Comment by cperciva | Hacker News Reader

Comment by cperciva | Hacker News Reader

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It turns out that investors are generally about as involved as they are invested. [...] In a typical party round, no single investor cares enough to think about the company multiple times a day.

This sounds like something which is obviously true; but I'm not so sure: In particular, it seems to me that an investor's involvement is likely to depend as much or more on their investment as a fraction of their assets as it does on the absolute size of their investment. If I invested $100k in a startup, it would be because I really believed in it, and I would help them in any way I could; but if Warren Buffet invested $100k in a company he would probably forget about it before lunch.

To the extent that "party rounds" involve large investors throwing their spare change into a pot, I agree that they would certainly not be productive; but if a party round allows small investors who would provide advice and assistance disproportionate to their assets to get involved, it seems like it could only be a net positive.

After all, nobody expects that an investment of only $20k means that YC won't provide much help.

Definitely true--if someone invests a lot of their money, they'll focus. The problem comes when a 500MM fund makes a 100k investment.

YC is somewhat different, since all the investments we make are the same size. And, I'm biased, but I think we work pretty hard.

"The problem comes when a 500MM fund makes a 100k investment."

Interestingly, after crunching the data, this is not true.

In reality, companies who receive money from a larger, multi-stage fund actually raise follow-on financing at a higher rate than those that raise only from dedicated Seed VC firms who presumably care more as they're more invested (or that's what they'd like you to believe :)

While Chris Dixon (prior to joining Andreessen Horowitz) and others have championed the idea that large funds don't care and are just investing in seed rounds as a call option for future rounds, the data just doesn't support this contention.

We were as surprised as everyone else when we found this.

Full research brief we published on this here - http://www.cbinsights.com/blog/trends/seed-venture-capital-f...

Disclosure: I'm co-founder of the firm, CB Insights, that put this research together. We sell data to VCs, LPs, etc.

YC has to work hard in order to justify the low valuation (or large equity stake, whichever definition you prefer). In that sense you can't really compare YC with normal investors.

The problem comes when a 500MM fund makes a 100k investment.

Right, so the problem isn't party rounds, so much as people not taking advantage of the fact that doing a party round allows them to go after smaller investors.

I think we work pretty hard.

Having never been through YC I have no direct evidence, but all the indirect evidence points in this direction, yes. ;-)

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