Is this the first step towards a YC IPO?
It is not really clear how is it structured, but it seems that Sequoia will own equity in the new startups funded by the YC-managed fund. In this way YC or that new fund won't need an exit strategy.
Y Combinator Gets The Sequoia Capital Seal Of Approval
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Re: Y Combinator Gets The Sequoia Capital Seal Of Approval
#22Is this the first step towards a YC IPO?
Venture capital funds (which is what YC is very very roughly) don't do IPOs because a public company has to produce returns every quarter with some degree of regularity and VC returns are always very very skewed. I can bet YC will never do an IPO.
More importantly, you typically do an IPO to raise money for your operations. VC funds raise money from private investors. So it doesn't usually make sense for VC funds to do an IPO.
Re: Y Combinator Gets The Sequoia Capital Seal Of Approval
#23Is this the first step towards a YC IPO?
Venture capital funds (which is what YC is very very roughly) don't do IPOs because a public company has to produce returns every quarter with some degree of regularity and VC returns are always very very skewed. I can bet YC will never do an IPO. More importantly, you typically do an IPO to raise money for your operations. VC funds raise money from private investors. So it doesn't usually make sense for VC funds to…
It's not something they would rush into for the reasons you point to, but it's not unheard of (e.g Harris and Harris), and if the goal of YC is to maximize the number of companies they can fund then an IPO may make sense at some point.
Re: Y Combinator Gets The Sequoia Capital Seal Of Approval
#24I really don't understand this. Why would YC want to manage a fund and investors? Is it more likely to get Sequoia to invest down the road?
aren't you over thinking this? YC simply took fund to expand their current operations . Sequoia merely put money in, its like thinking the people that put money in the Sequoia funds get involved in who Sequoia finances.
People that put money into Sequoia get a lot of attention from Sequoia partners. If I were YC I wouldn't want to manage that.
Re: Y Combinator Gets The Sequoia Capital Seal Of Approval
#25The most important part of this for me is a 50% increase in the number of startups funded. I approve of anything which increases our chances.
Of course, in the long term, this will mean that Y Combinator will be more sustainable if it is drawing interest from outside investors.
I wouldn't be surprised if Sequoia is doing this just for the publicity, or just to find out more about Y Combinator. $2 million might well be worth the price for information about how Y Combinator is doing, since it is a very popular but secretive fund.
Re: Y Combinator Gets The Sequoia Capital Seal Of Approval
#26Earlier quoted context omitted.
I guess they don't have enough cash in the bank to keep investing half a million dollars twice a year with no mostly returns for 7+ years (typical time for a start-up to become valuable).
I read it that they wanted to expand their operations, rather than they were running out of money.
If it is a cash/deal flow thing then the same principle swombat mentioned applies.
Re: Y Combinator Gets The Sequoia Capital Seal Of Approval
#27I really don't understand this. Why would YC want to manage a fund and investors? Is it more likely to get Sequoia to invest down the road?
* YC gets: - $2M more to invest in startups (more money can't hurt and they clearly enjoy what they do) - Sequoia investing in YC makes YC that much more trustworthy in the eyes of a lot of potential investees and potential acquirers of their startups. Also YC's reach in terms of potential acquirers and potential round 2 investors probably increases. - It gets YC startups almost all the advantages of having Sequoia a…
Great returns because the market is down now and will go up in the next 4 years. If you think about this in relation to the stock market it makes perfect sense. People are investing now because they think the bad times are over (even if they aren't, it is still not a bad time to start investing in something that will take 3 or 4 years to mature like a startup). So both YC and Sequoia win because the valuation of the startup whether it is public or not will be greater in just a matter of years. More small risk, much greater potential return.
Re: Y Combinator Gets The Sequoia Capital Seal Of Approval
#28I really don't understand this. Why would YC want to manage a fund and investors? Is it more likely to get Sequoia to invest down the road?
We wanted to increase the number of startups we funded, but we didn't feel we could do that in a recession. We probably had enough money to last out the recession at the current rate, but we noticed that thinking this way was starting to make us conservative, which is the last thing you want in the seed funding business.
I don't think this deal would increase the likelihood of Sequoia investing in a given YC startup. They make up their own minds about who to invest in. But it should increase the absolute number they fund, because the number we fund will increase.
Re: Y Combinator Gets The Sequoia Capital Seal Of Approval
#29I really don't understand this. Why would YC want to manage a fund and investors? Is it more likely to get Sequoia to invest down the road?
* YC gets: - $2M more to invest in startups (more money can't hurt and they clearly enjoy what they do) - Sequoia investing in YC makes YC that much more trustworthy in the eyes of a lot of potential investees and potential acquirers of their startups. Also YC's reach in terms of potential acquirers and potential round 2 investors probably increases. - It gets YC startups almost all the advantages of having Sequoia a…
It gets YC startups almost all the advantages of having Sequoia as an investor without the dilution of a large Sequoia investment (eg: opens a lot of doors for the YC startups to get their products in the marketplace.)
I want to emphasize that this one isn't true. We're not claiming any such advantage. Sequoia won't be a direct investor in these startups.
Re: Y Combinator Gets The Sequoia Capital Seal Of Approval
#30Earlier quoted context omitted.
aren't you over thinking this? YC simply took fund to expand their current operations . Sequoia merely put money in, its like thinking the people that put money in the Sequoia funds get involved in who Sequoia finances.
People that put money into Sequoia get a lot of attention from Sequoia partners. If I were YC I wouldn't want to manage that.
It won't be any extra work. We already pay a lot of attention to all the investors in this deal, because they are the biggest investors in YC startups. In fact, that's how they were chosen.