Things we've learned about Series As | Hacker News Reader

Things we've learned about Series As

blog.ycombinator.com

159 pointsakharris32 comments

The analysis about execution quality of VCs gives me validation for being frustrated a huge swathe of the VC industry. The bar is shockingly low. I'm surprised the long tail gets in any deals at all given how lazy most of their execution is. So many of them are just farming out associates to send spammy drip emails from Salesforce.

This is such a niche market (how many investable companies are there?), I don't see how it works for most of them at all. Every deal we did at Ionic involved a very attentive and responsive partner on the other end, and our first conversation with that firm was always through a partner rather than an associate/analyst.

I suppose we're in a capital bubble and when this long tail comes back with awful returns for their LPs this issue might sort itself out.

I actually see this from a different angle. I think the bar is incredibly high, and that many investors fail to clear it. It is high because, when you see the best investors at work, it is blindingly obvious that they operate in a different way.

The strange thing to me is that many investors don't realize this is happening and just coast on the funds they've raised. Founders talk to one another constantly. They know who works hard and who doesn't, and orient themselves accordingly.

Good point. The bar is high to get into great deals, the bar is low to starting a fund right now.

And yes, shocking how many investors don't realize or care that founders talk and have long memories!

I've seen this locally but a lot of investors aren't really in it for a return. They want to talk about being in to everyone at the country club and in their family. It is assets they can (usually) afford to lose. It is the same as buying a lamborghini, they want to be someone. Then if it does manage to hit, "look at what a genius I am".

I agree. This mentality only encourages "sexy startups", i.e. those with mass consumer appeal, over more fundamentally sound asset creation, e.g. smart traffic and rail signaling software, which in turn incentivizes entrepreneurs to build sexy startups - which lets be honest are mainly social apps these days - then rinse and repeat.

Do people actually consider rail signaling software "unsexy"? It's like a router for trains instead of packets. If I was an investor I would much rather brag about my investment in freight train routing infrastructure than a tinder for IoT users app.

You're not a typical investor in the described class. Frankly, I suffer from this expectation sometimes too - many things that seem wildly off course make sense from the perspective of the folks driving the ship.

Also not being an investor, I agree with your ranking. Even better would be any sort of heavy industry. Elon Musk's stuff (rockets, cars, tunnels) is mighty nice. Refineries, 100-ton forges, container ships, and similar are all more impressive than software.

> I think the bar is incredibly high, and that many investors fail to clear it.

A two-sided lemon market, if you will.

A very small subset of firms generate almost all the industry cash returns.

What we need is a Glassdoor for VCs.

I read this as YC saying to investors that if you want to play in the YCA pool, you will respond to emails and make decisions in a timely fashion. Major props to them for this.

We raised an A on great terms, though we are not in YC or YCA. It was surprising how many investors ghosted us, or promised timelines that didn't happen, etc.

Here is a nice tell tale to differentiate between the good and the bad: get a partner to be present during all the initial meetings, negotiations and during the dd phase. It will help tremendously in figuring out which vcs are really in the market for you and which ones are just window shopping. Partner time is expensive.

> the importance of the batch itself

This may be the most profound statement about YC relative to the rest of VC. YC provides founders with a founder community, which is very valuable and fairly inexpensive to offer. Traditional VC resources are variable in quality based on often based on expensive experts.

Even with how well I understand the batch - having been part of one and having seen 5 years worth as a partner - I'm still amazed by how powerful the structure is.

Part of what's cool is that the strengths of the batch have evolved and changed over time as the environment changes.

> In the last year, YC companies raised over $945mm across 95 Series As. That’s an increase of 50% over the prior year in terms of rounds done, and 71% in dollars raised

Anyone know if the batches were of similar size in terms of the number of companies? It would be nice to have relative statistics (YC companies are on average raising As more often and at higher amounts) than absolute ones which could be just due to batch size.

Not quite sure what you're asking here. Could you clarify? Happy to try to answer based on our data.

There was only 1 actual YCA batch last year. The other companies that participated in the program did so in more of an adhoc fashion - basically using the advice and knowledge we're building for their own raises.

> In the last year, YC companies raised over $945mm across 95 Series As.

Are you able to share the median deal size?

Is the YCA program available to non-YC companies?

The program is only open to YC companies.

What was the average MRR for YCA companies?

MRR is only one components of some raises. Some of the companies had millions of dollars a year in revenue, some had none.

The relevant metrics change depending on the company, industry, time since launch, capital raised, geography, etc.

Interesting. I've always heard that $100k MRR is the minimum metric for an A but I guess that only applies to SaaS companies. Looking forward to hearing about YCA

It isn't even true there. This is one of the common misconceptions that show up in blogs. There's no such thing as a minimum metric for an A - SaaS or otherwise.

(I'm not a vc)

We got an A with way less MRR because of who we had sold to. The quoted MRR figures may be approximately correct for b2c or for b2b for smb customers. For b2b enterprise customers, you can raise on way less. And you'll have to given you have 6-12 month sales cycles.

Is this a program to give Series A rounds to selected companies that graduate from YC?

No, it's a program to help YC companies raise As from investors.

Never trust anyone who abbreviates a million dollars with two Ms.

Disagree, MM is the classy way to do it. M can either mean 1,000 or 1,000,000. For example, millimeter, or in advertising CPM, which is cost per mille. Using MM disambiguates it.

Obviously we should just use scientific notation for everything:

> YC companies raised over $9.45e8...

Have you actually ever seen anyone use M to refer to 1,000?

What I'm about to write is very irrelevant but I see Facebook going down the Theranos path. It will be a slow slow death for them. If not death, Facebook will be crippled by the end of this phase.

Reply on news.ycombinator.com