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Paul Graham: Y Combinator Companies Have Raised Over $1 Billion
- adambenayoun 14y agoImpressive numbers
- lazyjones 14y agoHow much is Y Combinator's share (if any)?
- adambenayoun 14y agoWe make small investments (rarely more than $20,000) in return for small stakes in the companies we fund (usually 2-10%). Taken from http://ycombinator.com/about.html http://ycombinator.com/about.html
- skrebbel 14y agoHow very Silicon Valley of the author to treat these numbers almost like they're profits, or any reasonable sort of "income" at all. The real question is: how much of that money has already been multiplied tenfold, through exits, IPOs or exorbitant profits?
- adambenayoun 14y agoRaising money isn't any indication for any success but is a nice accomplishment - money coupled with the mentoring and connection from ycombinator could significantly improve the companies odds to succeed. These numbers are vanity metrics but are still indicating a trend - companies going through ycombinator are more likely to raise money than others. I know I would go thru ycombinator - not because of the money I could raise easily but mostly because of the alumni network, connections and access to world class mentors. You could have a look at what companies raised money and what were the successful exits to date: http://www.crunchbase.com/company/y-combinator http://www.crunchbase.com/company/y-combinator
- jedc 14y agoPG originally made the comment in this thread http://news.ycombinator.com/item?id=4291075 http://news.ycombinator.com/item?id=4291075 on Seed-DB. I launched Seed-DB earlier today (http://www.seed-db.com http://www.seed-db.com) where you can find these data points for all companies that have been through seed accelerators.
- hollerith 14y agoDid you try to compute (latest-round) valuations?
- mehulkar 14y agoAlso would like to see how much of that money went to the same founders. I hear that after the getting funding after the first "success" gets easier.
- pbreit 14y agoThe distinct minority since there are so few repeats and none that I can think of among the big fundraisers (Dropbox, airbnb).
- DanielRibeiro 14y agoIn Techcrunch's defense, they have published a very good article on these kind of numbers[1]. Actually, they have published a lot of articles on this[2]. What is more insteresting, is that Paul Graham reiterates the Power Law of Startups he talked to Peter Thiel recently[3]: Peter Thiel: Do Y-Combinator companies follow a power law distribution? Paul Graham: Yes. They’re very power law. [1] http://techcrunch.com/2011/07/30/vanity-metrics/ http://techcrunch.com/2011/07/30/vanity-metrics/ [2] http://techcrunch.com/search/vanity+metrics http://techcrunch.com/search/vanity+metrics [3] http://blakemasters.tumblr.com/post/21869934240/peter-thiels-cs183-startup-class-7-notes-essay http://blakemasters.tumblr.com/post/21869934240/peter-thiels...
- pbreit 14y agoWhy are HNers so dense when it comes to fundraising? No, the treatment doesn't come off at all sounding like profits or income. Yes, fundraising is definitely a point of success. Why do HNers have such a hard time with this? Money is an important resource for growing companies! Sheesh.
- brazzy 14y agoIf anyone is dense, it's you. It is certainly odd that the number of HN postings that follow the pattern "Company X raised $Y" far exceeds that of postings about revenue or profits, which are undeniably more important metrics for success. To some degree that can be explained by the fact that many incubated startups are legitimately in a phase where raising capital is important and revenue/profits not yet achievable. But why do we hear so little about later phases? IMO it's just as much a symptom of the dysfunctional aspects of the current startup scene that aims primarily towards acquisitions, where revenue, let alone profits, are ctively avoided because they're seen as an impediment to ridiculous acquisition valuations.
- pbreit 14y agoFor startups, to which HN is oriented, actual revenue is in fact not that important and profits are actually to be avoided.
- brazzy 14y agoIf you think that the goal of a startup is to get the highest possible hype-based acquisition valuation, sure. Call me naive, but I still believe that building an actual profitable business is a much better goal. It may not lead to crazy payouts, but it is also more honest and does not depend as much on timing a boom phase. I gather that this kind of thing is derisively called a "lifestyle business" in startup circles. I submit that at least it is actually a business, rather than a hand of hype poker.
