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YC companies are collectively worth over $80 billion. They’ve invested in about 1500. Considering they’re almost always first money in, those are not even in t

YC companies are collectively worth over $80 billion. They’ve invested in about 1500. Considering they’re almost always first money in, those are not even in the same zip code as normal returns. Those numbers are absolutely astounding.

majani 9y ago
The 'worth' of a private investor's portfolio is a vanity metric. A more precise measure of YC's success would be money invested VS realized returns. Are those figures available?
- austenallred 9y ago
  It’s not really a vanity metric in this day and age. A lot of the best companies aren’t going public... ever. The measure that determines whether it’s a vanity metric or not is liquidity. If there are a dozen investors willing to buy stock at $x it’s worth $x.
  - sanderjd 9y ago
    > The measure that determines whether it’s a vanity metric or not is liquidity. Ok, are those figures available?
    - austenallred 9y ago
      There’s not really a way to get those numbers outside of asking a bunch of random people. I can say that I worked at a company that wasn’t in the top 50 and the market for shares was completely liquid. Most of the time at $100m+ valuation it should pretty active.
      - dsacco 9y ago
        I think you should clarify what liquidity means in your anecdote, because liquidity is a function of time and volume. Definitionally speaking, shares in a private company are not as liquid as shares in a public company. So what does "completely liquid" mean? Could every owner of private shares find a buyer if they wanted to? If not, what subset could? That these figures are not public is a very important discussion point, because it does introduce some level of anecdata and arbitrary speculation into the discussion. That's not to say you're wrong, but it's certainly imprecise and questionable.
        austenallred 9y ago
        It means I had shares that I could sell a ton a moments notice on a secondary market, and so far as I could tell the market for those shares was enormous. I’d guess anyone, including VCs and founders, at the top 50 or so YC companies could sell their shares at any time to a large number of willing buyers, given the ability to do so. Therefore I’d argue that the value of those shares is far different from a “vanity metric.”
        sanderjd 9y ago
        > anyone, including VCs and founders What about non-founder employees?
        austenallred 9y ago
        Yes them too (I wasn’t a founder)
        sanderjd 9y ago
        Are there any limitations to who can do what in the secondary markets? (Thanks for your answers to my questions - it's not easy to find information on this and I don't know anybody at a company like this to ask.)
      - sanderjd 9y ago
        > I can say that I worked at a company that wasn’t in the top 50 and the market for shares was completely liquid. Most of the time at $100m+ valuation it should pretty active. In the top 50 what? The top 50 private companies?
        austenallred 9y ago
        The top 50 YC companies as measured by valuation
  - dsacco 9y ago
    > If there are a dozen investors willing to buy stock at $x it’s worth $x. This is not a correct representation of liquidity, and thinking about it under this definition can be very dangerous. You need to consider: 1. How many shares are there outstanding? 2. What is the ask price of those shares on paper? 3. What is the bid price of those shares by investors willing to purchase them on the private market? 4. How many owners are allowed to sell their shares at the same time? 5. How many owners could realistically find a buyer at the paper ask price of the shares? 6. How many owners could sell their shares before the existing deviation (spread) between the paper ask price and available bid prices changed? This is not to say your overall point is wrong, it's to say that it can't be defended this way; more importantly, we really shouldn't be simplifying our discussion and its definition of liquidity to the one you've presented here, which is too simplistic. There is a lot of nuance about price discovery between public and private valuation that's missing here. For (one) example, you can maintain an artificially inflated valuation of a private company if there are fewer owners willing/able to sell than there are buyers, despite a relatively larger set of potential owners either not allowed to, or not conveniently capable of, selling their shares. This scenario makes presents an asymmetry between the weighting and availability of positive vs negative price sentiment that is much more easily resolved in the public market.
