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I'm onehundertpercent pissed off with YC: * The modal win for a founder is $0.00 * PG makes big talk about winner's average returns... Yayyyyy..... However YC

I'm onehundertpercent pissed off with YC: * The modal win for a founder is $0.00 * PG makes big talk about winner's average returns... Yayyyyy..... However YC gets preferential shares; YC is not aligned with the common shareholders (founders; builders). YC builds a story that they support creators however YC doesn't sit on the same table-side as creators. * I actually believe YC is worthwhile, but I wonder if Ize just been brainwashed? (reëdited for clarity)

aswegs8 2y ago
Welcome to capitalism. Of course there is an asymmetry between individual founders and one of the, if not the most famous VC firm on the planet. It's an individual decision to determine whether YC is worthwhile. If it wouldn't be, it wouldn't work.
- AbstractH24 2y ago
  Is it still? Or was that true 10 years ago. Not sure if I’ve changed or the landscape has.
- rchaud 2y ago
  Silicon Valley is not capitalism, it's financier-ism. It isn't about finding a gap in the market and providing a profitable service, but bandwagoning behind the latest trends so as to chase "scalability" and later using financial/political muscle to weaken regulations so as to better "disrupt" the market. Profits? That's a problem for whoever they manage to dump their shares on.
  - saulpw 2y ago
    What do you think capitalism is, if not that? "Those with capital use their money to make the rules so they make more money." Many people think capitalism is simply a market economy. It's not. You can have a market economy without "capital" (investors) having special privileges that make all the money flow to them.
  - immibis 2y ago
    That's capitalism.
rvz 2y ago
The quality bar for YC has been at an all time low. Hence why lots of “startups” are getting accepted into YC in 2024 screaming about AI and some that compete against each other over the same idea, but “open source”. > I actually believe YC is worthwhile, but I wonder if Ize just been brainwashed? Ask yourself, if you really need VC money in the first place. The moment you go to YC, they become your new boss and always win and you get to laugh at all of us HNers in this secret club called bookface [0]. (Yes, that hidden version of HN and part of YC) Very unlikely to change anytime soon, but the SVB collapse should have taught us something. [0] https://bookface.ycombinator.com/ https://bookface.ycombinator.com/
- nradov 2y ago
  The quality bar of pretty much all seed stage investors has always been extremely low. That is simply the nature of the business. At that stage the signal-to-noise ratio is very low. There just isn't enough data to make reliable determinations, hence the emphasis on quantity of deals over quality. There is nothing to learn from the SVB collapse. They mismanaged interest rate risk and overextended. So what.
  - rvz 2y ago
    > The quality bar of pretty much all seed stage investors has always been extremely low. That is simply the nature of the business. Of course it is. That is why I said the quality bar it is at an "all time low". > There is nothing to learn from the SVB collapse. They mismanaged interest rate risk and overextended. So what. Ah yes, why not tell those same so-called "AI startups" to repeat that same mistakes again in 2023 and also continue to burn lots of that money and we'll see yet again widespread massive panic, downrounds on this site like we did before. The startups that got complacent over believing that VCs will just throw money into their startup forever (until they don't) are the ones that will be added into that inactive directory unfortunately. So as soon as this AI bubble collapses with a new surprise catalyst, I won't be surprised to see YC directly caught in the contagion because they threw themselves into hundreds of low-quality startups, unable to make money and they are cloned and raced to zero.
dmbche 2y ago
Check the Principal-Agent problem in game theory, that's what's going on
jasode 2y ago
>However YC gets preferential shares; It's not that YC specifically gets "preferred shares" -- it's that investors in general insist on liquidation preferences when buying non-liquid shares in unproven private companies. How would an alternative scenario of investors buying common shares of illiquid stock in a private company actually be realistic? Maybe the startup founders could hypothetically insist on selling only common shares and never preferred shares as a condition of investment?!? But what investors (other than family relatives) would put in money in that case? Or put another way, let's say we create a brand new VC fund to invest in startups and one of the novel concepts is that the fund only buys common shares to be more "founder friendly". The problem is that hypothetical VC fund will attract no rational limited partners with money because they know that startup founders can just take their invested dollars with no payback protection. Such a VC fund with no investors and no money to invest would be a moot point. The general partner of such a VC fund would be considered a "financial idiot" for buying common shares in startups. In the end, the "preferred shares" is the market's "risk premium" that investors charge as an offsetting factor for losing 100% of their money. If startup founders can't find a way to convince investors to accept illiquid common stock instead of preferred shares, they need to avoid investors altogether and self-fund via bootstrapping.
- dustingetz 2y ago
  preferred shares prevent cookie cutter founder fraud. Founder raises $1M at 10 post. Founder decides to sell 6 months later for 2 mil. Investors get 200k back founder gets 1.8 mil. Now run this math for AI unicorns.
  - AbstractH24 2y ago
    This is a valid concern. But shifting risk entirely to those without preferential shares (typically employees) is also unfair.
    - dustingetz 2y ago
      different share classes trade at different prices. Employee NSO/ISO strike price at seed stage (i.e. on a SAFE) are typically priced at a FMV of 10% (!!) of the SAFE's postmoney valuation. Also, your use here of the word "fair" has triggered a personal tick of mine so I must direct you to https://quotefancy.com/quote/3709551/Chris-Voss-The-F-word-Fair-is-an-emotional-term-people-usually-exploit-to-put-the-other https://quotefancy.com/quote/3709551/Chris-Voss-The-F-word-F...
morgante 2y ago
> However YC gets preferential shares; YC is not aligned with the common shareholders (founders; builders). YC invests on a SAFE, the terms are public.[0] For most companies, pre-seed SAFEs don't end up much above common. [0] https://www.ycombinator.com/deal https://www.ycombinator.com/deal
- robocat 2y ago
  > For most companies, pre-seed SAFEs don't end up much above common. I'm not sure that is correct. AFAIK the modern YCombinator post-money SAFE [1] converts to the exact same share class as the VC investment round. The bookface document[2] says "when the company decides to sell shares of preferred stock in a priced round (an 'Equity Financing'), the outstanding safes will convert into shares of preferred stock" and also says elsewhere "then the safe holder will receive shares of Standard Preferred Stock". I know nothing - so could be completely wrong!!! Complicated stuff LOL [1] https://www.ycombinator.com/documents/ https://www.ycombinator.com/documents/ [2] https://bookface-static.ycombinator.com/assets/ycdc/Website%20User%20Guide%20Feb%202023%20-%20final-28acf9a3b938e643cc270b7da514194d5c271359be25b631b025605673fa9f95.pdf https://bookface-static.ycombinator.com/assets/ycdc/Website%...

