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> As it became more famous, it focused more and more on later-stage companies, and the investment sizes also grew. Something I've wondered: was this focus chan

> As it became more famous, it focused more and more on later-stage companies, and the investment sizes also grew. Something I've wondered: was this focus change deliberate? Or is it just a result of becoming more famous, attracting many more applicants, and accepting more mature companies since their success to date looks better?

apsec112 10y ago
Good question, I don't know. If anyone knows anything about this, I'd be very curious to hear.
clay_to_n 10y ago
Another explanation is they may have realized that the pre-incorporation "super early" startups were a riskier bet, and moved their sweet spot preference just a little bit past that based on the success metrics of their previous classes.
tyre 10y ago
(Recent YC founder) This looks confusing if you consider YC to be an accelerator or incubator, labels which they hate. If you look at them as a seed stage investor, their shifting focus makes sense. They give $120k for 7% of the company. Since the deal is set, the only variable, to maximize shareholder return, is the companies they accept. Since they are an investor, they're going to pick the best investments. How do they know the "best" investment? Past history helps, so (relatively) later stage companies will have an advantage. Revenue, team, traction, etc. are all good indicators. If you look at YC as just a seed stage VC, their actions are pretty consistent and logical.
- CalChris 10y ago
  If you view them as just a seed stage VC then is 7% for $120,000 reasonable? Seems that if someone thinks $120,000 is a lot of money (cuz 7% is a hefty percentage) they're desperate. If they think the YC Rolodex will make them, they're desperate. I'm not getting the value. Yes, YC has a brand and they can command this and their actions are indeed pretty consistent and logical. But it doesn't make sense from the other side of the transaction at least to me.
  - uiri 10y ago
    Won't YC get diluted along with the founders? That 7% will end up being less than 5% after a few rounds of VC when the founders' collective share of the company is 40-60%. 7% for $120k is a pre-money valuation of ~$1.6M. The value of a startup is not just its present value but also includes its expected future value. If you believe that your startup is worth less than that before YC, it makes sense to sell as much as possible at that valuation. On the flip side, that is a post-money (and post-YC) valuation of over $1.7M. I think any reasonable founder would expect their startup to be worth at least $2M after going through YC - for the Rolodex and for the 3 months of heads down focus that it forces you to do.
  - mbesto 10y ago
    > But it doesn't make sense from the other side of the transaction at least to me. It does make sense, because YC is effectively help price a round. What doesn't make sense is that most companies that go through YC are getting convertible notes from non-YC seed stage investors, while YC itself as an equivocal seed stage investor is getting equity. This is where the waters get a bit muddy.
  - applecore 10y ago
    Empirically, selling 7% of your company to join YC improves your average outcome so much that the remaining 93% is worth more than the entire company before to the transaction. If anything, YC is too cheap.
    - obstinate 10y ago
      What empirical data is there about this? Selection biases would seem to prevent a simple analysis.

apsec112 10y ago

Good question, I don't know. If anyone knows anything about this, I'd be very curious to hear.

clay_to_n 10y ago

Another explanation is they may have realized that the pre-incorporation "super early" startups were a riskier bet, and moved their sweet spot preference just a little bit past that based on the success metrics of their previous classes.

tyre 10y ago

(Recent YC founder) This looks confusing if you consider YC to be an accelerator or incubator, labels which they hate. If you look at them as a seed stage investor, their shifting focus makes sense. They give $120k for 7% of the company. Since the deal is set, the only variable, to maximize shareholder return, is the companies they accept. Since they are an investor, they're going to pick the best investments. How do they know the "best" investment? Past history helps, so (relatively) later stage companies will have an advantage. Revenue, team, traction, etc. are all good indicators. If you look at YC as just a seed stage VC, their actions are pretty consistent and logical.

CalChris 10y ago
If you view them as just a seed stage VC then is 7% for $120,000 reasonable? Seems that if someone thinks $120,000 is a lot of money (cuz 7% is a hefty percentage) they're desperate. If they think the YC Rolodex will make them, they're desperate. I'm not getting the value. Yes, YC has a brand and they can command this and their actions are indeed pretty consistent and logical. But it doesn't make sense from the other side of the transaction at least to me.
- uiri 10y ago
  Won't YC get diluted along with the founders? That 7% will end up being less than 5% after a few rounds of VC when the founders' collective share of the company is 40-60%. 7% for $120k is a pre-money valuation of ~$1.6M. The value of a startup is not just its present value but also includes its expected future value. If you believe that your startup is worth less than that before YC, it makes sense to sell as much as possible at that valuation. On the flip side, that is a post-money (and post-YC) valuation of over $1.7M. I think any reasonable founder would expect their startup to be worth at least $2M after going through YC - for the Rolodex and for the 3 months of heads down focus that it forces you to do.
- mbesto 10y ago
  > But it doesn't make sense from the other side of the transaction at least to me. It does make sense, because YC is effectively help price a round. What doesn't make sense is that most companies that go through YC are getting convertible notes from non-YC seed stage investors, while YC itself as an equivocal seed stage investor is getting equity. This is where the waters get a bit muddy.
- applecore 10y ago
  Empirically, selling 7% of your company to join YC improves your average outcome so much that the remaining 93% is worth more than the entire company before to the transaction. If anything, YC is too cheap.
  - obstinate 10y ago
    What empirical data is there about this? Selection biases would seem to prevent a simple analysis.