10 ms·

Yuri Milner, SV Angel Offer Every New Y Combinator Startup $150k

425 points by ssclafani 16y ago

dusing 16y ago
Wow, big win for YC!
mindcrime 16y ago
Wow; that's great news. Congrats to the YC companies for this opportunity! Guess it's time to get cracking on those YC applications, folks...
sahillavingia 16y ago
Holy shit. The word "disruptive" is overused but it's pretty applicable here. Crazy. But is this fair to other angels/investors?
- BenSchaechter 16y ago
  This is what I was thinking. It might be better for people trying to raise money from other angels who aren't a YC company because the new YC batch now has their boats floated for quite a bit more time.
- peteforde 16y ago
  A lot of people will hate this, but it's neither unfair nor immoral. There's nothing stopping anyone else from making similar deals, including you. What it does do is turn YC into a market index. Interesting.
  - JabavuAdams 16y ago
    > There's nothing stopping anyone else from making similar deals, including you. SEC Accredited Investor Status.
- patio11 16y ago
  Capitalism happens. plays tiny violin Less sardonically: if YC is so ridiculously superior to other investment models that investing money at these terms is profitable knowing nothing of the actual company invested in, then the system is broken. This is the market's corrective measure, attempting to come up with a better approximation of the true value of early stage startups. Might it discomfit people who made a lot of money when it was broken? shrug
  - nostrademons 16y ago
    My first thought is that there must be a ridiculous amount of money floating around in the capital markets right now...
    - nicholasjbs 16y ago
      That might be true, but I don't think this particular news provides much evidence either way. The total amount being invested across all 40 companies is less than many companies' A rounds.
    - patio11 16y ago
      Much like I look at "200,000 visitors! Whoa!" and think it is a big number, and you guys might think "Hmm, perhaps there was something interesting going on that second.", I think we collectively share a borked perception of what constitutes a big amount of capital. $150k is a meaningful amount for an early-stage startup. Multiplied by 40, that is $6 million. $6 million is, seat of the pants calculation, two orders of magnitude lower than 2% of United States VC funding in a typical year. VC funding is three orders of magnitude lower than the amount of outstanding bonds in the US. That is one asset class: there are others. Or, for another visualization: if this investment is one pixel, then the US bond market is a grizzled old neckbeard sporting six monitors at 1024x768. The remainder from that calculation might fit an iPhone, but I don't know the resolution on those off the top of my head. Long story short: there is always a ridiculous amount of money in the capital markets.
      - nostrademons 16y ago
jackowayed 16y ago
> It’s the most investor friendly investment that I can think of, short of just handing people money as a gift. s/investor/entrepreneur/
samwise 16y ago
$150,000 in convertible debt. With no cap and no discount. I suspect all 40 companies will take the money on those terms. You would be crazy not to.
- rudiger 16y ago
  What are the terms of the deal, specifically? How much to startups have to pay back if they take the $150K, and when do they pay it? What about valuation of the startups (ie. $150k for 10% implies $1.5m valuation)? Or is this more like a loan ($150k, pay back over X years, or upon Y liquidity event)?
  - bhavin 16y ago
    Its convertible debt, meaning that whenever the startup raises the A series funding, at how much ever valuation, SV angel gets 150k worth percentage stock in the startup. e.g. If the A series funding was taken at $1.5 Million valuation, the SV share in the company would be 10%. No valuation ceiling, no discount. Lower the A series valuation, better off SV angel are.
  - JoeAltmaier 16y ago
    It means your plan IS to give some of your company away for money. Instead of holding 100%, getting ramen-profitable, working your butt off to make it.
    - boucher 16y ago
      Actually, even that isn't true. If a company were to take this money, and then never raise another round, they would simply have to pay the debt back, I'm guessing at a fairly modest interest rate.
mattgratt 16y ago
YC is now the best deal that exists.
- mkramlich 16y ago
  maybe now we need a YC for new YC's
  - rudiger 16y ago
    How many thousands of people apply for YC every year? Someone should offer a service: $500 to prepare you for a successful YC application.
    - mkramlich 16y ago
      good idea. a sort of pre-YC. could be worth it now that every YC alumni is basically guaranteed a $160k+ investment. (forgot offhand how much YC itself gives)
- JoeAltmaier 16y ago
  Hm. There are folks still using the 'old-fashioned' model of fundraising manually, building a team, honing a product and going to market. YC may be the best deal for a crew of wet-behind-the-ears startup virgins, I'll grant that.
  - justin 16y ago
    That was a trollish comment but I'll bite. 150k is not going to get a company very far, and certainly not far enough to reinvent the startup model completely. Building a team is still a critical part of building a YC (or any other) company, as is honing a product and bringing it to market (which is primarily what they help you do). Saying that those things aren't part of the YC model just because you get some extra free money on great terms is disingenuous. Also, more and more experienced entrepreneurs are going to YC, because of the effects of the network and because the money really isn't that expensive. People always bring up that it isn't a great deal for experienced entrepreneurs, but you can ask my friend Steve, who just sold Reddit, went back to YC, and just raised a fat series A for hipmunk whether it was worth it.
ssclafani 16y ago
Congrats to YC and all of the startups. Sadly, I can already hear the chants of "Bubble!".
- robryan 16y ago
  Not really, I think most of here would assume YC would in the next few years produce a solid return. Here your basically aligning youself to YC's performance instead of trying to pick which ones you think will turn out the best. Although sounds like they are still doing that additionally.
  - deleted 16y ago
    [deleted]
  - daniel_levine 16y ago
    absolutely not. YC is getting their percentage at valuations of around 200-300k. This investment will convert at valuations closer to 5M these days. So in fact they're effectively paying 10x what YC is paying for about the same stake in a company post the financing. Congrats to YC and time will tell if it works, exciting either way.
  - ebaysucks 16y ago
    Performance is only the nominator of what defines return. The denominator is the investment valuation, which is significantly different for YC and DST.
- peteforde 16y ago
  There's only two types of people in the world: people who chant things and people who do things.
  - cal5k 16y ago
    Great for entrepreneurs, but eventually it will be the relatively unsophisticated angels who will get burned by these valuations. I have no problem with that, really. In 2001 it was different - everyone was playing with public money through IPOs. Now only a few quite established companies can afford to go public. Don't be mistaken, though - this will turn into a bubble, whether you wax romantic about "entrepreneurs just do it!" or not. It always happens - it will happen again, life will go on, but it will happen.
robryan 16y ago
So this investment isn't at a valuation and the valuation is only decided at a future round at which point this converts into an amount of equity based off that valuation? I've read about convertible notes before just a little confusing at first.
- staunch 16y ago
  Right. $150,000 paid in advance. Whenever the company raises its first significant money (usually >=$1M) that $150,000 buys equity at the same rate the new investors are paying.
  - hugh3 16y ago
