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Comment by vikramkr | Hacker News Reader

A big reason they said they were raising the deal previously was the cost of living in the bay area and increased cost of starting a company today[0]. Are they anticipating that those costs are going to come down now? They suggest that this decreased amount will allow them to fund more companies, and hint that it has to do with economic conditions as well. But, if that amount of money is still needed to live in the bay area and work for 6 months, then wouldn't it make more sense to decrease the number of companies funded as to not potentially handicap startups with not enough money?

[0]https://blog.ycombinator.com/new-standard-deal/

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It almost likely will be remote-friendly due to covid, no?

Also, with -$25k/deal they can fund 6 startup where they could found 5 before.

So remote-friendly = less cost, +20% batch size at the same cost. It makes sense to me.

Rents in San Francisco’s SOMA neighborhood dropped 9% in May https://www.google.com/amp/s/sf.curbed.com/platform/amp/2020...

My guess is that the departures will continue as unemployment rates grown and that when federal and state payments run out we will see a further decline.

I think companies will soon have to justify why they can afford to have an office with remote as the better (and cheaper option). Other than headcount, rent is usually the largest line item for a startup

Rents dropped 9%

but landlords are also offering 8 weeks free

Which really means an annual lease has dropped 25%

quite steep, you could probably offer something closer to 38% lower.

It’s unrealistic to project those incentives in to future years

It’s realistic to use them as market signals for actual price discovery in the current year

I’d wager the rent rate is necessary to cover the mortgage, homeowners policy, other insurance, and repairs. I don’t think landlords have 36% IRR on their investments. Rents at that large of a discount aren’t sustainable.

No, they don’t have that IRR if their investments were made at 2019 market prices. They have more than that IRR even with all those expenses if they bought at 1980 prices.

What’s unsustainable is the property prices of 2019 (and June 2020 because real estate asset prices are sticky). “Investment” is path dependent and is irrelevant to pricing for the market as a whole (it obviously does to a single player)

Most “x weeks free” are limited to luxury buildings and 8 weeks is on the very high end of those offers. And even before COVID you’d see 4 weeks free advertised reasonably often. IMO the rental drop isn’t nearly as drastic as you’re suggesting.

Non-AMPed link: https://sf.curbed.com/2020/6/2/21277355/san-francisco-rent-p...

If cost of living is so high, I wonder why they wouldn't invest in a dorm-like living space for founders? I'm not familiar with the area, so I imagine there's reasons for it, but being able to focus on work instead of life-maintenance details seems like it would benefit the organization.

This would benefit a subset of founders - those who are young and single. What if you have a partner? A family?

YC is actively moving away from its roots as an alternative to a summer internship for college students to premier seed / Series A investor for companies with traction. Your suggestion runs counter to where they're headed.

Among other things, I'd expect this is because YC is trying to break free of the idea that the only way to be a successful startup founder is to be a young, single, attachment-free man.

Successful startups are created by all kinds of people in all kinds of different life situations, and YC needs to be careful to be inviting to as broad an array of people as possible.

At the same time, I agree that dorm-style living (along with other nontraditional styles of living like mulitigenerational or multifamily units, cohousing, coliving, etc...) is a great idea and our culture should work to be more supportive of experimenting with housing. Especially, as you said, in areas with severely impacted housing markets.

Are women unable to live in dorms?

> young, single, attachment-free man.

Some YC founders bring their whole family with them. Also, at some point in life, living a dorm starts to sound like torture.

Many women have obvious, easily predicable concerns about sharing living space with unknown men.

Surely you could set up the spaces so that this could be much less of an issue?

Sure. Those are called "apartments".

Yeah, and then you put a couple of people of the same gender together in them…and now they're basically back to being dorms.

Providing employees with some kind of inexpensive nutrient slurry would also be a great way to help mitigate the high cost of living.

I'd need zero money towards cost of living if I could simply do it all from my home country. I could then use the $125k towards the actual business.

(a) It's not clear why YC could run an apartment complex better or cheaper than the many companies who already do it (including some YC-funded startups like https://zeusliving.com)

(b) Founders tend to be independent-minded people who like to do things their own way.

> better or cheaper than the many companies

why would existing companies be offering cheaper? The price will be set by the market, and any saving will be taken as profit, not passed on to the tenants.

