I mean I know roughly how it works from the standpoint of taking investment money and funneling it into companies but unless I missed it I have yet to see them "cash out" on any existing investments so are they bringing in any money from those investments or is it just more and more funding to do further investments that powers everything?
Going forward, we'll get some management fees from this fund that will contribute to operations.
We also practice what we preach to startups, and spend surprisingly little money each year--our all-in cost for 2015 is about equal to the salary of 2 GPs at many other firms.
The direct effect of this is that "backtesting" this reasoning would have resulted in many of your biggest successes, simply not being funded at all. (Because they were too large gambles.)
Note: due to the provocative question I would have preferred to ask you by email, but I think it just gets routed away and you don't see my emails.
Also, there is a secondary market for private stock. It's possible for YC to sell some of their position in the big successes that haven't yet IPO'ed.
In the early days, YC raised money from VCs to fund their seed investments. That ended because YC doesn't need the money anymore. This continuity fund might be different in that regard.
To prove that they are very well known, suffice to say that the French news [0] spoke about them back in 2012.
[0] http://www.lemonde.fr/economie/article/2012/08/24/y-combinat... (In French, to summarize it says YC is basically a prestigious incubator with a great portfolio).
http://techcrunch.com/2010/05/21/y-combinator-closes-new-8-2...
It must be tied to this free money that only certain individuals can play with, and this stock market that isn't playing by the fundamentals?
Or the wealthy have more play money than I dreamed of?
I'm not knocking it, and would gladly accept funding. I just think it's going to end, and as Willie Brown echoed , 'What are we going to do with all these unemployed Tech workers?'
Then again maybe it won't, and rent for a one bedroom in San Francisco Bay Area will be $15,000/month in a few years?
I obviously don't know much about investing in tech. I just see a lot of money thrown around, and certain CEO's seem clueless about their product, or even if their tech product is better than what we currently have.
Maybe I will never know? Why should I? I'm not investing in these companies. It's not my money, or is it? I do know my investment income is tied to the interest rate. No, I can't afford to gamble, so my investment income relies on Janet Yellen raising the interest rate, and hoping inflation doesn't eat it up.
I'd be interested in hearing how being more like a regular VC firm helps YC be better at what it is currently.
Two thoughts:
1) In the same way YC was able to make the early-stage ecosystem better for founders, we think we can do the same for the late-stage ecosystem.
2) It's important that we can support companies at later stages in areas that other investors don't like to support.
Having been through the process three times now (on the side of the startup, not the firm) its been interesting to evaluate the different focus and people who populate the later stage companies from the early stage companies. Clearly the questions and metrics are different, but I've found the engagement to be different too. Much more bankerish and less advisorish if that rings any bells at all.
I think YC changed the early stage game in a fundamental way, much better than Angels it has the whole network effect of both Angels and every company that has been through the program. I guess I'd like to challenge you to be more innovative as a late stage investor than announcement seemed to suggest.
i.e. YC leads a growth round for Company A, but not for Company B. Ergo, VCs think Company B isn't worth funding.
Good stuff.
(Why don't current VCs invest in those areas, if they're potentially profitable? Just a lack of a long-term view / fund wind-down timelines?)
YC isn't immune to becoming too big for themselves. It just opens up room for a new "startup yc" where everybody can have a strong initial impact again (until the new one grows too big too, then the cycle starts again).
Especially likely to happen once the first cohort of YC founders has kids of age 12-18.
At some point life experience has to happen outside of YC VC invest startup win exit pivot iterate mvp lean partner found excellence smartest-founders-under-8-years-old bubble land.
There's also the risk of "startup dynasty" — like how mark's sister became an associate parter at a VC firm and his other sister turned into a "self-made" social phenom of blandness-by-association. meritocracy for all, but meritocracy more for the friends and family of the already successful.
Most of us are not that connected in SV that we know every name you do... so please provide context.
Thanks
Does anyone else read this and take away "[investors/VCs/other equity funds who don't group-think and blindly follow each other based on FOMO] are an important ingredient in that mission."
Exit as in: cash or public stock readily convertible to cash
Know there is a timing issue, but would be interested in just total actual exits?
most of this is publicly accessible; that said, YC may have sold their positions in some companies (unknown). Twitch, heroku, reddit, omgpop, others... YC may (or may not) still hold Dropbox, and many others.
You've addressed signalling risk in another response, but I'm curious to hear your thinking about the impact this will have on your ability to have an authentic advisory relationship with founders.
Do you have any concerns that this could make founders dial back their level of authenticity with you? I think there's tremendous value in having founders who are comfortable being completely transparent about the concerns they have.
In the back of founders minds, there could now be a small voice saying "Should I discuss possible future issue X with YC? If we haven't come up with a good answer to X, it could impact the next round. We'd be better off dealing with X after our series C rather than after our series B." But in not having the conversation, tremendous value is lost - good advice might turn it into a non-issue.
I must say Sama...I am truly impressed. I honestly wasn't sure how much better YC could have become when PG stepped down, but looking back...just from the outside looking in...it seems to have gotten at least 5X better if not more.
So keep up the good work you (guys) do. I suspect though that it is also testament to the team you have around you as well.
PG used to say you were one of the smartest people he knows, but many people are smart. It is quite a different thing to be effective and you have been remarkably effective at doubling down and significantly improving the value that YC truly creates.
It is wonderful to witness, as much as watching Musk do his thing.
Is founder ceo succession inherently less likely at YC startups due to YC selection process?
[0]: The Founder's Dilemmas, Wasserman, p.299
sama: "In the same way YC was able to make the early-stage ecosystem better for founders, we think we can do the same for the late-stage ecosystem."
rdl: "Curious if in 5 years YC figures out a way to OpenIPO YC companies, solving the private/public market impedance mismatch which seems to be happening now."
dshankar: "Instead, I wonder if YC can formalize & self-regulate a secondary market as an intermediate step before IPOs. "
rdl: "I wonder how long until YC goes upstream of fellowship/startup school: consolidated remote/mini internships for high school students, or some other "get involved with YC companies early" kind of thing."
Many things going on. No way of knowing all of this could work out fine. Just to me, from my observation of business over many years (not specific to startups) I say "DWR" [1]
[1] Danger Will Robinson.
