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Y Combinator raising $1B for new fund
- richardwhiuk 9y agoYC edging to become more like a typical VC?
- elmar 9y agonot typical, probably more like a Full-Stack VC.
- elmar 9y agofor example 500 Startups had already publicly positioned themselves as a Full-Stack VC. https://www.slideshare.net/mobile/dmc500hats/venture-capital-unlocked-stanford-venture-capital-20/15-500_Startups_FullStack_VC https://www.slideshare.net/mobile/dmc500hats/venture-capital...
- maxxxxx 9y agoI am starting to wonder if they are falling into the growth trap a lot of companies seem to fall. Instead of staying at a certain size and having a nice sustainable business, they grow too big and lose their character.
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- justinzollars 9y agoPlease don't become a typical VC. I love YC for what it does so well
- QAPereo 9y agoWhat in your view, distinguishes a typical VC from YC?
- throwawaybbq1 9y agoMaximizing return to investors.
- vthallam 9y agoThe application process, number of deals they do and the community across YC companies which is not so great in the typical VC firms.
- willholloway 9y agoWhat I got from reading Paul Graham's own writing on the genesis of YC, was that his key insight was that VC's should be funding more companies, and earlier, and giving founder's much more control. The other key innovation was funding in batches, in classes. This created a close-knit ad hoc community with shared goals, and one in which teams whose ideas were not finding traction could join teams whose ideas were.
- Danihan 9y agoPaul Graham's own writing and advice is not really followed by YC though. As an easy example, look at his recent post about naming your startup, versus the names of the companies allowed through in a recent round of seed funding. http://www.paulgraham.com/name.html http://www.paulgraham.com/name.html https://techcrunch.com/2016/08/22/y-combinator-demo-day-summer-2016/ https://techcrunch.com/2016/08/22/y-combinator-demo-day-summ...
- erikpukinskis 9y agoAre the batches really that tight still? Seems nice just as a way to structure the curriculum, but is it more than that?
- dieselz 9y ago
- ericb 9y agoI'm wondering if this is related to scaling Startup School. A clear business purpose for YC isn't visible in startup school, yet--could this be related?
- tptacek 9y agoThe article says it's for Continuity Fund, which does investments in YC startups (and, apparently, non-YC startups now as well).
- ericb 9y agoShortly after that, it goes on to say they are all being merged, so I don't put much stock in that as an indicator of the purpose.
- tptacek 9y agoIt says Continuity and Early Stage are being merged, not that everything in YC is being merged.
- ericb 9y agoTo clarify, when I said "everything" I meant stage-wise, early and late are being co-mingled, which to me, implies that this isn't necessarily related to continuity, which is late stage. I'm not trying to imply that the overall corporate structure is changing. I was assuming that startup school would fall under the early stage rubric, but maybe not?
- tedmiston 9y agoIIRC YC does not invest in startup school companies at all (but invites them to apply for YC Core as they do any startup).
- tommynicholas 9y agoI think it's about making money by investing in companies they think could be big but maybe I'm crazy.
- orthoganol 9y agoI believe it's possible YC has overextended themselves such that top AI companies - the most valuable companies in the future - are going to first try Gradient Ventures or more specialized funds, and it may cost them their future. I understand they want to be a destination for AI, but I have a tough time imagining it. Maybe when they opened the floodgates to 100+ per cohort was when their brand became "the best anything and everything of startups," and if a rich, connected AI veteran launched his own AI fund, I'd be more excited to knock on that door first, if not an AI fund from an org intimately tied to a top AI shop.
- user5994461 9y agoOverextending... to only control billions of dollars in some of the most valuable companies in the world. What a bad position to be in.
- graycat 9y ago> AI companies - the most valuable companies in the future To me that's like going to a state fair 150 years ago, seeing the vendors of snake oil, and concluding that the most valuable companies in the future will be selling bottles of secret potions. For "artificial intelligence", I see no actual intelligence and a lot of emphasis on artificial. The best of it is at its core some fairly traditional applied math and/or electronic engineering. Instead, there're huge sections of the research libraries for pure math, applied math, physical science, electronic engineering, and computer engineering, and in comparison so far the best of AI is hardly more than a few books on one shelf. How to do applied science, engineering, etc. hasn't changed; AI hasn't changed how; the only way to have > AI companies - the most valuable companies in the future is just to call all the most valuable companies, or safer yet, all new companies, AI. Silly talk. A claim like > AI companies - the most valuable companies in the future will be part of what we've seen before: AI winter, AI spring of new hope, AI summer of scam, AI fall of failure, AI winter again. Get your warm clothing while it's cheap now because the next AI winter will be darned cold! E.g., look up the little game of, say, matchsticks called Nim. Let AI learn to play it. Against just a common man in the street, it might do well. Against me, it will lose at least half the games if we first flip a coin to determine who moves first. Just why and how I'm winning, the AI program won't figure out; figuring out such things is so far just not what AI does. Or, teach AI some high school plane geometry. Then consider the problem, given triangle ABC, by Euclidean construction find point D on side AB and point E on side BC so that the lengths AD = DE = EC. To do this, need to be a little creative; that is, need some actual intelligence. The people who taught the AI geometry program likely didn't teach how to do that, and, then, for the solution, the AI program won't know how to do it, won't figure it out, and won't do it. Net, AI is not "intelligent". Chase down big trees in chess, checkers, Go, etc., play games against itself, accumulate a lot of statistics, and, then, play and often win -- okay. Be "intelligent"? Nope, not yet. Or, one day I got via e-mail a specification of a problem in 0-1 integer linear programming. A first example had 40,000 constraints and 600,000 