A big reason they said they were raising the deal previously was the cost of living in the bay area and increased cost of starting a company today[0]. Are they anticipating that those costs are going to come down now? They suggest that this decreased amount will allow them to fund more companies, and hint that it has to do with economic conditions as well. But, if that amount of money is still needed to live in the bay area and work for 6 months, then wouldn't it make more sense to decrease the number of companies funded as to not potentially handicap startups with not enough money?
My guess is that the departures will continue as unemployment rates grown and that when federal and state payments run out we will see a further decline.
I think companies will soon have to justify why they can afford to have an office with remote as the better (and cheaper option). Other than headcount, rent is usually the largest line item for a startup
If cost of living is so high, I wonder why they wouldn't invest in a dorm-like living space for founders? I'm not familiar with the area, so I imagine there's reasons for it, but being able to focus on work instead of life-maintenance details seems like it would benefit the organization.
I know this is HN and jokes are shunned, but you wrote "We do not expect this to be the last time we change the deal"
and I can't help but think you missed a golden opportunity to write,
"We have altered the deal. Pray we don't alter it any further".
25k doesn’t seem all that relevant. Yeah it’s slightly better to have another 25k in the bank, but it just seems like normal fluctuation with the economic times, to me.
You do YC for the network and guaranteed funding post demo day. Getting $125k is inconsequential and has almost no barring on YC’s value to a new startup.
well, they'll be taking on more risk if that money ends up not being enough to support early stage startups. And, it makes the deal even more difficult to swallow for hardtechs/biotechs/moonshots, and potentially making it worse for those companies could decrease diversification opportunities? still a better move for YC than the companies getting funded
Our startup is profitable, scaling, and in the single-digit millions of revenue per year. We don't have any investors but are still capital constrained. The default YC valuation of $125k/0.07 = ~$1.8M is way too low for us, nor do we want the requirement of having to meet with other startups once a week since we're already quite busy.
Does YC have a "funding offering" for startups at our stage?
> The default YC valuation of $125k/0.07 = ~$1.8M is way too low for us
This is the wrong way to look at it.
Instead, ask yourself: would you exchange 7% of your company to join the YC community and be able to leverage their resources forever?
The answer should be a resounding yes if you think your company will be > 7.5% more valuable if you join YC [1]. Which it should [2]. The $125K is just the cherry on top and just one of many perks of joining YC (albeit a useful one for companies that have no funding/revenues so they can focus 100% on building their product instead of having to worry about paying for housing/food/servers/SaaS).
The vast majority of us who have gone through YC would've done it even if it wasn't for the monetary investment.
[2] You'll likely even make up for the 7% almost immediately because you'll likely raise your seed round at a significantly higher valuation (> 7.5% higher for sure) than if you hadn't gone through YC. But it's very likely that your company will intrinsically be worth significantly more than that too.
I'm not affiliated with YC and they might still be interested in your startup but I'm curious why you are interested in YC at this stage. Is it for the cap table signaling?
Your description sounds like you are beyond the accelerator/seed stage so the standard deal valuation and funding amount are too low. You also mention being too busy to take advantage of the networking opportunities provided by the program.
Being profitable but capital constrained, have you looked at debt financing opportunities? Do you need investors and a network or do you just need cash to accelerate growth?
In this case, why would you be interested in YC? What would it offer you?
It seems disappointing that YC's value is no longer qualitatively good advice for early-stage founders and a close-knit community of hackers.
Maybe I'm just jaded, but it appears increasingly corporatized every year. Sometimes it feels like YC might as well be a certificate — just a stamp of approval that provides access to a network of investors and clout. (I'd love to be wrong on this).
YC's model has never been to fund startups for long, only to get through the batch and then hopefully raise longer-term funding at Demo Day. When Scott and I were in the Winter 2009 batch, we got $15k. Costs have gone up since then but not by that much. $150k and $125k are both more than enough to accomplish the primary purpose. Actually I wish they'd lower it further. https://www.youtube.com/watch?v=VKHFZBUTA4k
They are not going to do a batch with 3000 companies. They are saying all in all this will allow them to fund more companies over the coming years - " In the coming years, this will enable us to fund as many as 3000 more companies".
I figured the increase to over 100k is when non-technical people started doing it. They hire people to make their MVP instead of the founders themselves. Or am I wrong about that?
$100K won't buy enough professional services to build, launch, and operate an MVP unless the app is very simple. If it's simple enough that anyone can drop $50K-100K on design services and have your business cloned, it's not a very defensible startup idea.
There are occasional exceptions, but typically the founding team must have the majority talent and skills required to launch the MVP.
How many YC companies are "remote"? What is the optimal deal if the cost of Bay Area located startups is balanced with the cost of distributed startups?
