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Y Combinator, Backer of Dropbox, Vaults from Experiment to Kingmaker

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Re: Y Combinator, Backer of Dropbox, Vaults from Experiment to Kingmaker

#51

Post by nl »

joeblau wrote: post #48
asaph wrote: post #44

Earlier quoted context omitted.

> 1280 Companies[1] — 1 IPO > Kingmakers... hardly. An IPO is not the only measure of success. Some successful YC companies are opting to remain private longer e.g. AirBnB, Coinbase and some have been acquired e.g. Heroku, Reddit.

Being acquired or acqui-hired(soft landing) means the company (and probably the culture) is gone. I worked at BBN Technologies back in the mid 2000's. This is the company that co-founded the internet, they have the second domain name ever registered (bbn.com)[1], their engineers co-invented foundational technologies that make the internet work today. In 2009, they were acquired by Raytheon[2]. As a stand alone compan…

I’d note the article specifically says when AirBnB is planning to IPO.

Private market valuations are more risky than public markets, but it isn’t 2008 anymore, and the ecosystem of large funds funding large growth rounds is well understood now.

Re: Y Combinator, Backer of Dropbox, Vaults from Experiment to Kingmaker

#52

Post by stale2002 »

joeblau wrote: post #48
asaph wrote: post #44

Earlier quoted context omitted.

> 1280 Companies[1] — 1 IPO > Kingmakers... hardly. An IPO is not the only measure of success. Some successful YC companies are opting to remain private longer e.g. AirBnB, Coinbase and some have been acquired e.g. Heroku, Reddit.

Being acquired or acqui-hired(soft landing) means the company (and probably the culture) is gone. I worked at BBN Technologies back in the mid 2000's. This is the company that co-founded the internet, they have the second domain name ever registered (bbn.com)[1], their engineers co-invented foundational technologies that make the internet work today. In 2009, they were acquired by Raytheon[2]. As a stand alone compan…

> Being acquired or acqui-hired(soft landing) means the company (and probably the culture) is gone.

So what? An exit is an exit, as it means the investor gets their money.

The one and only metric to look at is total value or total returns on investment.

Re: Y Combinator, Backer of Dropbox, Vaults from Experiment to Kingmaker

#54

Post by sanderjd »

austenallred wrote: post #50
majani wrote: post #49

Earlier quoted context omitted.

The 'worth' of a private investor's portfolio is a vanity metric. A more precise measure of YC's success would be money invested VS realized returns. Are those figures available?

It’s not really a vanity metric in this day and age. A lot of the best companies aren’t going public... ever. The measure that determines whether it’s a vanity metric or not is liquidity. If there are a dozen investors willing to buy stock at $x it’s worth $x.

> The measure that determines whether it’s a vanity metric or not is liquidity.

Ok, are those figures available?

Re: Y Combinator, Backer of Dropbox, Vaults from Experiment to Kingmaker

#55

Post by a13n »

austenallred wrote: post #45
joeblau wrote: post #32

1280 Companies[1] — 1 IPO Kingmakers... hardly. I remember going to a Commonwealth Club talk in January of 2013 titled: "Y Combinator:The Secret in this Incubator's Sauce". They talked about how YC exits are on par with or worse than any person trying to start a company. Sure there is tons of support when you're in the program and they really try to ensure soft landings through their relationships, but it's hardly a…

YC companies are collectively worth over $80 billion. They’ve invested in about 1500. Considering they’re almost always first money in, those are not even in the same zip code as normal returns. Those numbers are absolutely astounding.

They started doing pro rata rights a few years back, and terms have changed over the years. It's unclear exactly how good their return is.

That $80b isn't liquid.

Re: Y Combinator, Backer of Dropbox, Vaults from Experiment to Kingmaker

#56

Post by rococode »

majani wrote: post #49
austenallred wrote: post #45

Earlier quoted context omitted.

YC companies are collectively worth over $80 billion. They’ve invested in about 1500. Considering they’re almost always first money in, those are not even in the same zip code as normal returns. Those numbers are absolutely astounding.