The easiest way to insure against rent increase is buy a big chunk of local land. Actually offering it to your own startups just means they reduce overheads a little, provide an extra perk, and a small competitive advantage.

What is the opportunity cost of that land investment? Is YC really better off getting into the landlord business rather than using the same money to fund more companies?

I mean the money is going to landlords either way is it not?

A larger entity would have more bargaining power?

YC doesn’t need to be in a high-demand place at all, especially so long before you need to ramp up hiring.

Liability. Someone slips and falls, someone is (sexually) assaulted in the dorm, etc...

It would probably be exceptionally helpful for a lot of YC founders I imagine, but in addition to the liability, the optics are kind of creepy in that certain SV culture kind of way they likely want to avoid.

Founders may find & cluster in such spaces, themselves. Once upon a time, an SF high-rise got the nickname 'Yscraper' for all the YCers there:

https://www.sfgate.com/business/article/Justin-tv-to-get-boo...

And, there have been dorm-like living spaces throughout the Bay Area often favored by founders & young transplants. See, eg:

https://www.nytimes.com/2018/03/04/technology/dorm-living-gr...

I'd expect YC might informally be able to point out such places, or formally invest in some with the right vision, but would not necessarily get further into managing housing themselves. And, too much density/interaction with disparate teams might at some point become counterproductive, compared to the classic "intense founders of the same entity living together to the exclusion of other distractions" model, or the rising capabilities of mostly-remote teams.

From the beginning, YC was opposed to the incubator model, which that idea would be more aligned with. Even having startups share offices was never something they were interested in. That was partly because they had no interest in managing offices, or managing at all (or offices, for that matter). But there were deeper reasons: the sense that great startups develop in environments of their own creation, a suspicion of scenesterism, and ultimately the fact that they wouldn't have liked to work that way themselves. They strongly approved of saving money, but were more the kind of people who would work out of an apartment (as Viaweb indeed had). The incubator model comes more out of a business-managerial way of thinking. Words like 'synergy' come to mind.

One of the first things YC partners say to you when you the program starts is: "We are not your employers, we will let you fail." I think that's a core part of how YC works and things like sharing office space or having dorms would degrade that by helping founders to escape some of the responsibilities of their company.

For people in YC who are looking for places to work though and want to get out of their apartments I highly recommend the public libraries in Mountain View and the surrounding towns. They're quiet, well lit, have fast wifi, comfortable chairs and desks, and lots of nooks and crannies without much distracting foot traffic.

Employers let employees fail all the time, and when that happens the stop giving them money. When a startup fails VCs stop giving them money. The illusion of autonomy motivates some people, but make make no mistake - when you take VC money you are an employee of that VC firm - with low pay, no benefits, no title, no desk, etc.

This isn't true in the general case. If you found a startup that's profitable, for example, you have genuine autonomy to an extent that you simply couldn't obtain as an employee, no matter how successful.

This is true in the general case. In the general case a startup isn't going to be successful, the founder is inexperienced and easily pushed around by the VCs, and generally needs to follow their orders to keep bridge rounds, etc coming.

In the rare case of a successful startup, if the board doesn't replace the founder with an experienced executive, the founder probably has as much autonomy as corporate executive in charge of a successful division of a company.

FYI: there's a "YC House" townhouse in SF that several startups use for a while, then move on.

Source: been there.

For sure. I've been to those too. Startups choosing to colocate is different from the incubator model at the investor level.

No, the lease is held by YC, not the "startups choosing to colocate."

So the investor holds the lease.

> the lease is held by YC

That doesn't sound right to me (I've been in the YC network for 10+ years, as has dang), and is at odds with what tlb (an original and still-serving YC partner) said in this comment [1] above, and what has always been YC ethos.

Maybe the person who told you that was mistaken? Or it may have been a YC partner or staff member doing it privately?

[1] https://news.ycombinator.com/item?id=23655750

Maybe because the plan is to ditch Bay Area in the future? Why would people come to a specific place to found an internet company?

To be among likeminded people to use as a network for social and business purposes for one. You're more likely to feel at home and happy if you are surrounded by people going through similar challenges as you. I'm sure there are other reasons.

Boost.vc does this.

Because only a subset of a subset of founders would tolerate living like that?

I wouldn't. Even if I wanted to live like that, this starts seeming... a bit offputting. 'Come live and work at nerd camp..."

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