Per the blog post, this is to enable funding more companies in the future. How is YC able to scale funding all these companies? Are the ratios of partners to companies consistent? Does it scale linearly? Or as YC grows do they leverage their outside network more?
What if all the easy stuff has already been done and heavy lifting is necessary for the next wave of impactful startups? This funding model looks like it's going to continue fishing for guppies for the foreseeable future.
[+] [-] vikramkr|5 years ago|reply
[0]https://blog.ycombinator.com/new-standard-deal/
[+] [-] ecesena|5 years ago|reply
Also, with -$25k/deal they can fund 6 startup where they could found 5 before.
So remote-friendly = less cost, +20% batch size at the same cost. It makes sense to me.
[+] [-] dmor|5 years ago|reply
My guess is that the departures will continue as unemployment rates grown and that when federal and state payments run out we will see a further decline.
I think companies will soon have to justify why they can afford to have an office with remote as the better (and cheaper option). Other than headcount, rent is usually the largest line item for a startup
[+] [-] headcanon|5 years ago|reply
[+] [-] jedberg|5 years ago|reply
"We have altered the deal. Pray we don't alter it any further".
[+] [-] loco5niner|5 years ago|reply
[+] [-] heyd7xhhxhd|5 years ago|reply
[deleted]
[+] [-] gpderetta|5 years ago|reply
You'll be surprised.
And upvoted.
[+] [-] itwy|5 years ago|reply
[+] [-] IncRnd|5 years ago|reply
[+] [-] rsweeney21|5 years ago|reply
By giving each company $25K less, they can now place bets on 3,000 more companies. Less money for you, less risk for them.
I wonder if their success rate has declined as their batch sizes have gotten larger.
YC has become less and less attractive to me over the years. Is it just me?
[+] [-] lacker|5 years ago|reply
[+] [-] ryanSrich|5 years ago|reply
[+] [-] vikramkr|5 years ago|reply
[+] [-] joshpadnick|5 years ago|reply
Does YC have a "funding offering" for startups at our stage?
[+] [-] mauriziocalo|5 years ago|reply
This is the wrong way to look at it.
Instead, ask yourself: would you exchange 7% of your company to join the YC community and be able to leverage their resources forever?
The answer should be a resounding yes if you think your company will be > 7.5% more valuable if you join YC [1]. Which it should [2]. The $125K is just the cherry on top and just one of many perks of joining YC (albeit a useful one for companies that have no funding/revenues so they can focus 100% on building their product instead of having to worry about paying for housing/food/servers/SaaS).
The vast majority of us who have gone through YC would've done it even if it wasn't for the monetary investment.
[1] See PG's Equity Equation essay: http://paulgraham.com/equity.html
[2] You'll likely even make up for the 7% almost immediately because you'll likely raise your seed round at a significantly higher valuation (> 7.5% higher for sure) than if you hadn't gone through YC. But it's very likely that your company will intrinsically be worth significantly more than that too.
[+] [-] molsongolden|5 years ago|reply
Your description sounds like you are beyond the accelerator/seed stage so the standard deal valuation and funding amount are too low. You also mention being too busy to take advantage of the networking opportunities provided by the program.
Being profitable but capital constrained, have you looked at debt financing opportunities? Do you need investors and a network or do you just need cash to accelerate growth?
[+] [-] alehul|5 years ago|reply
It seems disappointing that YC's value is no longer qualitatively good advice for early-stage founders and a close-knit community of hackers.
Maybe I'm just jaded, but it appears increasingly corporatized every year. Sometimes it feels like YC might as well be a certificate — just a stamp of approval that provides access to a network of investors and clout. (I'd love to be wrong on this).
[+] [-] heimatau|5 years ago|reply
[+] [-] vincentmarle|5 years ago|reply
What happened to Yuri Milner, haven't heard his name in a while. Is he still actively investing?
[+] [-] krasin|5 years ago|reply
[+] [-] fizixer|5 years ago|reply
edit: Also I have no idea what a 'post-money safe' is.
[+] [-] dang|5 years ago|reply
[+] [-] throwaway1777|5 years ago|reply
https://www.ycombinator.com/documents/
[+] [-] Havoc|5 years ago|reply
[+] [-] Dacod|5 years ago|reply
[+] [-] phkahler|5 years ago|reply
[+] [-] PragmaticPulp|5 years ago|reply
There are occasional exceptions, but typically the founding team must have the majority talent and skills required to launch the MVP.
[+] [-] landon32|5 years ago|reply
[+] [-] ipnon|5 years ago|reply
[+] [-] gustaf|5 years ago|reply
[+] [-] PaulWaldman|5 years ago|reply
[+] [-] snowmaker|5 years ago|reply
[+] [-] say_it_as_it_is|5 years ago|reply
[+] [-] mathattack|5 years ago|reply
Still valuations north of 1mm.
[+] [-] amitutk|5 years ago|reply