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I can think of a few reasons why YC would make this decision without admitting so publicly: 1) Too much negative signaling risk when they don't make follow-on

I can think of a few reasons why YC would make this decision without admitting so publicly: 1) Too much negative signaling risk when they don't make follow-on investments 2) Negative returns given the recent downturn 3) The increasing business need to make non-founder-friendly changes in late stage companies (e.g. replacing CEO) 4) Anu/Ali deciding to leave first to start their own fund I wonder if any of these reasons is a predominant driver.

deleted 4y ago
[deleted]
ajross 4y ago
Oh, come on. This is three days after their favorite bank got shut down. We all know what the proximate cause is. I think it's clear that the venture world (at least the top of it) had turned itself into an industry on its own. They didn't make money on startup exits anymore, they made it on services. They'd fund startups, get those startups into later rounds by milking less sophisicated VCs[1], push them at their favorite bank, collect fees at each stage, and then take the profits and roll them up into more startus. Now that the favorite bank is dead, this gravy train is over immediately. And the smart VCs at the top of the heap are the ones to exit the wagon first. Honestly, the industry has had a toxic feel for a while. But the last 72 hours have made it clear that there was just no soul left. [1] Yes, this sounds like a pyramid scheme to me too.
- fairity 4y ago
  > They didn't make money on startup exits anymore You do realize YC's equity returns from Airbnb & Doordash probably cover their entire history of funding startups?
  - ajross 4y ago
    The discussion is about late-stage investing, though. Obviously yes, the occasional unicorn funds a lot of slop and failed choices in series B rounds. But if that were true, then they wouldn't be laying off a paltry 17 people because of a minor market downturn, would they? Again, the timing of this makes it abundantly clear that something YC was doing in the years before SVBs failure is instantly impossible now that it's dead.
- kortilla 4y ago
  If you’re going to hint at elaborate kick-back schemes, at least spend the effort to think through how that would work and spell it out.
  - mattbrewsbytes 4y ago
    It doesn't need to be that elaborate. Funding a startup and strongly suggesting they bank at SVB and then YC invests in SVB, telling other VC's to invest in SVB is all the kick back you need. Stock goes up you sell off some or leverage that for loans to invest in more startups. Stock goes down, your loan leverage/assets are down and can't invest any more. I don't know if that's the case here, just saying this example isn't very complicated. Also its not a coincidence that investors in SVB aren't getting money back from FDIC, only depositors, YC was an investor (and prob a depositor), they lost money and now have to lay people off. I would imagine other VC firms might be in the same scenario. Later on, will this period of time be thought of as dot com bust 2.0?
    - kortilla 4y ago
      That’s about the worst possible kickback scheme I can think of. Deposits drive so little of a bank’s profit that you would have to be the dumbest grifter in the world to setup such an expensive referral program with only the hope of stock appreciation.
      - deetsb 4y ago
        *citation needed Per SVB’s recent K, Net Interest Income: 4.065bn (after provisions) Non interest income: 1.728bn Deposits fund the net interest income
- dang 4y ago
  That works in internet logic but it's not true. At least, it's not what I've been told inside YC and I don't believe anyone was lying. What it's actually related to is Garry taking over YC and deciding to refocus YC on its original roots. (I specifically asked about that today during an all-hands btw.) At a minimum, it takes longer than 3 days to make a big change like this. I realize that's not a persuasive argument though, since there is endless supply of explanations one can come up with (what if they knew about SVB beforehand!)
  - rftyuikdjhgvcf 4y ago
    they knew about SVB beforehand.
    - astrange 4y ago
      You can't know about a bank run beforehand. It dies when it dies, it's kind of a surprise that way. (Being insolvent isn't actually enough to kill a bank as long as the run doesn't start. Of course, here the bank dies when the regulator decides it dies anyway.)
      - latchkey 4y ago
        > You can't know about a bank run beforehand. Explain the selling of stock by the executives then.
        astrange 4y ago
        They didn't know there would be a bank run either. They weren't working off private information, you could read their financial statements too. …but that's not enough to make a bank fail, it's just bad news for shareholders.
    - dang 4y ago
      See what I mean?
  - ajross 4y ago
- how2start 4y ago
  strange this is downvoted. Serious denial among the wannabes here. Everyone in the know, knows this is true.
- analyst74 4y ago
  Out of curiosity, what services do YC provide for additional fees?

