Investing in each others YC companies • Hacker News Board

Re: Investing in each others YC companies

#11

Post by ashleyreddy » Tue, Oct 19, 2010, 10:46 PM UTC

pclark wrote: post #10

I don't get it. A venture capitalist invests in a spread of companies because he isn't 100% sure which companies will win. However, a founder is 100% sure that his company will succeed. If he isn't, he is sure to fail. So why would I do this? I'm going to win - I don't need a backup plan. (this is how I see it, that is)

Ok let me explain it this way. No one has the exact amount of money, talent, time etc for their startup. You may have more of one and less of another. Say you have some surplus money, wouldn't you want to invest a tiny amount in a fellow Starter that had a promising idea. That wouldn't effect your level of success one bit. I don't see YC as a competition in the sense that their can be more than one winner.

Re: Investing in each others YC companies

#12

Post by praecipula » Tue, Oct 19, 2010, 11:17 PM UTC

I think this is a great idea - exchanging money, I'm not so sure. If everyone's trying to get funding, not a lot of cash to go around.

If, however, you worked out a shared-talent pool, that has a lot of potential. For example, often times startups don't need operations or HR staff right away, it's done by the founders. However, when it comes time to use more talented staff, what if one startup employed the person, but the pool can share their talent for an equity exchange? Seems like there are details to work out, but might be a good opportunity both for startups and for staff who would like to be in at the ground level, but there's not enough demand at any one company.

Re: Investing in each others YC companies

#13

Post by malandrew » Wed, Oct 20, 2010, 1:42 AM UTC

cubes wrote: post #3

The stock swap scenario is a hedge. It allows founders to potentially realize some upside even if their company does not succeed. I think this could be a useful tool to help founders effectively mitigate some of the risk they take on. That said, there is the danger that allowing founders to hedge there risk in this fashion would make them less motivated to make their own company succeed.

On the other hand, you may end up with what they call a Kigyo Shudan, a type of horizontally diversified business group found in Japan. Such a corporate structure could be beneficial if there is a lot of synergy between the participating companies, especially synergies where individual companies can increase their value by strengthening business and technological links with each other.

The Small Business Web is a group of companies that voluntary cooperate with each other for the greater good. Involved equity exchanges between companies should foster self-interested cooperation.

However, I do echo Cubes' sentiment that any equity exchanges should not diversify founder risk so much that they rest on their laurels or focus on the relationships with others to the detriment of their own startup.

Re: Investing in each others YC companies

#14

Post by malandrew » Wed, Oct 20, 2010, 1:43 AM UTC

camz wrote: post #9

This would be huge in helping startups leverage skills and assets from each other. Even people not chosen by y combinator could potentially still receive a majority of the rewards and help that those who are accepted receive. This could be a new step in startup funding/acceleration. Ashley reddy is a fricken genius. I would definitely participate in this endeavor. I'll be the first one to offer something. I'm a tax a…

Actually, this isn't a particularly novel idea. It's just that it hasn't been really applied to startups beyond FRC.

Read about keiretsus in "The Machine that Changed the World"