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The YC VC Program

ycombinator.com

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Re: The YC VC Program

#131

Post by prostoalex »

robryan wrote: post #123
drusenko wrote: post #100

Earlier quoted context omitted.

you have to understand that YC & the start fund has little to no control over the companies, except perhaps moral authority. YC has common shares (and a small minority at that) while the start fund is arguably even worse off with a convertible note. so, if the founders decided to, they could just pay out the rest of the money as a bonus. immoral? yes. illegal? i don't think so.

I seems weird to me, like the whole debt component of the convertible note pretty much ceases to exist unless it is able to be successfully converted to equity. I guess investors of the type investing in start fund tend to think of it more as a gamble that only converts to anything if the company raises and don't care much about recovering relatively small bits and pieces in the even the company fails.

A Start Fund investment comes with a buy-in for next round. Don't think they're planning to generate huge returns on the initial investment, it will get diluted eventually anyways, but a buy-in gets its participants the front-row seats on next Dropbox and Heroku.

Re: The YC VC Program

#132

Post by ajju »

pbiggar wrote: post #112
ajju wrote: post #101

Earlier quoted context omitted.

Misread your comment earlier. Actually 150k is enough to secure an H1B, all other things being kosher.

That is only true in some cases. I know people who have been turned down. It's very hit-and-miss.

You are correct in that immigration in general, and H1B visas in particular are non-deterministic. Even having $1M in the bank and a top VC firm as an investor does not a guarantee a H1B by any means.

Re: The YC VC Program

#133

Post by earbitscom »

malandrew wrote: post #126
pg wrote: post #51

Earlier quoted context omitted.

The office hours help all the startups. Decreasing the amount invested helps the successful and borderline startups because it means less of our time is taken up mediating founder disputes in the ones that are exploding. And yes, that was a significant time suck; Jessica says the majority of her time last batch was spent dealing with founder breakups.

What about holding the additional $70k per startup in escrow and dividing it among those startups that deserve to stick around? Basically, if you take 60 startups, give each $80k and put the $4.2 million (60 * $70k) in the bank. When that batch of YC startups gets to $20k left in the bank on average, figure out which ones show promise and which ones should be deadpooled. Assuming a 2/3 deadpool rate, that leaves 20 s…

This would all but put a nail in the coffin of those who are "lagging" behind. The first question an investor will ask is whether you received the additional $70k. No investor wants to institutionalize that 30% of their companies will receive bad signaling by default.

Re: The YC VC Program

#135

Post by pg »

Eliezer wrote: post #119
pg wrote: post #51

Earlier quoted context omitted.

The office hours help all the startups. Decreasing the amount invested helps the successful and borderline startups because it means less of our time is taken up mediating founder disputes in the ones that are exploding. And yes, that was a significant time suck; Jessica says the majority of her time last batch was spent dealing with founder breakups.

Forgive me, but if some other VC had said this, I would have thought, "The blowing-up startups aren't the primary revenue stream - this VC is solving the wrong problem, i.e., optimizing the hedonic profile of failing startups instead of optimizing the financial profile of successful startups." Obviously things are different for you because you aren't necessarily in YC primarily to maximize RoI... but nonetheless, am…

The explanation is that the two types of optimization are related, because the successful and exploding startups both consume our time and (perhaps more importantly) attention. If we can make founder disputes at the unsuccessful startups take up less of our attention, we have more left to use helping the successful startups.

Plus we're human, and we don't want to spend all our time mediating disputes. It's very boring.

I don't think outsourcing dispute mediation would work. There's too much context, and founders seem to want to make their case to us personally.

Re: The YC VC Program

#136

Post by pg »

malandrew wrote: post #126
pg wrote: post #51

Earlier quoted context omitted.

The office hours help all the startups. Decreasing the amount invested helps the successful and borderline startups because it means less of our time is taken up mediating founder disputes in the ones that are exploding. And yes, that was a significant time suck; Jessica says the majority of her time last batch was spent dealing with founder breakups.

What about holding the additional $70k per startup in escrow and dividing it among those startups that deserve to stick around? Basically, if you take 60 startups, give each $80k and put the $4.2 million (60 * $70k) in the bank. When that batch of YC startups gets to $20k left in the bank on average, figure out which ones show promise and which ones should be deadpooled. Assuming a 2/3 deadpool rate, that leaves 20 s…

If we delayed the investment, the investors would lose money. The investors are counting on indexing to generate returns. If they invest at the start of the YC cycle, all the startups take it, including the one that will later turn out to be the star of the batch. By Demo Day, though, there is a good chance that the star will have started to emerge and already have enough money. So this strategy would cause the money to go to the medium-good startups, which is not good in a domain with a power-law distribution of outcomes.

Re: The YC VC Program

#137

Post by zbruhnke »

n00b101 wrote: post #106

$80k is peanuts. Apparently these folks haven't learned the lesson that you get what you get what you pay for! Maybe $80k is enough for some ridiuclous $2 iPhone game or some startup for making a website for adding a single puny feature to an existing social network and having 15 minutes of fame. But $80k is nowhere near enough money to create an Enterprise solutions startup. I laugh at your $80k and the hubdreds of…

yeah, you're totally right man. Heroku, Dropbox, Airbnb ... those guys are all flops that never got anywhere coming out of YC ...

Re: The YC VC Program

#138

Post by pg »

sjtgraham wrote: post #74
pg wrote: post #51

Earlier quoted context omitted.

The office hours help all the startups. Decreasing the amount invested helps the successful and borderline startups because it means less of our time is taken up mediating founder disputes in the ones that are exploding. And yes, that was a significant time suck; Jessica says the majority of her time last batch was spent dealing with founder breakups.

PG how much of this attributable to $150k being too much money? Wasn't the last batch the largest by significant margin? Is it not expected that there will be more failure and therefore more demand on partner time as batch size increases? In another comment, you mention founders scrapping over the carcass of their failed startups; what is it exactly they're fighting over? Surely the money has run out and anything lef…

The batches usually grow, but we also hire more partners, so the ratio of startups to partners stays pretty constant.

Re: The YC VC Program

#139

Post by loceng »

ridruejo wrote: post #94
loceng wrote: post #72

Earlier quoted context omitted.

VC loses half the equity they would get otherwise..

The equity is insignificant, specially for the top startups. What those 20k buys the VC is first-hand knowledge of what is going on with the company and (hopefully) a better chance to invest additional money when/if the company takes off.

Of course, though it's still half of what they'd get before. That is better for the startup. Don't take more money than you need, unless you're getting a really good deal - though then you could burn and piss off VCs and may look bad during future rounds.

Re: The YC VC Program

#140

Post by argumentum »

tatsuke95 wrote: post #116
argumentum wrote: post #86

THANK YOU! This makes 250% sense, particularly for "no idea" companies. 150k led to several bad decisions at the beginning, and led to our breakup later on. 80k will be a lot more valuable than 150k, and make startups think more carefully about how to spend money. Perhaps for capital intensive startups that ought to be funded, there can be a separate arrangement. This shows why YC is YC.. it constantly innovates and…

> "This makes 250% sense, particularly for "no idea" companies." I can't decipher the level of exaggeration. If your company has "no idea", maybe that's where the blame should lie, rather than on having too much money.

In no way do I blame the money, but it certainly made it easier to make bad decisions. A better way to put it would be that it made us make decisions that shouldn't have had to be made that early.

"no idea" doesn't literally mean we had "no idea", we had plenty of ideas. We just hadn't settled on one yet.

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