Comment by brudgers | Hacker News Reader

Comment by brudgers | Hacker News Reader

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Raising a billion dollars for a fund might be considered 'typical VC', or not, depending on one's perspective. Certainly the financial scale at which YC operates has changed over recent years. Practically speaking it is no longer ~$17k for ~7% to get through three months before demo day. While I believe that YC played a role in changing the economics of startups, the economics of startups have started looking more and more like "big money" investing...particularly as the idea of "startup" has morphed as the term has been adopted in popular culture and pension funds and insurance companies have gotten into the act.

At some point it will make sense to start thinking about YC as a staid financial institution (whether or not that point is today, is another question) rather than some plucky newcomer. The amount of money an organization has affects its operation. It's impossible to spend $1 billion carefully deliberating $20,000 decisions one at a time...and carefully deliberated $20,000 decisions one at a time was what made YC successful...and how and why it changed the startup landscape.

and carefully deliberated $20,000 decisions one at a time was what made YC successful...and how and why it changed the startup landscape.

Not really. If YC had invested $20k in every startup that applied, they'd still have caught Airbnb and Dropbox, and would be quite successful.

Counter-intuitively, their success was pg's essays plus HN, which stuffed their funnel with high quality applicants.

> Counter-intuitively, their success was pg's essays plus HN, which stuffed their funnel with high quality applicants.

Yup, but there's at least one more: YC took applicants from anywhere provided that they could get to the YC site. VCs want to fund only founders with offices the VCs can easily drive to, and that is very limiting. YC has been able to fund founders from Silicon Valley, NYC, Boston, DC, all points between, and many points outside the US. Biggie difference in size of good stuff entering the funnel.

The VCs have some rigid ways of doing business. The best of the VCs had good returns, but on average the VC returns have not been good. Some of this rigidity seems to be enforced by the LPs. But in general the rigidity has seriously hurt the VCs.

One of the perceived benefits of YC is the alumni network. In so far as this perception is meaningful, funding every application would reduce the signal to noise within it...perhaps so far as to make it no more useful than Hacker News.

If YC had invested $20k in every startup that applied, they'd still have caught Airbnb and Dropbox, and would be quite successful.

Some quick googling shows YC acceptance rate at ~3% let's call it 5%.

So that means 20x the capital expenditure in investments, that's going to put a damper on returns(provided the company picking prowess for a round was somewhere not to distant from optimal). Even if profitability could be theoretically maintained with these shifted numbers, it really couldn't.

The value proposition of YC is the exclusivity and the individual attention the partners can give the companies. With the exclusivity entirely gone and partner attention massively diminished YC would obviously not be YC as we know it.

It would not be anything as we know it. An institution that invests in everyone that applies? wtf is that? it doesn't exist. The closest thing might be the sub-prime mortgage bubble and we saw how that worked out.

How would they distinguish the applicants that applied without this counterfactual from the ones who would do so in droves when they realized there was guaranteed money to be had?

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