Worked for a major ecommerce company that did this too - It was extremely unpleasant to work under (yet profitable if you won) and I don't like the practice but it was pretty effective. I'd guess that YC would take the "sea turtle" reproduction pattern here of hatching a bunch of mostly similar turtles and hoping a couple of them make it to sea. Stinks for the small guys that don't make it though.
Truly curious, why does it "stink" for the loser? Being funded with pay to pursue a failing business venture with a chance at wild financial success seems like a pretty good gig.
From the perspective of people with capital, it doesn't. From the perspective of a loser it sucks because they may or may not have invested significant emotional, financial, and otherwise non-fungible capital into a future that relied on the success of this venture (and also the people they employed), and I can tell you from personal experience being an underling when this kind of venture collapses really sucks. Maybe not for founders, but for everyone else it definitely does.
... but still, they have just about as much chance as the other guys, no?
Competition is a given usually anyway.
Maybe even in the same batch having very similar companies makes sense -- see the recent rush of YC funded companies that build on whatever OpenAI released -- because different founders/teams can be introduced to different contacts in the YC network.
I can hypothesize that it may give startups the incentive to behave in reckless ways (e.g. pursue the MVP instead of the MVSP); think of the modern distortion of "ask for forgiveness, not permission" [0]:
> So “Ask forgiveness, not permission” meant:
Do the right thing within the organization, whether or not they know it. That way you can help the people that you work for.
> It did NOT mean:
Move the extrinsic cost to the public domain so that we can profit.
