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Stanford, Michael Bloomberg Now Back Every Y Combinator Startup

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Re: Stanford, Michael Bloomberg Now Back Every Y Combinator Startup

#11

Post by BinaryIdiot »

gameshot911 wrote: post #5

>Each startup that goes through the three-month program now receives$120,000 in cash — $20,000 from Y Combinator, plus $100,000 from the outside investors – in exchange for 7% equity in their company. $120k for 7% in a company!? Is that really a favorable term to startups? There's no way I would ever , EVER sell 7% of my company for a such a small sum. Who would sell out their passion for such a pittance? It's very p…

> $120k for 7% in a company!? Is that really a favorable term to startups? There's no way I would ever, EVER sell 7% of my company for a such a small sum. Who would sell out their passion for such a pittance?

YC is typically funding a company in their seed round. At this stage the company doesn't have a real valuation and could honestly be worth zero. Valuing a company at $1.7 million at this stage seems pretty good to me.

Now companies coming into YC much later when they already have a specific valuation? May or may not be worth it, it depends on where the company is.

Re: Stanford, Michael Bloomberg Now Back Every Y Combinator Startup

#12

Post by gokhan »

gameshot911 wrote: post #5

>Each startup that goes through the three-month program now receives$120,000 in cash — $20,000 from Y Combinator, plus $100,000 from the outside investors – in exchange for 7% equity in their company. $120k for 7% in a company!? Is that really a favorable term to startups? There's no way I would ever , EVER sell 7% of my company for a such a small sum. Who would sell out their passion for such a pittance? It's very p…

Having 100% of something vs having 93% of something with access to a great network, a demo day for best investors, great mentors, resources for HW startups, Azure grants for SW startups (worth $500k) etc etc.

Some time ago, PG published an email exchange between himself and Fred Wilson, where PG was really pushing USV to invest in AirBnB, what a service for both sides. How much would you pay for it?

IMO 7% for 120k is quite cheap, especially if you're in early stage.

Re: Stanford, Michael Bloomberg Now Back Every Y Combinator Startup

#13

Post by Animats »

Stanford is really an investment fund that runs a school on the side for the tax break. This started in 1991, when Stanford spun off their endowment management as the Stanford Management Company.[1] SMC's headquarters was on Sand Hill Road, across from all the VCs. This ended up putting Stanford into venture capital in a big way.

This was new. Before that, universities tended to put their endowments into passive investments - real estate, stocks, and bonds. Investing in startups worked out very well for Stanford. Stanford had pre-IPO stock in Cisco, Yahoo, Google... They have money in various VC funds. Buying into YCombinator is consistent with that investing approach.

As SMC became more powerful, executives from SMC started moving into positions in the university itself. SMC moved its HQ onto the main campus. Not clear where this will end; we'll have to see who replaces Henessey as president.

[1] http://www.smc.stanford.edu/

Re: Stanford, Michael Bloomberg Now Back Every Y Combinator Startup

#14

Post by sama »

beambot wrote: post #10

You know what would be really awesome / disruptive / game-changing? If YC funded the program via crowdfunding (eg. JOBS Act) monies so that normal peons (sorry, "non accredited investors") could realize gains from a fund of early startups while effectively locking out all these institutional investors. This would be a real coup for people who believe in Basic or Guaranteed Minimum Income [1], like Sama. [1] http://bl…

We would someday like to allow access for individual investors. We actually looked into it this time around; it's still extremely difficult. But hopefully the laws keep evolving and someday soon we can make you lots of money :)

Re: Stanford, Michael Bloomberg Now Back Every Y Combinator Startup

#15

Post by beambot »

sama wrote: post #14
beambot wrote: post #10

You know what would be really awesome / disruptive / game-changing? If YC funded the program via crowdfunding (eg. JOBS Act) monies so that normal peons (sorry, "non accredited investors") could realize gains from a fund of early startups while effectively locking out all these institutional investors. This would be a real coup for people who believe in Basic or Guaranteed Minimum Income [1], like Sama. [1] http://bl…

We would someday like to allow access for individual investors. We actually looked into it this time around; it's still extremely difficult. But hopefully the laws keep evolving and someday soon we can make you lots of money :)

Glad to hear it! In the meantime, I'm really excited for things like YC Research. Happy to contribute if I can (see profile). :)

Re: Stanford, Michael Bloomberg Now Back Every Y Combinator Startup

#16

Post by choppaface »

cmsmith wrote: post #2

Thanks, I'll forward this the next time they ask for money. A shotgun approach to investing other people's money in tech startups is fine, but drawing down the $__B endowment in 2008-2009 to avoid salary freezes was too risky.

