Comment by zachallaun
15 years ago
> "YC has invested a total of around $5 million"
It's incredible to think of the value that has been added to so many companies for the price of a single large series A.
15 years ago
> "YC has invested a total of around $5 million"
It's incredible to think of the value that has been added to so many companies for the price of a single large series A.
It's amazing how much you can do when you start unbreaking things.
Edit: That was excessively brief. So many parts about the whole investment cycle were broken. Some are marginally less broken now. Having a negotiation between a fresh engineering graduate who does not know what "pre-money valuation" means and the principal of a firm with 9 figures under management, and expecting that negotiation to produce an equitable or efficient outcome, is broken. Contacting angels serially is broken. Using who has attended a dinner party with your buddies as the most efficient screening method available for predicting skill with conversion rate optimization is broken. Investment outcomes where the company succeeds and founders do not end up rich is broken. The work culture in Silicon Valley is insanely broken. etc, etc
YC has unbroken some of these. It turns out that an application process and a few weeks with a team scalably works as a decently efficient proxy for success. It turns out founders can be taught what pre-money valuation means and when they know this they get screwed less often. It turns out that spending half of one's time raising money is, as expected, just a deadweight loss.
Your comment made me look at YC as an extended extremely thorough onsite interview, and it really clicked. But then I remembered that YC companies pitch demo day to a bunch of relative strangers-to-the-teams, not the YC investors themselves. Or do Demo Day investors get quality time with the teams during the season?
Of course YC is overall a mix of interview and internship and summer camp and summer classes and more. The above is an attempt to think through one of the threads.
The angels get one extraordinarily significant bit about all presenters prior to the Demo Day presentation: they were in YC. That is a very significant bit relative to another similarly situated twenty-something which a gleam in their eye and prototype on their MacBook.
It used to be implicit that some angels were saying "If you're good enough to be in YC, you're good enough to get investment from me." That is now 100% explicit for at least one deal. The vetting is getting outsourced, streamlined, and productized.
This is a good point, but to your original point: "invest in me just because I impressed PG (plus more good reasons that may be true but the investor cannot see)" does not fall into your category of "unbreaking things" like the rest, especially at the start of YC. By now YC has certainly built institutional credibility, but even that can be broken if one day PG turns evil and sells out the brand like Pyrex or show or a grade-inflating college.
Doesn't seem like in his best interest. His present model has been incredibly successful, and what he is selling is a pre-screened class.
I imagine that his applicant pool is becoming more and more qualified over time, giving him a graduating 'class' that is constantly improving.
1 reply →
That's definitely true, but what that doesn't accurately capture is the time / mentorships and introductions that the YC team invests in all of their startups.
Ok, double that 5 million then to 10 million (a very generous assessment of their time). It's still an incredible return.
5ish years for 5ish people, some of whom could draw quite a fine salary in the M&A division of a big company or hedge fund or VC firm, and $5M doesn't seem too very generous an estimate. It is close to dead-on.
1 reply →