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> How is it that you think YC makes money in a body shop acquihire deal? Liquidation preference.

• tptacek 2y ago
  At best that just gets them their money back, right? You can't buy for a nickel and sell for up to a nickel. That's not a business.
  • throwup238 2y ago
    That's only if they have 1X preference, which is the bare minimum (otherwise the founders could immediately e.g. flip a company with $1 mil in liquid cash for $X00k and pocket their share). The vast majority of (early stage) deals I've seen started at 2-3x preference. To be clear, I don't have any insider info on YC contracts and I'm not claiming that's where they make the bulk of their profits. But between my short time at a VC firm, the number of founders & early employees I know who have been screwed over by the practice (including myself), and >1X liquidation preference being such a pervasive clause, I suspect it's a rather significant fraction of software tech VC ROI. In practice acquihires help round out the numbers for LP presentations until the unicorns bear the real profitable fruit.
    • tptacek 2y ago
      The YC deal documents are famously public, right? You don't need "insider information" on them. This is pretty basic stuff. YC has blog posts about >1x preferences being a "dirty" term (as in, not a market term).
    • RestlessMind 2y ago
      > The vast majority of (early stage) deals I've seen started at 2-3x preference That's a very bold claim. Any citations?