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Was just thinking the other day, it'd be super interesting if YC ran some YC Equity/YC UBI experiments within its own network. Basically in joining YC, each YC

• sama 9y ago
  I am interested in trying some version of this! Have been thinking about all the edge cases.
  • jacquesm 9y ago
    That'll be expensive. On the order of 100's of millions per year at that scale. 15,000 * 1000 = 15 M / month for an amount that would move the needle, but still not enough to live off.
    • foota 9y ago
      I don't think they have 1500 companies inflight at once though.
      • jacquesm 9y ago
        Roughly, yes YClist has 1280 of them, and every half year there are more. And at 10 FTE / company average the GGGP's 15,000 FTE total is believable. It could easily be more than that.
        • foota 9y ago
          Wow, okay then.
        • B1FF_PSUVM 9y ago
          I'm reminded of an amusing projection of telephone switchboard operator jobs (from the early 1900s) soon occupying half the US population, but can't find it right now.
    • jpao79 9y ago
      You're right and maybe its more about providing the YC participants with a vested interest in the overall success of all the YC companies than providing them with a guaranteed income for life. You'd want to size it to provide enough equity to turn the 15,000 participants into active evangelists of the larger network of YC companies than just their own individual startup. And yes it is expensive. There are definitely significant parallels in that sense to the larger UBI discussion :)
      • jacquesm 9y ago
        > You'd want to size it to provide enough equity to turn the 15,000 people into active evangelists of the larger network of YC companies than just their own individual startup. They already do this, for free. The YC alumni network is a vast resource and a substantial force behind the recruitment of new start-ups.
  • beambot 9y ago
    This could be an interesting (end-around) way to create a US Inc, as you discussed in your UBI interview: https://spectacle.com/001/sam-altman-interview-universal-basic-income/ https://spectacle.com/001/sam-altman-interview-universal-bas...
  • simonebrunozzi 9y ago
    Sam, let me offer one humble suggestion. 1) UBI (or anything similar) in Oakland is expensive. Back of the napkin calculation: $1,000/month/person = $12,000 = you need about $0.5M in capital to maintain that level of basic income without reducing the capital over time (I am applying the usual 4% interest on capital, for passive income - the number might be wrong or might change in the future (see Piketty) but let's use it for now). Instead, UBI in other regions of the world can be a small fraction of it (I can easily imagine 1/10th of what it costs in Oakland = $50,000). 2) You have ~15,000 YC alumni. Ask each one of them to commit at least 50k each (or multiples of it), to offer UBI to 15,000 people in a developing country. In exchange for that, you might give them a tiny share of YC (not equivalent to 50k, but perhaps a smaller amount). It shouldn't be seen as a great investment for them; it should be instead done mostly out of altruism. 3) UBI provided to 15,000 people (or possibly more) is the right type of experiment, at a big enough size. It's essentially a big village, or a number of small villages. It's also good to see this applied in a developing country: the impact can really be seen and observed properly. 4) I am pretty sure that there would be a number of volunteers willing to commit their time to observing and measuring the experiment, wherever it will be (however, I suggest to pick an English-speaking developing country, as it makes many other things easier).
    • alexasmyths 9y ago
      This micro-UBI thing is a bad experiment with good intentions. UBI only works if it's fairly 'U'. If you give UBI to 'one village' - that village will have tremendous leverage over the surrounding villages. Any rational application of commercial knowledge will - knowingly or unwittingly - drive competitors out of business, and that 'UBI village' could theoretically come to control a lot. It only took a very small marginal advantage in transport costs for Oil companies to put others out of business and to create massive monopolies. If you run a little 'sim village' experiment on that, you might find the UBI village owning all the regional real-estate over time and just extracting rent. Another way of saying: a consistent, stable fixed income, even a not very big one, can be a powerful asset.
      • xapata 9y ago
        You're making claims like you have empirical evidence, but I'm not aware of such an experiment.
  • deleted 9y ago
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  • JSONwebtoken 9y ago
    The quotes you provided in the article weren't clear on this: did you mean to say that some of these companies don't deserve funding or that it would be a better choice for them to continue to grow and operate without raising capital?
