10 ms·

Stanford, Michael Bloomberg Now Back Every Y Combinator Startup

123 points by cryptoz 11y ago

cmsmith 11y ago
Thanks, I'll forward this the next time they ask for money. A shotgun approach to investing other people's money in tech startups is fine, but drawing down the $__B endowment in 2008-2009 to avoid salary freezes was too risky.
- deleted 11y ago
  [deleted]
- choppaface 11y ago
  Wow, any links about Stanford's position on the salary issues? Agree that Stanford putting in so much money (more than YC!!) seems pretty wonky. Perhaps not as bad as Larry Summers blowing billions of Harvard's money on derivatives, though.
  - deleted 11y ago
    [deleted]
- robryan 11y ago
  They might be putting up $10 million a year. In the context of a $22 billion dollar endowment this seems minor. All that money has to be invested somewhere, this isn't drawing it down.
georgeglue1 11y ago
I wonder if YC's seed investment being LP money changes the incentives/advice on the part of the partners. (?)
- jacquesm 11y ago
  It should not, they'll try hard not to let it make a difference (and in the case of the Yuri Milner investments it did not as far as I can see) but it could change if decisions made in one funding round would affect their ability to attract capital in the next. In other words, LPs have bigger influence in follow on rounds if any of the decisions made in the current round turn out bad for YC, but so far there is no evidence of that as far as I can see. It's a very interesting question though, sources of funds tend to exert pressure on the places those funds flow to. YC has always been 'as much hands on as you need or want' so in that respect they've been very good about letting their portfolio companies run themselves as much as possible while being there when needed.
gameshot911 11y ago
>Each startup that goes through the three-month program now receives$120,000 in cash — $20,000 from Y Combinator, plus $100,000 from the outside investors – in exchange for 7% equity in their company. $120k for 7% in a company!? Is that really a favorable term to startups? There's no way I would ever, EVER sell 7% of my company for a such a small sum. Who would sell out their passion for such a pittance? It's very possible I'm missing something here, because my impression is that YC truly tries to act as a partner with founders. I just can't see giving a go at a startup - with all that entails - for an idea I believe is worth only $1.7M (even at the nascent stage).
- dsrguru 11y ago
  Pretty sure it used to be <$20k for the same ~7%. The main value of YC has always been the training, network, and vote of confidence, not the funding. Not everyone finds it worth it for their particular situation, but many do.
- vessenes 11y ago
  You are wrong. So, so, wrong. If you were allowed to, the best thing you could possibly do for your early stage company would be to go take $100,000, nay $500,000 plus 30% of your stock and give it to Paul Graham in exchange for being let in to YC. It's not just the education you get, nor the peer pressure of being in a 'class' with other companies, it's also the social cache, the network of other YC funders, the access to investors, and lately, the benefits of YC punishing investors who treat their portfolio companies badly. Good/Great investors are all people you would always pay to have on your board, and gunning for your company. The money they give you helps keep the lights on and grow, but it's really a proxy for getting (and holding) their attention and focus on what you need to succeed.
  - jacquesm 11y ago
    The big draw of YC to me seems to be the alumni network, that's the real gold and with every class that network expands.
    - 11y ago
beambot 11y ago
You know what would be really awesome / disruptive / game-changing? If YC funded the program via crowdfunding (eg. JOBS Act) monies so that normal peons (sorry, "non accredited investors") could realize gains from a fund of early startups while effectively locking out all these institutional investors. This would be a real coup for people who believe in Basic or Guaranteed Minimum Income [1], like Sama. [1] http://blog.samaltman.com/technology-and-wealth-inequality http://blog.samaltman.com/technology-and-wealth-inequality
- sama 11y ago
  We would someday like to allow access for individual investors. We actually looked into it this time around; it's still extremely difficult. But hopefully the laws keep evolving and someday soon we can make you lots of money :)
  - beambot 11y ago
    Glad to hear it! In the meantime, I'm really excited for things like YC Research. Happy to contribute if I can (see profile). :)
  - planfaster 11y ago
