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Yuri Milner, SV Angel Offer Every New Y Combinator Startup $150k

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Re: Yuri Milner, SV Angel Offer Every New Y Combinator Startup $150k

#61

Post by knowsnothing613 »

trotsky wrote: post #48

Basically he just paid $6M to have a seat at the table and be a guaranteed call when they're raising their series A. I guess that's one way to get in to the early stage game.

It's not about PR. It's about a halo effect. DST needs a pipeline of new startups to continue the web x.0 hype-cycle, so he can offload his Groupon, Facebook & Zynga. positions.

He can afford to gamble $6M on YC startups, if they will create demand in the market for his hundreds of millions dollars worth Groupon, Facebook, Zynga shares.

It's a good assymetry position to have.

If one of the 40 becomes the next google, he wins. If he can exit his DST positions, he wins.

However if the web bubble burst, he is sh*t out of luck. And DST will be a huge bagholder.

Re: Yuri Milner, SV Angel Offer Every New Y Combinator Startup $150k

#62

Post by cal5k »

peteforde wrote: post #44
ssclafani wrote: post #8

Congrats to YC and all of the startups. Sadly, I can already hear the chants of "Bubble!".

There's only two types of people in the world: people who chant things and people who do things.

Great for entrepreneurs, but eventually it will be the relatively unsophisticated angels who will get burned by these valuations.

I have no problem with that, really. In 2001 it was different - everyone was playing with public money through IPOs. Now only a few quite established companies can afford to go public.

Don't be mistaken, though - this will turn into a bubble, whether you wax romantic about "entrepreneurs just do it!" or not. It always happens - it will happen again, life will go on, but it will happen.

Re: Yuri Milner, SV Angel Offer Every New Y Combinator Startup $150k

#63

Post by DevX101 »

sushrutbidwai wrote: post #35

This sounds like a campus placement scene. If you get in a top college, you wont be even interviewed properly or see how you have changed in last few years/months. We will just hire you with fat paychecks. As shown by history - this does not work in the long run and makes things worse than better. Dont get me wrong - YC is great, pg and rest of the team do an amazing job of selecting startups. But such blanket offers…

" But such blanket offers will mean lesser money available to non-YC companies"

I actually think precisely the opposite will happen.

Re: Yuri Milner, SV Angel Offer Every New Y Combinator Startup $150k

#64

Post by spydertennis »

rdamico wrote: post #43

Unless there are additional terms at play here (e.g. liquidation preference), this means that unless YC companies raise a series A before exiting, Yuri and SV Angels won't get more than a 1x return (plus interest). It's hard to believe the math works out here, but obviously a lot of thought and number crunching has gone into this decision. Great news for YC though!

I think that depends on how the note is written. I've never seen a note without a cap but usually it converts at the cap on acceleration. No idea how a conversion at acceleration would work if there is no pre determined valuation but it could be possible.

Re: Yuri Milner, SV Angel Offer Every New Y Combinator Startup $150k

#66

Post by hugh3 »

peteforde wrote: post #42
hugh3 wrote: post #31

Earlier quoted context omitted.

Is there any way to game this? For instance: 1. I get $150K in convertible debt from Yuri. 2. At the end of YC, my rich friend Joe decides to invest a million dollars in my company at a valuation of five hundred trillion dollars. Yuri thus gets an insanely small slice of my company. 3. Two days later, my company buys Joe's shares back for a million dolars. 4. Now my company goes off to seek actual funding at a sane v…

You're leaving out the part about getting accepted into YC and then being willing to blackball your reputation and ability to ever raise money to do anything, again. Who would do that for $150k? To me, this is the equivalent of leaving $20 on the table to see if you can trust your friends.

Fair enough. I was just wondering whether there were any legal barriers built in to stop people doing these sorts of dodgy deals.

Re: Yuri Milner, SV Angel Offer Every New Y Combinator Startup $150k

#67

Post by hugh3 »

knowsnothing613 wrote: post #61
trotsky wrote: post #48

Basically he just paid $6M to have a seat at the table and be a guaranteed call when they're raising their series A. I guess that's one way to get in to the early stage game.

It's not about PR. It's about a halo effect. DST needs a pipeline of new startups to continue the web x.0 hype-cycle, so he can offload his Groupon, Facebook & Zynga. positions. He can afford to gamble $6M on YC startups, if they will create demand in the market for his hundreds of millions dollars worth Groupon, Facebook, Zynga shares. It's a good assymetry position to have. If one of the 40 becomes the next google,…

DST needs a pipeline of new startups to continue the web x.0 hype-cycle, so he can offload his Groupon, Facebook & Zynga. positions.

I don't get it, how does this help with that?

Re: Yuri Milner, SV Angel Offer Every New Y Combinator Startup $150k

#68

Post by webwright »

sushrutbidwai wrote: post #57
jacquesm wrote: post #45

Earlier quoted context omitted.

> But such blanket offers will mean lesser money available to non-YC companies. They could have bought a boat instead, investing is not a zero sum game, they don't have to spend the money.

Right. We will just invest in all YC companies. Why bother reading up business plans, checking out markets, exploring new things. YC thinks some one is good, we will put our money. If 10% of YC companies give huge exits fine. As investors - our job is to just provide money. Why bother with research? And as an entrepreneur, do you really want to take money from some one who might not have enough knowledge about you an…

"And as an entrepreneur, do you really want to take money from some one who might not have enough knowledge about you and your business?"

Um, yes. Taking money with these terms is a no-brainer. It doesn't preclude you from taking on more active money or taking on advisors. Anyone who puts together an angel syndicate almost always has investors who say, "I'm really busy, so I can't help out much, but here's my money". Most angels think about your business for a few hours a month, at best.

Re: Yuri Milner, SV Angel Offer Every New Y Combinator Startup $150k

#69

Post by waterlesscloud »

DevX101 wrote: post #63
sushrutbidwai wrote: post #35

This sounds like a campus placement scene. If you get in a top college, you wont be even interviewed properly or see how you have changed in last few years/months. We will just hire you with fat paychecks. As shown by history - this does not work in the long run and makes things worse than better. Dont get me wrong - YC is great, pg and rest of the team do an amazing job of selecting startups. But such blanket offers…

" But such blanket offers will mean lesser money available to non-YC companies" I actually think precisely the opposite will happen.

I think you're right. It's like the concept of "anchoring", setting a new normal.
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