
YCombinator - A Force to Reckon With, A Model to Replicate - usablecontent
http://www.usablecontent.com/2007/03/19/ycombinator-a-force-to-reckon-with-a-model-to-replicate/
======
sethjohn
Is YC a force to reckon with?...a model to replicate? I'd love to hear some
guesses about how well they've done so far.

I tried to estimate their return on Reddit
(<http://news.ycombinator.com/comments?id=4474),> but couldn't find even a
ballpark number for the sale (paul? ;) ). My best guess is that they did
great, but not stratospheric. With Kiko selling for 200K, they can't have done
much more than break even.

Perhaps seed money has different economics than later stage VC money, which
traditionally looks for 10x return on 10%(+) of companies. Are they getting in
early in hopes of getting 100x return on 1%(+) of companies?

~~~
pg
We have no idea how much money something like YC might make long term. VC is a
well understood business, but this is completely new. We're in the black at
the moment, but not buying jets.

We lost money on Kiko, incidentally. Their later stage investors got paid
back, and the founders made a little, but YC got 38 cents on the dollar.

~~~
sethjohn
In the black already...with more companies in the pipeline...seems like a
great place to be!

What's so new about this model? Tapping into an under-exploited resource
(hackers)? Or the economics of micro-seed funding?

~~~
pg
The VC model encourages/forces founders to go for huge exits. You can't do a
series A round and then sell the company for 10 million. Probably not even 20.
The VCs won't let you. So they're more likely to get the giant outcomes that
make up for the losses on the rest of their portfolio. Whereas there's nothing
to prevent the founders of a startup we fund selling early for comparatively
little.

Also, VCs have leverage working for them. They get a percentage of the returns
on other people's money. We're using only our own.

Smaller principal x lower returns = less profit. Probably. But we're hoping to
make enough that we can at least keep doing this.

------
dmarques1
How come the article does not load?