- tomblomfield 14y agoYou do see posts about massive profits - from companies like PayPal & Google. These are the startups that made it.
- pg 14y agoWhat on earth did the author say that conflated fundraising with revenues? All he did was compute an average and list some individual amounts raised. Also, a 10x return is the sort of target a VC will have for a series A round. Investors in later stage rounds have lower expectations. And since later stage rounds are much bigger, that means most of the money invested in a successful startup is done with the expectations of way less than 10x returns. From what I know, I would guess that the investor of the median dollar of that billion is happy with the way things are going so far.
- skrebbel 14y agoEssentially, my complaint is exactly that: he just reported the numbers. In a more mainstream financial magazine, I would've expected the author to also do his best trying to find out what those investments are doing. Basically, what I find an interesting question is "Ok, so $1B has been invested in YC companies. How much are those worth now? Of those which exited, how much did they exit for?". Essentially: how healthy is the startup ecosystem economy? Why can't TechCrunch ask and answer questions like these? The impression I get from articles like these, which don't balance the equation but just say "investment, hooray!!", is that the common conception in Startupland is that you're already halfway done when you secured a large amount of funding. In other words, that getting investors implies success. Some other commenters in this thread called me bitter and even jealous for that, but I don't understand that. Sure, getting investment increases the chance for success. Admittedly, I'd go and share a few drinks if someone just gave me a few million dollars for me to spend on making my dream reality. But it's not success yet. I'm still very much in the red! Now, what I find really interesting is the last line of your comment. Do you have any numbers about that? How much is that $1B worth right now? (and, why didn't TechCrunch ask?) ps. I really believed that tenfold returns were expected in later rounds, too. Thanks for clearing that up.
- austenallred 14y agoCan't knock TC for releasing recently-updated numbers. Do they put too much emphasis on funding? Perhaps, but this post is not evidence of that.
- cluda01 14y agoDidn't Paul breakout the outcomes of Y Combinator companies a while back (e.g. acquired, sold, in business, etc)? It would be interesting to see if anything has dramatically changed.
- wallawe 14y agoIt's interesting, they invest an average of $15,000 in each company so let's say they have invested somewhere around 6M. According the the FAQ (http://ycombinator.com/faq.html http://ycombinator.com/faq.html) they take an average of 6 or 7 percent stake in each company. For shits and giggles let's use 6%. A low end estimate of their ROI would be around a whopping 174%. Their current holdings of the 7.78 Billion would be around 466 million. This is all wacky math I realize but it's interesting to take into account how well this fund has done.
- adambenayoun 14y agoYou're not taking into consideration the various dilutions and other preferred rights from other investors but all in all - it's clear that this fund will be very successful.
- il 14y agoIt's pretty incredible to think that YC is likely the highest performing venture fund in history. For 380 companies that works out to about $7.6 million invested into a portfolio of companies worth $7.78 billion. Assuming a 2-7% stake for YC(after dilution), that puts the value of YC's share at $155-$545 million on that $7 million invested.
- nrao123 14y agoMore here - http://news.ycombinator.com/item?id=2854630 http://news.ycombinator.com/item?id=2854630
- frankphilips 14y agoI think it's mainly because of Paul Graham. He's a visionary and he's excellent at spotting awesome teams (even if their ideas suck). Nobody would have thought twice about Airbnb, but Paul saw something that other investors didn't see. He noticed how effectively the team worked together. He also knew they would pivot if they needed to. Having that type of discernment has allowed YC to find & fund all these amazing startups. His hunch with the Airbnb guys paid off considering the company is valued at over a billion now!
- prpx 14y agoDon't underestimate being the dominant startup accelerator. While probably well deserved, it's also kind of a "self-fulfilling prophecy".
