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The YC VC Program

ycombinator.com

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Re: The YC VC Program

#21

Post by rdl »

ibdknox wrote: post #16
rdl wrote: post #10

Earlier quoted context omitted.

80k also substantially complicates hardware, I think. I wouldn't do a $50k hardware build without $100k in the bank.

It seems like the smart thing to do in this case is to then go down the Kickstarter route. I definitely wouldn't suggest it for software, as I genuinely think we got extraordinarily lucky, but for hardware it's an excellent choice.

Yeah. Getting early revenue or at least commits is key for anyone.

That said, I think I'd still want to have a bigger bank doing hardware. If you kickstart or take pre-delivery payment for something at ~cost, and you need to respin a few times, you may become the next Wakemake. Being able to just take your $50k reserve fund and buy all new parts or pay for an expedited mold or something could make a big difference early on.

I wish I had enough silicon-valley-version-of-Wasta to raise a $2-5mm microfund. Being able to finance hardware projects or other obviously capital-intensive YC projects on START terms with an extra $100-200k early on would be a pretty decent investment. It would still be a much more algorithmic decision than "which teams do I think will win", which probably wouldn't work as well. The ideal LP for this would be Jeff Bezos and maybe a few other guys who made bank off hardware or retail.

You'd almost be a bank, vs. an investor -- you would be investing based on a specific credible expenditure. Do it as debt + warrant coverage, or secure against revenue. Just be easy about it -- it should take 5 minutes to make a decision, and you should be adding hardware/distribution/retail/logistics clue to the process to help the founders.

YC hardware companies (and, honestly, all startup hardware companies) kind of sucked before the $150k START in W11.

Re: The YC VC Program

#22

Post by cyphersanctus »

ibdknox wrote: post #14
cyphersanctus wrote: post #2

Pg, are there really many ugly ducklings on demo day, despite the rigorous selection and the subsequent teaching/incubation process?

people often switch ideas in the middle of YC, so there are more than a few who get up on stage with just a couple week's worth of work (if even that). By ugly ducklings in this case he means ideas that may not yet be fully fleshed out or well understood - he's making no statement about the teams themselves, which is what the selection process "solves."

Good point. Thanks.

Re: The YC VC Program

#23

Post by pg »

evansolomon wrote: post #6

Is there any significance to Ron Conway not being in the group anymore?

We certainly didn't kick SV Angel out. They're among our favorite investors in fact. It just didn't make sense with their fund size to keep doing these investments. Unlike the other investors, they are what's now called a "super angel" fund, and those are much smaller.

Re: The YC VC Program

#25

Post by smalter »

evansolomon wrote: post #6

Is there any significance to Ron Conway not being in the group anymore?

From Techcrunch (http://techcrunch.com/2012/11/26/y-combinator-debuts-yc-vc-t...):

"Notably missing from the investor group: Ron Conway’s SV Angel. Y Combinator founder Paul Graham said in an interview that this new format didn’t make sense for Conway and David Lee’s fund size."

Re: The YC VC Program

#26

Post by rdl »

notaddicted wrote: post #19
rdl wrote: post #10

Earlier quoted context omitted.

80k also substantially complicates hardware, I think. I wouldn't do a $50k hardware build without $100k in the bank.

I don't think that taking this money precludes founders from raising more money if they need it, as they would have needed to do two years ago before the Start Fund.

The problem is raising money during the 3mo YC program is difficult and discouraged. YC founders have said they are discouraged from raising money until Demo Day or beyond, so they can focus on building stuff.

In very few cases will $80k vs. $150k make a difference before Demo Day, except for (IMO) hardware, certain other businesses with specific prepayments (maybe a licensing deal like "exclusive 12mo license for Kinect tech for pharmaceutical industry"), etc. But really hardware is the only obvious case.

Re: The YC VC Program

#28

Post by bmohlenhoff »

My first thought at seeing the submission title was that YC was offering a program teaching people about how to be VCs. Then I realized that this was simultaneously awesome and nonsensical, since Joe Random probably isn't going to have the scratch necessary to fund much of anything. Still, it would probably be fascinating from an academic perspective.

Re: The YC VC Program

#29

Post by debacle »

rdl wrote: post #17
debacle wrote: post #13

What kind of messy things happen with 150k that don't happen with 80k?

I think the assumption is that only the most colossal implosions happen in the first 6mo after YC. It's much easier for 2-3 people plus 1-2 hires to burn through most of $80k in 6mo after YC, vs. 150k. Figure founders consume $3-4k/mo each, and hires cost $10-15k, and you spend $20-30k on corp/legal/etc.

I was asking specifically about:

> it sometimes caused messy disputes in the unsuccessful ones.

I can't imagine a dispute that would occur at 150k but not at 80, except maybe of the cut-and-run variety, but the same could be said of any dollar amounts - you need to know when to cut your losses.

Re: The YC VC Program

#30

Post by pg »

debacle wrote: post #13

What kind of messy things happen with 150k that don't happen with 80k?

It's a matter of degree. In the old days, when a startup fell apart, the founders would just go their separate ways. When every startup got $150k, sometimes they'd end up fighting over the carcass instead. Our hope is that now they'll fight half as hard.
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