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"investing $150,000 in exchange for 7 percent of each company — a stake that it can maintain throughout the company’s life it it so chooses, per its pact with i

"investing $150,000 in exchange for 7 percent of each company — a stake that it can maintain throughout the company’s life it it so chooses, per its pact with its founders." I think the issue might be the second part as, if I understand correctly, it means that YC is insulated against dilution without having to invest a penny more. Considering how many startups apply I would say that more than enough people are happy with those terms, though.

wjossey 8y ago
I’m not a YC company founder but that’s not how I understand their terms to work. They can follow in subsequent rounds to maintain their percentages but they aren’t “locked in” at 7%. —-Edit—— Yeah. They have pro rata rights to follow in their agreement.
- jtbayly 8y ago
  So... which is it? I don't know what "pro rata rights to follow in their agreement" means. Are they "locked in" at 7% regardless of other funding rounds or do they have the option to buy in to future rounds to keep 7% ownership?
  - wjossey 8y ago
    They have an option to buy to maintain their stake. They are not locked in and get diluted like everyone else.
    - jtbayly 8y ago
      Thanks for the answer. And wow. This is the first time I've been downvoted for asking a serious question.
      - wjossey 8y ago
        How dare you not know what pro rata means! :) Happy to help. Be well!
sjbp 8y ago
I think that refers to standard pro rata rights, which gives the right to invest in subsequent rounds of funding to maintain their ownership. So they would have to invest their pennies :)
ganeshkrishnan 8y ago
>I think the issue might be the second part as, if I understand correctly, it means that YC is insulated against dilution without having to invest a penny more. No this is incorrect. They have the ability to top off their investment to maintain their stake. Implicitly this investment would be at lower valuation. This is a standard procedure for most 'early stage' accelerators although yc is hardly early stage

wjossey 8y ago

I’m not a YC company founder but that’s not how I understand their terms to work. They can follow in subsequent rounds to maintain their percentages but they aren’t “locked in” at 7%. —-Edit—— Yeah. They have pro rata rights to follow in their agreement.

jtbayly 8y ago
So... which is it? I don't know what "pro rata rights to follow in their agreement" means. Are they "locked in" at 7% regardless of other funding rounds or do they have the option to buy in to future rounds to keep 7% ownership?
- wjossey 8y ago
  They have an option to buy to maintain their stake. They are not locked in and get diluted like everyone else.
  - jtbayly 8y ago
    Thanks for the answer. And wow. This is the first time I've been downvoted for asking a serious question.
    - wjossey 8y ago
      How dare you not know what pro rata means! :) Happy to help. Be well!

sjbp 8y ago

I think that refers to standard pro rata rights, which gives the right to invest in subsequent rounds of funding to maintain their ownership. So they would have to invest their pennies :)

ganeshkrishnan 8y ago

>I think the issue might be the second part as, if I understand correctly, it means that YC is insulated against dilution without having to invest a penny more. No this is incorrect. They have the ability to top off their investment to maintain their stake. Implicitly this investment would be at lower valuation. This is a standard procedure for most 'early stage' accelerators although yc is hardly early stage