    - austenallred 9y ago
      Of course there’s a lot of nuance there. But certainly we can all agree on two things: 1. YC has not had good returns because it has only had one IPO (apparently selling Twitch and Cruise for $1B each don’t count as a win?) 2. While it’s difficult to know what the true value of YC companies is, the fact that there are nearly 100 companies valued at $100m+ is not just a “vanity metric.” Especially st the later stages of more mature companies there are real dollars trading hands and there’s more liquidity available on secondary markets.
      - dsacco 9y ago
        Sure, I agree with those two points.
- rococode 9y ago
  I doubt realized returns are available, but I think it's possible to at least very roughly estimate money invested. Their current "deal" is $120k for 7%, and that number has been going up over the years. So say all 1,588 startups they've funded got that investment (not true, since earlier investments were something like $20k). You're looking at about $150m in cash investments. According to https://www.ycombinator.com/people/ https://www.ycombinator.com/people/, there are about 50 people working full-time at YC. We're being conservative, so let's say 150 people at $150k/year salaries, over the 13 years since YC's founding (again, very high estimates since they obviously did not start with even remotely close to that many people). That's about $300m. So we're at maybe $450m spent on initial investments and people over the years. Maybe throw in another $200m for extra investments (I presume they re-invest in a couple promising companies on demo day) and other costs. They say their portfolio's valuation is roughly $80b. Their "deal" is for 7%. I'm not super familiar with the technical stuff but they really only need to keep about 1% of that total value to be fairly successful, and I imagine that number is probably much higher unless I'm misunderstanding some of the details about how fundraising works.
  - austenallred 9y ago
    Their return from Airbnb alone will probably cover the costs of investing in every other YC company. So Dropbox, Stripe, Twitch, Reddit, Cruise etc. are gravy. Those are phenomenal returns.
    - dsacco 9y ago
      I think the fact that they're phenomenal is pretty clear, but I think a more important question is how reliable the returns are. They might be reliable, but that doesn't seem obvious to me from the comments in this thread, and it's still not clear to me that YC is capable of catapulting an arbitrary company in their set to wild success ("kingmaking") or that they're capable of repeating those successes over the long term.
      - austenallred 9y ago
        They have consistently pumped out many of the top companies in Silicon Valley for over 10 years now. Most of the companies are newer, as always, and I don’t think YC would claim they can pick any random company and make them successful, but if YC isn’t a “kingmaker” then there’s no such thing in Silicon Valley.
a13n 9y ago
They started doing pro rata rights a few years back, and terms have changed over the years. It's unclear exactly how good their return is. That $80b isn't liquid.
- dsacco 9y ago
  Can you clarify how terms of changed, or direct me to further reading about that? Otherwise I think point about the $80B not being liquid is a good one. It's not a dishonest figure, but it's clearly inaccurate and inappropriate for the purpose of estimating returns. The real answer is going to be far more nuanced than simply stating the aggregate value of all YC companies on paper.
  - austenallred 9y ago
    It used to be $20k for 7%, now it’s basically $120k for 7% with pro rats rights (that’s again a simplification, but it’s close enough for this conversation). I agree that n companies valued at over x isn’t a great metric, except that the number is so huge and the valuation so high that a single company could return the entire amount YC has invested, and what we’re debating is if YC are “kingmakers.” By nearly any possible measure they are.

