11–20 of 22 posts
I'm gambling that YC and Yuri are pretty smart about what they're doing. It's a branding/publicity exercise that will probably return just a few (not important) numbers for Yuri that uses these YC kids as a vehicle.
My understanding is that each bubbles require leverage (credit, margins, etc.) with imperfectly informed lenders. You might call this as a bad investment (which I don't think - internet and mobile is finaly maturing), but it lacks definition of bubble.
And this is a problem?
With this move all small angel investors are out of biz. What? The startups we fund almost always want to raise more than $150k. I would guess the median startup in the last YC batch raised 4 to 5 times that much.
Personally, I don't think many YC companies in the batch will be able to raise an entire round with no cap, no discount. However, the $150K investment from SV Angel/Yuri will help companies negotiate better deal terms than they would have otherwise obtained.
With this move all small angel investors are out of biz. What? The startups we fund almost always want to raise more than $150k. I would guess the median startup in the last YC batch raised 4 to 5 times that much.
How a small angel investor can invest in conv. debt. without cap and discount? Maybe the no cap/discount are only for SV/Yuri but I guess that in any case startups (even if they need more than 150k) will feel more confortable with some nice cash in the bank, thus they will become more picky and will ask for hyper-strong favorable terms that not anyone will be able to afford (good for entrepreneurs). Therefore a lot of small angel investors can't invest anymore in YC startups (I guess YC will push out 100 startups/year - for sure a big chunk). Thus, they will go somewhere and the one who were able to invest, were able to invest at huge valuations whit less nice terms, so they will get smaller future returns (bad for the future of the ecosystem).
To conclude, my concerns are not about now but about the future cause there is a risk that we'll have less angels, then less money available for entrepreneurs. I may be wrong though...
(obviously we're talking only about investments into YC startups; investors can always invest elsewhere. So when I said "out of biz" it was more about the "YC related biz")
It most definitely will. The potential to be severely diluted in the next round with uncapped convertible debt is a real potential. It also can perversely make the angel wish for a lower valuation on the series A so they convert at a higher percentage. Overall I don't think that this affects VCs as much as it does angels. If anything you will start to see angels move up the food chain and raise bigger funds to go aft…
It looks like a bubble, and in the human history every bubble has crushed; soon or later. My understanding is that each bubbles require leverage (credit, margins, etc.) with imperfectly informed lenders. You might call this as a bad investment (which I don't think - internet and mobile is finaly maturing), but it lacks definition of bubble.
It most definitely will. The potential to be severely diluted in the next round with uncapped convertible debt is a real potential. It also can perversely make the angel wish for a lower valuation on the series A so they convert at a higher percentage. Overall I don't think that this affects VCs as much as it does angels. If anything you will start to see angels move up the food chain and raise bigger funds to go aft…
They wouldn't be diluted at all. Convertible debt is not a priced round.
With this move all small angel investors are out of biz. What? The startups we fund almost always want to raise more than $150k. I would guess the median startup in the last YC batch raised 4 to 5 times that much.
I mean...this is for sure the right move to help entrepreneurs, but I'm not sure about the near future. How a small angel investor can invest in conv. debt. without cap and discount? Maybe the no cap/discount are only for SV/Yuri but I guess that in any case startups (even if they need more than 150k) will feel more confortable with some nice cash in the bank, thus they will become more picky and will ask for hyper-s…
That doesn't make it any more expensive to invest; it just decreases the eventual returns. But that variation in returns will be dwarfed by the variation caused by which startup you pick. Which means investing with no cap would be business as usual for angels.
Not that they would have to in any case. We don't anticipate that the startups' additional money will have to come with no cap. Ron and Yuri had to do this because to make their fund work like an index fund, they had to get the entire batch, which meant they had to make it an offer no rational founder would refuse.