No reason that won't change, and even if it did why would they ever make that public? In other words, they'd say that, even if it were not true.
> I know a number of founders who were rejected from YC and while they don't plaster it on their website, they don't hide it if it comes up.
It stands to reason that there are in a pool that large founders that feel one way or the other.
The HN wisdom is that if you let such a rejection affect you then you weren't successful start-up founder material to begin with but in reality it isn't all that simple.
> YC is not some magic oracle at picking startups.
That must be why the chances of getting follow on investment from other investors is so much lower once you reach demo day /s. YC start-ups are generally oversubscribed, especially when compared to non YC start-ups, so even if YC is not an oracle it definitely is a stamp of approval. Lack of such a stamp after trying to obtain it is a negative signal of sorts. And getting continuity funding or not is another signal of that kind.
> They just have way better dealflow because of their reputation and how simple their process is.
Yes, that reputation is what this is about, and that reputation is in a feedback loop. The process being simple has little to do with it, most start-up accelerators have a simple process.
The big factors are: founder friendly, huge alumni network with vast amounts of knowledge, huge pool of people willing to work for YC backed start-ups, coming to America, large chance of finding follow on investment once you are accepted.
Note how all it would take to make a play at this is to drop one single line from the YC continuity program terms, which is that YC continuity won't take the lead. The existence of that one line is the sign that they are not yet ready for a play like that. But that won't always be the case and at some point YC will be flush enough that they can run their incubator at the next higher level.