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Yuri Milner, SV Angel Offer Every New Y Combinator Startup $150k

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Re: Yuri Milner, SV Angel Offer Every New Y Combinator Startup $150k

#31

Post by hugh3 »

staunch wrote: post #23
robryan wrote: post #9

So this investment isn't at a valuation and the valuation is only decided at a future round at which point this converts into an amount of equity based off that valuation? I've read about convertible notes before just a little confusing at first.

Right. $150,000 paid in advance. Whenever the company raises its first significant money (usually >=$1M) that $150,000 buys equity at the same rate the new investors are paying.

Is there any way to game this?

For instance:

1. I get $150K in convertible debt from Yuri.

2. At the end of YC, my rich friend Joe decides to invest a million dollars in my company at a valuation of five hundred trillion dollars. Yuri thus gets an insanely small slice of my company.

3. Two days later, my company buys Joe's shares back for a million dolars.

4. Now my company goes off to seek actual funding at a sane valuation. Yuri gets annoyed.

Re: Yuri Milner, SV Angel Offer Every New Y Combinator Startup $150k

#32

Post by jacquesm »

staunch wrote: post #26

Every YC batch should have at least 1-2 big wins. They're betting that it's more important not to miss out on those than to save a little money trying to pick the winners. A great strategy if you can afford it.

> Every YC batch should have at least 1-2 big wins.

Can you quantify a big win?

Re: Yuri Milner, SV Angel Offer Every New Y Combinator Startup $150k

#33

Post by mindcrime »

jgilliam wrote: post #24

Web startups are now rock bands, and YC is the record label.

%cough% There is more to the startup world than just "web" startups, ya know. %cough%

And YC don't limit themselves to just web startups, or even just to software companies, according to the FAQ. [1]

[1]: http://ycombinator.com/faq.html

Re: Yuri Milner, SV Angel Offer Every New Y Combinator Startup $150k

#34

Post by jacquesm »

forensic wrote: post #19
citricsquid wrote: post #13

Investing in a company based on its acceptance into YC? Hm. Also, I think this breaks the model a bit, I thought the point of the initial small(er) investment was to drive creation of a product or business model that could then expand naturally or take further investment once they've proven the products value/viability etc. I guess for some it would be a bonus, but for some it might be a curse? Although "Paul Graham…

The model has changed. Now it's about the ability of Paul et al. to pick horses. (Also the Ycomb environment and all that too)

Yes that's the best way of putting it. YC is seen as a vetting agent that has so much experience in evaluating start-ups now that their ability to separate the wheat from the chaff makes a deal like this feasible.

How long before a major VC steps in to offer a third round for those that get to some pre-set goal to every YC funded company that took the second round too?

Re: Yuri Milner, SV Angel Offer Every New Y Combinator Startup $150k

#35

Post by sushrutbidwai »

This sounds like a campus placement scene. If you get in a top college, you wont be even interviewed properly or see how you have changed in last few years/months. We will just hire you with fat paychecks.

As shown by history - this does not work in the long run and makes things worse than better.

Dont get me wrong - YC is great, pg and rest of the team do an amazing job of selecting startups. But such blanket offers will mean lesser money available to non-YC companies. So if you are competing with a YC company, you have so much ground to cover.

More money for startups is good, but quality of the startups should be judged almost every 3 months. That is very healthy for entire startup community on the whole.

Re: Yuri Milner, SV Angel Offer Every New Y Combinator Startup $150k

#36

Post by robryan »

jacquesm wrote: post #14

Super news this, that's going to have one nasty little side effect, YC will see an order of magnitude increase in the number of applications they will receive in the next round. Predictably there will be a lot of bitching by other angels, imo they should create a fund and offer to match. YC might become a one stop shop.

Is more applications necessarily a bad thing though? Sure they are likely to miss more winners and the application/ interview process is going to be even more time consuming but you would have to think it would translate to a highly quality group.

Re: Yuri Milner, SV Angel Offer Every New Y Combinator Startup $150k

#38

Post by jacquesm »

robryan wrote: post #36
jacquesm wrote: post #14

Super news this, that's going to have one nasty little side effect, YC will see an order of magnitude increase in the number of applications they will receive in the next round. Predictably there will be a lot of bitching by other angels, imo they should create a fund and offer to match. YC might become a one stop shop.

Is more applications necessarily a bad thing though? Sure they are likely to miss more winners and the application/ interview process is going to be even more time consuming but you would have to think it would translate to a highly quality group.

Reviewing applications is hard work.

YC now has more partners and a larger network of alumni so that should help a bit with scaling this.

Re: Yuri Milner, SV Angel Offer Every New Y Combinator Startup $150k

#39

Post by andreshb »

There seems to be a correlation between high performing funds and how fast they move to get into the good deals, this is a very efficient way for SV Angels to move faster than anyone else. They already moved fast before, now it's a tremendous head start.

If it's a bubble, it's a cheap bubble $6M is nothing for most funds.

Re: Yuri Milner, SV Angel Offer Every New Y Combinator Startup $150k

#40

Post by jmtame »

hugh3 wrote: post #31
staunch wrote: post #23

Earlier quoted context omitted.

Right. $150,000 paid in advance. Whenever the company raises its first significant money (usually >=$1M) that $150,000 buys equity at the same rate the new investors are paying.

Is there any way to game this? For instance: 1. I get $150K in convertible debt from Yuri. 2. At the end of YC, my rich friend Joe decides to invest a million dollars in my company at a valuation of five hundred trillion dollars. Yuri thus gets an insanely small slice of my company. 3. Two days later, my company buys Joe's shares back for a million dolars. 4. Now my company goes off to seek actual funding at a sane v…

it's not worth ruining your reputation over screwing a single investor especially in a deal this small. it's a small community and even if you found a way to trick the investor in this situation, it reflects very poorly on you. i'm sure there are ways to game it, but why even bother?

yc is a small network; if one founder screws someone else, everyone knows about it. vice versa.

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