    I can't help but think how ironic it is that most Americans would say what we have is capitalism, but at the same time there are laws in place prohibiting people from freely sending capital to each other.
    - brainflake 11y ago
      It's regulated capitalism... You may not agree with the laws governing investments for private companies, but surely you can understand the motivation for protecting investors?
      - tvanantwerp 11y ago
        Protecting investors? By making it illegal for most people to actually become investors?
Animats 11y ago
Stanford is really an investment fund that runs a school on the side for the tax break. This started in 1991, when Stanford spun off their endowment management as the Stanford Management Company.[1] SMC's headquarters was on Sand Hill Road, across from all the VCs. This ended up putting Stanford into venture capital in a big way. This was new. Before that, universities tended to put their endowments into passive investments - real estate, stocks, and bonds. Investing in startups worked out very well for Stanford. Stanford had pre-IPO stock in Cisco, Yahoo, Google... They have money in various VC funds. Buying into YCombinator is consistent with that investing approach. As SMC became more powerful, executives from SMC started moving into positions in the university itself. SMC moved its HQ onto the main campus. Not clear where this will end; we'll have to see who replaces Henessey as president. [1] http://www.smc.stanford.edu/ http://www.smc.stanford.edu/
- monopolemagnet 11y ago
  Budget and Auxiliaries alum here. B&A is a boring-sounding organization which is the primary income sheet profit-center, which rakes in slightly more than tuition; SMC is balance sheet (aka investment) management. Stanford is unlike most other universities in the fact that there is no pretense of firewalling business opportunity development from academic research. I think this pushes away some pure-research, money-is-evil people and attracts more entrepreneurial folks.
- nrao123 11y ago
  Stanford did not pioneer investments in alternative assets classes (VC/PE etc...) Robert Swenson of the Yale endowment fund was much earlier than that. It also became known as the "Yale Model" === For the two decades after Swensen took over as manager of Yale’s endowment in 1985 (just five years after he’d gotten his economics Ph.D at Yale), this worked spectacularly well — with a 16.1% annualized return compared with 12.3% for the S&P 500 and a remarkable record of sailing through stock market downturns that pummeled most other institutional investors. https://hbr.org/2010/04/why-the-yale-model-of-investin/ https://hbr.org/2010/04/why-the-yale-model-of-investin/ === The prevalence of Swensen acolytes in leadership posts highlights how dominant the Yale investment model has become among major U.S. universities. Colleges and universities ended 2014 with 51% of their portfolios invested in less-traditional fare like hedge funds, private equity and real estate that Yale favors—nearly double the allocation to those investments in 2001, according to annual surveys done by Nacubo and Commonfund. http://www.wsj.com/articles/universities-look-to-yale-for-investment-managers-1430299801 http://www.wsj.com/articles/universities-look-to-yale-for-in... === Swensen’s idea, implemented at Yale and copied nationwide, was that universities should shift their endowment money out of traditional investments such as stocks and bonds and into higher-yielding ones like private equity, hedge funds, and real estate. The Yale model, as it came to be known, perennially outperformed stodgier strategies, gaining Swensen gurulike adulation. http://upstart.bizjournals.com/executives/2009/03/18/David-Swensen-and-the-Yale-Model.html?page=all http://upstart.bizjournals.com/executives/2009/03/18/David-S...
tkinom 11y ago
Love to see Stanford leverage their successful models in incubating large part of Silicon Valley huge startup and franchise/multiple/clone into Stanford NY, Stanford LA, HongKong, Shanghai, Bangalore, London, etc. With large amount of the Stanford class contents already online, it is probably just setup small local campus for testing, group study local students and meetup.
pbreit 11y ago
"Y Combinator has struggled to hold on to its founder-friendly mentality" This assertion wasn't backed up by much and it's not my impression.
- anonbanker 11y ago
  let's pretend it's a TV show. Y Combinator is Blues Clues. pg was Steve. we're currently in the first part of the Joe Era. Joe was actually better than Steve in many ways[1], but he just isn't Steve, and everyone, including the audience, is trying not to notice, because yay, new Blue's Clues. Now, when it fully pivots into Blue's Room, run. [1] ways that don't include Steven Drozd.
  - pbreit 11y ago
    I didn't understand a word you just wrote.

