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I'm in the W22 batch. These tweets bear no relationship to reality. YC is unarguably transformative if you throw yourself into it and listen to the advice. The

I'm in the W22 batch. These tweets bear no relationship to reality. YC is unarguably transformative if you throw yourself into it and listen to the advice. The emotive nature of this thread probably speaks for itself. But for any startup considering issuing equity to anyone - YC or otherwise - there is a simple formula you can use that Paul Graham came up with: 1/(1 - n) He also put it way better than I can in his essay "Equity Equation": "You should give up n% of your company if what you trade it for improves your average outcome enough that the (100 - n)% you have left is worth more than the whole company was before." [1] [1] http://www.paulgraham.com/equity.html http://www.paulgraham.com/equity.html

Flashtoo 5y ago
Ignoring the merits of that specific rule of thumb, it seems unwise to take advice from a VC on how much equity you should give to VCs.
- jedwhite 5y ago
  The rule applies to giving equity to anyone - co-founders, employees, investors, accelerators. As an investor in a company, a VC would have a vested interest in giving this advice only if it made their investment more successful by making the company more successful in future. I think it is sensible to judge advice and the substance of an argument on its merits, taking into account any industry expertise or relevant biases, rather than exclude it because someone was an investor at the time.
tyre 5y ago
I think it can both be true than a $500k SAFE is marginally worth it and also true that given YC’s existing ownership at 7%, centralizing more equity isn’t. At the end of they day you’re only going to raise so much in your next round and half a million is a lot of space taken up by one investor (who is already motivated to help you if you only do 7%.) I have a couple batchmates who opted out of doing YC again because the equity was too high and that was pre-additional 375k SAFE. On the other hand it is 500k less that you have to raise to close a round and 500k you have if you can’t raise or want to wait to raise. So he doesn’t not have a point. It depends a lot on the company. But to his accusation that YC only cares about the top 10 companies, I think this additional money—which is optional!— disproportionately helps the not-top ten.
- jedwhite 5y ago
  It's important to note that the additional $375k investment is completely optional, something I don't think is mentioned in the original tweets.
  - tyre 5y ago
    Yes, this is important. I don’t know if he knows that, or at least his tweets read to me as if he doesn’t.
52-6F-62 5y ago
And how do you calculate outcome? Should you be even trying to calculate outcome? Profit isn’t a universal virtue, so that’s out. Beyond that I’m curious.

Flashtoo 5y ago

Ignoring the merits of that specific rule of thumb, it seems unwise to take advice from a VC on how much equity you should give to VCs.

jedwhite 5y ago
The rule applies to giving equity to anyone - co-founders, employees, investors, accelerators. As an investor in a company, a VC would have a vested interest in giving this advice only if it made their investment more successful by making the company more successful in future. I think it is sensible to judge advice and the substance of an argument on its merits, taking into account any industry expertise or relevant biases, rather than exclude it because someone was an investor at the time.

tyre 5y ago

I think it can both be true than a $500k SAFE is marginally worth it and also true that given YC’s existing ownership at 7%, centralizing more equity isn’t. At the end of they day you’re only going to raise so much in your next round and half a million is a lot of space taken up by one investor (who is already motivated to help you if you only do 7%.) I have a couple batchmates who opted out of doing YC again because the equity was too high and that was pre-additional 375k SAFE. On the other hand it is 500k less that you have to raise to close a round and 500k you have if you can’t raise or want to wait to raise. So he doesn’t not have a point. It depends a lot on the company. But to his accusation that YC only cares about the top 10 companies, I think this additional money—which is optional!— disproportionately helps the not-top ten.

jedwhite 5y ago
It's important to note that the additional $375k investment is completely optional, something I don't think is mentioned in the original tweets.
- tyre 5y ago
  Yes, this is important. I don’t know if he knows that, or at least his tweets read to me as if he doesn’t.

52-6F-62 5y ago

And how do you calculate outcome? Should you be even trying to calculate outcome? Profit isn’t a universal virtue, so that’s out. Beyond that I’m curious.