- nikcub 14y ago~20x isn't close in the pantheon of record venture deals, especially when normalized to an IRR (annual return). Benchmark Capital is often cited since their $6M investment was worth 500M+ at IPO less than a year later and then eventually ballooned to being worth $5B as shit got crazy. the 12.7M Accel invested into Facebook in the A was worth ~$10B at IPO. I think even that is less on IRR than the ebay deal
- kunle 14y ago
- adambenayoun 14y agoWhat's interesting is that if 2-3 years ago, ycombinator had the ability to identify and pick winners. I have the impression that in the past year it became the other way around. Y combinator by picking companies are in fact the kingmakers and are creating the winners.
- cluda01 14y agoNot too clear about what your last sentence means. Could you please clarify?
- pnachbaur 14y agoHe means that in the past, they made good guesses about which companies would be winners. Now, they have so much clout that merely by picking a company they can make it a winner. Of course, they're still making smart picks. It's just easier for those picks to succeed.
- adambenayoun 14y agoThanks for translating it!
- adambenayoun 14y agoSorry about that - what I meant is that an investor role is to identify likely winners and support them until they get acquired or IPO. But ycombinator have more than the ability of identifying winners, I think they have achieved the status of turning people into winner just by picking them. Their true value is not by giving out money or knowing who are the winners, but by adding value to teams to a point where everything they touch turn into gold. People will want to get associated with anything ycombinator invests in, you can see that with the fact that the startfund is now offering $150k convertible note to any company getting accepted into YC. That is amazing. _disclaimer:_ I tried getting into YC once but got rejected - but I still think of myself as a winner!
- deleted 14y ago[deleted]
- harel 14y agoAnd how much money have they generated to date?
- pg 14y agoQuite a lot, actually. While some startups (e.g. Twitter) take a while to generate significant revenues, it happens that the most successful startups we've funded were not of that type.
- nitrogen 14y agoI'm curious what proportion of YC's success has come through very public, consumer-facing companies like Reddit, vs. companies the outside world never hears of, that quietly make tons of money behind the scenes selling to businesses and/or governments.
- harel 14y agoI'd still like to know the exact figure. its easy to find out how much was put in, but not so easy how much was generated. I'd love to know the total yc bottom line.
- brazzy 14y agoFor whom? As I understand it, quite a bit of that "raised" money ends up in the pockets of earlier investors.
- CubicleNinjas 14y agoI like you.
- xxiao 14y agothis is a _lot_ of money, way to go YC! meanwhile, can we have less job-posting here...
- iioowwee 14y agoRaising venture capital is an interesting way to pay salaries. But maybe a more interesting title is how much profit YC companies have made.
- MaysonL 14y agoI do wonder how many (if any) successful YC companies have bootstrapped (except for the YC funding).
- davidwhodge 14y agoprobably only ones that had no choice.
- _delirium 14y agoDepends on what you mean by successful. :) I can't think of any YC-funded companies that have slowly grown organically into modestly successful long-term businesses. Paul Graham made a comment somewhere that YC actually has no problem if the founders want to build a "lifestyle" business, and won't push for VC-backed moonshots if it's not in the founders' interests, but I just haven't heard of that outcome happening. It's possible I just don't know about them, though. There have been several that sold for reasonably good totals without raising any funding, if that counts. For example, Clickpass sold for $1m, and raised no funding except YC's $20k.
- eupharis 14y agoObligatory: http://imgur.com/7yyJC http://imgur.com/7yyJC
- teyc 14y agoThat's amazing. Assuming the valuation of $5B, YC is now worth $250m.
- earbitscom 14y agoMore amazing, given that over half of the companies are from last year and this year, and it is mostly agreed that they have only gotten better and better by Demo Day.
- swift107 14y agoI'm doing quick 3 min survey on what people think about certain venture capital firms and see if there is any correlation to their industry, location, school etc. Will post results back here upon completion. https://www.surveymonkey.com/s/VCstartup https://www.surveymonkey.com/s/VCstartup