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Comment by akharris | Hacker News Reader

We think this is going to be an interesting new way for companies to raise their A rounds. Here to answer any questions people have about it.

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Obvious thing to say is: is this limited to YC companies, or can external companies apply too? And if so, what's the "cost" (equity / etc)?

Thanks.

How does YC think about signaling issues (in general and specific to YC)?

Important question. We think signaling is a tricky subject, especially with the number of VCs investing in As. There's a lot to unpack there, which I'll write about in the future.

For YC - we're thinking actively how to prevent any signaling. That's why we invest pro-rata in all of our companies in the same way.

What are "signaling issues"? Signaling that you're seeking a series A, or that you're seeking a series A from YC?

I believe the signaling issues are companies which are admitted to YC Series A and those that are not.

YC typically invests at the seed stage. If YC makes, or doesn't make, a large follow up investment for some companies in series A it sends a signal to other investors about what YC thinks about the company. Since YC has access to information about the company's financials from already being an investor this kind of thing can influence other investors to make, or avoid making, an investment.

I don't believe this is an issue. YC's stance is to always participate in their pro rata.

"We exercise YC’s pro rata investing rights in all follow-on priced financing rounds, beginning with a company’s first priced round. At post-money valuations equal to or below $300M, we exercise our rights in all companies where we have a formal pro rata right."

From: https://www.ycombinator.com/continuity/

Yes, and per further up in this comment chain the purpose of that is to avoid signaling issues:

> For YC - we're thinking actively how to prevent any signaling. That's why we invest pro-rata in all of our companies in the same way.

Is the "signaling" idea mostly about the differential signal that would be sent about companies they didn't invest in, if this automatic policy were not in place? Like, no matter how awesome Company A is, if YC chose to invest a disproportionate amount of money in Company A, then everyone would say, "what's wrong with Company B?"

How has the series A stage changed over the last few years?

How does it differ in focus from early stage YC batches?

From TFA, it looks exclusively focussed on fundraising and not at all on starting/growing a business, developing product, dealing with users etc.

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