We have developed a mode-locked diode-pumped Yb:KYW laser generating nearly band-width limited pulses as short as 101 fs using semiconductor saturable absorber mirror (SESAM). With the nonsaturable losses of 1.94% and the modulation depth of 1.48% the self-starting and stable mode-locking was observed. The nonsaturable losses are mainly related to As_{Ga}^{0}-CB transitions in InGaAs QW absorbing layer and low temperature defects. Low temperature defects are eliminated by using higher growth temperature and lower ratio of group V to group III beam equivalent pressure than typically used. The InGaAs layer was grown by molecular beam epitaxy at the temperature as high as 420°C, under the V/III ratio as low as 10. No annealing was performed.