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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

#171

Post by justin »

JoeAltmaier wrote: post #148
mattgratt wrote: post #7

YC is now the best deal that exists.

Hm. There are folks still using the 'old-fashioned' model of fundraising manually, building a team, honing a product and going to market. YC may be the best deal for a crew of wet-behind-the-ears startup virgins, I'll grant that.

That was a trollish comment but I'll bite.

150k is not going to get a company very far, and certainly not far enough to reinvent the startup model completely. Building a team is still a critical part of building a YC (or any other) company, as is honing a product and bringing it to market (which is primarily what they help you do). Saying that those things aren't part of the YC model just because you get some extra free money on great terms is disingenuous.

Also, more and more experienced entrepreneurs are going to YC, because of the effects of the network and because the money really isn't that expensive. People always bring up that it isn't a great deal for experienced entrepreneurs, but you can ask my friend Steve, who just sold Reddit, went back to YC, and just raised a fat series A for hipmunk whether it was worth it.

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

#172

Post by tmekjian »

I think this is fantastic. Whether it is this $150k or the great number of startups that are getting huge funding early on, it all means one thing... it is GREAT for business and competition.

I've heard from quite a few people who say this is a negative thing and they say it defeats the idea of being a startup. My question is, why do you HAVE to start in a garage? Why do you HAVE to eat Ramen noodles for 2 years? At the end of the day, being a startup is about having a creative team and being innovative.

This is a great step forward and if it helps a few more teams create a killer product then we all win.

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

#173

Post by mdda »

schwabacher wrote: post #167
mdda wrote: post #150

Earlier quoted context omitted.

The clever thing about this is that Yuri doesn't have any of the due-diligence costs of Ron Conway : He's outsourced it all. OTOH, maybe/probably Ron Conway actually enjoys the thrill of the hunt for new exciting stuff, so he doesn't consider it a particular cost. Right now, according to the article, YC (pg) is happy about the situation : it improves their brand, helps entrepreneurs, etc. But I'm sure that they'll re…

Why is he in at a better valuation than YC? From what I read it seemed like he loans 150k for an option to be repayed in stock at whatever valuation they take their first round of funding at? YC's 30k goes in at somthing like a 0.5 million valuation, so i would assume the rounds most of these companies are taking are higher than that?

Mea Culpa - you're absolutely right on the valuation side. I think that the majority of value in a YC investment is not in the actual cash, though. And in some ways, this provides a side-by-side comparison of the difference between a 'pure money' investor and a true 'value added' investor should be getting.

Given how (YC) entrepreneur-friendly this is, there must be a whole lot of soul-searching going on at VCs and other angels now : Somehow, the private equity space just got an index investor.

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

#174

Post by billclerico »

pg wrote: post #101
wheels wrote: post #94

Earlier quoted context omitted.

I wonder if there's a clause that requires the ability to participate in later rounds. That would make more sense. Otherwise it's not clear that they'd be able to. Heroku raised $3m a month after demo day; I'm not sure what it would have taken for an angel to be able to get into that round.

All convertible notes convert into shares with the same rights as the shares sold in the equity round in which they convert. These invariably include pro-rata rights.

I believe a lot of pro rata rights have minimums (i.e. you have to have at least 500,000 shares) to have that right. most series a term sheets that I've seen have set the minimums above any threshold that an angel would meet

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

#175

Post by beagle3 »

narag wrote: post #119
Joakal wrote: post #116

Earlier quoted context omitted.

Possibly a sign of different upbringings? Can be parental, culture, education, standard of living, etc.

It seems to me that the case is exactly the opposite: the talent appears randomly, so the only way to concentrate it is migration.

> the talent appears randomly

That's a pretty strong statement, but even if we take it as an axiom, I think that it isn't migration that concentrates it -- people migrate from everywhere to everywhere all the time.

I think it has more to do with having gone through some hardship, and (selection bias) having done so successfully, makes people better at taking risks.

There's a statistic that says that a huge number (ten percent or so) of immigrants immigrate again to a 3rd country.

Someone who never immigrated would think "all that trouble, again?". Someone who [successfully] has thinks "Well, that wasn't so hard, we can try that again".

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

#176

Post by dennisgorelik »

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…

If that happens, Yuri would be insanely profitable. Five hundred trillion dollars are coming into the company. Then all that shares are bought back. So now Yuri has substantial share of these five hundred trillion dollars. Even if Yuri's share would be just 1% -- 5 trillion dollars would allow Yuri never work again.

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

#177

Post by hristov »

schwabacher wrote: post #167
mdda wrote: post #150

Earlier quoted context omitted.

The clever thing about this is that Yuri doesn't have any of the due-diligence costs of Ron Conway : He's outsourced it all. OTOH, maybe/probably Ron Conway actually enjoys the thrill of the hunt for new exciting stuff, so he doesn't consider it a particular cost. Right now, according to the article, YC (pg) is happy about the situation : it improves their brand, helps entrepreneurs, etc. But I'm sure that they'll re…

Why is he in at a better valuation than YC? From what I read it seemed like he loans 150k for an option to be repayed in stock at whatever valuation they take their first round of funding at? YC's 30k goes in at somthing like a 0.5 million valuation, so i would assume the rounds most of these companies are taking are higher than that?

You are right. No-one gets in at a better valuation than YC. Of course they deserve it, they created the whole phenomenon.

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

#178

Post by hristov »

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…

You probably will not be able to pull off part 3. There are duties the company has towards its shareholders. Thus, it will often cause legal problems for the company to buy out one person's stock without offering to buy everyone's stock for the same price.

That's why when companies buy back stock they tend to use tender offers that are extended towards all shareholders.

This is not legal advice. The legal issues here are more complex than this post calls for.

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

#179

Post by nir »

DevX101 wrote: post #37

For all the talk from U.S. politicians about encouraging innovation, it takes the Russian to come here and put his money where his mouth is.

When YC takes developers and mentors them towards a first version in an aggressive timeframe with limited resources, it's encouraging innovation. When someone comes in and gives a bunch of company they know nothing about $150k each, it's called having more money than sense.

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

#180

Post by waterlesscloud »

nir wrote: post #179
DevX101 wrote: post #37

For all the talk from U.S. politicians about encouraging innovation, it takes the Russian to come here and put his money where his mouth is.

When YC takes developers and mentors them towards a first version in an aggressive timeframe with limited resources, it's encouraging innovation. When someone comes in and gives a bunch of company they know nothing about $150k each, it's called having more money than sense.

But they aren't investing in companies they know nothing about. They're investing in companies that have made it through the YC sieve. If nothing else, they know that about them.

These are investors with a large number of connections in the silicon valley world. My assumption is that they have some extremely well-informed spreadsheets about past YC company performance.

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