"B) Sell your product to startups and see a lot of benefits from gaining access to the YC network."
Keep everything inside the distorted reality of the "tech" community. The "YC Network" sounds like MLM, something like Herbalife or Amway.
This reminded me of a recent NYT article that mentioned YC.
https://www.nytimes.com/2023/03/17/technology/svb-tech-start...
The article discussed how SVB made loans to "tech" start-up founders who had just received funds from "tech" VC, the bank's primary customers.
First, cults require some "reality-distortion" to use Steve Jobs' term. Close people off from the outside world, e.g., traditional banks.
"These companies put a priority on breakneck growth, shift strategies frequently and celebrate failure as a learning opportunity. They are often worth billions before ever turning a profit, and they can go from silly idea to behemoth at astonishing speed. Most crucially, they rely on a tight network of money, workers, founders and service providers to function.
That unique and often irrational reality required a specialized bank."
What about the common, rational reality that we all share. The one that informs us that, e.g., MLM, cults, Ponzi schemes, and the like are not what we want. For example, the reality of getting a mortgage for a first home.
"SVB's dominance was well known at Y Combinator, a start-up incubator. Dozens of tech founders who participated in Y Combinator last year were told to open bank accounts at SVB, and they were introduced to SVB bankers at Y Combinator events, said three people who took part in Y Combinator's 2022 class of tech entrepreneurs over the summer.
One described a cocktail hour mixer in which he was introduced to an SVB banker who could provide a loan to his start-up once he graduated from Y Combinator's program. Six months later, when he needed a loan to buy his first home, he went to SVB. The bank looked at his company's valuation, based on the money it had raised in its first round of funding, and spoke to investors of his company. It granted a loan after two other banks turned him down, he said.
SVB's home loans were significantly better than those from traditional banks, four people who received them said. The loans were $2.5 million to $6 million, with interest rates under 2.6 percent. Other banks had turned them down or, when given quotes for interest rates, offered over 3 percent, the people said."
Let's see. "Tech" VC use a special bank. The special bank's customers are generally only either "tech" VC or "tech" start-up founders. The "tech" VC deposit funds into "tech" start-up founder bank accounts. Then the special bank loans money (that likely came from "tech" VC) to "tech" start-up founders, based on dubious valuations made by the bank's "tech" VC customers. The entire scheme is fully insulated from the reality of the outside world.
Someone I know who studied finance read this NYT article and commented that the term "venture debt" reminded him of "EBITDA",^1 specifically Munger's comment about replacing every instance of the acronym EBITDA with the words "bullshit earnings".
1. https://www.youtube.com/watch?v=tvnKylAyLbQ