Basically he just paid $6M to have a seat at the table and be a guaranteed call when they're raising their series A. I guess that's one way to get in to the early stage game.
He can afford to gamble $6M on YC startups, if they will create demand in the market for his hundreds of millions dollars worth Groupon, Facebook, Zynga shares.
It's a good assymetry position to have.
If one of the 40 becomes the next google, he wins. If he can exit his DST positions, he wins.
However if the web bubble burst, he is sh*t out of luck. And DST will be a huge bagholder.
I don't get it, how does this help with that?
They say that the only limit to AOL's revenue from this was the amount of space on their website first page, not the number of interested startups.
Basically the valuation of the giants stayed up for as long as easy funding was available to .com's. Their spending habits, without being backed by actual revenues, were more than enough to sustain the stock prices of the few big ones selling to startups whatever they needed (ad space, big iron or aerons).
They all fell together when the crash came and easy funding dried up.
Most startups now to know that building an audience isn't enough that they need a revenue model. Many startups being built to are good fits for acquisitions by the bigger players, generally less people getting funding for things that are unworkable.
Also the public is far less adverse to sharing and purchasing online and innovations like the app stores and things like the kindle have opened up many more markets to generate revenue.