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The Big Winner from Y Combinator’s Success? Sequoia Capital

2pasc 12y ago
It's worth noting that Sequoia invested in YC early on, which gave them a preferential portfolio access I assume. The beauty of the model is not that YC has a portfolio worth $1B of gain - but that they spent less than $15M to get there: A staggering 67x. Why? Because they are good at picking Companies for sure - but most importantly because the % they own for the money they put is very high ("founder level" almost)... and is all a consequence of their brand and processes and its power on entrepreneurs, investors + the network effect of their community. Amazing jobs guys!
- blobbers 12y ago
  http://techcrunch.com/2009/03/16/y-combinator-gets-the-sequoia-capital-seal-of-approval/ http://techcrunch.com/2009/03/16/y-combinator-gets-the-sequo...
  - nostrademons 12y ago
    For those who don't like to read articles, the one in the parent comment says: "Y Combinator says that the investment by Sequoia and the angels won’t change how they do business (other a projected increase in the number of investments). The new investors won’t get any special investment rights in the new startups, or have any obligation to invest further in them." Having talked with one of the founders of the startups listed in this article, the reason Sequoia led their round is because Sequoia "got" their idea - they instantly understood the product, the business, and why it would be a big hit - and then moved quickly to invest, getting a term sheet to them within a week of Demo Days. Other VC firms hemmed and hawed and said "Well, maybe once you show more traction", and that's why they missed out on those billions. Sequoia didn't have preferential access, just better decision-making.
    - 2pasc 12y ago
      that's true and they are impressive - and I know that because one of my previous Companies got a term sheet from them and they made their decision super fast.
- argonaut 12y ago
  What does "preferential portfolio access" even mean? I don't think that's the reason they invested, or a benefit of having invested. Sequoia is one of the top VC firms (that and a16z and Benchmark). They have preferential access to everyone already.
  - 2pasc 12y ago
    Sure. But YC was started in 2005 or something. this was a very different market. Sequoia benefitted from he YC deal flow early on from founders who might have not even considered them at that time. Sequoia missed FB and twitter and the social media thing. Of course, now everybody has the same access, so there is no advantage whatsoever.
    - argonaut 12y ago
      If anything, the reverse is true. In 2005, Sequoia was considered the preeminent VC firm. Nowadays they probably share that mantle with a16z and Benchmark
- mathattack 12y ago
  They also add a lot of value to the companies along the way. If the partners instead created a high tech strategic consulting firm, what would their daily rate be? This method allows them to share the upside and downside of the advice, as they help choose who can get the most benefit from it.
deleted 12y ago
[deleted]
krschultz 12y ago
I feel like priceonomics is specifically crafting articles for HN. I'm sure they get a lot of traffic from here, but is this really their best channel?
- deleted 12y ago
  [deleted]
- georgemcbay 12y ago
  I don't know, but at least their articles usually have pretty good content as opposed to, say, businessinsider and those forbes blogs that seem to craft articles by randomly pasting together a bunch of PR pieces and slapping an HN-related click-bait headline on it.
- larrys 12y ago
  "but is this really their best channel?" Do you mean is HN their best sales channel for what they are selling? The blog appears to show a wide variety of posts about different subjects. I'm only seeing a few that appear to be HN targeted. But on the topic what I'd like to see is a pricenomics post that details the business purpose and value of the blog posts...comparing which place they are posting to that seems to payoff in the most new customers for example.
  - rohin 12y ago
    Hi, I work at Priceonomics so I can sort of answer your question. The blog posts we do that use data crawled from the web pay off enormously in terms of generating leads and revenue for our data business. Here's an example. http://priceonomics.com/the-seo-dominance-of-retailmenot/ http://priceonomics.com/the-seo-dominance-of-retailmenot/ The rest of the blog posts are done because we want to make them. In the past, there wasn't any direct financial payoff from them. Now, it seems like they lead to book sales which is neat.
    - larrys 12y ago
      Interesting. Thanks. For the hedge fund market (or for any market for that matter) you might want to append this statement: "via API or spreadsheet" on http://priceonomics.com/data-services/ http://priceonomics.com/data-services/ to also say "via Spreadsheet, Web interface or API". You should probably also dedicate a complete "sell" page to each industry you are targeting. Hedge funds deserve a dedicated page if that is a (and I suspect it is or will be) big whale for you. I'm guessing you know this but PN hasn't done it yet. When making buying decisions people lock onto things that say "ok they have exactly what I need and are experts in helping my industry and my competitors are using them". "We help financial service firms crawl data" "We help hedge funds crawl data" "We help retailers crawl data" "We help non-profits crawl data" And so on....
deleted 12y ago
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birken 12y ago
Well there is massive survivorship bias here. For all you know there is another VC that invested 20MM into 5 equally great-looking YC companies that all went bust, and now that VC is out of business and the former partners are homeless. Sequoia presumably only ends up invested in only a small # of companies from YC, so saying their success is based on Y Combinator is logically incorrect. Their success would be based on their own ability to invest in the type of companies they like to invest in. Perhaps in theory YC is helping to increase the supply of these companies, but that would affect all VCs equally. And of course, Sequoia also invests in a lot of companies that never went through YC and end up being successful. I'm not any sort of huge YC or Sequoia apologist either, this post is just a giant logical fallacy.
- akiselev 12y ago
  No one said Sequoia Capital is successful because of YC but that Sequoia has probably made more money (in absolute terms) from YC portfolio companies than YC itself.
- larrys 12y ago
  "Sequoia presumably only ends up invested in only a small # of companies from YC, so saying their success is based on Y Combinator is logically incorrect " I'm unclear how a headline that says "The Big Winner from Y Combinator’s Success? Sequoia Capital" is the same as "so saying their success is based on Y Combinator is logically incorrect" I'm not seeing anything that claims that Seq's success is based on YC.

