
YC Continuity - dshankar
http://blog.ycombinator.com/yc-continuity-fund
======
BinaryIdiot
So this announcement got me thinking and while this is slightly off topic and
it may seem like a dumb question but I'm going to ask it anyway because I'm
curious: where does YC get the money to do everything it does (seed and later
stage investment, research, running hacker news, employees, startup school,
etc)?

I mean I know roughly how it works from the standpoint of taking investment
money and funneling it into companies but unless I missed it I have yet to see
them "cash out" on any existing investments so are they bringing in any money
from those investments or is it just more and more funding to do further
investments that powers everything?

~~~
sama
We have had a number of exits, and two or three times we've sold some of our
stock in our larger companies for cashflow for operations. Partners have also
contributed money.

Going forward, we'll get some management fees from this fund that will
contribute to operations.

We also practice what we preach to startups, and spend surprisingly little
money each year--our all-in cost for 2015 is about equal to the salary of 2
GPs at many other firms.

~~~
pw
Someone want to chime in and give us an idea of approximately how much the
"salary of 2 GPs" is? Also, by "all-in cost" is he talking about all
expenditures except for actual monies invested?

~~~
sama
Just asked our CFO--she thinks we will be at about $8MM for 2015 not counting
investments.

~~~
samstave
So a General Partner at an average VC makes $4mm per year?

~~~
austenallred
I'd argue that's not "average," that's probably a good GP at a top VC firm,
but it's by no means unreasonable.

~~~
cma
High end might be so high that even though it is more than median it still
ends up being the mean.

------
ChuckMcM
While I think its great to participate pro-rata in later rounds, it feels a
lot like YC is backing into becoming yet-another-VC like Sequoia or any other
firm in the valley, granted with their 'incubator arm'.

I'd be interested in hearing how being more like a regular VC firm helps YC be
better at what it is currently.

~~~
sama
This will just be a small part of what we do. There are now 15 partners on the
early stage side and 1 on the late stage side.

Two thoughts:

1) In the same way YC was able to make the early-stage ecosystem better for
founders, we think we can do the same for the late-stage ecosystem.

2) It's important that we can support companies at later stages in areas that
other investors don't like to support.

~~~
rory096
Can you give an example of an area that late-stage investors don't support? Do
you mean something like fusion research, which will obviously have payoffs
>10-20 years down the line?

(Why don't current VCs invest in those areas, if they're potentially
profitable? Just a lack of a long-term view / fund wind-down timelines?)

~~~
sama
That is a good specific example :)

------
not_that_noob
Awesome! I'm a natural born cynic, but even I have to say that YC has reshaped
the entrepreneurial financing ecosystem in the Valley. All these new funds
falling all over themselves to be founder friendly, while the old legacy
vultures slowly slip into irrelevance - this is the world that pg, sama and
team have wrought. As an entrepreneur, thank you for existing.

------
rdl
Curious if in 5 years YC figures out a way to OpenIPO YC companies, solving
the private/public market impedance mismatch which seems to be happening now.

~~~
dshankar
Instead, I wonder if YC can formalize & self-regulate a secondary market as an
intermediate step before IPOs. This is already happening, but with undesirable
side effects.

~~~
nostromo
Someday I'd love to see a decentralized equity exchange built on block chain
technology. Maybe YC could pioneer this approach down the road.

~~~
ceejayoz
Bitcoin was bad enough with multi-million dollar fortunes evaporating into
thin air after people got hacked. Suggesting tying company ownership to such a
thing makes me wonder if we're seeing Poe's Law in action.

~~~
nostromo
The existing ways of selling equity to the public also has drawbacks, such as
high transactional costs. And, yes, multi-million dollar fortunes have
evaporated into thin air under our existing legal structures -- Eduardo
Severin for example.

I agree this isn't something that is ready for primetime today - but it could
be in the near future. Even multinational banks are now looking into using
block chains for funds transfer.

~~~
ceejayoz
Let's not pretend Saverin's situation is anything comparable to the ease of
stealing someone's bitcoins. He also had legal recourse, which he used,
successfully.

~~~
voltagex_
Why does every thread on HN at the moment involve "X, but with Bitcoin"?

~~~
aianus
Bitcoin is _the_ breakthrough technology of the 21st century so far. It's like
moving from snail mail to emails in its power and cost-effectiveness relative
to existing payment and remittance schemes.

Besides that, it's a beautiful solution to a 30-year-old unsolved problem in
computer science (the byzantine general's problem).

------
rdl
I wonder how long until YC goes upstream of fellowship/startup school:
consolidated remote/mini internships for _high school_ students, or some other
"get involved with YC companies early" kind of thing.

