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I get that YC makes sense for larger companies, but also am curious as to why YC is so inflexible on the terms of the investment. Capital is obviously not a con

by lquist 11y ago

I get that YC makes sense for larger companies, but also am curious as to why YC is so inflexible on the terms of the investment. Capital is obviously not a constraint for YC, so why doesn't the fund just put up more money for the 7% for larger companies? One guess I have is that it makes it introduces friction and makes YC much less scalable, but also would attract more large startups.

mafuyu 11y ago
The cynic in me says because they have the brand name and they can be stingy. The reality is likely that they are conveying their values through the investment terms. They want startups to be lean, fast, and high growth. Money makes you lazy. They're saying they'll teach you the actually valuable stuff in the program. YC also says they'll help you raise more investment money if you need it, which is true, I suppose...
tptacek 11y ago
One reason for this is that they're working with tens of companies per batch, and the way the application/interview process works doesn't give them a lot of time to wait for people to accept. If you make the deal negotiable, people will try to negotiate. Given that this is the. major. problem. with raising money from institutional venture capitalists, it's not hard to see why someone trying to do lightweight capital for new companies would want to avoid that problem. Remember also: they're doing two batches per year, the batch lasts 3 months, there's a lot of stuff that happens right after the batch, and the whole application/acceptance process is condensed down to a month as it is. There's not a lot of flexibility available in this calendar even as it is. (Also: at least in earlier batches, there were IIRC companies that did negotiate the % YC was buying for their money).
- markolschesky 11y ago
  Agreed. I was previously a founder with a company in an incubator in which we were able to negotiate the terms of the deal. One founder spent 3 months basically trying to negotiate the terms and at the end we didn't take that funding and it was like lighting 3 months of time of fire on equity discussions that didn't matter if we weren't successful. If you only have 2-3 founders, it's a major distraction/waste of time up front when you really need to be taking advantages of whatever the incubator provides (connections, mentorship, pilots, etc.) and executing. If there are no advantages, don't join the incubator. If you don't want to take VC funding, you probably shouldn't join an incubator/accelerator since VC connections are usually the few consistent things the incubator can provide.

by lquist 11y ago

mafuyu 11y ago

The cynic in me says because they have the brand name and they can be stingy. The reality is likely that they are conveying their values through the investment terms. They want startups to be lean, fast, and high growth. Money makes you lazy. They're saying they'll teach you the actually valuable stuff in the program. YC also says they'll help you raise more investment money if you need it, which is true, I suppose...

tptacek 11y ago

One reason for this is that they're working with tens of companies per batch, and the way the application/interview process works doesn't give them a lot of time to wait for people to accept. If you make the deal negotiable, people will try to negotiate. Given that this is the. major. problem. with raising money from institutional venture capitalists, it's not hard to see why someone trying to do lightweight capital for new companies would want to avoid that problem. Remember also: they're doing two batches per year, the batch lasts 3 months, there's a lot of stuff that happens right after the batch, and the whole application/acceptance process is condensed down to a month as it is. There's not a lot of flexibility available in this calendar even as it is. (Also: at least in earlier batches, there were IIRC companies that did negotiate the % YC was buying for their money).

markolschesky 11y ago
Agreed. I was previously a founder with a company in an incubator in which we were able to negotiate the terms of the deal. One founder spent 3 months basically trying to negotiate the terms and at the end we didn't take that funding and it was like lighting 3 months of time of fire on equity discussions that didn't matter if we weren't successful. If you only have 2-3 founders, it's a major distraction/waste of time up front when you really need to be taking advantages of whatever the incubator provides (connections, mentorship, pilots, etc.) and executing. If there are no advantages, don't join the incubator. If you don't want to take VC funding, you probably shouldn't join an incubator/accelerator since VC connections are usually the few consistent things the incubator can provide.