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Paul Graham Shares Number of Y Combinator Companies Sold or Valued at Over $40M
- tannerc 13y agoWow, that and the follow-up tweet are impressive. What happened in 2013 though?
- pazimzadeh 13y agoYounger companies probably haven't had time to be bought yet! Or to be valued as highly.
- rjvir 13y ago2013 companies haven't had enough time yet
- jayzalowitz 13y agoI dont think that is true, YC seems to be progressively accepting later and later companies. the 2005 batch was a bunch of kids in college. 2013 is seasoned engineers working on it for a year already with massive traction.
- rdl 13y agoI think what's expanding is the standard deviation/variance. The mode is not moving all that much. Mean/median, a bit. There is definitely a trend toward some later companies (it used to be ~none), but there are still a lot of early stage.
- pg 13y agoAlso, there is little correlation between how far along a company is when we fund them and how well they end up doing.
- jayzalowitz 13y agoI am sure this is true, but very specifically getting to just the level of above 40m, it can't hurt, can it? I am not saying if you fund them later they will become dropbox, just have a higher likelihood of hitting 40-50m
- nostrademons 13y agoDropbox is an ironic example, because Drew applied right before the deadline with a video, a string-and-wires prototype, and no cofounder. He'd been working on it 3 months and had just barely quit his day job.
- the_watcher 13y agoThis is the first batch where I knew people in YC. They started their company (with an entirely different idea) on Feb. 1. The founders were all between 24 and 26 at founding, all 4, 2010 or 2011 graduates. Reddit was started after Alex and Steve graduated from UVA. DropBox (S07) was Drew's 4th startup.
- dkl 13y ago42 companies * $40M is $1.7B. Wow.
- seiji 13y agoAlmost half of one snapchat (with only 20 employees).
- idoh 13y agoIt's 40MM or more. There are some significant outliers, like Dropbox and AirBnB.
- canistr 13y ago42 * $40M * 6% (average stake YC gets in company) = $100M According to http://techcrunch.com/2013/10/25/y-combinator-13-7b-valuation/ http://techcrunch.com/2013/10/25/y-combinator-13-7b-valuatio...: - YC company valuations total $13.7 Billion - 511 companies total $11,000 + $3000 * # of founders = total investment in YC companies (let's just go with 17k for 2 founders on average) = $17K $17000 * 511 = $8.7M $100M - $8.7M = $91.3M Clearly a pretty good investment =P
- recuter 13y agoThat's (very very roughly) 30% IRR which sounds kind of nuts to me.
- jayzalowitz 13y agoaccount /2 for average probable dilution.
- mattmanser 13y agoWhat about dilution?
- epa 13y agoYC Equity stakes are likely unable to be diluted. Not all shares can just get 'diluted' aka expanded.
- skosuri 13y agoSold or valued at.
- dmazin 13y agoI also found the equivalency funny.
- rutigers 13y agopg in 2012 Sept "The one thing we can track precisely is how well the startups in each batch do at fundraising after Demo Day. But we know that's the wrong metric. There's no correlation between the percentage of startups that raise money and the metric that does matter financially, whether that batch of startups contains a big winner or not." (http://www.paulgraham.com/swan.html http://www.paulgraham.com/swan.html)
- pg 13y agoAlmost none of these valuations are the result of investments after Demo Day. These are later rounds, and later rounds converge on an ultimate valuation.
- jusben1369 13y agoDoes anyone know how many are actually sold vs valuations?
- rlt 13y agoYou should be able to get a rough idea from http://yclist.com/ http://yclist.com/
- pg 13y ago7 of the 42 were acquisitions.
- jusben1369 13y agoThanks
- johnrob 13y agoTo put this in perspective, any company that has raised 10M or more is likely to be valued at something near 40M. The numbers seem less startling to me after factoring that in (my first reaction was that there must be a lot more acquisitions than what we see in the news).
- dmishe 13y agoSomebody, fix "OFY" in graph header.
- chacham15 13y agoNote to dmor: I wouldnt put that copyright on the image. The data is shared by pg, not you. The image itself without the data has little value. Therefore, that copyright seems greedy and portrays a bad image to me. All in all, not a big deal, but someone can take a detail like that a turn it into a PR nightmere.
- dmor 13y agoThis is a really good point, I just copy/pasted the format for some old slides. I'll update it, definitely not the intent
- lucb1e 13y agoThe current graphs don't say much. How about average/median/top valued company by year funded 2 years after funding? Say in 2005 company X got funded, then its value from 2007 should be used. Of course 2013 and 2012 cannot be included then, but it's obvious that older companies had a much longer period to build up value and thus the current graphs don't say all that much.
- philwelch 13y agoYC's investment thesis is that the whole game of investing in startups boils down to investing in big stars. If you got into Google with an early stake, you won. Medians don't matter: what matters is how many big stars you caught since they'll pay for the rest many times over. So I think PG is measuring the same thing he's trying to make.
- pg 13y agoThough I wish we could claim credit for discovering that, it's really the thesis of every startup investor.
- paul_f 13y agoSo many confuse mean with median. It's why lotteries work. The mean return might be positive. But the median is always $0.
- lucb1e 13y agoAlright, top valued then. Or the median/average from the top 10%. Shouldn't that give okay results?
- mooted1 13y agoIs there a similar breakdown of companies YC lost money on?
- zmitri 13y agoI'm sure they could, but it's not really relevant. It's more about the 2-3 Dropbox, AirBnB, Heroku like companies. Think of it this way with Heroku: YC gets 6-7% initially and probably ends up with close to 3% after Series A and B. That's $6.2M on the $212M exit price. A single exit like Heroku returns them enough to run YC for at least a couple years and returned >10x for other investors. So while you could show that, it doesn't really matter to YC or to investors, because they have those 2-3 huge wins.
