Bad Startup Ideas (That Look Good): The YC Reject List
Insights from Y Combinator on the ideas investors are tired of seeing – and how you can stand out instead
A lot of startup advice online is full of optimism. But sometimes, the most valuable advice is about what not to do.
Every year, Y Combinator reviews thousands of startup applications. And every year, the same patterns emerge: smart founders building the wrong things.
This isn’t a newsletter to crush your ideas — it’s to sharpen your thinking. In this edition, we’ll cover:
What Tarpit startup ideas are — and why they’re so dangerous
Why consumer startups are harder than ever to succeed at
The types of ideas VCs instantly reject
How to think about supply & demand as a founder
What to do if you’re still building in a crowded space
If you’re an early-stage founder gearing up for fundraising or a YC application, this is your filter test.
What is a Tarpit Startup Idea?
The term “tarpit” was popularized by Y Combinator to describe startup ideas that are:
Easy to get into, but hard to win.
These are often shiny, intuitive, and familiar, which is exactly why they attract hundreds of first-time founders — and get ignored by investors.
Examples of Tarpits:
A new social network for college students
A task manager app with AI
A marketplace for freelancers
You might think: “I’ll just do it better.” But unless you have a clear unfair advantage, YC will ask — why are you any different from the 200 others we rejected this week?
Rule of thumb: If it feels too easy to explain, it’s probably been tried — and failed — many times before.
The Harsh Reality of Building Consumer Startups
Building a consumer product feels intuitive. After all, we’re all consumers — we use apps, shop online, scroll feeds. So building something for people like us should be straightforward, right?
Not quite.
Today’s consumer landscape is a battlefield, and most new products never make it past the first few months. Here's why:
High CAC: Customer acquisition is expensive. The golden days of cheap Facebook or Instagram ads are over.
Low retention: Most consumer apps are downloaded, opened once, and forgotten.
Hard to monetize: Unless you have millions of users, ad revenue and freemium models don’t move the needle.
The harsh truth? Most consumer apps get crushed between giants like Meta, YouTube, and Netflix, or are outcompeted by hyper-specific niche apps with deep user loyalty.
It wasn’t always this way. Between 2010 and 2016, the consumer startup playground looked very different:
Facebook ads were cheap and wildly effective
The App Store wasn’t yet crowded
Virality happened organically
Early adopters were excited to try new things
A journaling app or a photo-sharing tool could hit 100K users without much spend. Today? Those same ideas hit a wall. Attention is fragmented, trust is low, and novelty fades fast.
But here’s the good news: consumer startups can still win — if approached smartly.
Here’s what makes the difference:
Be your own first user. Deep understanding beats broad assumptions.
Find your niche wedge. Start small — a tiny but obsessed community is worth more than 10K uninterested downloads.
Engineer distribution. Virality is not a given. Have a clear go-to-market strategy from day one.
Great consumer startups today don’t chase virality. They earn loyalty.
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What Ideas VCs See Too Often — and Reject Fast
Every VC inbox has a recurring cast of pitch characters. These aren’t necessarily bad ideas — just ones that have been done to death, usually by founders with little edge, traction, or insight. If you’re building in one of these spaces, it’s an uphill battle unless you bring something radically different.
1. Generic SaaS Tools for SMBs
Think: CRM for small businesses, project management for agencies, or analytics dashboards for D2C brands.
These ideas flood investor pipelines — because they’re simple to build, but often lack depth or clear distribution strategy.
Unless you have strong traction or deep industry insight, they won’t excite investors.
2. Creator Economy Platforms
Everyone wants to “empower creators,” but most solutions either:
Help creators monetize via subscriptions (already saturated), or
Create marketplaces that need massive scale to survive.
Unless you’ve built for or been a creator with a built-in audience, it’s tough to stand out.
3. AI x Everything (Without Real Use Cases)
“AI for legal contracts,” “AI for slide decks,” “AI for journaling”…
YC and VCs are seeing a flood of AI-wrapped features presented as businesses. These often feel like a wrapper around ChatGPT with little differentiation or customer validation.
You need more than AI — you need an urgent workflow problem with a business case behind it.
4. Wellness/Fitness Apps Without Retention Strategy
Calm and Headspace succeeded, but they were early and capital-rich.
VCs now see dozens of:
Habit-tracking apps
Workout apps
Sleep assistants
These products often suffer from low retention and weak monetization. Behavioral change is hard — and most founders underestimate that.
5. Social + Community Apps Without Distribution
From “a new app to connect with college batchmates” to “interest-based micro-networks,”
these ideas depend heavily on network effects — and network effects don’t work until they work.
Without an existing audience or very specific niche, these ideas rarely get past seed.
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Supply & Demand: The Founder Mistake No One Talks About
Most early-stage founders build in overcrowded markets. Not crowded in terms of customers — but in terms of other founders.
This means:
Tons of startups are building the same thing
Customers aren't really asking for these solutions
Competition is high, but demand is low or non-existent
✅ Flip the Equation
The smartest founders shift to:
👉 Low Founder Supply + High Customer Demand
These are often unsexy, hard-to-spot problems. Think:
B2B workflows in agriculture
Compliance software for outdated industries
Internal tools for underserved professions
💡 The more “boring” the idea sounds at first, the more likely it is to have real, untapped demand.
Ask yourself:
Are users already trying to hack together solutions for this?
Are founders ignoring this because it’s “not cool”?
Will solving this actually make someone’s life easier — and are they willing to pay for that?
That’s where the best startups are hiding.
Final Takeaway
The next time you pitch your idea, ask yourself:
✅ Am I solving a real, painful problem?
✅ Do I have insight, obsession, or experience here?
✅ Does the market feel under-served or over-supplied?
✅ Can I acquire users without spending a fortune?
✅ Does this need to exist — or am I just building what’s trendy?
Startups fail more often from idea mistakes than execution ones. YC doesn’t reject you because you’re not capable — they reject you because you’re building the wrong thing.
Choose better battles. Pick better problems. And remember — the best startup ideas are often the ones that don’t look like startups at first.
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