majani 9y ago

The 'worth' of a private investor's portfolio is a vanity metric. A more precise measure of YC's success would be money invested VS realized returns. Are those figures available?

austenallred 9y ago
It’s not really a vanity metric in this day and age. A lot of the best companies aren’t going public... ever. The measure that determines whether it’s a vanity metric or not is liquidity. If there are a dozen investors willing to buy stock at $x it’s worth $x.
- sanderjd 9y ago
  > The measure that determines whether it’s a vanity metric or not is liquidity. Ok, are those figures available?
  - austenallred 9y ago
    There’s not really a way to get those numbers outside of asking a bunch of random people. I can say that I worked at a company that wasn’t in the top 50 and the market for shares was completely liquid. Most of the time at $100m+ valuation it should pretty active.
    - dsacco 9y ago
      I think you should clarify what liquidity means in your anecdote, because liquidity is a function of time and volume. Definitionally speaking, shares in a private company are not as liquid as shares in a public company. So what does "completely liquid" mean? Could every owner of private shares find a buyer if they wanted to? If not, what subset could? That these figures are not public is a very important discussion point, because it does introduce some level of anecdata and arbitrary speculation into the discussion. That's not to say you're wrong, but it's certainly imprecise and questionable.
      - austenallred 9y ago
        It means I had shares that I could sell a ton a moments notice on a secondary market, and so far as I could tell the market for those shares was enormous. I’d guess anyone, including VCs and founders, at the top 50 or so YC companies could sell their shares at any time to a large number of willing buyers, given the ability to do so. Therefore I’d argue that the value of those shares is far different from a “vanity metric.”
        sanderjd 9y ago
        > anyone, including VCs and founders What about non-founder employees?
        austenallred 9y ago
        Yes them too (I wasn’t a founder)
        sanderjd 9y ago
        Are there any limitations to who can do what in the secondary markets? (Thanks for your answers to my questions - it's not easy to find information on this and I don't know anybody at a company like this to ask.)
    - sanderjd 9y ago
      > I can say that I worked at a company that wasn’t in the top 50 and the market for shares was completely liquid. Most of the time at $100m+ valuation it should pretty active. In the top 50 what? The top 50 private companies?
      - austenallred 9y ago
        The top 50 YC companies as measured by valuation
- dsacco 9y ago
  > If there are a dozen investors willing to buy stock at $x it’s worth $x. This is not a correct representation of liquidity, and thinking about it under this definition can be very dangerous. You need to consider: 1. How many shares are there outstanding? 2. What is the ask price of those shares on paper? 3. What is the bid price of those shares by investors willing to purchase them on the private market? 4. How many owners are allowed to sell their shares at the same time? 5. How many owners could realistically find a buyer at the paper ask price of the shares? 6. How many owners could sell their shares before the existing deviation (spread) between the paper ask price and available bid prices changed? This is not to say your overall point is wrong, it's to say that it can't be defended this way; more importantly, we really shouldn't be simplifying our discussion and its definition of liquidity to the one you've presented here, which is too simplistic. There is a lot of nuance about price discovery between public and private valuation that's missing here. For (one) example, you can maintain an artificially inflated valuation of a private company if there are fewer owners willing/able to sell than there are buyers, despite a relatively larger set of potential owners either not allowed to, or not conveniently capable of, selling their shares. This scenario makes presents an asymmetry between the weighting and availability of positive vs negative price sentiment that is much more easily resolved in the public market.
  - austenallred 9y ago
    Of course there’s a lot of nuance there. But certainly we can all agree on two things: 1. YC has not had good returns because it has only had one IPO (apparently selling Twitch and Cruise for $1B each don’t count as a win?) 2. While it’s difficult to know what the true value of YC companies is, the fact that there are nearly 100 companies valued at $100m+ is not just a “vanity metric.” Especially st the later stages of more mature companies there are real dollars trading hands and there’s more liquidity available on secondary markets.
    - dsacco 9y ago
      Sure, I agree with those two points.
rococode 9y ago
I doubt realized returns are available, but I think it's possible to at least very roughly estimate money invested. Their current "deal" is $120k for 7%, and that number has been going up over the years. So say all 1,588 startups they've funded got that investment (not true, since earlier investments were something like $20k). You're looking at about $150m in cash investments. According to https://www.ycombinator.com/people/ https://www.ycombinator.com/people/, there are about 50 people working full-time at YC. We're being conservative, so let's say 150 people at $150k/year salaries, over the 13 years since YC's founding (again, very high estimates since they obviously did not start with even remotely close to that many people). That's about $300m. So we're at maybe $450m spent on initial investments and people over the years. Maybe throw in another $200m for extra investments (I presume they re-invest in a couple promising companies on demo day) and other costs. They say their portfolio's valuation is roughly $80b. Their "deal" is for 7%. I'm not super familiar with the technical stuff but they really only need to keep about 1% of that total value to be fairly successful, and I imagine that number is probably much higher unless I'm misunderstanding some of the details about how fundraising works.
- austenallred 9y ago
  Their return from Airbnb alone will probably cover the costs of investing in every other YC company. So Dropbox, Stripe, Twitch, Reddit, Cruise etc. are gravy. Those are phenomenal returns.
  - dsacco 9y ago
    I think the fact that they're phenomenal is pretty clear, but I think a more important question is how reliable the returns are. They might be reliable, but that doesn't seem obvious to me from the comments in this thread, and it's still not clear to me that YC is capable of catapulting an arbitrary company in their set to wild success ("kingmaking") or that they're capable of repeating those successes over the long term.
    - austenallred 9y ago
      They have consistently pumped out many of the top companies in Silicon Valley for over 10 years now. Most of the companies are newer, as always, and I don’t think YC would claim they can pick any random company and make them successful, but if YC isn’t a “kingmaker” then there’s no such thing in Silicon Valley.

a13n 9y ago

They started doing pro rata rights a few years back, and terms have changed over the years. It's unclear exactly how good their return is. That $80b isn't liquid.

dsacco 9y ago
Can you clarify how terms of changed, or direct me to further reading about that? Otherwise I think point about the $80B not being liquid is a good one. It's not a dishonest figure, but it's clearly inaccurate and inappropriate for the purpose of estimating returns. The real answer is going to be far more nuanced than simply stating the aggregate value of all YC companies on paper.
- austenallred 9y ago
  It used to be $20k for 7%, now it’s basically $120k for 7% with pro rats rights (that’s again a simplification, but it’s close enough for this conversation). I agree that n companies valued at over x isn’t a great metric, except that the number is so huge and the valuation so high that a single company could return the entire amount YC has invested, and what we’re debating is if YC are “kingmakers.” By nearly any possible measure they are.