The 'worth' of a private investor's portfolio is a vanity metric. A more precise measure of YC's success would be money invested VS realized returns. Are those figures available?

I doubt realized returns are available, but I think it's possible to at least very roughly estimate money invested. Their current "deal" is $120k for 7%, and that number has been going up over the years. So say all 1,588 startups they've funded got that investment (not true, since earlier investments were something like $20k). You're looking at about $150m in cash investments. According to https://www.ycombinator.com/people/, there are about 50 people working full-time at YC. We're being conservative, so let's say 150 people at $150k/year salaries, over the 13 years since YC's founding (again, very high estimates since they obviously did not start with even remotely close to that many people). That's about $300m.

So we're at maybe $450m spent on initial investments and people over the years. Maybe throw in another $200m for extra investments (I presume they re-invest in a couple promising companies on demo day) and other costs.

They say their portfolio's valuation is roughly $80b. Their "deal" is for 7%. I'm not super familiar with the technical stuff but they really only need to keep about 1% of that total value to be fairly successful, and I imagine that number is probably much higher unless I'm misunderstanding some of the details about how fundraising works.

Re: Y Combinator, Backer of Dropbox, Vaults from Experiment to Kingmaker

#57

Post by simonebrunozzi »

Does anybody know if the terms they offer to startups are negotiable / have been negotiated before? I believe that it's currently $120k for 7% of the company, with pro rata rights. (it roughly equates to investing $120k at a 1.7M cap).

Re: Y Combinator, Backer of Dropbox, Vaults from Experiment to Kingmaker

#58

Post by austenallred »

sanderjd wrote: post #54
austenallred wrote: post #50

Earlier quoted context omitted.

It’s not really a vanity metric in this day and age. A lot of the best companies aren’t going public... ever. The measure that determines whether it’s a vanity metric or not is liquidity. If there are a dozen investors willing to buy stock at $x it’s worth $x.

> The measure that determines whether it’s a vanity metric or not is liquidity. Ok, are those figures available?

There’s not really a way to get those numbers outside of asking a bunch of random people. I can say that I worked at a company that wasn’t in the top 50 and the market for shares was completely liquid. Most of the time at $100m+ valuation it should pretty active.

Re: Y Combinator, Backer of Dropbox, Vaults from Experiment to Kingmaker

#59

Post by austenallred »

rococode wrote: post #56
majani wrote: post #49

Earlier quoted context omitted.

The 'worth' of a private investor's portfolio is a vanity metric. A more precise measure of YC's success would be money invested VS realized returns. Are those figures available?

I doubt realized returns are available, but I think it's possible to at least very roughly estimate money invested. Their current "deal" is $120k for 7%, and that number has been going up over the years. So say all 1,588 startups they've funded got that investment (not true, since earlier investments were something like $20k). You're looking at about $150m in cash investments. According to https://www.ycombinator.com…

Their return from Airbnb alone will probably cover the costs of investing in every other YC company. So Dropbox, Stripe, Twitch, Reddit, Cruise etc. are gravy.

Those are phenomenal returns.

Re: Y Combinator, Backer of Dropbox, Vaults from Experiment to Kingmaker

#60

Post by dsacco »

austenallred wrote: post #58
sanderjd wrote: post #54

Earlier quoted context omitted.

> The measure that determines whether it’s a vanity metric or not is liquidity. Ok, are those figures available?

There’s not really a way to get those numbers outside of asking a bunch of random people. I can say that I worked at a company that wasn’t in the top 50 and the market for shares was completely liquid. Most of the time at $100m+ valuation it should pretty active.

I think you should clarify what liquidity means in your anecdote, because liquidity is a function of time and volume. Definitionally speaking, shares in a private company are not as liquid as shares in a public company. So what does "completely liquid" mean? Could every owner of private shares find a buyer if they wanted to? If not, what subset could?

That these figures are not public is a very important discussion point, because it does introduce some level of anecdata and arbitrary speculation into the discussion. That's not to say you're wrong, but it's certainly imprecise and questionable.

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