    Is there any way to game this? For instance: 1. I get $150K in convertible debt from Yuri. 2. At the end of YC, my rich friend Joe decides to invest a million dollars in my company at a valuation of five hundred trillion dollars. Yuri thus gets an insanely small slice of my company. 3. Two days later, my company buys Joe's shares back for a million dolars. 4. Now my company goes off to seek actual funding at a sane valuation. Yuri gets annoyed.
    - jmtame 16y ago
      it's not worth ruining your reputation over screwing a single investor especially in a deal this small. it's a small community and even if you found a way to trick the investor in this situation, it reflects very poorly on you. i'm sure there are ways to game it, but why even bother? yc is a small network; if one founder screws someone else, everyone knows about it. vice versa.
    - peteforde 16y ago
      You're leaving out the part about getting accepted into YC and then being willing to blackball your reputation and ability to ever raise money to do anything, again. Who would do that for $150k? To me, this is the equivalent of leaving $20 on the table to see if you can trust your friends.
deleted 16y ago
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ericmsimons 16y ago
That is awesome. I wish I'd made it into the winter 11 batch :(
citricsquid 16y ago
Investing in a company based on its acceptance into YC? Hm. Also, I think this breaks the model a bit, I thought the point of the initial small(er) investment was to drive creation of a product or business model that could then expand naturally or take further investment once they've proven the products value/viability etc. I guess for some it would be a bonus, but for some it might be a curse? Although "Paul Graham seemed very pleased" implies it doesn't, so I figure I'm wrong. Maybe it is for the better, especially when it's optional...
- forensic 16y ago
  The model has changed. Now it's about the ability of Paul et al. to pick horses. (Also the Ycomb environment and all that too)
  - jacquesm 16y ago
    Yes that's the best way of putting it. YC is seen as a vetting agent that has so much experience in evaluating start-ups now that their ability to separate the wheat from the chaff makes a deal like this feasible. How long before a major VC steps in to offer a third round for those that get to some pre-set goal to every YC funded company that took the second round too?
jacquesm 16y ago
Super news this, that's going to have one nasty little side effect, YC will see an order of magnitude increase in the number of applications they will receive in the next round. Predictably there will be a lot of bitching by other angels, imo they should create a fund and offer to match. YC might become a one stop shop.
- robryan 16y ago
  Is more applications necessarily a bad thing though? Sure they are likely to miss more winners and the application/ interview process is going to be even more time consuming but you would have to think it would translate to a highly quality group.
  - jacquesm 16y ago
    Reviewing applications is hard work. YC now has more partners and a larger network of alumni so that should help a bit with scaling this.
    - mdda 16y ago
      And that's why this move is a smart one : Yuri has effectively outsourced all the valuation work for the investments onto really smart people that he doesn't have to pay anything for. While that doesn't seem particularly fair to the rest of the VC community, it's exactly analogous to investing in an S&P ETF (which just invests in a whole bunch of stocks at the current market prices).
keeptrying 16y ago
When was the last time you looked at a yc company and didn't say "Damn that's a great idea." and then follow it up with "wow that's pretty good execution too". It's a little scary how good the yc companies seem to be lately.
- peteforde 16y ago
  I'm not keeping a tally but I often find myself scratching my head and wondering what PG et al saw in some startups. My guess is that it's usually a bet on the people, not the idea. If you mentor a founder that eventually starts the next Google, they are going to remember that.
johnrob 16y ago
This is awesome. It's great to see big money split up into lots of small investments. I've always wondered what would happen if Microsoft took 1 billion dollars and make 10K $100K angel investments. Something amazing would surely come out of so many trials. Traditionally, that 1 billion (if invested in startups) would be doled out in 100 or so $10MM-ish chunks, mostly to later stage companies.
coryl 16y ago
Wow, amazing deal. Only time will tell if its good for them or not.
jgilliam 16y ago
Web startups are now rock bands, and YC is the record label.
- mindcrime 16y ago
  %cough% There is more to the startup world than just "web" startups, ya know. %cough% And YC don't limit themselves to just web startups, or even just to software companies, according to the FAQ. [1] [1]: http://ycombinator.com/faq.html http://ycombinator.com/faq.html
  - tlb 16y ago
    Relatively few are pure web startups. They all have websites, of course, but most companies YC funds are in a particular business.
- peteforde 16y ago
  I know people are excited right now, but this is a terrible analogy. Rock bands don't need labels to succeed anymore, and the vast majority of record labels are deeply corrupt. They are consolidating to avoid bankruptcy, and throwing their CapEx funding into litigators and lobbyists so that they have someone to blame when in reality it was their greed and ignorance that brought their downfall. Does that sound like what's happening at Y-Combinator?
- MichaelApproved 16y ago
  I thought rock bands got shitty contract deals from record labels. These terms seem pretty fair and very unlike the recording industry.
  - bryanlarsen 16y ago
    On the surface, YCombinator IS giving a shitty deal. 6% for a few thousand dollars? That's highway robbery. Except, of course, you're getting a lot more than money for your 6%. The difference is that YCombinator's promise are much less empty than that of a record labels. (I know, I deflected. Milner's terms are not shitty. It's YCombinator's that are, but only on the surface).
staunch 16y ago
Every YC batch should have at least 1-2 big wins. They're betting that it's more important not to miss out on those than to save a little money trying to pick the winners. A great strategy if you can afford it.
- jacquesm 16y ago
  > Every YC batch should have at least 1-2 big wins. Can you quantify a big win?
  - staunch 16y ago
    Heroku.
    - wheels 16y ago
      Actually, if we assume that Heroku's post-money valuation in their first round of financing was $10m (reasonable since they raised $3m) and that they took a 30% dillution hit each time, this would have returned $2.88m to someone that got in on these terms, or not even enough to cover the investments for that batch. So either the homeruns have to be further out of the park than Heroku or (as is likely) the median return needs to keep things in balance a bit more.
      - mlinsey 16y ago
        The assumption has to be that Milner will participate in follow-on rounds for companies that look like they will be Heroku or bigger.
        wheels 16y ago
        I wonder if there's a clause that requires the ability to participate in later rounds. That would make more sense. Otherwise it's not clear that they'd be able to. Heroku raised $3m a month after demo day; I'm not sure what it would have taken for an angel to be able to get into that round.
gojomo 16y ago
I saw on the news it was going to rain tonight; I didn't realize they meant that in Mountain View it would be raining money.
greglockwood 16y ago
And the collective of the YC W'11 hopefuls just let out a wistful sigh. At least I did.
marcamillion 16y ago
...and they said good guys finish last? PG seems to be proving them wrong, every day.
- furbearntrout 16y ago
  Remember that life is not a race, neither is investing.
  - marcamillion 16y ago
    HaH! Try telling Calacanis that.
davidmurphy 16y ago
High five, pg!
- pg 16y ago
  ⁵
sushrutbidwai 16y ago