variables. Some people had tried "simulated annealing", ran for days, took the best results they had so far, results of unknown distance from optimality, and stopped. Drop that problem into a lot of integer linear programming (ILP) packages, and won't get very far. Write some software to do what such ILP packages do and call it AI, and again won't get very far. So, instead, need some new ideas, that is, from some actual intelligence. So, I put my feet up, popped open a cold can of diet soda, reviewed a little, thought a little, did some derivations in non-linear duality theory (early in that theory there are some darned cute results, e.g., get some surprising, useful convexity), designed and wrote some code, and in 905 seconds on a slow PC found a feasible solution guaranteed to be within 0.025% of optimality. Figuring out how to do that for that problem took some actual intelligence. Here's one: I was in an AI group monitoring server farms and networks. So, suppose we are given instances of one or both of those and collect data, say, points, where each point consists of numerical data on each of several variables, say, 50, and where we get, say, 100 such points a second. Now we want to define and detect in essentially real time anomalies as, really, a reason to start diagnosis and see if there is a real problem. For this, we want, and are quite serious about, false alarm rate: We want the rate adjustable in advance and, then, in practice to get that rate essentially exactly. And when we get an anomaly, we want the lowest rate of false alarms at which the data would still be an anomaly. Okay, AI/ML machine, how the heck to do that? The answer needs some intelligence, e.g., borrow some from ergodic theory, get a finite algebraic group, sum over the group, etc. For that work, the current techniques of AI/ML won't even pass the giggle test. Sure, taking my work, could program that and call the result "artificial intelligence", but really just programmed some pure/applied math. And, sure, will need an algorithm to make the computations fast, and that will need more genuine intelligence. AI "intelligent"? LOL. > AI companies - the most valuable companies in the future More LOL.
- 11thEarlOfMar 9y agoJust guessing, but 'going global' may factor into this. Not as in more than one meeting center, rather, globalizing the marketing for startups. There is an interesting 'snowball effect' of successful exits growing the number of investors, and YC, even with the huge number of applicants it enjoys today, may be seeing quality diminish and therefore need to establish more permanent presence in other founder hot beds around the world. Perhaps that such a move is independent of this raise, but in order to invest the money, they'll need to keep the building the flow of recruits.
- jaypaulynice 9y agoMy guess is they will fund some Startup School founders with a small amount of money like they did with the Fellowship. Then again it's all up in the air. They raised 700M last year or so. They could also be piling up cash for bad times to keep YC companies private for as long as possible.
- OoTheNigerian 9y agoI'm amazed at how YC has successfully executed the ultimate startup by funding startups. Going from investing 15 in 6 companies to have a one billion dollar fund. I wonder how this will alter the market considering they'll have first option from the very first check. Will other VC firms look at how they can go down the pipeline? Kudos to them!
- probe 9y agoIsn't it risky to selectively back particular YC companies? There's always a negative signal when your lead investor doesn't participate in future rounds - if they start doing that more regularly with this new fund, then it might become a negative signal for a YC company NOT to have Continuity/YC as a follow-on investor (which sucks b/c the firms are so early stage). Anyone know how VC firms that invest in all early-growth-late firms deal with this dilemma (realizing there are only a few cases)?
- dzink 9y ago"to selectively back companies that didn't participate in its accelerator program"
- WisNorCan 9y ago"So far it's only done one such deal, which remains unannounced, but more could come." How does Axios know that they have done a deal if it hasn't been announced?
- joncalhoun 9y agoMy best guess - someone told them of such a deal, but wouldn't disclose who the company was because it hasn't been officially announced.
- _sentient 9y agoYC has explicitly stated they won't lead Seed or Series A rounds in order to avoid this conflict. They are intentionally leaving economics on the table in order to better support their founders. At the stage Continuity invests ($15-$50M rounds), YC's early signal is far less important than the actual fundamentals of the business.
- ivankirigin 9y agoIt's even better than that too, given their commitment to invest pro-rata. So the money is there if you can get another firm to lead. Because this policy is public, there shouldn't be signalling issues.
- andreasklinger 9y agoFor those who like game theory: By doing this they don't have to consider if startups are suitable for follow up investors and thus avoid the Keynesian beauty contest problem of not selecting the "prettiest" startup: https://en.wikipedia.org/wiki/Keynesian_beauty_contest https://en.wikipedia.org/wiki/Keynesian_beauty_contest > "It is not a case of choosing those [faces] that, to the best of one's judgment, are really the prettiest, nor even those that average opinion genuinely thinks the prettiest. We have reached the third degree where we devote our intelligences to anticipating what average opinion expects the average opinion to be. And there are some, I believe, who practice the fourth, fifth and higher degrees."
- draw_down 9y agoHmm?
- andyidsinga 9y agoit's interesting because each level of indirection is not like a pointer in C but has error associated with it. interesting thought exercise to try to understand the error at each level.
- clock_tower 9y agoI hadn't heard of that before, but I'll keep it in mind for sure. I was going to say that the obvious solution is to not play -- to buy and hold based on fundamental value, and specifically seek out promising but undervalued stocks -- but then, that solution doesn't offer the kind of growth that VC wants, or that a Keynsian beauty contest offers when you win.
- jklein11 9y agoI don't know too much about the VC world but could this be seen as negative signal? What is the purpose of combining the funds? The only thing I can think of is to obfuscate some of their losses. Also, is the new round of funding because YC's assets are illiquid and they need a cash infusion?