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Y Combinator plans to fund more start-ups

Venture firm launches $2 million fund, aiming to raise number of companies it funds per year from 40 to 60. It wants to "expand to take advantage of" the recession.

Y Combinator on Monday announced that it has raised a $2 million venture fund with the aid of Sequoia Capital and angel investors.

In making the announcement, Y Combinator noted that it plans to increase the number of start-ups it funds to 60 a year, up from 40.

For Web services and software start-ups, that may bode well. Y Combinator focuses its investments on those two sectors and funds companies that are in their early stages.

As it notes, one unusual twist to this venture firm is its reliance on the strength of entrepreneurs' ideas, rather than on their business plans to support the ideas.

Y Combinator said it is ramping up its investments at a time when others are scaling back:

It's a big step for us to raise outside money. Till now, we'd only used our own. But we didn't want to let the bad economy make us conservative. Instead of hunkering down to wait out the recession, we want to expand to take advantage of it.

Y Combinator also noted that the quality of surviving start-ups is of a higher caliber during these economically trying times.

With the added funding in hand, Y Combinator extended its deadline for start-ups to apply for funding to March 25.