This sounds like a campus placement scene. If you get in a top college, you wont be even interviewed properly or see how you have changed in last few years/months. We will just hire you with fat paychecks. As shown by history - this does not work in the long run and makes things worse than better. Dont get me wrong - YC is great, pg and rest of the team do an amazing job of selecting startups. But such blanket offers will mean lesser money available to non-YC companies. So if you are competing with a YC company, you have so much ground to cover. More money for startups is good, but quality of the startups should be judged almost every 3 months. That is very healthy for entire startup community on the whole.
- jacquesm 16y ago
  > But such blanket offers will mean lesser money available to non-YC companies. They could have bought a boat instead, investing is not a zero sum game, they don't have to spend the money.
  - sushrutbidwai 16y ago
    Right. We will just invest in all YC companies. Why bother reading up business plans, checking out markets, exploring new things. YC thinks some one is good, we will put our money. If 10% of YC companies give huge exits fine. As investors - our job is to just provide money. Why bother with research? And as an entrepreneur, do you really want to take money from some one who might not have enough knowledge about you and your business? Who is relying on a second hand judgement about you and your business, even if that judgement directly comes from pg?
    - webwright 16y ago
      "And as an entrepreneur, do you really want to take money from some one who might not have enough knowledge about you and your business?" Um, yes. Taking money with these terms is a no-brainer. It doesn't preclude you from taking on more active money or taking on advisors. Anyone who puts together an angel syndicate almost always has investors who say, "I'm really busy, so I can't help out much, but here's my money". Most angels think about your business for a few hours a month, at best.
DevX101 16y ago
For all the talk from U.S. politicians about encouraging innovation, it takes the Russian to come here and put his money where his mouth is.
- andreshb 16y ago
  Consider, also, that most entrepreneurs in tech are foreigners (or children of), Vivek Wadwha had an interesting article on that. But those that stand out: Larry+Sergei. If "The Russian" comes to the U.S. to make an investment is because the U.S. has done a really really good job in terms of policy to make it easy and convenient for foreign investors to bring money to the U.S. now they (gov) need to do the same for talent/entrepreneurs.
  - jolhoeft 16y ago
    A while back as I was meandering through my history readings, I noticed that most of the philosophers, sages, and artists of ancient Athens weren't from Athens. I didn't actually follow that up with a study to confirm it, but I can't help but wonder if there is some deep truth hidden here.
    - aditya 16y ago
      No deep truth, if you're ambitious and determined enough go leave your home and everything and everybody you know, you're not going to arrive in a foreign land and sit on your ass - the drive will keep pushing you to achieve great things... otherwise you could just have stayed at home and eaten your mom's potatoes for the rest of your life, right?!
  - deleted 16y ago
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  - _delirium 16y ago
    Digging up Vivek Wadwha's article, he found that 25% of U.S. tech entrepreneurs were immigrants, which is certainly higher than their share of the population (about 10% of U.S. residents are foreign-born), but not really "most". The numbers were higher for the Bay Area, though, at about 50%; but then the number of total immigrants in the Bay Area is also higher (33% of Californians are foreign-born).
andreshb 16y ago
There seems to be a correlation between high performing funds and how fast they move to get into the good deals, this is a very efficient way for SV Angels to move faster than anyone else. They already moved fast before, now it's a tremendous head start. If it's a bubble, it's a cheap bubble $6M is nothing for most funds.
- peteforde 16y ago
  It's only a bubble if the world stops spending money online and every re-discovers network reality television as a hobby.
rdamico 16y ago
Unless there are additional terms at play here (e.g. liquidation preference), this means that unless YC companies raise a series A before exiting, Yuri and SV Angels won't get more than a 1x return (plus interest). It's hard to believe the math works out here, but obviously a lot of thought and number crunching has gone into this decision. Great news for YC though!
- spydertennis 16y ago
  I think that depends on how the note is written. I've never seen a note without a cap but usually it converts at the cap on acceleration. No idea how a conversion at acceleration would work if there is no pre determined valuation but it could be possible.
trotsky 16y ago
Basically he just paid $6M to have a seat at the table and be a guaranteed call when they're raising their series A. I guess that's one way to get in to the early stage game.
- knowsnothing613 16y ago
  It's not about PR. It's about a halo effect. DST needs a pipeline of new startups to continue the web x.0 hype-cycle, so he can offload his Groupon, Facebook & Zynga. positions. He can afford to gamble $6M on YC startups, if they will create demand in the market for his hundreds of millions dollars worth Groupon, Facebook, Zynga shares. It's a good assymetry position to have. If one of the 40 becomes the next google, he wins. If he can exit his DST positions, he wins. However if the web bubble burst, he is sh*t out of luck. And DST will be a huge bagholder.
  - hugh3 16y ago
    DST needs a pipeline of new startups to continue the web x.0 hype-cycle, so he can offload his Groupon, Facebook & Zynga. positions. I don't get it, how does this help with that?
    - nickpp 16y ago
      Read up on AOL's position during the .com boom.
      - pclark 16y ago
        can you just explain it?
        nickpp 16y ago
        Startups made "collaboration deals" announcements with AOL then got funding based on those "perspectives". Large part of that funding would go to AOL to buy a front-page add. They say that the only limit to AOL's revenue from this was the amount of space on their website first page, not the number of interested startups. Basically the valuation of the giants stayed up for as long as easy funding was available to .com's. Their spending habits, without being backed by actual revenues, were more than enough to sustain the stock prices of the few big ones selling to startups whatever they needed (ad space, big iron or aerons). They all fell together when the crash came and easy funding dried up.
tchae 16y ago
absolutely crazy
deleted 16y ago
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peteforde 16y ago
Honestly, I'm surprised that nobody did this sooner. Hell, didn't Conway invest in six of the last round anyhow? This is sort of like going to the race track and betting on every horse. Except at this particular race track, the horses are all above average and multiple horses can win each race. I'd take those odds.
- bl4k 16y ago
  you almost rescued the analogy, but not quiet.
  - peteforde 16y ago
    Edits welcome. Where did I go wrong?
    - Swannie 16y ago
      Hmm, it's more like investing in/always betting on a solid racing stable. You know the jockeys they use are great (investor community), you know their horses are from great stock (top applicants), you know that the breeders, handlers and trainers (advisors and partners) are THE most experienced in the area. You know the stable only enter horses into races (markets) where they think the odds of placing are good, or the opportunity cost is so low for a potential outsider. Sure there are other stables, and sure, some of the horses in this figurative stable are co-owned by people with very different aims from you (boot strapping cofounders?), and some are backed some of your competitors.
    - JoeAltmaier 16y ago
      Its exactly like ... investing in a bunch of promising, vetted business plans with motivated founders!
- mdda 16y ago
