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This seems very inefficient for the startup. They have people willing to offer more money for less shares, so why not go down the list until they have enough mo
by wbl 14y ago
This seems very inefficient for the startup. They have people willing to offer more money for less shares, so why not go down the list until they have enough money? Or are there second-order effects I am not seeing here.
- Jplenbrook 14y agoIt may not necessarily be inefficient. YC has an established brand. Initial YC investors know they will get the best possible terms, so they would be wise to offer the max value. The start-up it could take this "max" valuation to all future investors. The alternative would be a low initial offer which would essentially keep anyone else from paying more. In essence the YC start-ups are giving the initial investor a money back guarantee on the difference between their offer and the lowest offer.