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Ask HN: Are all YC startups encouraged to get acquired?
What is the path to liquidity you're encouraged to take as a YC startup? Are you ever encouraged to build for the long haul and create something profitable that pays investors dividends? Is it assumed that all YC startups will be acquired and is that where the emphasis is placed? Is there any focus on building revenue and keeping costs down, or is the focus on growth and future funding rounds? Is the option of not raising future rounds but rather self funding through revenue discussed much?
I'm genuinely curious about the state of startup incubators. Thanks.
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- johngalt 16y agoI don't know the answer to this question, but if I were an investor I'd be looking to create a business that showed a lot of long term promise.... Then I'd want to sell that promise. So acquisition or a big stock sale (IPO). Think of an incubator as a tree nursery. They handle the high risk portion of getting the seeds to grow into a sapling, and determine if it will bear fruit. But fundamentally they don't want to be a fruit producer, and they aren't interested in running an orchard. They are selling the promise of fruit for years to come to someone else.
- brudgers 16y ago>"Think of an incubator as a tree nursery." A nursery will plant 3000 seeds. Pot up the 2000 that survive the first year to one gallon and sell half as one gallon to recover their costs. Later they will pot the remaining 1000 up to three gallon and sell many of those. Very few will be sold as 45 gallon trees.
- coryl 16y agoWhile operating costs can be a reason startups are forced to shut down, I'm sure its not the reason startups close shop. I would assume advice is optimized for growth and traction to make something people want. After all, nobody is in this game to build a business slow and marginally (although there's nothing wrong with that).
- staunch 16y ago1) It's in YC's interest for their startups to aim as high as possible. Ideally billion dollar acquisitions or IPOs. Even if less than 1/10 can achieve that goal and the rest die it's still financially beneficial if they all shoot for it. YC makes very little money off small exits. 2) YC doesn't want to stand in the way of founders getting rich. They accept that many of the YC founders will take life-changing acquisition offers and don't try to stop them. They hope at least some will take a little cash "off the table" along the way and then go for The Big Win. 3) YC doesn't get paid until a "liquidity event". In practice that means either an acquisition or an IPO. There's currently no acceptable method for distributing dividends or similar. I think that's about all there is to it.