  The clever thing about this is that Yuri doesn't have any of the due-diligence costs of Ron Conway : He's outsourced it all. OTOH, maybe/probably Ron Conway actually enjoys the thrill of the hunt for new exciting stuff, so he doesn't consider it a particular cost. Right now, according to the article, YC (pg) is happy about the situation : it improves their brand, helps entrepreneurs, etc. But I'm sure that they'll realize that Yuri just got in at a better valuation (on average) than they did, but they're doing all the work. Of course, they probably already have realized this, but they don't have many other options now - other than inserting 'poison pill' anti-freeloader terms into their deals...
waterlesscloud 16y ago
The fact that this story generates so much excitement at 10 PM on Friday night says something about the community. Good things.
marcamillion 16y ago
It sucks to be a graduate from Summer 2010. Missed it by 1 term.
- gyardley 16y ago
  Come now, you were admitted into a highly-competitive incubator that attracts a lot of investor attention and puts you in touch with some very valuable mentors. The next term might be a bit better off, but it certainly doesn't suck to be you.
- mickdj 16y ago
  No it doesn't.
- yef 16y ago
  What would someone relentlessly resourceful do?
ebaysucks 16y ago
This turn YC into a market index. The payment pg and company receive for this service is the increased negotiation power in the deals they fund. Theoretically this makes entire YC batches without a single dollar invested by YC itself possible.
- nostrademons 16y ago
  It was always possible - the value proposition for YC has always been the advice, connections, and reputation from being associated with them. The monetary investment is just so that founders who wouldn't otherwise be able to do it (eg. those newly out of college) can take part.
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blackrabbit 16y ago
This really is crazy. I'm sure this will only lead to i liar deals for TechStars and others. Angel Investing needs to evolve.
- fedd 16y ago
  Nothing stops Mr Milner from doing the same offer for TechStars companies, I guess
garply 16y ago
The recession is over.
pclark 16y ago
I am most excited because this will mean hardware and oter "harder" things might be possible with less "baby steps" involved to get companies where they want to be - faster.
jackowayed 16y ago
One potential issue I see is that YC companies might get complacent. I know that there are tons of factors that lead to the insane productivity that happens during YC, but I'm sure that the fact that many companies need to raise money or fail contributes. Also, the money might keep people working on bad ideas instead of giving up and trying something new. Obviously they could pivot, but $150k gives them the ability to spend ~a year working on a bad idea before needing outside validation. But I'm sure it'll be great for YC overall
- kd5bjo 16y ago
  It would go a lot farther than a year for a single founder, and even farther than that if they were willing to move somewhere cheaper than the Bay area.
- JoeAltmaier 16y ago
  Fundraising is famously a huge hit to productivity. This should make YC founders an order of magnitude MORE productive.
- KMStraub 16y ago
  I think it will only separate the men from the mice.
d8niel 16y ago
Y combinator is doing an amazing job!
kevinelliott 16y ago
This is truly remarkable. Those of us yet to have submitted to YC now have an additional reason to do so. And it took a foreigner to do it. Po.iticians should take note, because this is how you stimulate an economy and innovation.
shareme 16y ago
I want ask an obvious question.. We have at this point in time, the lowest rate of success or ROI of the VC industry since stats were kept. It would seem to me that any deal whereas someone short-changes the process of getting to a Series A deal for any VC or group of VCs is somewhat dangerous of destroying the very model that got all of us here. What steps are being taken to protect the 'YC-Combinator' VC and start-up incubaor model?
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lyime 16y ago
Yuri Milner is a baller. That's all.
markessien 16y ago
Techstars is going to be unhappy about this. After one of their premier companies, SendGrid gets hit by the amazon announcement, YC closes this deal.
bourbaki 16y ago
Is YC become a bubble itself?
danest 16y ago
This is great for YC and the new companies coming out, congrats guys.
expressive 16y ago
I was planning to bootstrap my new startup I have in the works, but now I think I will apply to be among the next batch of startups to be funded by Y Combinator. I just woke up to this news, and what a lovely start to my day.
fromRussia 16y ago
DST is a money laundering operation. Yuri Milner is a criminal. I can't believe Paul Graham deals with these guys. He should understand that Russia is outside of his circle of competence. His smarts are not enough to make the judgement. Russia gets roughly $90B annually for oil and gas. Most of the money gets stolen one way or the other and ends up in the funds like DST. Dealing
- fromRussia 16y ago
  Ternovskiy had told no one he was taking the Sunday-afternoon flight out of Moscow’s Sheremetyevo airport. But when he arrived in New York he found a car from Digital Sky Technologies, the Russian company, waiting for him at the airport. From the driver, he learned that an associate of Yuri Milner was already on his way to New York to talk to him. Back in Moscow, Milner repeatedly called Vladimir, a contemporary of his in college, and urged him to get his son to coöperate. Andrey, ensconced in a New York hotel, was scornful. “Is that even appropriate for an investor?” he asked me. “Harassing and hounding are the only words which come to mind.” Andrey Ternovskiy is the founder of Chatroulette. And the excerpt above is from The New Yorker http://www.newyorker.com/reporting/2010/05/17/100517fa_fact_ioffe?currentPage=all http://www.newyorker.com/reporting/2010/05/17/100517fa_fact_...
  - fromRussia 16y ago
    More here: http://www.thenewamerican.com/index.php/usnews/politics/4346-facebook-are-you-interfacing-with-the-russian-mafia-a-kgb http://www.thenewamerican.com/index.php/usnews/politics/4346...
- rudiger 16y ago
  Not unlike quantitative easing here in the USA resulting in peoples' pensions and savings being given to VCs and funds.
  - fromRussia 16y ago
    Indeed. All these lucrative google and microsoft stock options are eventually paid by people forced to sell their homes to pay for health care and food.
chmike 16y ago
Can someone explain what is a "convertible debt. With no cap and no discount" ?
aneth 16y ago
No more debates about whether YC is a "good deal" because of the low implied valuation of their initial investment. This changes the character of the YC experience. YC companies can now spend their time on product, not fundraising. On the other hand, less financial pressure may mean the founders don't learn to hustle and act less lean.
k1ngpin 16y ago
Convertibles with no-cap, frothy valuations, great time to be an entrepreneur. I wonder if this is going to pressure other angels into offering similar terms, and I think if they try to then ultimately angels have the potential to get severely diluted in follow on rounds. I do think that this is a great PR move. Given the hands-off terms from Yuri, I highly doubt that this is a kiss of death for other large VCs who are looking to invest in the follow on rounds, I think it puts much more pressure on Angels who are looking to get into the seed round.
tmekjian 16y ago
I think this is fantastic. Whether it is this $150k or the great number of startups that are getting huge funding early on, it all means one thing... it is GREAT for business and competition. I've heard from quite a few people who say this is a negative thing and they say it defeats the idea of being a startup. My question is, why do you HAVE to start in a garage? Why do you HAVE to eat Ramen noodles for 2 years? At the end of the day, being a startup is about having a creative team and being innovative. This is a great step forward and if it helps a few more teams create a killer product then we all win.