  • dzink 9y ago
    Edge cases: A. If you give the equity to the startups: 1. There is a risk of activist or corporate acquirers getting a substantial share of YC after buying out startups. Contract clauses can eliminate that, and prevent dilution, but value of extended network advocacy is lost too. 2. Do dead startups lose their share? If they do, you would see more zombies, which is not ideal. If they don’t who keeps the equity when founders part ways? If it’s the founders based on equity share - see (B) 3. Competing startups could have shares in the successful one, and potential vote, which leads Oracle/Salesforce type battles. Potential swinging votes during corporate governance, but also potential helpful behavior, which while nice could be seen collusion by regulators at scale. That said, startups win with monopoly characteristics, so that may be less of an issue. B. If you give the equity to individual members: 1. There is selection bias where alumnae help friends and go through the program multiple times - you risk having portfolio maximization and groups voting buddies in for control over YC. Even if you don’t see clique battles, there will still be: Vote these guys in because they were Stanford alumns too. Over time you will lose even more diversity in the network and a broader network that captures the next wave of breakouts not seen by the less diverse YC will gain speed. 2. The resume stuffing and portfolio padding motif to join YC will be dominant to the “let’s build a unicorn” motif. People who pursue status and do YC as the next Harvard will have more easy access (B1) and more reason to go for it. 3. To boost the unicorn incentive the above equity distribution needs to continue only if you have a startup within YC that is actively growing by certain criteria or has had a meaningful exit for the YC network. Another way to protect integrity of the network, is to allow equity in YC to be stacked only if the person has been a founder of more than one startup still growing or with a meaningful exit. This scenario may be enhanced with some incentive for people who join other YC startups meaningfully, but how complicated a structure will be too complicated for investors in the YC startups themselves? This is first layer of brainstorming with minimal info.
  • austenallred 9y ago
    In the beginning YC kind of was a UBI experiment. $20k isn’t enough for more than living expenses for some amount of time. Of course, $120k is a bit more, but in my mind YC was a very successful implementation of UBI.
    • dzink 9y ago
      It was a BI experiment, the U being eliminated by heavy selection. Xerox PARC started that way as well - select very talented people, then give them money to work. UBI presumes you are ready to give the guy begging on the street with an alcohol habit the same check you'd give Drew Houston. A company can pick its most favorable market to make a profit (people with money to invest then boost the companies with most favorable returns). Government is a silent partner in all commercial transactions because it has to serve all of the other citizens too at a basic level (it can't just pick and choose). Non-profits get a pass on taxation by the government to serve the markets missed by profit-makers.
      • fuzzfactor 9y ago
        This is a reason I like paying attention to Sam, looks like he has an experimental streak and is not motivated primarily by greed but instead shows a benevolent or generous approach. Unfortunately such an approach is not shared by the majority of well-heeled capitalists who are interested and available to supply the next round of funding for the growing number of the very entrepreneurs that he helps to get off the ground. This puts him in a unique position to see the effect first hand and looks like it's getting him started at a young age seeking solutions which could maximize the return from scarce resources (or in his case more abundant financial resources), one of the most important of which is to reduce the suction of pure greed from the mix. Seems to me it is exactly that suction on what is supposed to be the most prosperous and promising nation that keeps there from being enough to go around anyway. Then again I have always done the math a little differently than most economists, but I sure have been doing it a lot longer than the vast majority. So I think it would add up better for a greater number of less privileged citizens if the bar were lowered for entrepreneurs and raised for follow-up VC's first and foremost on the greed factor itself, and this is something that YC for one can implement on it's own, at least within its growing sphere of influence. If Sam is not yet capable of accomplishing this just by saying the word, I hope that does occur during my remaining lifetime. This could be gradually accomplished, and if momentum is not lost along the way, taken to its logical conclusion from this one seed it could end up becoming more universal than anything anyone has seen before. It's impossible to put numbers to the difference between committing resources to a less financially capable entrepreneur with an apparently weaker idea and market, versus an alternative that rings all the bells for the majority of VC's even when you try to include greed as the realistically destructive factor that it has always been. Therefore you just have to do more advanced math without using numbers or prosperity will never become as universal as it could be. When you leverage greed, you are only going to get more greed in return. So it might be more accurate to restate this little problem as "Too many greedy VC's are investing in otherwise promising YC companies, and that keeps some of the most ideal investments for less greedy VC's from moving in the direction of YC to begin with". That would be most logical, Captain.
