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The New Deal

blog.ycombinator.com

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Re: The New Deal

#81

Post by waterlesscloud »

tptacek wrote: post #77
logicallee wrote: post #73

Earlier quoted context omitted.

You're simply empirically wrong [about the 'amount' of money that represents, whether it is large enough to make a substantial difference], and your anchors[1] are not only irrelevant and misleading in an early-stage context, but extremely toxic.[2] What was Google's first check in the amount of? $100K. It was a ton of money. As Wikipedia points out, "The first funding for Google as a company was secured in August 19…

Your comment is very emphatic, but you didn't rebut either of my points: * 120k will barely pay the fully loaded cost of a single engineer * A good freelancer can generate 120k above living expenses in a year Your response was "the fully loaded cost of an engineer is irrelevant". That's a weird argument, given that the cost of engineers dominates the expenses of early-stage startups.

That's cool and all, but what matters to a very early stage startup isn't the cost of hiring an engineer, it's covering the founders' living expenses and whatever business expenses arise (which may be very small).

You know this, so I'm not sure why you're off on a tangent about things that don't normally apply in these situations.

Re: The New Deal

#82

Post by zmitri »

Patrick_Devine wrote: post #54

The 17k for 7% is what always stopped me from considering the Y Combinator route. It's a huge chunk of your company for not very much money. If the new deal had been in place when we started, I think we would have been very tempted to join. The real benefits of YC though are the focus it brings you, and being able to get access to the YC ecosystem. Oh, and being able to attend Demo Day, but with so many companies in…

17K for 7% isn't as raw a deal as you think when you realize that at an "acceptance" into YC essentially doubles your valuation to most seed investors.

Re: The New Deal

#83

Post by argonaut »

yahelc wrote: post #49
tptacek wrote: post #15

Earlier quoted context omitted.

They obviously can, the same way that they can offset the dollars by paying for their childrens' living expenses. But $120k is just not a lot of money. The real value of YC is the signal that getting accepted sends to other seed investors.

Which is, incidentally, not dissimilar from the signaling effects of attending Harvard/MIT/Stanford.

In the tech world, the YC signal > H/M/S signal.

Re: The New Deal

#85

Post by espitia »

It would be great to see this annotated on RapGenius in order to learn all the terminology and how investment like these work.

Re: The New Deal

#86

Post by Iftheshoefits »

logicallee wrote: post #51
tptacek wrote: post #15

Earlier quoted context omitted.

They obviously can, the same way that they can offset the dollars by paying for their childrens' living expenses. But $120k is just not a lot of money. The real value of YC is the signal that getting accepted sends to other seed investors.

> But $120k is just not a lot of money. The real value of YC is the signal that getting accepted sends to other seed investors. This idea (first quoted sentence) needs to die. It is toxic to the early-stage ecosystem. Any amount of money is a ton of money. Period. You can ignore the hustling that Jobs or Zuckerberg did for literally a couple of thousand dollars - read Zuckerberg's contracts at the time he was at Harv…

That $120k has to buy incorporation and legal fees, business operating expenses, and living expenses for at least 2 founders for three months. It's significantly better than $17k plus a note, but it's still a small enough amount that the program effectively selects for founding teams who either don't need the money (e.g. already have substantial financial means from other sources) or haven't got anything to lose (e.g. 20-somethings fresh out of school, or still in it). That excludes a huge talent pool.

Re: The New Deal

#87

Post by tptacek »

waterlesscloud wrote: post #81
tptacek wrote: post #77

Earlier quoted context omitted.

Your comment is very emphatic, but you didn't rebut either of my points: * 120k will barely pay the fully loaded cost of a single engineer * A good freelancer can generate 120k above living expenses in a year Your response was "the fully loaded cost of an engineer is irrelevant". That's a weird argument, given that the cost of engineers dominates the expenses of early-stage startups.

That's cool and all, but what matters to a very early stage startup isn't the cost of hiring an engineer, it's covering the founders' living expenses and whatever business expenses arise (which may be very small). You know this, so I'm not sure why you're off on a tangent about things that don't normally apply in these situations.

There was a long comment here, but I found a better way to make my point:

If I gave you $120k to start a company with 1-2 other people, and you had no other funding commitments, I don't think I'd be changing your odds all that much.

But I have no trouble believing that when YC gives founders $120k, they are changing the odds significantly.

Re: The New Deal

#88

Post by argonaut »

logicallee wrote: post #73
tptacek wrote: post #60

Earlier quoted context omitted.

Sorry, I just don't agree. 120k barely makes expenses for 1 FTE. Not only that, but it's also an amount of money that a strong freelancer can generate on top of living expenses in a particularly well-utilized year.

You're simply empirically wrong [about the 'amount' of money that represents, whether it is large enough to make a substantial difference], and your anchors[1] are not only irrelevant and misleading in an early-stage context, but extremely toxic.[2] What was Google's first check in the amount of? $100K. It was a ton of money. As Wikipedia points out, "The first funding for Google as a company was secured in August 19…

You say it "was a ton of money," but you haven't provided any reasons that is the case, other than claiming that Google would not exist otherwise, something we don't really know either. Maybe Larry and Sergey didn't really need that 100k either, but took it just in case? And even if it were a lot of money at the time, 1999 was a different time and place. First-time founders were a lot less sophisticated. The seed funding environment that exists today didn't exist. AngelList did not exist. The current market rate for engineers and cost of living is a lot higher than then.

Re: The New Deal

#89

Post by SocksCanClose »

logicallee wrote: post #51
tptacek wrote: post #15

Earlier quoted context omitted.

They obviously can, the same way that they can offset the dollars by paying for their childrens' living expenses. But $120k is just not a lot of money. The real value of YC is the signal that getting accepted sends to other seed investors.

> But $120k is just not a lot of money. The real value of YC is the signal that getting accepted sends to other seed investors. This idea (first quoted sentence) needs to die. It is toxic to the early-stage ecosystem. Any amount of money is a ton of money. Period. You can ignore the hustling that Jobs or Zuckerberg did for literally a couple of thousand dollars - read Zuckerberg's contracts at the time he was at Harv…

... actually a "ton" of money is technically £2000, or $3365 at the 22APR14 exchange rate. $120,000 is therefore ~35.66 tons of money.

Re: The New Deal

#90

Post by uiri »

logicallee wrote: post #51
tptacek wrote: post #15

Earlier quoted context omitted.

They obviously can, the same way that they can offset the dollars by paying for their childrens' living expenses. But $120k is just not a lot of money. The real value of YC is the signal that getting accepted sends to other seed investors.

> But $120k is just not a lot of money. The real value of YC is the signal that getting accepted sends to other seed investors. This idea (first quoted sentence) needs to die. It is toxic to the early-stage ecosystem. Any amount of money is a ton of money. Period. You can ignore the hustling that Jobs or Zuckerberg did for literally a couple of thousand dollars - read Zuckerberg's contracts at the time he was at Harv…

I just want to raise the point that your Apple example doesn't take inflation into account. The $4300 in 1975 is roughly $18.5k (to within $500) in today's dollars. This is inline with YC's previous seed funding of $17k.

I have to agree with you that what is "a lot of money" is entirely relative; I don't think that $5k in today's terms is a lot of money by any startup's standards but any amount upwards of $15k or so is definitely "a lot of money" to a larval startup.

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