123 points by cryptoz 11y ago

Thanks, I'll forward this the next time they ask for money. A shotgun approach to investing other people's money in tech startups is fine, but drawing down the $__B endowment in 2008-2009 to avoid salary freezes was too risky.

deleted 11y ago
[deleted]
choppaface 11y ago
Wow, any links about Stanford's position on the salary issues? Agree that Stanford putting in so much money (more than YC!!) seems pretty wonky. Perhaps not as bad as Larry Summers blowing billions of Harvard's money on derivatives, though.
- deleted 11y ago
  [deleted]
robryan 11y ago
They might be putting up $10 million a year. In the context of a $22 billion dollar endowment this seems minor. All that money has to be invested somewhere, this isn't drawing it down.

georgeglue1 11y ago

I wonder if YC's seed investment being LP money changes the incentives/advice on the part of the partners. (?)

jacquesm 11y ago
It should not, they'll try hard not to let it make a difference (and in the case of the Yuri Milner investments it did not as far as I can see) but it could change if decisions made in one funding round would affect their ability to attract capital in the next. In other words, LPs have bigger influence in follow on rounds if any of the decisions made in the current round turn out bad for YC, but so far there is no evidence of that as far as I can see. It's a very interesting question though, sources of funds tend to exert pressure on the places those funds flow to. YC has always been 'as much hands on as you need or want' so in that respect they've been very good about letting their portfolio companies run themselves as much as possible while being there when needed.

gameshot911 11y ago

>Each startup that goes through the three-month program now receives$120,000 in cash — $20,000 from Y Combinator, plus $100,000 from the outside investors – in exchange for 7% equity in their company. $120k for 7% in a company!? Is that really a favorable term to startups? There's no way I would ever, EVER sell 7% of my company for a such a small sum. Who would sell out their passion for such a pittance? It's very possible I'm missing something here, because my impression is that YC truly tries to act as a partner with founders. I just can't see giving a go at a startup - with all that entails - for an idea I believe is worth only $1.7M (even at the nascent stage).

dsrguru 11y ago
Pretty sure it used to be <$20k for the same ~7%. The main value of YC has always been the training, network, and vote of confidence, not the funding. Not everyone finds it worth it for their particular situation, but many do.
vessenes 11y ago
You are wrong. So, so, wrong. If you were allowed to, the best thing you could possibly do for your early stage company would be to go take $100,000, nay $500,000 plus 30% of your stock and give it to Paul Graham in exchange for being let in to YC. It's not just the education you get, nor the peer pressure of being in a 'class' with other companies, it's also the social cache, the network of other YC funders, the access to investors, and lately, the benefits of YC punishing investors who treat their portfolio companies badly. Good/Great investors are all people you would always pay to have on your board, and gunning for your company. The money they give you helps keep the lights on and grow, but it's really a proxy for getting (and holding) their attention and focus on what you need to succeed.
- jacquesm 11y ago
  The big draw of YC to me seems to be the alumni network, that's the real gold and with every class that network expands.
  - 11y ago

beambot 11y ago

You know what would be really awesome / disruptive / game-changing? If YC funded the program via crowdfunding (eg. JOBS Act) monies so that normal peons (sorry, "non accredited investors") could realize gains from a fund of early startups while effectively locking out all these institutional investors. This would be a real coup for people who believe in Basic or Guaranteed Minimum Income [1], like Sama. [1] http://blog.samaltman.com/technology-and-wealth-inequality http://blog.samaltman.com/technology-and-wealth-inequality

sama 11y ago
We would someday like to allow access for individual investors. We actually looked into it this time around; it's still extremely difficult. But hopefully the laws keep evolving and someday soon we can make you lots of money :)
- beambot 11y ago
  Glad to hear it! In the meantime, I'm really excited for things like YC Research. Happy to contribute if I can (see profile). :)
- planfaster 11y ago
  I can't help but think how ironic it is that most Americans would say what we have is capitalism, but at the same time there are laws in place prohibiting people from freely sending capital to each other.
  - brainflake 11y ago
    It's regulated capitalism... You may not agree with the laws governing investments for private companies, but surely you can understand the motivation for protecting investors?
    - tvanantwerp 11y ago
      Protecting investors? By making it illegal for most people to actually become investors?