• jaggederest 9y ago
  For that matter, why not just distribute shares of YC, or a YC ownership vehicle, itself, rather than individual member companies. Take a percent of equity, add it to the "YC Mutual Fund", and return equal value in the form of "YC Mutual Fund" shares at par value.
  • garmaine 9y ago
    They would have to do this, to avoid limits on the number of shareholders in an privately held company.
• mmvvaa 9y ago
  This sounds along the lines Hexayurt Capital proposal: http://hexayurt.capital/transcript.html http://hexayurt.capital/transcript.html
• soared 9y ago
  Not even remotely what UBI is.
  • deleted 9y ago
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  • jedmeyers 9y ago
    UBI at this time has just became a fancy word for "money for nothing". - Wouldn't it be nice if X just gave away money for nothing to everyone. - Oh, yes, of course it would be.
  • deleted 9y ago
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• JSONwebtoken 9y ago
  Wow imagine a UBI concept that has a barrier to entry dependent on one's merit and qualifications and stipulates that the recipient contributes a certain number of hours per week to a pursuit that generates a positive economic input. This is a brilliant idea, if only somebody had come up with this earlier.
  • sillysaurus3 9y ago
    It'd be funny snark if it were true, but the point is that the only qualification is to be a member of YC. Nothing else matters, including how much or little effort you put in. Also, members of YC are members for life unless they get excluded. It doesn't matter if their company fails.
  • newaccount4434 9y ago
    Communism.
  • speedplane 9y ago
    How about instead of UBI we just get free healthcare. That'll accomplish 90% of what UBI seeks to accomplish.
• nugget 9y ago
  > Basically in joining YC, each YC member would be granted a percentage of YC's 7% stake in all of the YC companies which would reduce their need to fundraise. I was curious what this could mean in reality so I did some back of the envelope math. (As a disclaimer - I have no inside knowledge of the performance of YC's portfolio, so all this math could be wrong.) YC Summer '17 had 294 founders at 124 startups. Let's say there is an Airbnb ($30 billion to common at liquidity) and three smaller but still substantial exits ($1 billion, $500 million and $250 million respectively, same terms). The rest of the class is a wash after expenses and fees which leaves $31,750,000,000 to split up. On a side note, every time I do this math I'm reminded how the ten figure exits really carry the rest of the valley along for the ride; whether there is one in your class or not is a roll of the dice. YC keeps 4% for themselves (out of which they generally fund expenses and management fees) and puts 3% (with no carry) into the common class pool, divided equally by startup (not founder, to avoid perverse incentives around cramming). In other words, the YC Summer '17 class collectively owns 3% of every member company. After ten years the 3% has been diluted down by follow on rounds to 1.5%. At liquidity, the fund returns 1.5% of $31.175 billion: $467,625,000. Divided among 294 founders equally (which it wouldn't be, as mentioned above - but for easy math) that's about $1.5 million per founder. If you miss the class with an Airbnb, Uber, or Snapchat and end up with (merely) a few traditional unicorns, the returns decline 90% to a couple hundred thousand dollars per founder, a.k.a. not that exciting financially. So it seems like a gamble. Still, I like the spirit of the whole idea. As a lifelong entrepreneur who hasn't quite pulled the trigger on applying to YC this might push me over the edge. It would definitely feel like being part of a grander experiment of some kind.
  • chrishacken 9y ago
    Maybe I'm missing something. I don't see how that would reduce anyones need to fundraise. No one can wait around 10 years for others in their class to become liquid to fund their company.
    • njarboe 9y ago
      If you know you are a likely to get between $100k and $1m in ten years, then there is a lot less financial risk of not putting any money in a 401k for a few years when creating a startup that eventually fails. I think this is a really cool idea. It would also will bind the group together even more (if you think that is a good thing).
• brouhahaTA 9y ago
  Waaaw brouhaha, it would be layk just like UBI but for layk startups.
• rabbitonrails 9y ago
  You've never dealt with a secondaries contract, have you.