425 points by ssclafani 16y ago

Wow, big win for YC!

Wow; that's great news. Congrats to the YC companies for this opportunity! Guess it's time to get cracking on those YC applications, folks...

sahillavingia 16y ago

Holy shit. The word "disruptive" is overused but it's pretty applicable here. Crazy. But is this fair to other angels/investors?

BenSchaechter 16y ago
This is what I was thinking. It might be better for people trying to raise money from other angels who aren't a YC company because the new YC batch now has their boats floated for quite a bit more time.
peteforde 16y ago
A lot of people will hate this, but it's neither unfair nor immoral. There's nothing stopping anyone else from making similar deals, including you. What it does do is turn YC into a market index. Interesting.
- JabavuAdams 16y ago
  > There's nothing stopping anyone else from making similar deals, including you. SEC Accredited Investor Status.
patio11 16y ago
Capitalism happens. plays tiny violin Less sardonically: if YC is so ridiculously superior to other investment models that investing money at these terms is profitable knowing nothing of the actual company invested in, then the system is broken. This is the market's corrective measure, attempting to come up with a better approximation of the true value of early stage startups. Might it discomfit people who made a lot of money when it was broken? shrug
- nostrademons 16y ago
  My first thought is that there must be a ridiculous amount of money floating around in the capital markets right now...
  - nicholasjbs 16y ago
    That might be true, but I don't think this particular news provides much evidence either way. The total amount being invested across all 40 companies is less than many companies' A rounds.
  - patio11 16y ago
    Much like I look at "200,000 visitors! Whoa!" and think it is a big number, and you guys might think "Hmm, perhaps there was something interesting going on that second.", I think we collectively share a borked perception of what constitutes a big amount of capital. $150k is a meaningful amount for an early-stage startup. Multiplied by 40, that is $6 million. $6 million is, seat of the pants calculation, two orders of magnitude lower than 2% of United States VC funding in a typical year. VC funding is three orders of magnitude lower than the amount of outstanding bonds in the US. That is one asset class: there are others. Or, for another visualization: if this investment is one pixel, then the US bond market is a grizzled old neckbeard sporting six monitors at 1024x768. The remainder from that calculation might fit an iPhone, but I don't know the resolution on those off the top of my head. Long story short: there is always a ridiculous amount of money in the capital markets.
    - nostrademons 16y ago

jackowayed 16y ago

> It’s the most investor friendly investment that I can think of, short of just handing people money as a gift. s/investor/entrepreneur/

samwise 16y ago

$150,000 in convertible debt. With no cap and no discount. I suspect all 40 companies will take the money on those terms. You would be crazy not to.

rudiger 16y ago
What are the terms of the deal, specifically? How much to startups have to pay back if they take the $150K, and when do they pay it? What about valuation of the startups (ie. $150k for 10% implies $1.5m valuation)? Or is this more like a loan ($150k, pay back over X years, or upon Y liquidity event)?
- bhavin 16y ago
  Its convertible debt, meaning that whenever the startup raises the A series funding, at how much ever valuation, SV angel gets 150k worth percentage stock in the startup. e.g. If the A series funding was taken at $1.5 Million valuation, the SV share in the company would be 10%. No valuation ceiling, no discount. Lower the A series valuation, better off SV angel are.
- JoeAltmaier 16y ago
  It means your plan IS to give some of your company away for money. Instead of holding 100%, getting ramen-profitable, working your butt off to make it.
  - boucher 16y ago
    Actually, even that isn't true. If a company were to take this money, and then never raise another round, they would simply have to pay the debt back, I'm guessing at a fairly modest interest rate.

mattgratt 16y ago

YC is now the best deal that exists.

mkramlich 16y ago
maybe now we need a YC for new YC's
- rudiger 16y ago
  How many thousands of people apply for YC every year? Someone should offer a service: $500 to prepare you for a successful YC application.
  - mkramlich 16y ago
    good idea. a sort of pre-YC. could be worth it now that every YC alumni is basically guaranteed a $160k+ investment. (forgot offhand how much YC itself gives)
JoeAltmaier 16y ago
Hm. There are folks still using the 'old-fashioned' model of fundraising manually, building a team, honing a product and going to market. YC may be the best deal for a crew of wet-behind-the-ears startup virgins, I'll grant that.
- justin 16y ago
  That was a trollish comment but I'll bite. 150k is not going to get a company very far, and certainly not far enough to reinvent the startup model completely. Building a team is still a critical part of building a YC (or any other) company, as is honing a product and bringing it to market (which is primarily what they help you do). Saying that those things aren't part of the YC model just because you get some extra free money on great terms is disingenuous. Also, more and more experienced entrepreneurs are going to YC, because of the effects of the network and because the money really isn't that expensive. People always bring up that it isn't a great deal for experienced entrepreneurs, but you can ask my friend Steve, who just sold Reddit, went back to YC, and just raised a fat series A for hipmunk whether it was worth it.

ssclafani 16y ago

Congrats to YC and all of the startups. Sadly, I can already hear the chants of "Bubble!".

robryan 16y ago
Not really, I think most of here would assume YC would in the next few years produce a solid return. Here your basically aligning youself to YC's performance instead of trying to pick which ones you think will turn out the best. Although sounds like they are still doing that additionally.
- deleted 16y ago
  [deleted]
- daniel_levine 16y ago
  absolutely not. YC is getting their percentage at valuations of around 200-300k. This investment will convert at valuations closer to 5M these days. So in fact they're effectively paying 10x what YC is paying for about the same stake in a company post the financing. Congrats to YC and time will tell if it works, exciting either way.
- ebaysucks 16y ago
  Performance is only the nominator of what defines return. The denominator is the investment valuation, which is significantly different for YC and DST.
peteforde 16y ago
There's only two types of people in the world: people who chant things and people who do things.
- cal5k 16y ago
  Great for entrepreneurs, but eventually it will be the relatively unsophisticated angels who will get burned by these valuations. I have no problem with that, really. In 2001 it was different - everyone was playing with public money through IPOs. Now only a few quite established companies can afford to go public. Don't be mistaken, though - this will turn into a bubble, whether you wax romantic about "entrepreneurs just do it!" or not. It always happens - it will happen again, life will go on, but it will happen.

robryan 16y ago

So this investment isn't at a valuation and the valuation is only decided at a future round at which point this converts into an amount of equity based off that valuation? I've read about convertible notes before just a little confusing at first.

