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Let's assume that they have invested since the beginning of YC with the 250 startups: 250 * 150 000 = $37 500 000 So far, 20 YC companies have been acquire
by wave 16y ago
Let's assume that they have invested since the beginning of YC with the 250 startups:
250 * 150 000 = $37 500 000
So far, 20 YC companies have been acquired generating $401 500 000 (data taken from yclist.com). If the investors own an average of 5% of the startups, their current position would have been about 50% loss:
401 500 000 * .05 = $20 075 000
I don't think this is a bad position to be in since there are still great companies that have not been acquired or exited. The $150k investment may also reduce the failure rate.
- dmitrypakhomkin 16y agoInvestors owning 5% of the company? Unlikely. YC takes an average 6% I believe? Then VC takes say 10-15% in next round for $700K (average after-YC investment).
- webwright 16y ago5% is high. If the Series A rounds were 1 on 3 ($1M on $3M pre-money valuation), then $150k would get him 3.75%. For hotter startups, 1 on 4 or 5 might actually happen. Presumably they would have the option to put more in, but that would increase their basis. But your assessment is right. Average time to liquidity for a VC backed startup is 7+ years-- older than the oldest YC company, right? There is a TON of value locked in in previous YC companies.
- jaxn 16y agoAccording to the article, the average YC company raises $700k in seed funding. Assuming your $3M pre is correct, that would be about 18% total and 4% for the $150k investor. The question is, does a quick and easy $150k delay fundraising until a company is looking at a $6M pre? For the super hot ones I bet it does. For those startups that are more worried about not getting early traction they probably won't delay fundraising. So if we are going to throw a number around... my fuzzy math says 2% of the hottest companies and 4% of the others.
- mlinsey 16y agoThe first post-YC fundraising is usually made up of convertible notes. So in your example, that $700K at $3M pre would not trigger the conversion of Start Fund's note, which would instead convert at the valuation of the next round of fundraising.
- arihelgason 16y agoThey have pro-rata rights on the next round. This means that they can follow the investment in subsequent rounds if the company is successful. This completely changes the economics.