YC has just closed a new $8.25 million fund

Investors will question your judgement if you pay yourself more than 50-70k? That's surprising.

I don't agree with this. Most startups I've worked for paid better than that. Especially after series A. The investors know you have to pay for talent.

There are no IPOs these days so at a typical .5-1% the best outcome for a hired engineer is for the company to get acquired in < 2 years, make about $300K and get a job at the acquiring company that pays 2x they would make if they just went to work there in the first place. Kids who go to Stanford and MIT seem to have this figured out and are expecting to be paid market rates. Your market rate may vary.

The worst places I've worked are the ones where the founders conned all the staff into working for $50-$70K by using extremely optimistic outcomes for demonstrating how much their options might be worth in the future. Which is like 70% of all startups in Silicon Valley.

I suspect American student loans aren't (more or less) de-facto interest free. Interest on UK student loans supposedly only tracks inflation, although that doesn't seem to be quite true in practice. Nevertheless, interest is low enough that you can actually benefit from arbitrage if instead of paying back the loan you invest in high-interest savings. (except there's no such thing as a high-interest savings account right now) We did this for my girlfriend's student loan for a while, but we're just going to pay as much of it back as possible before interest goes up to >4% in September. No arbitrage possible at that rate, not in this economic climate.

The other aspect is that UK student loans are probably much smaller for the majority of people.

I think most of the ones that are the best known seem to be consumer facing, but then things like Clustrix, which has raised more money than Loopt, Scribd or Dropbox are a reminder that there's other stuff happening that's just less visible.

This won't change the types of startup we fund. But the types of startups we fund aren't as constrained as they seem. If it seems like we fund mostly consumer web apps, that's because (a) consumer web apps are more visible; Reddit has a lot more users than Clustrix, and (b) that is the kind of startup that younger, more technically inclined founders tend to start.

Another way (and perhaps the optimal way) to mitigate your risk is to join an existing startup early on, which we're also trying to make easier for hackers to do:

http://workatastartup.org

As I pointed out in another thread, you can titrate the amount of startupness you want by the age of the company you join.

Starting a start-up will risk your marriage in plenty of other ways besides financially.

And those people wouldn't be willing to go all out killing themselves like the start-up myth around YC funded companies seems to more or less ask for. That's self selecting to some extent because one of the demands YC makes (drop everything and move here for 3 months) only applies to young or at a minimum fairly unattached people willing to take a fairly large risk in return for a shot at a potentially larger success.

Founders with 'lives' are a lot less likely to take that plunge, even an 80K investment would not be enough to provide the required security for a team of four to get to the break even point, after all that depends not on the size of the investment as much as to how long it will take you to get to 'ramen profitable' and that point is a lot further in to the future than you'd be with 3 or 4 'cheap' people.

The problem is to get monthly income to become greater than monthly expenses, and to get people that would require more payment during the launch phase the whole picture becomes terribly unattractive as long as there are plenty of young guns willing to try it for a lesser take home pay.

Their chances of success are better, they are less demanding and they probably have more energy (even if less experience).

You are in direct competition with them and I don't think that from an investors point of view there is an incentive to change the formula if it already works. The chances of those larger investments tanking is just as large or larger as it is with the small ones.

And a nice side bonus is that younger people are less set in their ways and more likely to listen to good advice.

i.e., "Make it easier to put risk capital into people who are more risk averse."

A mortgage and family are a handicap in something that requires high levels of uncertainty and huge amounts of time. It seems you'd want to bias selection towards those who would take the plunge despite that handicap rather than offering a work around with a 6 month expiration date.

I'd argue those of us who do either #1 or #2 are the ones most likely to succeed anyway. So "natural selection" gets the projects out the door.

My co-founders and I are in this situation, and we did YC this winter (Zencoder), so it definitely can be done. We basically ran on savings for four months, and were able to raise money quickly, so none of us lost our homes or wives/girlfriends.

But not risking your savings, on the other hand - if you aren't willing to risk your savings, being a startup founder might not be for you. :)

I speculate your average 100k/yr hacker has enough money in the bank to launch a startup without pay if he was so inclined.

Really? Wildly inconsistent with this for example?

http://ycombinator.com/party.html

Till recently the two main bottlenecks in YC were my time and the size of our space. Which is why we recently hired Harj and expanded the orange room by a third. I'm not sure what the next bottleneck will turn out to be.

As I said in another comment on this thread, we approach scaling YC the same way we approach scaling software. You can never predict what the bottleneck will be till you hit it, so you just fix them as you hit them. If we did eventually hit a bottleneck that we couldn't fix, in the sense that if we continued to expand, the startups we funded would start to do worse, we'd stop expanding. But we clearly haven't hit such a bottleneck yet, and my experience of scaling stuff makes me cautious about predicting exactly where it might occur.

The network of alum really helps. Having access to so many startups that have already optimize the hell out of the steps needed to start a company is a big value add.

The reality is that if you want/need PG's time you can get at any point during YC.

But would these people requiring 4x more investment be willing to give up 4x more equity?

But it would never be 4x more likely to succeed, or at least not in any way that you can prove in advance, and statistics are against you anyway.

Batting averages do not vary considerably based on the size of the investment, and having 'graybeards' on board is no guarantee for success, at best it is neutral.

The only real case I could make for investing in a company with older people with a lot of responsibilities (distractions!) is that they have a lot more to lose.

Proven startup veterans tend to be rich enough not to need seed funding.

Could the YC model compete with undergraduate education?

Can you please elaborate how YC Alumni network helps?

Hmm, interesting question, but so much harder to calculate, however bogusly. Paradoxically enough, the answer there would be the fewer, the better, because the spread of YC alumni to companies they didn't found tends to happen through startups dying or getting acquired in small, early acquisitions. Ideally all the startups we funded would go public and the founders would still be working for them 10 years later, like Larry & Sergey are. In that ideal scenario the number YC alumni were involved with would reduce to the number we funded.

That is a type of question we think about a lot. But we know that our guesses are likely to be pretty bogus. We approach scaling YC the way you would approach scaling software. And the way scaling works is that you can never be sure what the bottlenecks are, or how you're going to get around them, till you hit them.

So it's interesting to speculate about, but not useful except in a mind-opening way.

As a percentage, but not as an absolute number. YC is actually run very cheaply, but the amounts we invest are so small that any expenses seem high in comparison.

I don't know the details but from my observations they are:

- Office space - Legal fees - Events (demo days, etc., are catered) - Salaries - Weekly food costs

I actually thought the operating costs would be slightly higher. The office is a comfortable space and the food is great(IMO, others might disagree :) ), the events are always well done, you'd expect the legal fees to be high, not to mention how much time everyone at YC puts in.