staunch 16y ago
Right. $150,000 paid in advance. Whenever the company raises its first significant money (usually >=$1M) that $150,000 buys equity at the same rate the new investors are paying.
- hugh3 16y ago
  Is there any way to game this? For instance: 1. I get $150K in convertible debt from Yuri. 2. At the end of YC, my rich friend Joe decides to invest a million dollars in my company at a valuation of five hundred trillion dollars. Yuri thus gets an insanely small slice of my company. 3. Two days later, my company buys Joe's shares back for a million dolars. 4. Now my company goes off to seek actual funding at a sane valuation. Yuri gets annoyed.
  - jmtame 16y ago
    it's not worth ruining your reputation over screwing a single investor especially in a deal this small. it's a small community and even if you found a way to trick the investor in this situation, it reflects very poorly on you. i'm sure there are ways to game it, but why even bother? yc is a small network; if one founder screws someone else, everyone knows about it. vice versa.
  - peteforde 16y ago
    You're leaving out the part about getting accepted into YC and then being willing to blackball your reputation and ability to ever raise money to do anything, again. Who would do that for $150k? To me, this is the equivalent of leaving $20 on the table to see if you can trust your friends.

deleted 16y ago

[deleted]

ericmsimons 16y ago

That is awesome. I wish I'd made it into the winter 11 batch :(

citricsquid 16y ago

Investing in a company based on its acceptance into YC? Hm. Also, I think this breaks the model a bit, I thought the point of the initial small(er) investment was to drive creation of a product or business model that could then expand naturally or take further investment once they've proven the products value/viability etc. I guess for some it would be a bonus, but for some it might be a curse? Although "Paul Graham seemed very pleased" implies it doesn't, so I figure I'm wrong. Maybe it is for the better, especially when it's optional...

forensic 16y ago
The model has changed. Now it's about the ability of Paul et al. to pick horses. (Also the Ycomb environment and all that too)
- jacquesm 16y ago
  Yes that's the best way of putting it. YC is seen as a vetting agent that has so much experience in evaluating start-ups now that their ability to separate the wheat from the chaff makes a deal like this feasible. How long before a major VC steps in to offer a third round for those that get to some pre-set goal to every YC funded company that took the second round too?

jacquesm 16y ago

Super news this, that's going to have one nasty little side effect, YC will see an order of magnitude increase in the number of applications they will receive in the next round. Predictably there will be a lot of bitching by other angels, imo they should create a fund and offer to match. YC might become a one stop shop.

robryan 16y ago
Is more applications necessarily a bad thing though? Sure they are likely to miss more winners and the application/ interview process is going to be even more time consuming but you would have to think it would translate to a highly quality group.
- jacquesm 16y ago
  Reviewing applications is hard work. YC now has more partners and a larger network of alumni so that should help a bit with scaling this.
  - mdda 16y ago
    And that's why this move is a smart one : Yuri has effectively outsourced all the valuation work for the investments onto really smart people that he doesn't have to pay anything for. While that doesn't seem particularly fair to the rest of the VC community, it's exactly analogous to investing in an S&P ETF (which just invests in a whole bunch of stocks at the current market prices).

keeptrying 16y ago

When was the last time you looked at a yc company and didn't say "Damn that's a great idea." and then follow it up with "wow that's pretty good execution too". It's a little scary how good the yc companies seem to be lately.

peteforde 16y ago
I'm not keeping a tally but I often find myself scratching my head and wondering what PG et al saw in some startups. My guess is that it's usually a bet on the people, not the idea. If you mentor a founder that eventually starts the next Google, they are going to remember that.

johnrob 16y ago

This is awesome. It's great to see big money split up into lots of small investments. I've always wondered what would happen if Microsoft took 1 billion dollars and make 10K $100K angel investments. Something amazing would surely come out of so many trials. Traditionally, that 1 billion (if invested in startups) would be doled out in 100 or so $10MM-ish chunks, mostly to later stage companies.

coryl 16y ago

Wow, amazing deal. Only time will tell if its good for them or not.

jgilliam 16y ago

Web startups are now rock bands, and YC is the record label.

mindcrime 16y ago
%cough% There is more to the startup world than just "web" startups, ya know. %cough% And YC don't limit themselves to just web startups, or even just to software companies, according to the FAQ. [1] [1]: http://ycombinator.com/faq.html http://ycombinator.com/faq.html
- tlb 16y ago
  Relatively few are pure web startups. They all have websites, of course, but most companies YC funds are in a particular business.
peteforde 16y ago
I know people are excited right now, but this is a terrible analogy. Rock bands don't need labels to succeed anymore, and the vast majority of record labels are deeply corrupt. They are consolidating to avoid bankruptcy, and throwing their CapEx funding into litigators and lobbyists so that they have someone to blame when in reality it was their greed and ignorance that brought their downfall. Does that sound like what's happening at Y-Combinator?
MichaelApproved 16y ago
I thought rock bands got shitty contract deals from record labels. These terms seem pretty fair and very unlike the recording industry.
- bryanlarsen 16y ago
  On the surface, YCombinator IS giving a shitty deal. 6% for a few thousand dollars? That's highway robbery. Except, of course, you're getting a lot more than money for your 6%. The difference is that YCombinator's promise are much less empty than that of a record labels. (I know, I deflected. Milner's terms are not shitty. It's YCombinator's that are, but only on the surface).

staunch 16y ago

Every YC batch should have at least 1-2 big wins. They're betting that it's more important not to miss out on those than to save a little money trying to pick the winners. A great strategy if you can afford it.

jacquesm 16y ago
> Every YC batch should have at least 1-2 big wins. Can you quantify a big win?
- staunch 16y ago
  Heroku.
  - wheels 16y ago
    Actually, if we assume that Heroku's post-money valuation in their first round of financing was $10m (reasonable since they raised $3m) and that they took a 30% dillution hit each time, this would have returned $2.88m to someone that got in on these terms, or not even enough to cover the investments for that batch. So either the homeruns have to be further out of the park than Heroku or (as is likely) the median return needs to keep things in balance a bit more.
    - mlinsey 16y ago
      The assumption has to be that Milner will participate in follow-on rounds for companies that look like they will be Heroku or bigger.
      - wheels 16y ago
        I wonder if there's a clause that requires the ability to participate in later rounds. That would make more sense. Otherwise it's not clear that they'd be able to. Heroku raised $3m a month after demo day; I'm not sure what it would have taken for an angel to be able to get into that round.

gojomo 16y ago

I saw on the news it was going to rain tonight; I didn't realize they meant that in Mountain View it would be raining money.

greglockwood 16y ago

And the collective of the YC W'11 hopefuls just let out a wistful sigh. At least I did.

marcamillion 16y ago

...and they said good guys finish last? PG seems to be proving them wrong, every day.

furbearntrout 16y ago
Remember that life is not a race, neither is investing.
- marcamillion 16y ago
  HaH! Try telling Calacanis that.

davidmurphy 16y ago

High five, pg!