- aashaykumar92 13y agoI'm glad pg also shared the percentage breakdown. If just the number of startups based on funding year had been shared, YC's progress/success would not be nearly as telling as with the percentages also shared.
- YPetrov 13y agoI would be curious to find out why he chose $40M as the benchmark.
- pg 13y agoThere's a sort of threshold around there. A startup can raise at $20m after Demo Day by looking really promising, but to raise at $40m you usually have to be launched and growing consistently.
- carlosrt 13y agoSo presumably, companies that are on a ~$3M revenue run rate are a safer bet. Assuming a multiple of 15.
- sytelus 13y agoThis numbers don't give away too much because of subjective nature of "valued at" as well not actually knowing the mean or the variance, let alone the nature of distribution. However what is impressive is that if you were going to do startup with YC, your chance of becoming significant company is about 10%. Due to nature of power law in these things, I tend to think, may be about 20% of other startups managed to become less spectacular but still successful and other 40% may be just sustainable to make a reasonable living(lifestyle business) and rest had to fold.
- larrys 13y ago"be just sustainable to make a reasonable living(lifestyle business)" Pure speculation and just throwing this out there to see if others agree but somehow I don't feel that YC is spinning off lifestyle businesses. Not to mention that it's hard to believe that some of the founders (and supporting people) that get involved in and strive to be in YC will stay put at what ends up amounting to a lifestyle business.
- graeme 13y agoI'm not sure I follow. OP's point is that a failed startup might still be profitable enough to be a lifestyle business. That opens up some pretty cool options for the founders.
- larrys 13y ago"I'm not sure I follow. OP's point is that a failed startup might still be profitable enough to be a lifestyle business." But who will operate the lifestyle business? The founders and the team? My point is that the type of person/team that gets involved in wanting and getting into YC (both the founders and the team) don't seem to me to be the type of people that would want to continue in "merely" a lifestyle business. Not that some wouldn't but my speculation is that the majority would not. From your profile I see that you do LSAT prep. My guess is that the majority of people who put in the time to get into law school are generally shooting to be lawyers. If they end up graduating and not getting employment in law (or not being able to sustain that) they might very well end up having to do another job. (Actually they will or they will starve.). But now we have a case of people who pursue the startup lifestyle presumably for the big win.[1] And now after all the work "all" it turns out to be is "lifestyle" I would think a high percentage of them would then try to get involved in another startup (whether their own or someone elses) not stay and have "only" a lifestyle business. Otoh if enough time goes on before it becomes apparent that it is only going to be a lifestyle business it's possible that members of the team might have priority changes (marriage and kids) and decide that the lifestyle business is pretty attractive. [1] Edit: Or to change the world.
- deleted 13y ago[deleted]
- LearnAndBurn 13y agoMust be nice. ;) But on a serious note, I wonder how much that 2009-2012 bump has to do with inflation or a lack of other opportunities in the market. Maybe I am out of touch, but it seems like there are less and less places to put your money. Not to suggest that startups are a bubble. The rise is probably due to YC becoming a better filter, picking better horses in the race.
- arbuge 13y agoAdjusting for time (takes a while to build the company), it seems like about 15-20% of YC's startups will eventually hit that number.
- stevewilhelm 13y agoTo put that in perspective, most of the first non-founder engineers couldn't buy (outright) a 3br house within walking distance of Y Combinator's office with their stock option proceeds.
- pg 13y agoI think what you're saying is that if a company were sold for $40m, employee #1 wouldn't get enough to buy such a house. That would depend on how much stock he or she got and how much he or she was diluted by later investments. The cases I've seen fall on both sides of the line, but there are plenty above it. But also, we're not talking about 42 companies with valuations of $40m. $40m is the lower bound.
- iamshs 13y agoSo how does it compare to companies borne out of Y Combinator? That would be interesting to see.
- vasilipupkin 13y agoI agree. That would be very interesting - how much better is YC relative to the overall data set ?
- arikrak 13y agoTechstars publishes a fair amount of data too: http://www.techstars.com/companies/stats/ http://www.techstars.com/companies/stats/ Then there's general studies of VC-backed companies. Not much available on pre-VC companies though.
- codex 13y agoInteresting: to a close approximation, the odds of a positive payoff from YC (vs opportunity cost) is about the same as buying a California scratch ticket--about one in ten.
- bobbygoodlatte 13y agoAnyone know which two are the 2013 companies?
- puppetmaster3 13y agoNames?
- jhh 13y agoTypical LISP guy: delimiting the pairs with whitespace - good enough :)
- confluence 13y agoIn other news, women share how much their diamond rings were valued at when they got married. Unfortunately, when they go to sell their cherished tokens after their eventual divorce, they soon discover that diamonds aren't worth nearly as much as they thought they were. Indeed, they are often horrified to learn that the valuation of the diamond at point of sale was horrendously overpriced through the use of psychological arbitrage and cultural indoctrination, that the cost of their production is surprisingly low thanks to copious amounts of slave labor and theft, and that the wholesale price that the diamonds will clear at is so low as to be an insult to their very dignity. Oh, were we talking about startups? I must have digressed into accurate land. For anyone who's being a bit slow today: women = investors diamonds = startups marriage = first rounds divorce = likely failure of startup valuation at point of sale = optimistic valuation by investors at inception cost of production = ramen, servers and underpaid employees without equity wholesale price = true value of a startup on average