aswegs8 2y ago

Welcome to capitalism. Of course there is an asymmetry between individual founders and one of the, if not the most famous VC firm on the planet. It's an individual decision to determine whether YC is worthwhile. If it wouldn't be, it wouldn't work.

AbstractH24 2y ago
Is it still? Or was that true 10 years ago. Not sure if I’ve changed or the landscape has.
rchaud 2y ago
Silicon Valley is not capitalism, it's financier-ism. It isn't about finding a gap in the market and providing a profitable service, but bandwagoning behind the latest trends so as to chase "scalability" and later using financial/political muscle to weaken regulations so as to better "disrupt" the market. Profits? That's a problem for whoever they manage to dump their shares on.
- saulpw 2y ago
  What do you think capitalism is, if not that? "Those with capital use their money to make the rules so they make more money." Many people think capitalism is simply a market economy. It's not. You can have a market economy without "capital" (investors) having special privileges that make all the money flow to them.
- immibis 2y ago
  That's capitalism.

rvz 2y ago

The quality bar for YC has been at an all time low. Hence why lots of “startups” are getting accepted into YC in 2024 screaming about AI and some that compete against each other over the same idea, but “open source”. > I actually believe YC is worthwhile, but I wonder if Ize just been brainwashed? Ask yourself, if you really need VC money in the first place. The moment you go to YC, they become your new boss and always win and you get to laugh at all of us HNers in this secret club called bookface [0]. (Yes, that hidden version of HN and part of YC) Very unlikely to change anytime soon, but the SVB collapse should have taught us something. [0] https://bookface.ycombinator.com/ https://bookface.ycombinator.com/

