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Y Combinator narrows current cohort size by 40%, citing downturn and funding

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Re: Y Combinator narrows current cohort size by 40%, citing downturn and funding

#101

Post by q-big »

yunohn wrote: post #98
q-big wrote: post #75

Earlier quoted context omitted.

> at some point in their process they borrow money I would be somewhat careful with such claims. As an investor who has money available, you have two options (in this example) where none involve borrowing money: a) invest in some startups b) lend this money to other entities Increased market interest rates mean that b) becomes more attractive. In other words: the startups that you invest in for a) have to be much mor…

Sure, but we’re talking about a VC fund. I’m not convinced that YC reduces investing in startups to pivot and profit from increased lending rates.

A VC fund will only get money if the risk-adjusted rate of return is greater than the rate of interest; otherwise backers of the VC fund invest their money elsewhere.

This means that VC have to become more selective with respect to the startups that they invest in, as I described.

Re: Y Combinator narrows current cohort size by 40%, citing downturn and funding

#102

Post by yawboakye »

YC has been irrelevant since they started admitting more than a handful of companies. It has almost become a rite of passage on to the fundraising circuit. It’s unclear what their admission philosophy is (e.g. p% of all applications?—I doubt). Or perhaps some fear of missing out dominates their thinking now? It would be interesting to know. Hopefully the current economic situation forces them to reconsider and perhaps return to admitting and cultivating an extremely small number of applications.

Re: Y Combinator narrows current cohort size by 40%, citing downturn and funding

#103

Post by dijit »

rmbyrro wrote: post #97
bigtunacan wrote: post #80

Earlier quoted context omitted.

VCs aren't directly funded by debt. They generally receive funding from accredited investors, and accredited investors are as a rule wealthy. Now when you are wealthy you make money off your money (through traditional means stocks/derivatives/etc...) but you want to get even more wealthy and have access to special discounted loan rates through things like guaranteed loans. So you go to the bank and say here's some of…

Well, in that case, everything is indirectly funded by debt

That’s the gist of capitalism and why we have boom and bust cycles (in the short and long).

Ray Dalios series on the topic of capitalism being funded by debt is quite approachable.

https://youtu.be/PHe0bXAIuk0

Re: Y Combinator narrows current cohort size by 40%, citing downturn and funding

#104

Post by spoonjim »

yawboakye wrote: post #102

YC has been irrelevant since they started admitting more than a handful of companies. It has almost become a rite of passage on to the fundraising circuit. It’s unclear what their admission philosophy is (e.g. p% of all applications?—I doubt). Or perhaps some fear of missing out dominates their thinking now? It would be interesting to know. Hopefully the current economic situation forces them to reconsider and perhap…

Why would they? They are buying into these companies at a $2m valuation which is absurd. It's a no-brainer move and almost nobody can rationally say no since YC is so powerful

Re: Y Combinator narrows current cohort size by 40%, citing downturn and funding

#105

Post by mizzao »

yawboakye wrote: post #102

YC has been irrelevant since they started admitting more than a handful of companies. It has almost become a rite of passage on to the fundraising circuit. It’s unclear what their admission philosophy is (e.g. p% of all applications?—I doubt). Or perhaps some fear of missing out dominates their thinking now? It would be interesting to know. Hopefully the current economic situation forces them to reconsider and perhap…

We actually thought about doing YC and demurred because (1) it wasn't a great deal and (2) because the batch size was so big, it wasn't a particularly good signal anymore. I've heard from other founders that they have so many startups no one gets much individual attention.

That didn't stop us from launching on HN though :-P https://news.ycombinator.com/item?id=32266086

Re: Y Combinator narrows current cohort size by 40%, citing downturn and funding

#106

Post by grepfru_it »

andy_ppp wrote: post #47
nostrademons wrote: post #34

Earlier quoted context omitted.

You have the luxury of patience when it's your own money. YC has been raising outside capital for several years (a decade?) now. As soon as you're investing other people's money you're at the mercy of other people's willingness to invest.

They could sell some of their holdings in these huge companies they have 7% of but basically they are saying everything is screwed right now and they expect a decade or more of depression.

> and they expect a decade or more of depression.

Kinda what the 30Y treasure yields are saying (if you believe in recession indicators)

Re: Y Combinator narrows current cohort size by 40%, citing downturn and funding

#108

Post by blagie »

yunohn wrote: post #99
blagie wrote: post #85

Earlier quoted context omitted.

It's signs like these that cause a recession. A lot of recession (and growth) is about belief in the economy. If YCombinator tells everyone there will be a tech recession, it increases odds of a recession.

+1, “are we manifesting a recession”: https://kyla.substack.com/p/the-vibecession-the-self-fulfill...

It's a good set of thoughts.

My own opinion is that COVID19 ground the economy to a halt. We had two choices for dealing with the lost productivity:

a) About 2x inflation of currency (long-term -- e.g. 15% for five years). At the end, currency is worth less.

b) Structural damage (e.g. businesses going bankrupt, people losing mortgage, people fired, etc.)

And a bit of a spectrum in between. We chose much closer to (a) than to (b). This feels like the right choice. We didn't do it very cleanly, unfortunately, which has repercussions now.

Personally, I feel like we should all just accept that money is worth less today, that it's not a runaway problem, and just deal with it. I'm concerned we'll either just delay the structural damage, or see run-away inflation.

Re: Y Combinator narrows current cohort size by 40%, citing downturn and funding

#109

Post by nojito »

balaselvam wrote: post #20

The emphasis on "downturn" concerns me. Aren't reputed firms like YC supposed to look at a 10+ year horizon? If this is true, it indicates that earlier investments were based on the market than the fundamentals of the founding team, market, and product.

>Aren't reputed firms like YC supposed to look at a 10+ year horizon?

Hard to see a bubble when you're literally inside of it.

Re: Y Combinator narrows current cohort size by 40%, citing downturn and funding

#110

Post by mojuba »

chrisseaton wrote: post #92
I_am_tiberius wrote: post #68

I always find it amazing that applicants only have 10 minutes to present themselves. If I only had 10 minutes, I'd be nervous as hell and it would not give a true representation as me as a person and my project - unless the nervousness factor is a key decision factor as well.

> If I only had 10 minutes, I'd be nervous as hell and it would not give a true representation as me as a person and my project How do you sell your product to customers if you aren't able to pitch it in ten minutes?

Customers usually have more time to make a decision. When it comes to spending our own money, we ask around, we do some research by googling for independent reviews etc. before we buy an innovative product.

So yes, I think a 10 minute presentation of any more or less novel/disruptive product is going to be largely a lie. Disruption is a complex process with a ton of important details.

It is why as an entrepreneur you learn to use cacthphrases, all the current buzzwords that can please the investors' ears more than you actually talk about what you are building.

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