7 ms·

Ask PG: Do you get companies wanting to acquire Y Combinator itself?

78 points by badclient 15y ago

And how do you typically respond?

pg 15y ago
No; investment firms don't get acquired.
- tzm 15y ago
  What about portfolio positions?
- alain94040 15y ago
  Didn't Sequoia invest in Y Combinator, $8.25M in 2010 (http://techcrunch.com/2010/05/21/y-combinator-closes-new-8-25-million-fund-sequoia-is-lead-investor/ http://techcrunch.com/2010/05/21/y-combinator-closes-new-8-2...)? I guess you can argue that LPs it's not quite the same as a direct investment.
  - IdeaVentura 15y ago
    Sequoia isn't a Limited Partner of YC, it's a Limited Partner in one of several funds in which YC is the General (Managing) Partner; I presume.
- cperciva 15y ago
  Is it fair to call YC an investment firm? I've always thought of YC as being an incubator which dabbles in investing -- in the sense of creating wealth primarily via mentoring rather than the initial startup-picking process -- rather than as an investment firm which dabbles in incubation. I'd be very interested to hear your opinion on the relative importance of the various roles YC plays.
- badclient 15y ago
  Fair enough. What if a PE group made you an insanely crazy monetary offer for majority stake?
- te_platt 15y ago
  Do you mean that sort of thing just isn't done? Or there are legal/other reasons why it can't be done?
  - alain94040 15y ago
    YC is likely in the same situation as a famous Hollywood studio: you can buy the buildings and the logo, but once the people leave, the value is gone. So there is nothing worth acquiring.
    - IdeaVentura 15y ago
      In fact a better question for PG would be, would YC license or franchise their brand (like TechStars has done). Except I already know the answer: No.
    - SureTheyDo 15y ago
      You could say the same thing about a law firm, or an investment bank, or a talent agency. But people acquire both of them all the time, just like people acquire Hollywood studios all the time. The question is, "why would the people leave?" or "How do I ensure that they stay?" I think you have a point, I just don't think it is quite the point you are trying to make. To wit, this is a lot of the reason the storied SF law firm Heller Ehrman collapsed a few years ago: a large group I believe simultaneously left the firm, and the firm had losses, and there was no capital base left to draw on to get over bad times (for the record, a lot of professional services firms like investment banks used to be organized this way, and in bad years, the partners would be responsible for recapitalizing the firm. This is one of the reasons you so frequently saw IBs and other similar firms so anxious to sell themselves in the 90s, and it was, in fact, the primary driver behind the notoriously secretive Goldman Sachs going public: they had people rejecting partnership because losses made it unattractive, and their capital base was too unstable to compete in the global big leagues when it was just partners). That said, Heller was cobbled together through a series of acquisitions, most notably for the HN audience, the famed Venture Law Group. And it's not like this was all terrible, the firm lasted for well over 100 years. Similarly, people have acquired real estate brokerage firms, where you'd think there'd be even _less_ of value to acquire, but they do it profitably. I think Cendant paid like $50m for Corcoran Group. Organizing people and assembling clients is difficult: if you can buy an organized group of people with an active customer list/market position...there is some value there, it's just not going to be at sales/earnings multiples we are used to seeing with companies that own technologies.
- SureTheyDo 15y ago
  Investment firms get acquired all the time. There's nothing any less acquirable about an organization that deploys a pile of capital into third-party companies to produce return than any other type of company. Sometimes investment firms even sell chunks of themselves to the public, like BlackRock or Berkshire Hathaway (which is a slightly different story, and a different structure, but not in the important senses) Hell, giant BHCs are investment firms, they just focus on very different opportunities (sovereign debt, insured mortgage bonds, etc.) and they have a different regulatory regime and funding source (deposits, short-term debt finance) Man Group plc is a large acquirer of investment firms and stakes in investment firms. If you broaden the definition of "investment firms" slightly (from the top down an insurance company looks an awful lot like an investment firm with a strange 'cost of float' funding source), then they get acquired all the time. E.g. everything Sanford Weil has done in his life.
  - pg 15y ago
    By investment firms I meant VC funds and the like. I've never heard of a VC fund being acquired. (About 10 years ago a fund of Ron Conway's was acquired, but I believe it was fully invested then. I.e. the acquirer was buying a portfolio, not a business.)
    - larrys 15y ago
      Wow Paul. Someone creates a new HN handle just to refute something you've said and hide their identity. I wonder if the sign up IP was also anonymous. What happened to the days when Gates liked someone who gave him a hard time and stood up to him?
      - abbasmehdi 15y ago
        How is this Paul's doing?
        larrys 15y ago
        I didn't say it was Paul's doing. Edit: Ok I see what gave you that impression. The Gates comment. I don't mean to imply that this behavior is brought on by Paul at all.
- hr 15y ago
  This statement is bait.
TamDenholm 15y ago
An alternative question: Does Y Combinator ever consider fully acquiring one of its companies? Surely there must be a few companies directly relevant to your business that you could acquire?
- Zak 15y ago
  YC has hired and/or made partners of founders of companies it invested in. That seems more in line with its goals than buying companies.
pitdesi 15y ago
PG said a couple of days ago "I never considered what I'd do if someone wanted to buy YC, because companies like YC aren't buyable. But even if someone wanted to buy it I could not imagine selling it, because I don't need the money and it wouldn't be worth the risk that the acquirer would ruin it." http://news.ycombinator.com/item?id=3178173 http://news.ycombinator.com/item?id=3178173

