Hacker News Reader

Comment by misterbowfinger | Hacker News Reader

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

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?"

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

Reply on news.ycombinator.com