility. Taggar's experience as a founder adds to his appeal among limited partners (LPs). "Zeus was a really hard company to run. He has a tremendous number of battle scars from doing this hard thing in the physical world," Friedman said, highlighting Taggar's empathy for fellow founders. Phosphor Capital typically writes checks ranging from $100,000 to $500,000, and has already invested in over 200 YC companies, several of which have progressed to Series A funding rounds, including workflow automation platform Gumloop and AI meeting assistant Circleback.