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Hi…Ali from YC here. There are a couple of things I’d like to address in the comment above from YC’s perspective. First, YC has no “vertical integration stra

Hi…Ali from YC here. There are a couple of things I’d like to address in the comment above from YC’s perspective. First, YC has no “vertical integration strategy” to make “demo day and A round financing by outsiders” to “disappear.” In fact, it’s quite the opposite. We work very hard to make sure that there is a vibrant investing ecosystem around YC. Our core program is attractive to founders because there are hundreds of investors who come to Demo Day to invest in YC companies. YC would be much less valuable if this ecosystem did not exist, so it would not be in our interest (or in the best interest of our founders) to make these investors “disappear” or otherwise compete with them for Series A deals. In fact, YC's Continuity Fund expressly does not compete for Series A deals. Secondly, it's highly unlikely that companies who do not participate in our Growth Stage program will find it more difficult to raise money because they will be labeled “damaged goods.” YC’s signal at the growth stage is largely irrelevant. Investors evaluate growth stage companies based on their business metrics. There is enough data at this stage to evaluate whether a business is working or whether it’s not. Companies with robust metrics attract investors; those with weak metrics don’t. It’s as simple as that. No late stage investor will care whether a company participates in our program or not.

jacquesm 9y ago
Hey Ali, I totally understand where you are coming from but a similar dismissive comment was made when I first suggested YC would eventually do follow on investments and tada, that is now the case. Long term plans or long term reality and short term strategy do not necessarily overlap. No malice is inferred or intended, just a change of perspective over time. As for > "Secondly, it's highly unlikely that companies who do not participate in our Growth Stage program will find it more difficult to raise money because they will be labeled “damaged goods.”" I meant that to be related to the combination of funding and growth stage program, not to be related to the growth stage program by itself.
- deleted 9y ago
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- arowghani 9y ago
  Thanks Jacques. I don’t read any malice in your words and I certainly don’t mean to sound dismissive. My point was simply that, as a matter of strategy, it would not be in YC’s interest to “vertically integrate” as you suggest. And I can assure you it’s not in our plans. I also don’t believe that YC’s actions have a profound impact on how growth stage companies are perceived by investors because these companies thrive or suffer based on their own measured performance rather than based on YC’s signal. I think a lot of your comments on this thread were quite smart, but wanted to add some color on these two points
  - jacquesm 9y ago
    > My point was simply that, as a matter of strategy, it would not be in YC’s interest to “vertically integrate” as you suggest. Why do you believe this to be the case? YC has sucked a substantial amount of oxygen out of the lower tiers, to the point where no matter where in the world you are as an early stage investor YC competes. What in particular do you feel will stop YC from doing the same thing for higher tiers, where - as far as I can see it - the only differentiating factor is the size of the tickets?
    - arowghani 9y ago
      We won’t compete for traditional Series A deals because it would damage our core program to do so. It would be self-defeating to try to “vertically integrate” and disrupt the vibrant investor ecosystem that we have cultivated around Demo Day. Not to mention the fact that founders would hate us for denying them the ability to choose their own investors if, as you write, we made Demo Day “disappear” in order to compel founders take more money from us.
      - jacquesm 9y ago
        Ok, but you could do a better job than traditional VCs, just like what you did with the original program. So: better alignment of interest between founders and capital providers, better terms and so on. Just like right now YC does not have exclusivity in the early stage, it could be a viable alternative, and if that viable alternative has better terms and other intangibles it could easily work out as a win-win for both founders and YC. Demo day would then shift down the road to series B and later. Anyway, that is just speculation. Thank you for taking the time to answer me.

jacquesm 9y ago

Hey Ali, I totally understand where you are coming from but a similar dismissive comment was made when I first suggested YC would eventually do follow on investments and tada, that is now the case. Long term plans or long term reality and short term strategy do not necessarily overlap. No malice is inferred or intended, just a change of perspective over time. As for > "Secondly, it's highly unlikely that companies who do not participate in our Growth Stage program will find it more difficult to raise money because they will be labeled “damaged goods.”" I meant that to be related to the combination of funding and growth stage program, not to be related to the growth stage program by itself.

deleted 9y ago
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arowghani 9y ago
Thanks Jacques. I don’t read any malice in your words and I certainly don’t mean to sound dismissive. My point was simply that, as a matter of strategy, it would not be in YC’s interest to “vertically integrate” as you suggest. And I can assure you it’s not in our plans. I also don’t believe that YC’s actions have a profound impact on how growth stage companies are perceived by investors because these companies thrive or suffer based on their own measured performance rather than based on YC’s signal. I think a lot of your comments on this thread were quite smart, but wanted to add some color on these two points
- jacquesm 9y ago
  > My point was simply that, as a matter of strategy, it would not be in YC’s interest to “vertically integrate” as you suggest. Why do you believe this to be the case? YC has sucked a substantial amount of oxygen out of the lower tiers, to the point where no matter where in the world you are as an early stage investor YC competes. What in particular do you feel will stop YC from doing the same thing for higher tiers, where - as far as I can see it - the only differentiating factor is the size of the tickets?
  - arowghani 9y ago
    We won’t compete for traditional Series A deals because it would damage our core program to do so. It would be self-defeating to try to “vertically integrate” and disrupt the vibrant investor ecosystem that we have cultivated around Demo Day. Not to mention the fact that founders would hate us for denying them the ability to choose their own investors if, as you write, we made Demo Day “disappear” in order to compel founders take more money from us.
    - jacquesm 9y ago
      Ok, but you could do a better job than traditional VCs, just like what you did with the original program. So: better alignment of interest between founders and capital providers, better terms and so on. Just like right now YC does not have exclusivity in the early stage, it could be a viable alternative, and if that viable alternative has better terms and other intangibles it could easily work out as a win-win for both founders and YC. Demo day would then shift down the road to series B and later. Anyway, that is just speculation. Thank you for taking the time to answer me.