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I wonder what this implies about YC's demo day. The hottest deals offer poor economics but attract the best investors. Besides investing in a YC index fund, tho
by ivankirigin 14y ago
I wonder what this implies about YC's demo day. The hottest deals offer poor economics but attract the best investors. Besides investing in a YC index fund, those looking to mitigate upside risk could pursue a top-10 strategy. But in that case the economics of the round (what percentage of the company you own for the $) are worse.
- sama 14y agoIt's much better to invest in a good company at a high price than a bad company at a low price.
- loganfrederick 14y agoWhile this is true, I would take away from your post an almost opposing viewpoint: That it would be better to invest in more startups, rather than fewer, because of the difficulty in identifying which companies are "good" and "bad" ahead of time. How do you resolve the conflict between trying to only invest in good companies (almost regardless of price) versus investing in as many startups as possible (so as to increase your likelihood of investing in a good startup since they are hard to find and identify)?
- crapshoot101 14y agoLogan, what you've identified, in a nutshell, is the SV Angel or "spray and pray" hypothesis.
- tptacek 14y agoThat stops working if your "increase quantity" mechanism sets up a filter on companies with worse terms; it's an adverse selection problem, because the companies that are easiest to buy into are going to include a disproportionate share of the losers.