Forgive my ignorance, but what does LP stand for?
The New Deal
21–30 of 194 posts
Re: The New Deal
#22Things I had to look up because I never knew or had forgotten:
LP is Limited Partner, basically an investor.
A safe is like a convertible note but better. http://ycombinator.com/safe/
Re: The New Deal
#23Getting accepted into YC immediately values your company at $1.7M.
That actually makes sense. VC is a reputation-driven system. It shouldn't be that way, but it is. I'm not talking about YC but in general here: there are people way dumber than I am who can put in a good word for a startup and bump its perceived value (and, arguably, its expected return, because reputation is so big in this game) by 50% or more.
In fact, I always held a pretty negative view of YC's prior low valuations. It struck me as PG monetizing his (admittedly, well-earned, because his Lisp chops are really strong) reputation, and the low infusions, to me, indicated that the target audience was young people without families.
I'm afraid to say this, for fear that people are thinking I'm losing my edge by saying something nice about an investor, but I actually like Sam Altman so far. I think he's making a lot of really good decisions.
Re: The New Deal
#24> Most people don’t do YC for the financial investment—they do it because they want the advice, the help of the network, the benefits of the program, etc. But still, more money for less equity is definitely better.
I know advice is a big part of it but this is a exaggeration right? Most of that network/benefits/etc that surrounds YCombinator is about the financial investment.
Re: The New Deal
#25I predict that this is going to lead to an increase in the number of applicants who have already raised some money (though not a full round). > Most people don’t do YC for the financial investment—they do it because they want the advice, the help of the network, the benefits of the program, etc. But still, more money for less equity is definitely better. This is good news for people who've issued convertible notes be…
same as the old deal: PG IS A BUTT
Re: The New Deal
#26Getting accepted into YC immediately values your company at $1.7M.
investors understand YC and don't utilize the investment for valuation purposes that I've seen. most companies I know were going backwards by that math to bring YC on board as an investor (which we did so willingly).
Re: The New Deal
#27sama: While you have our attention, you might as well explain the details about the $120k/7% happening in two chunks. [Edit 1:] Thanks; OK. I had read it as potentially indicating the money came at two different times rather than just from two different sources. All clear now.
not much to explain--the reason for this is so that YC itself still has no LPs, and can do new things like fund non-profits without being restricted by an LPA. mechanically, the company gets two separate checks form two separate legal entities--one for 20k and one for 100k--but they work with YC for both of them.
Is the 7% equity split pro rata between those two entities?
Re: The New Deal
#28I'm more excited about the effect this will have in general than the effect it will have on YC companies. The difference for a YC company is that they don't have to give up an extra percentage as they raise their seed round to cover the convertible note/SAFE that they got from YCVC. With no discount, if a YC company raised at a $10M valuation that 80,000 would be worth .8% of the company - not enough to really move t…
POEM alert :affect...think you want effect :)
Re: The New Deal
#29Earlier quoted context omitted.
If they valued different companies differently, then it sends a certain kind of signal. The ones with the better valuation would end up getting a disproportionate amount of follow-on funding. Now, that may be a good thing, but it also might be a bad thing. At a certain point, this is a numbers game, and you want the market to sort things out, not YC management.
Didn't Altman just say that they sometimes do value companies differently? What was bad about the signaling problem with YCVC was that it probably often had nothing whatsoever to do with the value of the company, and was instead just an artifact of circumstance. But other investors might not be savvy enough (or just might not have the time to think through it) to understand that that was all that was happening.
Maybe? I don't remember, but I may have just missed it.