deleted 4y ago

[deleted]

ajross 4y ago

Oh, come on. This is three days after their favorite bank got shut down. We all know what the proximate cause is. I think it's clear that the venture world (at least the top of it) had turned itself into an industry on its own. They didn't make money on startup exits anymore, they made it on services. They'd fund startups, get those startups into later rounds by milking less sophisicated VCs[1], push them at their favorite bank, collect fees at each stage, and then take the profits and roll them up into more startus. Now that the favorite bank is dead, this gravy train is over immediately. And the smart VCs at the top of the heap are the ones to exit the wagon first. Honestly, the industry has had a toxic feel for a while. But the last 72 hours have made it clear that there was just no soul left. [1] Yes, this sounds like a pyramid scheme to me too.

fairity 4y ago
> They didn't make money on startup exits anymore You do realize YC's equity returns from Airbnb & Doordash probably cover their entire history of funding startups?
- ajross 4y ago
  The discussion is about late-stage investing, though. Obviously yes, the occasional unicorn funds a lot of slop and failed choices in series B rounds. But if that were true, then they wouldn't be laying off a paltry 17 people because of a minor market downturn, would they? Again, the timing of this makes it abundantly clear that something YC was doing in the years before SVBs failure is instantly impossible now that it's dead.
kortilla 4y ago
If you’re going to hint at elaborate kick-back schemes, at least spend the effort to think through how that would work and spell it out.
- mattbrewsbytes 4y ago
  It doesn't need to be that elaborate. Funding a startup and strongly suggesting they bank at SVB and then YC invests in SVB, telling other VC's to invest in SVB is all the kick back you need. Stock goes up you sell off some or leverage that for loans to invest in more startups. Stock goes down, your loan leverage/assets are down and can't invest any more. I don't know if that's the case here, just saying this example isn't very complicated. Also its not a coincidence that investors in SVB aren't getting money back from FDIC, only depositors, YC was an investor (and prob a depositor), they lost money and now have to lay people off. I would imagine other VC firms might be in the same scenario. Later on, will this period of time be thought of as dot com bust 2.0?
  - kortilla 4y ago
    That’s about the worst possible kickback scheme I can think of. Deposits drive so little of a bank’s profit that you would have to be the dumbest grifter in the world to setup such an expensive referral program with only the hope of stock appreciation.
    - deetsb 4y ago
      *citation needed Per SVB’s recent K, Net Interest Income: 4.065bn (after provisions) Non interest income: 1.728bn Deposits fund the net interest income
dang 4y ago
That works in internet logic but it's not true. At least, it's not what I've been told inside YC and I don't believe anyone was lying. What it's actually related to is Garry taking over YC and deciding to refocus YC on its original roots. (I specifically asked about that today during an all-hands btw.) At a minimum, it takes longer than 3 days to make a big change like this. I realize that's not a persuasive argument though, since there is endless supply of explanations one can come up with (what if they knew about SVB beforehand!)
- rftyuikdjhgvcf 4y ago
  they knew about SVB beforehand.
  - astrange 4y ago
    You can't know about a bank run beforehand. It dies when it dies, it's kind of a surprise that way. (Being insolvent isn't actually enough to kill a bank as long as the run doesn't start. Of course, here the bank dies when the regulator decides it dies anyway.)
    - latchkey 4y ago
      > You can't know about a bank run beforehand. Explain the selling of stock by the executives then.
      - astrange 4y ago
        They didn't know there would be a bank run either. They weren't working off private information, you could read their financial statements too. …but that's not enough to make a bank fail, it's just bad news for shareholders.
  - dang 4y ago
    See what I mean?
- ajross 4y ago
how2start 4y ago
strange this is downvoted. Serious denial among the wannabes here. Everyone in the know, knows this is true.
analyst74 4y ago
Out of curiosity, what services do YC provide for additional fees?