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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 ear
by 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 agoIt'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 agoDST 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 agoRead up on AOL's position during the .com boom.
- pclark 16y agocan you just explain it?
- nickpp 16y agoStartups 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.
- jacquesm 16y agoI don't see any such strings attached to this deal.
- robryan 16y agoExpenditure is different this time round though, most of these startups aren't looking to blow heaps of investment on advertising and expensive offices and server costs are nowhere near where they were. Most startups now to know that building an audience isn't enough that they need a revenue model. Many startups being built to are good fits for acquisitions by the bigger players, generally less people getting funding for things that are unworkable. Also the public is far less adverse to sharing and purchasing online and innovations like the app stores and things like the kindle have opened up many more markets to generate revenue.
- kjksf 16y agoFrom the article: "Now he’s partnering (as an individual, not as part of DST)"
- ztan 16y agoThat's $6M every batch, at least $12M a year. Assuming YC classes does not expand. I think PG mentioned about 1/3 of the YC companies fail. So that's $4M in the water every year. Out of the rest 2/3s chances of being a Heroku are... actually I'm going stop here because I'm sure they've worked out all the math already.
- trotsky 16y agoWhy stop there? How about $50k to everyone in the greater bay area with 10 slides and a business plan?
- MichaelApproved 16y agoMaybe the extra 150k can help lower the 1/3 failure rate.
- axod 16y agoI'm pretty sure more money can actually make things worse not better.
- robryan 16y agoWould be interesting to know how many YC companies failed because they couldn't get even a minimum amount of funding required to sustain themselves and continue. Of course some of these may have just burned through the extra cash then hit the same problem.