Animats 11y ago

Stanford is really an investment fund that runs a school on the side for the tax break. This started in 1991, when Stanford spun off their endowment management as the Stanford Management Company.[1] SMC's headquarters was on Sand Hill Road, across from all the VCs. This ended up putting Stanford into venture capital in a big way. This was new. Before that, universities tended to put their endowments into passive investments - real estate, stocks, and bonds. Investing in startups worked out very well for Stanford. Stanford had pre-IPO stock in Cisco, Yahoo, Google... They have money in various VC funds. Buying into YCombinator is consistent with that investing approach. As SMC became more powerful, executives from SMC started moving into positions in the university itself. SMC moved its HQ onto the main campus. Not clear where this will end; we'll have to see who replaces Henessey as president. [1] http://www.smc.stanford.edu/ http://www.smc.stanford.edu/

monopolemagnet 11y ago
Budget and Auxiliaries alum here. B&A is a boring-sounding organization which is the primary income sheet profit-center, which rakes in slightly more than tuition; SMC is balance sheet (aka investment) management. Stanford is unlike most other universities in the fact that there is no pretense of firewalling business opportunity development from academic research. I think this pushes away some pure-research, money-is-evil people and attracts more entrepreneurial folks.
nrao123 11y ago
Stanford did not pioneer investments in alternative assets classes (VC/PE etc...) Robert Swenson of the Yale endowment fund was much earlier than that. It also became known as the "Yale Model" === For the two decades after Swensen took over as manager of Yale’s endowment in 1985 (just five years after he’d gotten his economics Ph.D at Yale), this worked spectacularly well — with a 16.1% annualized return compared with 12.3% for the S&P 500 and a remarkable record of sailing through stock market downturns that pummeled most other institutional investors. https://hbr.org/2010/04/why-the-yale-model-of-investin/ https://hbr.org/2010/04/why-the-yale-model-of-investin/ === The prevalence of Swensen acolytes in leadership posts highlights how dominant the Yale investment model has become among major U.S. universities. Colleges and universities ended 2014 with 51% of their portfolios invested in less-traditional fare like hedge funds, private equity and real estate that Yale favors—nearly double the allocation to those investments in 2001, according to annual surveys done by Nacubo and Commonfund. http://www.wsj.com/articles/universities-look-to-yale-for-investment-managers-1430299801 http://www.wsj.com/articles/universities-look-to-yale-for-in... === Swensen’s idea, implemented at Yale and copied nationwide, was that universities should shift their endowment money out of traditional investments such as stocks and bonds and into higher-yielding ones like private equity, hedge funds, and real estate. The Yale model, as it came to be known, perennially outperformed stodgier strategies, gaining Swensen gurulike adulation. http://upstart.bizjournals.com/executives/2009/03/18/David-Swensen-and-the-Yale-Model.html?page=all http://upstart.bizjournals.com/executives/2009/03/18/David-S...

tkinom 11y ago

Love to see Stanford leverage their successful models in incubating large part of Silicon Valley huge startup and franchise/multiple/clone into Stanford NY, Stanford LA, HongKong, Shanghai, Bangalore, London, etc. With large amount of the Stanford class contents already online, it is probably just setup small local campus for testing, group study local students and meetup.

pbreit 11y ago

"Y Combinator has struggled to hold on to its founder-friendly mentality" This assertion wasn't backed up by much and it's not my impression.

anonbanker 11y ago
let's pretend it's a TV show. Y Combinator is Blues Clues. pg was Steve. we're currently in the first part of the Joe Era. Joe was actually better than Steve in many ways[1], but he just isn't Steve, and everyone, including the audience, is trying not to notice, because yay, new Blue's Clues. Now, when it fully pivots into Blue's Room, run. [1] ways that don't include Steven Drozd.
- pbreit 11y ago
  I didn't understand a word you just wrote.