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Why is it a bubble buy? They are getting in on the A round of every YC company with the same terms as the other participants and with their deep pockets the ab
by bretpiatt 16y ago
Why is it a bubble buy? They are getting in on the A round of every YC company with the same terms as the other participants and with their deep pockets the ability to lead A rounds as well as B, and C rounds for those that take off is worth way more than the $150k each.
Consider this acquisition costs, like buying a really expensive key word on Google. The ~$6M every 6 months is worth it for the seat at the table. An additional benefit is getting to see the terms at which all of these rounds are financed at -- this will help them ensure they are paying properly on non-YC deals they get in.
- hugh3 16y agoBasically, he's investing in everything that YC is investing in, except he's investing at much worse terms than YC gets (that is, YC typically invests in companies at a valuation of a couple of hundred grand, while Series A rounds are typically at a significantly higher valuation than that). It may, in the end, pay off, but I don't think it's a good investment strategy to follow someone else's investments and pay systematically more than they did.
- jackowayed 16y agoHe's getting much worse terms, but he's also doing a lot less work. YC picks the companies, does office hours, finds speakers for dinners, cooks the dinners, works out deals like this one and the Facebook one, etc.
- bretpiatt 16y agoThe terms are only worse in the beginning, the YC organizers do not have a $1B fund to lead on A, B, C rounds and beyond. Because of the ability to double down on the winners the terms may actually be better than what the YC team gets.