78 points by badclient 15y ago

And how do you typically respond?

pg 15y ago

No; investment firms don't get acquired.

tzm 15y ago
What about portfolio positions?
alain94040 15y ago
Didn't Sequoia invest in Y Combinator, $8.25M in 2010 (http://techcrunch.com/2010/05/21/y-combinator-closes-new-8-25-million-fund-sequoia-is-lead-investor/ http://techcrunch.com/2010/05/21/y-combinator-closes-new-8-2...)? I guess you can argue that LPs it's not quite the same as a direct investment.
- IdeaVentura 15y ago
  Sequoia isn't a Limited Partner of YC, it's a Limited Partner in one of several funds in which YC is the General (Managing) Partner; I presume.
cperciva 15y ago
Is it fair to call YC an investment firm? I've always thought of YC as being an incubator which dabbles in investing -- in the sense of creating wealth primarily via mentoring rather than the initial startup-picking process -- rather than as an investment firm which dabbles in incubation. I'd be very interested to hear your opinion on the relative importance of the various roles YC plays.
badclient 15y ago
Fair enough. What if a PE group made you an insanely crazy monetary offer for majority stake?
te_platt 15y ago
Do you mean that sort of thing just isn't done? Or there are legal/other reasons why it can't be done?
- alain94040 15y ago
  YC is likely in the same situation as a famous Hollywood studio: you can buy the buildings and the logo, but once the people leave, the value is gone. So there is nothing worth acquiring.
  - IdeaVentura 15y ago
    In fact a better question for PG would be, would YC license or franchise their brand (like TechStars has done). Except I already know the answer: No.
  - SureTheyDo 15y ago
    You could say the same thing about a law firm, or an investment bank, or a talent agency. But people acquire both of them all the time, just like people acquire Hollywood studios all the time. The question is, "why would the people leave?" or "How do I ensure that they stay?" I think you have a point, I just don't think it is quite the point you are trying to make. To wit, this is a lot of the reason the storied SF law firm Heller Ehrman collapsed a few years ago: a large group I believe simultaneously left the firm, and the firm had losses, and there was no capital base left to draw on to get over bad times (for the record, a lot of professional services firms like investment banks used to be organized this way, and in bad years, the partners would be responsible for recapitalizing the firm. This is one of the reasons you so frequently saw IBs and other similar firms so anxious to sell themselves in the 90s, and it was, in fact, the primary driver behind the notoriously secretive Goldman Sachs going public: they had people rejecting partnership because losses made it unattractive, and their capital base was too unstable to compete in the global big leagues when it was just partners). That said, Heller was cobbled together through a series of acquisitions, most notably for the HN audience, the famed Venture Law Group. And it's not like this was all terrible, the firm lasted for well over 100 years. Similarly, people have acquired real estate brokerage firms, where you'd think there'd be even _less_ of value to acquire, but they do it profitably. I think Cendant paid like $50m for Corcoran Group. Organizing people and assembling clients is difficult: if you can buy an organized group of people with an active customer list/market position...there is some value there, it's just not going to be at sales/earnings multiples we are used to seeing with companies that own technologies.
SureTheyDo 15y ago
Investment firms get acquired all the time. There's nothing any less acquirable about an organization that deploys a pile of capital into third-party companies to produce return than any other type of company. Sometimes investment firms even sell chunks of themselves to the public, like BlackRock or Berkshire Hathaway (which is a slightly different story, and a different structure, but not in the important senses) Hell, giant BHCs are investment firms, they just focus on very different opportunities (sovereign debt, insured mortgage bonds, etc.) and they have a different regulatory regime and funding source (deposits, short-term debt finance) Man Group plc is a large acquirer of investment firms and stakes in investment firms. If you broaden the definition of "investment firms" slightly (from the top down an insurance company looks an awful lot like an investment firm with a strange 'cost of float' funding source), then they get acquired all the time. E.g. everything Sanford Weil has done in his life.
- pg 15y ago
  By investment firms I meant VC funds and the like. I've never heard of a VC fund being acquired. (About 10 years ago a fund of Ron Conway's was acquired, but I believe it was fully invested then. I.e. the acquirer was buying a portfolio, not a business.)
  - larrys 15y ago
    Wow Paul. Someone creates a new HN handle just to refute something you've said and hide their identity. I wonder if the sign up IP was also anonymous. What happened to the days when Gates liked someone who gave him a hard time and stood up to him?
    - abbasmehdi 15y ago
      How is this Paul's doing?
      - larrys 15y ago
        I didn't say it was Paul's doing. Edit: Ok I see what gave you that impression. The Gates comment. I don't mean to imply that this behavior is brought on by Paul at all.
hr 15y ago
This statement is bait.

TamDenholm 15y ago

An alternative question: Does Y Combinator ever consider fully acquiring one of its companies? Surely there must be a few companies directly relevant to your business that you could acquire?

Zak 15y ago
YC has hired and/or made partners of founders of companies it invested in. That seems more in line with its goals than buying companies.

pitdesi 15y ago

PG said a couple of days ago "I never considered what I'd do if someone wanted to buy YC, because companies like YC aren't buyable. But even if someone wanted to buy it I could not imagine selling it, because I don't need the money and it wouldn't be worth the risk that the acquirer would ruin it." http://news.ycombinator.com/item?id=3178173 http://news.ycombinator.com/item?id=3178173