nradov 2y ago
The quality bar of pretty much all seed stage investors has always been extremely low. That is simply the nature of the business. At that stage the signal-to-noise ratio is very low. There just isn't enough data to make reliable determinations, hence the emphasis on quantity of deals over quality. There is nothing to learn from the SVB collapse. They mismanaged interest rate risk and overextended. So what.
- rvz 2y ago
  > The quality bar of pretty much all seed stage investors has always been extremely low. That is simply the nature of the business. Of course it is. That is why I said the quality bar it is at an "all time low". > There is nothing to learn from the SVB collapse. They mismanaged interest rate risk and overextended. So what. Ah yes, why not tell those same so-called "AI startups" to repeat that same mistakes again in 2023 and also continue to burn lots of that money and we'll see yet again widespread massive panic, downrounds on this site like we did before. The startups that got complacent over believing that VCs will just throw money into their startup forever (until they don't) are the ones that will be added into that inactive directory unfortunately. So as soon as this AI bubble collapses with a new surprise catalyst, I won't be surprised to see YC directly caught in the contagion because they threw themselves into hundreds of low-quality startups, unable to make money and they are cloned and raced to zero.

dmbche 2y ago

Check the Principal-Agent problem in game theory, that's what's going on

jasode 2y ago

>However YC gets preferential shares; It's not that YC specifically gets "preferred shares" -- it's that investors in general insist on liquidation preferences when buying non-liquid shares in unproven private companies. How would an alternative scenario of investors buying common shares of illiquid stock in a private company actually be realistic? Maybe the startup founders could hypothetically insist on selling only common shares and never preferred shares as a condition of investment?!? But what investors (other than family relatives) would put in money in that case? Or put another way, let's say we create a brand new VC fund to invest in startups and one of the novel concepts is that the fund only buys common shares to be more "founder friendly". The problem is that hypothetical VC fund will attract no rational limited partners with money because they know that startup founders can just take their invested dollars with no payback protection. Such a VC fund with no investors and no money to invest would be a moot point. The general partner of such a VC fund would be considered a "financial idiot" for buying common shares in startups. In the end, the "preferred shares" is the market's "risk premium" that investors charge as an offsetting factor for losing 100% of their money. If startup founders can't find a way to convince investors to accept illiquid common stock instead of preferred shares, they need to avoid investors altogether and self-fund via bootstrapping.

dustingetz 2y ago
preferred shares prevent cookie cutter founder fraud. Founder raises $1M at 10 post. Founder decides to sell 6 months later for 2 mil. Investors get 200k back founder gets 1.8 mil. Now run this math for AI unicorns.
- AbstractH24 2y ago
  This is a valid concern. But shifting risk entirely to those without preferential shares (typically employees) is also unfair.
  - dustingetz 2y ago
    different share classes trade at different prices. Employee NSO/ISO strike price at seed stage (i.e. on a SAFE) are typically priced at a FMV of 10% (!!) of the SAFE's postmoney valuation. Also, your use here of the word "fair" has triggered a personal tick of mine so I must direct you to https://quotefancy.com/quote/3709551/Chris-Voss-The-F-word-Fair-is-an-emotional-term-people-usually-exploit-to-put-the-other https://quotefancy.com/quote/3709551/Chris-Voss-The-F-word-F...

morgante 2y ago

> However YC gets preferential shares; YC is not aligned with the common shareholders (founders; builders). YC invests on a SAFE, the terms are public.[0] For most companies, pre-seed SAFEs don't end up much above common. [0] https://www.ycombinator.com/deal https://www.ycombinator.com/deal

robocat 2y ago
> For most companies, pre-seed SAFEs don't end up much above common. I'm not sure that is correct. AFAIK the modern YCombinator post-money SAFE [1] converts to the exact same share class as the VC investment round. The bookface document[2] says "when the company decides to sell shares of preferred stock in a priced round (an 'Equity Financing'), the outstanding safes will convert into shares of preferred stock" and also says elsewhere "then the safe holder will receive shares of Standard Preferred Stock". I know nothing - so could be completely wrong!!! Complicated stuff LOL [1] https://www.ycombinator.com/documents/ https://www.ycombinator.com/documents/ [2] https://bookface-static.ycombinator.com/assets/ycdc/Website%20User%20Guide%20Feb%202023%20-%20final-28acf9a3b938e643cc270b7da514194d5c271359be25b631b025605673fa9f95.pdf https://bookface-static.ycombinator.com/assets/ycdc/Website%...