2pasc 12y ago

It's worth noting that Sequoia invested in YC early on, which gave them a preferential portfolio access I assume. The beauty of the model is not that YC has a portfolio worth $1B of gain - but that they spent less than $15M to get there: A staggering 67x. Why? Because they are good at picking Companies for sure - but most importantly because the % they own for the money they put is very high ("founder level" almost)... and is all a consequence of their brand and processes and its power on entrepreneurs, investors + the network effect of their community. Amazing jobs guys!

blobbers 12y ago
http://techcrunch.com/2009/03/16/y-combinator-gets-the-sequoia-capital-seal-of-approval/ http://techcrunch.com/2009/03/16/y-combinator-gets-the-sequo...
- nostrademons 12y ago
  For those who don't like to read articles, the one in the parent comment says: "Y Combinator says that the investment by Sequoia and the angels won’t change how they do business (other a projected increase in the number of investments). The new investors won’t get any special investment rights in the new startups, or have any obligation to invest further in them." Having talked with one of the founders of the startups listed in this article, the reason Sequoia led their round is because Sequoia "got" their idea - they instantly understood the product, the business, and why it would be a big hit - and then moved quickly to invest, getting a term sheet to them within a week of Demo Days. Other VC firms hemmed and hawed and said "Well, maybe once you show more traction", and that's why they missed out on those billions. Sequoia didn't have preferential access, just better decision-making.
  - 2pasc 12y ago
    that's true and they are impressive - and I know that because one of my previous Companies got a term sheet from them and they made their decision super fast.
argonaut 12y ago
What does "preferential portfolio access" even mean? I don't think that's the reason they invested, or a benefit of having invested. Sequoia is one of the top VC firms (that and a16z and Benchmark). They have preferential access to everyone already.
- 2pasc 12y ago
  Sure. But YC was started in 2005 or something. this was a very different market. Sequoia benefitted from he YC deal flow early on from founders who might have not even considered them at that time. Sequoia missed FB and twitter and the social media thing. Of course, now everybody has the same access, so there is no advantage whatsoever.
  - argonaut 12y ago
    If anything, the reverse is true. In 2005, Sequoia was considered the preeminent VC firm. Nowadays they probably share that mantle with a16z and Benchmark
mathattack 12y ago
They also add a lot of value to the companies along the way. If the partners instead created a high tech strategic consulting firm, what would their daily rate be? This method allows them to share the upside and downside of the advice, as they help choose who can get the most benefit from it.

deleted 12y ago

[deleted]

krschultz 12y ago

I feel like priceonomics is specifically crafting articles for HN. I'm sure they get a lot of traffic from here, but is this really their best channel?

deleted 12y ago
[deleted]
georgemcbay 12y ago
I don't know, but at least their articles usually have pretty good content as opposed to, say, businessinsider and those forbes blogs that seem to craft articles by randomly pasting together a bunch of PR pieces and slapping an HN-related click-bait headline on it.
larrys 12y ago
"but is this really their best channel?" Do you mean is HN their best sales channel for what they are selling? The blog appears to show a wide variety of posts about different subjects. I'm only seeing a few that appear to be HN targeted. But on the topic what I'd like to see is a pricenomics post that details the business purpose and value of the blog posts...comparing which place they are posting to that seems to payoff in the most new customers for example.
- rohin 12y ago
  Hi, I work at Priceonomics so I can sort of answer your question. The blog posts we do that use data crawled from the web pay off enormously in terms of generating leads and revenue for our data business. Here's an example. http://priceonomics.com/the-seo-dominance-of-retailmenot/ http://priceonomics.com/the-seo-dominance-of-retailmenot/ The rest of the blog posts are done because we want to make them. In the past, there wasn't any direct financial payoff from them. Now, it seems like they lead to book sales which is neat.
  - larrys 12y ago
    Interesting. Thanks. For the hedge fund market (or for any market for that matter) you might want to append this statement: "via API or spreadsheet" on http://priceonomics.com/data-services/ http://priceonomics.com/data-services/ to also say "via Spreadsheet, Web interface or API". You should probably also dedicate a complete "sell" page to each industry you are targeting. Hedge funds deserve a dedicated page if that is a (and I suspect it is or will be) big whale for you. I'm guessing you know this but PN hasn't done it yet. When making buying decisions people lock onto things that say "ok they have exactly what I need and are experts in helping my industry and my competitors are using them". "We help financial service firms crawl data" "We help hedge funds crawl data" "We help retailers crawl data" "We help non-profits crawl data" And so on....

deleted 12y ago

[deleted]

birken 12y ago

Well there is massive survivorship bias here. For all you know there is another VC that invested 20MM into 5 equally great-looking YC companies that all went bust, and now that VC is out of business and the former partners are homeless. Sequoia presumably only ends up invested in only a small # of companies from YC, so saying their success is based on Y Combinator is logically incorrect. Their success would be based on their own ability to invest in the type of companies they like to invest in. Perhaps in theory YC is helping to increase the supply of these companies, but that would affect all VCs equally. And of course, Sequoia also invests in a lot of companies that never went through YC and end up being successful. I'm not any sort of huge YC or Sequoia apologist either, this post is just a giant logical fallacy.

akiselev 12y ago
No one said Sequoia Capital is successful because of YC but that Sequoia has probably made more money (in absolute terms) from YC portfolio companies than YC itself.
larrys 12y ago
"Sequoia presumably only ends up invested in only a small # of companies from YC, so saying their success is based on Y Combinator is logically incorrect " I'm unclear how a headline that says "The Big Winner from Y Combinator’s Success? Sequoia Capital" is the same as "so saying their success is based on Y Combinator is logically incorrect" I'm not seeing anything that claims that Seq's success is based on YC.