3 ms·

That's sort of a semantic debate, isn't it? PG might not be a traditional venture capitalist, but nevertheless, he invests money in companies in order to see a

by nkohari 19y ago

That's sort of a semantic debate, isn't it? PG might not be a traditional venture capitalist, but nevertheless, he invests money in companies in order to see a return. YC just does it on a much smaller scale than typical VC firms.

lisper 19y ago
> That's sort of a semantic debate, isn't it? No. There's one very significant difference between a VC and YC. VC's invest other people's money. YC doesn't. VC's may also invest their own money, but this is incidental to their primary business, which is to assemble investment portfolios for other people to invest in. They charge a fee for this, and many VC's make most of their money from these fees, not from the returns on the investments. This has real consequences. VC's are much more risk-averse than YC, because if they have a bad year it can put them out of business. (No one will want to invest their money in a VC which lost money for their previous investors.) If YC has a bad year they can just shrug it off, learn from the experience, and try again. This dynamic also changes the VC's risk posture in another way. A VC has much more to lose from a loss than they have to gain from a really big win. If a VC has a really big win, most of the money goes to the investors, not to the VC. The VC's primary benefit from a Really Big Win will be that more people will want to participate in their next round of investments, which is nice, but that in and of itself doesn't make you a billionaire. So VC's are much more interested in avoiding loss than in going after a Really Big Win. YC, by contrast, has nothing to lose from a loss except the money they put in (which is not much), and a lot to gain from a Really Big Win (since they are the investor). This makes YC willing to take much bigger gambles than a VC would. It also aligns YC's interests with the interests of the companies they invest in, since the bigger the company wins, the bigger YC wins.
- xlnt 19y ago
  yc has time and effort to lose in addition to money. not the end of the world, but they do have a limited amount of those. i agree yc has less to lose than a big VC investing other people's money, but it does matter to them whether they are making good funding choices or not.
  - lisper 19y ago
    The point is that whatever YC loses, it's theirs and not someone else's. They do not have a fiduciary duty to anyone but themselves. This significantly changes their risk posture. It's not just a semantic quibble.
    - xlnt 19y ago
      Yes I agree with that, I was just pointing out that they invest more than the $15,000 per company.
- run4yourlives 19y ago
  You're confusing being a VC with the standard VC fund. You don't need to have the latter to be the former. A VC can use their own money exclusively, and do so all the time. The professional VC's that manage pooled investments of other people are only a subset of the term Venture Capitalist.
  - nostrademons 19y ago
    Usually, the term "venture capitalist" refers to those people who manage other people's money by investing in startups, and the term "angel investor" refers to people who manage their own money by investing in startups.
    - run4yourlives 19y ago
      Agreed, but to say PG is a VC is not technically wrong. Under the "real" definition, all Angels are VC's too. That's why I'm suggesting it's all semantics.
  - pg 19y ago
    In the industry, the term "VC" is used exclusively for people who manage venture capital firms. I'm not considered a VC. Closer to an angel. But that usually implies an individual person. There's no name yet for the kind of thing YC is.
    - electric 19y ago
      "But that usually implies an individual person" Not really... http://www.bandangels.com/ http://www.bandangels.com/ What's the difference between YC and these guys? Maybe in the amounts invested.
      - pg 19y ago
        These angel groups usually have a different structure. You go and present to them and the angels individually decide whether they want to invest. Whereas YC itself is the investor in the startups we fund, as with a VC firm.

by nkohari 19y ago

lisper 19y ago

> That's sort of a semantic debate, isn't it? No. There's one very significant difference between a VC and YC. VC's invest other people's money. YC doesn't. VC's may also invest their own money, but this is incidental to their primary business, which is to assemble investment portfolios for other people to invest in. They charge a fee for this, and many VC's make most of their money from these fees, not from the returns on the investments. This has real consequences. VC's are much more risk-averse than YC, because if they have a bad year it can put them out of business. (No one will want to invest their money in a VC which lost money for their previous investors.) If YC has a bad year they can just shrug it off, learn from the experience, and try again. This dynamic also changes the VC's risk posture in another way. A VC has much more to lose from a loss than they have to gain from a really big win. If a VC has a really big win, most of the money goes to the investors, not to the VC. The VC's primary benefit from a Really Big Win will be that more people will want to participate in their next round of investments, which is nice, but that in and of itself doesn't make you a billionaire. So VC's are much more interested in avoiding loss than in going after a Really Big Win. YC, by contrast, has nothing to lose from a loss except the money they put in (which is not much), and a lot to gain from a Really Big Win (since they are the investor). This makes YC willing to take much bigger gambles than a VC would. It also aligns YC's interests with the interests of the companies they invest in, since the bigger the company wins, the bigger YC wins.

xlnt 19y ago
yc has time and effort to lose in addition to money. not the end of the world, but they do have a limited amount of those. i agree yc has less to lose than a big VC investing other people's money, but it does matter to them whether they are making good funding choices or not.
- lisper 19y ago
  The point is that whatever YC loses, it's theirs and not someone else's. They do not have a fiduciary duty to anyone but themselves. This significantly changes their risk posture. It's not just a semantic quibble.
  - xlnt 19y ago
    Yes I agree with that, I was just pointing out that they invest more than the $15,000 per company.
run4yourlives 19y ago
You're confusing being a VC with the standard VC fund. You don't need to have the latter to be the former. A VC can use their own money exclusively, and do so all the time. The professional VC's that manage pooled investments of other people are only a subset of the term Venture Capitalist.
- nostrademons 19y ago
  Usually, the term "venture capitalist" refers to those people who manage other people's money by investing in startups, and the term "angel investor" refers to people who manage their own money by investing in startups.
  - run4yourlives 19y ago
    Agreed, but to say PG is a VC is not technically wrong. Under the "real" definition, all Angels are VC's too. That's why I'm suggesting it's all semantics.
- pg 19y ago
  In the industry, the term "VC" is used exclusively for people who manage venture capital firms. I'm not considered a VC. Closer to an angel. But that usually implies an individual person. There's no name yet for the kind of thing YC is.
  - electric 19y ago
    "But that usually implies an individual person" Not really... http://www.bandangels.com/ http://www.bandangels.com/ What's the difference between YC and these guys? Maybe in the amounts invested.
    - pg 19y ago
      These angel groups usually have a different structure. You go and present to them and the angels individually decide whether they want to invest. Whereas YC itself is the investor in the startups we fund, as with a VC firm.