Wow, any links about Stanford's position on the salary issues? Agree that Stanford putting in so much money (more than YC!!) seems pretty wonky. Perhaps not as bad as Larry Summers blowing billions of Harvard's money on derivatives, though.

Re: Stanford, Michael Bloomberg Now Back Every Y Combinator Startup

#17

Post by jacquesm »

gameshot911 wrote: post #5

>Each startup that goes through the three-month program now receives$120,000 in cash — $20,000 from Y Combinator, plus $100,000 from the outside investors – in exchange for 7% equity in their company. $120k for 7% in a company!? Is that really a favorable term to startups? There's no way I would ever , EVER sell 7% of my company for a such a small sum. Who would sell out their passion for such a pittance? It's very p…

$120K in return for 7% of "an idea" with a 90%+ failure rate outside of the YC trajectory seems like a pretty good deal to me.

I wouldn't sell 7% of whatever I'm doing to YC either because I (1) don't fit their profile and (2) am much too conservative to go for VC (the whole 'go big or go home' thing does not appeal to me) but if I were doing high risk high growth start-up(s) then I would definitely come knocking on their door.

Re: Stanford, Michael Bloomberg Now Back Every Y Combinator Startup

#18

Post by jacquesm »

georgeglue1 wrote: post #3

I wonder if YC's seed investment being LP money changes the incentives/advice on the part of the partners. (?)

It should not, they'll try hard not to let it make a difference (and in the case of the Yuri Milner investments it did not as far as I can see) but it could change if decisions made in one funding round would affect their ability to attract capital in the next.

In other words, LPs have bigger influence in follow on rounds if any of the decisions made in the current round turn out bad for YC, but so far there is no evidence of that as far as I can see.

It's a very interesting question though, sources of funds tend to exert pressure on the places those funds flow to. YC has always been 'as much hands on as you need or want' so in that respect they've been very good about letting their portfolio companies run themselves as much as possible while being there when needed.

Re: Stanford, Michael Bloomberg Now Back Every Y Combinator Startup

#19

Post by jacquesm »

vessenes wrote: post #7
gameshot911 wrote: post #5

>Each startup that goes through the three-month program now receives$120,000 in cash — $20,000 from Y Combinator, plus $100,000 from the outside investors – in exchange for 7% equity in their company. $120k for 7% in a company!? Is that really a favorable term to startups? There's no way I would ever , EVER sell 7% of my company for a such a small sum. Who would sell out their passion for such a pittance? It's very p…

You are wrong. So, so, wrong. If you were allowed to, the best thing you could possibly do for your early stage company would be to go take $100,000, nay $500,000 plus 30% of your stock and give it to Paul Graham in exchange for being let in to YC. It's not just the education you get, nor the peer pressure of being in a 'class' with other companies, it's also the social cache, the network of other YC funders, the acc…

The big draw of YC to me seems to be the alumni network, that's the real gold and with every class that network expands.

Re: Stanford, Michael Bloomberg Now Back Every Y Combinator Startup

#20

Post by kristiandupont »

jacquesm wrote: post #19
vessenes wrote: post #7

Earlier quoted context omitted.

You are wrong. So, so, wrong. If you were allowed to, the best thing you could possibly do for your early stage company would be to go take $100,000, nay $500,000 plus 30% of your stock and give it to Paul Graham in exchange for being let in to YC. It's not just the education you get, nor the peer pressure of being in a 'class' with other companies, it's also the social cache, the network of other YC funders, the acc…

The big draw of YC to me seems to be the alumni network, that's the real gold and with every class that network expands.

I am wondering hos this dilutes over time though. I mean, if I was in a select group of 100 people, I would pick up the phone if one of them rang and wanted my help. However, as that group grows to 1000, it would be less likely and at 10.000 I would probably not bother. But maybe there are stronger ties within the batches?
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