pg 16y ago
⁵

sushrutbidwai 16y ago

This sounds like a campus placement scene. If you get in a top college, you wont be even interviewed properly or see how you have changed in last few years/months. We will just hire you with fat paychecks. As shown by history - this does not work in the long run and makes things worse than better. Dont get me wrong - YC is great, pg and rest of the team do an amazing job of selecting startups. But such blanket offers will mean lesser money available to non-YC companies. So if you are competing with a YC company, you have so much ground to cover. More money for startups is good, but quality of the startups should be judged almost every 3 months. That is very healthy for entire startup community on the whole.

jacquesm 16y ago
> But such blanket offers will mean lesser money available to non-YC companies. They could have bought a boat instead, investing is not a zero sum game, they don't have to spend the money.
- sushrutbidwai 16y ago
  Right. We will just invest in all YC companies. Why bother reading up business plans, checking out markets, exploring new things. YC thinks some one is good, we will put our money. If 10% of YC companies give huge exits fine. As investors - our job is to just provide money. Why bother with research? And as an entrepreneur, do you really want to take money from some one who might not have enough knowledge about you and your business? Who is relying on a second hand judgement about you and your business, even if that judgement directly comes from pg?
  - webwright 16y ago
    "And as an entrepreneur, do you really want to take money from some one who might not have enough knowledge about you and your business?" Um, yes. Taking money with these terms is a no-brainer. It doesn't preclude you from taking on more active money or taking on advisors. Anyone who puts together an angel syndicate almost always has investors who say, "I'm really busy, so I can't help out much, but here's my money". Most angels think about your business for a few hours a month, at best.

DevX101 16y ago

For all the talk from U.S. politicians about encouraging innovation, it takes the Russian to come here and put his money where his mouth is.

andreshb 16y ago
Consider, also, that most entrepreneurs in tech are foreigners (or children of), Vivek Wadwha had an interesting article on that. But those that stand out: Larry+Sergei. If "The Russian" comes to the U.S. to make an investment is because the U.S. has done a really really good job in terms of policy to make it easy and convenient for foreign investors to bring money to the U.S. now they (gov) need to do the same for talent/entrepreneurs.
- jolhoeft 16y ago
  A while back as I was meandering through my history readings, I noticed that most of the philosophers, sages, and artists of ancient Athens weren't from Athens. I didn't actually follow that up with a study to confirm it, but I can't help but wonder if there is some deep truth hidden here.
  - aditya 16y ago
    No deep truth, if you're ambitious and determined enough go leave your home and everything and everybody you know, you're not going to arrive in a foreign land and sit on your ass - the drive will keep pushing you to achieve great things... otherwise you could just have stayed at home and eaten your mom's potatoes for the rest of your life, right?!
- deleted 16y ago
  [deleted]
- _delirium 16y ago
  Digging up Vivek Wadwha's article, he found that 25% of U.S. tech entrepreneurs were immigrants, which is certainly higher than their share of the population (about 10% of U.S. residents are foreign-born), but not really "most". The numbers were higher for the Bay Area, though, at about 50%; but then the number of total immigrants in the Bay Area is also higher (33% of Californians are foreign-born).

andreshb 16y ago

There seems to be a correlation between high performing funds and how fast they move to get into the good deals, this is a very efficient way for SV Angels to move faster than anyone else. They already moved fast before, now it's a tremendous head start. If it's a bubble, it's a cheap bubble $6M is nothing for most funds.

peteforde 16y ago
It's only a bubble if the world stops spending money online and every re-discovers network reality television as a hobby.

rdamico 16y ago

Unless there are additional terms at play here (e.g. liquidation preference), this means that unless YC companies raise a series A before exiting, Yuri and SV Angels won't get more than a 1x return (plus interest). It's hard to believe the math works out here, but obviously a lot of thought and number crunching has gone into this decision. Great news for YC though!

spydertennis 16y ago
I think that depends on how the note is written. I've never seen a note without a cap but usually it converts at the cap on acceleration. No idea how a conversion at acceleration would work if there is no pre determined valuation but it could be possible.

trotsky 16y ago

Basically he just paid $6M to have a seat at the table and be a guaranteed call when they're raising their series A. I guess that's one way to get in to the early stage game.

knowsnothing613 16y ago
It's not about PR. It's about a halo effect. DST needs a pipeline of new startups to continue the web x.0 hype-cycle, so he can offload his Groupon, Facebook & Zynga. positions. He can afford to gamble $6M on YC startups, if they will create demand in the market for his hundreds of millions dollars worth Groupon, Facebook, Zynga shares. It's a good assymetry position to have. If one of the 40 becomes the next google, he wins. If he can exit his DST positions, he wins. However if the web bubble burst, he is sh*t out of luck. And DST will be a huge bagholder.
- hugh3 16y ago
  DST needs a pipeline of new startups to continue the web x.0 hype-cycle, so he can offload his Groupon, Facebook & Zynga. positions. I don't get it, how does this help with that?
  - nickpp 16y ago
    Read up on AOL's position during the .com boom.
    - pclark 16y ago
      can you just explain it?
      - nickpp 16y ago
        Startups made "collaboration deals" announcements with AOL then got funding based on those "perspectives". Large part of that funding would go to AOL to buy a front-page add. They say that the only limit to AOL's revenue from this was the amount of space on their website first page, not the number of interested startups. Basically the valuation of the giants stayed up for as long as easy funding was available to .com's. Their spending habits, without being backed by actual revenues, were more than enough to sustain the stock prices of the few big ones selling to startups whatever they needed (ad space, big iron or aerons). They all fell together when the crash came and easy funding dried up.

tchae 16y ago

absolutely crazy

deleted 16y ago

[deleted]

peteforde 16y ago

Honestly, I'm surprised that nobody did this sooner. Hell, didn't Conway invest in six of the last round anyhow? This is sort of like going to the race track and betting on every horse. Except at this particular race track, the horses are all above average and multiple horses can win each race. I'd take those odds.

bl4k 16y ago
you almost rescued the analogy, but not quiet.
- peteforde 16y ago
  Edits welcome. Where did I go wrong?
  - Swannie 16y ago
    Hmm, it's more like investing in/always betting on a solid racing stable. You know the jockeys they use are great (investor community), you know their horses are from great stock (top applicants), you know that the breeders, handlers and trainers (advisors and partners) are THE most experienced in the area. You know the stable only enter horses into races (markets) where they think the odds of placing are good, or the opportunity cost is so low for a potential outsider. Sure there are other stables, and sure, some of the horses in this figurative stable are co-owned by people with very different aims from you (boot strapping cofounders?), and some are backed some of your competitors.
  - JoeAltmaier 16y ago
    Its exactly like ... investing in a bunch of promising, vetted business plans with motivated founders!
mdda 16y ago
The clever thing about this is that Yuri doesn't have any of the due-diligence costs of Ron Conway : He's outsourced it all. OTOH, maybe/probably Ron Conway actually enjoys the thrill of the hunt for new exciting stuff, so he doesn't consider it a particular cost. Right now, according to the article, YC (pg) is happy about the situation : it improves their brand, helps entrepreneurs, etc. But I'm sure that they'll realize that Yuri just got in at a better valuation (on average) than they did, but they're doing all the work. Of course, they probably already have realized this, but they don't have many other options now - other than inserting 'poison pill' anti-freeloader terms into their deals...

waterlesscloud 16y ago

The fact that this story generates so much excitement at 10 PM on Friday night says something about the community. Good things.

marcamillion 16y ago

It sucks to be a graduate from Summer 2010. Missed it by 1 term.

gyardley 16y ago
Come now, you were admitted into a highly-competitive incubator that attracts a lot of investor attention and puts you in touch with some very valuable mentors. The next term might be a bit better off, but it certainly doesn't suck to be you.
mickdj 16y ago
No it doesn't.
yef 16y ago
What would someone relentlessly resourceful do?

ebaysucks 16y ago

This turn YC into a market index. The payment pg and company receive for this service is the increased negotiation power in the deals they fund. Theoretically this makes entire YC batches without a single dollar invested by YC itself possible.

nostrademons 16y ago
It was always possible - the value proposition for YC has always been the advice, connections, and reputation from being associated with them. The monetary investment is just so that founders who wouldn't otherwise be able to do it (eg. those newly out of college) can take part.

deleted 16y ago

[deleted]

blackrabbit 16y ago

This really is crazy. I'm sure this will only lead to i liar deals for TechStars and others. Angel Investing needs to evolve.

fedd 16y ago
Nothing stops Mr Milner from doing the same offer for TechStars companies, I guess

garply 16y ago

The recession is over.

pclark 16y ago

I am most excited because this will mean hardware and oter "harder" things might be possible with less "baby steps" involved to get companies where they want to be - faster.

jackowayed 16y ago

One potential issue I see is that YC companies might get complacent. I know that there are tons of factors that lead to the insane productivity that happens during YC, but I'm sure that the fact that many companies need to raise money or fail contributes. Also, the money might keep people working on bad ideas instead of giving up and trying something new. Obviously they could pivot, but $150k gives them the ability to spend ~a year working on a bad idea before needing outside validation. But I'm sure it'll be great for YC overall

kd5bjo 16y ago
It would go a lot farther than a year for a single founder, and even farther than that if they were willing to move somewhere cheaper than the Bay area.
JoeAltmaier 16y ago
Fundraising is famously a huge hit to productivity. This should make YC founders an order of magnitude MORE productive.
KMStraub 16y ago
I think it will only separate the men from the mice.

d8niel 16y ago

Y combinator is doing an amazing job!

kevinelliott 16y ago

This is truly remarkable. Those of us yet to have submitted to YC now have an additional reason to do so. And it took a foreigner to do it. Po.iticians should take note, because this is how you stimulate an economy and innovation.

shareme 16y ago

I want ask an obvious question.. We have at this point in time, the lowest rate of success or ROI of the VC industry since stats were kept. It would seem to me that any deal whereas someone short-changes the process of getting to a Series A deal for any VC or group of VCs is somewhat dangerous of destroying the very model that got all of us here. What steps are being taken to protect the 'YC-Combinator' VC and start-up incubaor model?

deleted 16y ago

[deleted]

lyime 16y ago

Yuri Milner is a baller. That's all.

markessien 16y ago

Techstars is going to be unhappy about this. After one of their premier companies, SendGrid gets hit by the amazon announcement, YC closes this deal.

bourbaki 16y ago

Is YC become a bubble itself?

danest 16y ago

This is great for YC and the new companies coming out, congrats guys.

expressive 16y ago

I was planning to bootstrap my new startup I have in the works, but now I think I will apply to be among the next batch of startups to be funded by Y Combinator. I just woke up to this news, and what a lovely start to my day.

fromRussia 16y ago

DST is a money laundering operation. Yuri Milner is a criminal. I can't believe Paul Graham deals with these guys. He should understand that Russia is outside of his circle of competence. His smarts are not enough to make the judgement. Russia gets roughly $90B annually for oil and gas. Most of the money gets stolen one way or the other and ends up in the funds like DST. Dealing

fromRussia 16y ago
Ternovskiy had told no one he was taking the Sunday-afternoon flight out of Moscow’s Sheremetyevo airport. But when he arrived in New York he found a car from Digital Sky Technologies, the Russian company, waiting for him at the airport. From the driver, he learned that an associate of Yuri Milner was already on his way to New York to talk to him. Back in Moscow, Milner repeatedly called Vladimir, a contemporary of his in college, and urged him to get his son to coöperate. Andrey, ensconced in a New York hotel, was scornful. “Is that even appropriate for an investor?” he asked me. “Harassing and hounding are the only words which come to mind.” Andrey Ternovskiy is the founder of Chatroulette. And the excerpt above is from The New Yorker http://www.newyorker.com/reporting/2010/05/17/100517fa_fact_ioffe?currentPage=all http://www.newyorker.com/reporting/2010/05/17/100517fa_fact_...
- fromRussia 16y ago
  More here: http://www.thenewamerican.com/index.php/usnews/politics/4346-facebook-are-you-interfacing-with-the-russian-mafia-a-kgb http://www.thenewamerican.com/index.php/usnews/politics/4346...
rudiger 16y ago
Not unlike quantitative easing here in the USA resulting in peoples' pensions and savings being given to VCs and funds.
- fromRussia 16y ago
  Indeed. All these lucrative google and microsoft stock options are eventually paid by people forced to sell their homes to pay for health care and food.

chmike 16y ago

Can someone explain what is a "convertible debt. With no cap and no discount" ?

aneth 16y ago

No more debates about whether YC is a "good deal" because of the low implied valuation of their initial investment. This changes the character of the YC experience. YC companies can now spend their time on product, not fundraising. On the other hand, less financial pressure may mean the founders don't learn to hustle and act less lean.

k1ngpin 16y ago

Convertibles with no-cap, frothy valuations, great time to be an entrepreneur. I wonder if this is going to pressure other angels into offering similar terms, and I think if they try to then ultimately angels have the potential to get severely diluted in follow on rounds. I do think that this is a great PR move. Given the hands-off terms from Yuri, I highly doubt that this is a kiss of death for other large VCs who are looking to invest in the follow on rounds, I think it puts much more pressure on Angels who are looking to get into the seed round.

tmekjian 16y ago

I think this is fantastic. Whether it is this $150k or the great number of startups that are getting huge funding early on, it all means one thing... it is GREAT for business and competition. I've heard from quite a few people who say this is a negative thing and they say it defeats the idea of being a startup. My question is, why do you HAVE to start in a garage? Why do you HAVE to eat Ramen noodles for 2 years? At the end of the day, being a startup is about having a creative team and being innovative. This is a great step forward and if it helps a few more teams create a killer product then we all win.