Especially likely to happen once the first cohort of YC founders has kids of
age 12-18.

~~~
chucksmash
Are those 12-18 year olds well served by something like a startup themed
summer camp? If there are kids who are truly interested in it than so be it
but I'd hate to see something like this turned into just another impressive
extracurricular checkbox on college applications.

~~~
tajen
On a particular occasion, PG said that people are better when they have 10
years of experience in programming. He created a few workarounds so that
people from one minority and suitable experience get favourable exposure, but
to my knowledge he didn't come back on the "requirement". Does it do well to
tie 12-18 years olds into a formatted scheme?

~~~
strayptr
It's more common nowadays for an 18 year old to have 10 years of experience
programming.

Certainly it's uncommon, but the set of all 18 year olds who've been
programming for 10 years are a subset of those who'd benefit tremendously from
a YC program for young adults. And YC has shown that even though money is a
focus, it's not their primary focus.

Is there value in such a program? I think so. Even if the program serves as
nothing more than a reminder to young people that there are those in the world
who believe in them, it would be a win. Getting young people to consider "What
are some strategies for me to change the world?" before "What type of job do I
want?" might yield a better world.

------
DanielDent
The previous firm policy of not making follow-on investments had two
interesting side effects: signalling risk, and the nature of the relationship
with the founders.

You've addressed signalling risk in another response, but I'm curious to hear
your thinking about the impact this will have on your ability to have an
authentic advisory relationship with founders.

Do you have any concerns that this could make founders dial back their level
of authenticity with you? I think there's tremendous value in having founders
who are comfortable being completely transparent about the concerns they have.

In the back of founders minds, there could now be a small voice saying "Should
I discuss possible future issue X with YC? If we haven't come up with a good
answer to X, it could impact the next round. We'd be better off dealing with X
after our series C rather than after our series B." But in not having the
conversation, tremendous value is lost - good advice might turn it into a non-
issue.

------
calgaryeng
> Capital -- especially long-term capital willing to invest outside of the
> current trends -- is an important ingredient in that mission.

Does anyone else read this and take away "[investors/VCs/other equity funds
who don't group-think and blindly follow each other based on FOMO] are an
important ingredient in that mission."

~~~
cheepin
I just read it as "Accepting higher variance investments". Start-ups are
already high variance, but going outside of existing trends pushes it even
higher.

------
samstave
It would really be wonderful, if, when you announce some new person, you could
at least provide a link to their linkedin or some other page telling me ___who
the heck_ __this person is.

Most of us are not ___that_ __connected in SV that we know every name you
do... so please provide context.

Thanks

~~~
paul
[http://blog.ycombinator.com/welcome-ali](http://blog.ycombinator.com/welcome-
ali)

~~~
ahaseeb
He is an amazing person. YC is fantastic at attracting talent

------
geofft
Previous post on the pro rata thing seems to be
[https://blog.ycombinator.com/pro-rata](https://blog.ycombinator.com/pro-rata)
\-- AFAICT, the change there is that it's now <$300MM instead of <=$250MM.

------
marcamillion
I would just like to say that when PG announced he was handing over YC to sama
I was a bit nervous. Not because I didn't have faith in sama, but because
handing over the reins hardly ever goes according to how the departing
CEO/President/founder says it will go.

I must say Sama...I am truly impressed. I honestly wasn't sure how much better
YC could have become when PG stepped down, but looking back...just from the
outside looking in...it seems to have gotten at least 5X better if not more.

So keep up the good work you (guys) do. I suspect though that it is also
testament to the team you have around you as well.

PG used to say you were one of the smartest people he knows, but many people
are smart. It is quite a different thing to be effective and you have been
remarkably effective at doubling down and significantly improving the value
that YC truly creates.

It is wonderful to witness, as much as watching Musk do his thing.

------
mattty
It will be interesting to see YC manage the tension of being founder-friendly
at later stage companies. Statistically[0], the later stage the company, the
likelier it is the founder isn't running the show.

Is founder ceo succession inherently less likely at YC startups due to YC
selection process?

[0]: The Founder's Dilemmas, Wasserman, p.299

------
jkurnia
Does this affect YC nonprofits - will they be eligible for follow-on funding,
as well?

------
jpeg_hero
sama, of 1,000 co's how many have exited to date?

Exit as in: cash or public stock readily convertible to cash

Know there is a timing issue, but would be interested in just total actual
exits?

~~~
outericky
sama published some metrics recently...

most of this is publicly accessible; that said, YC may have sold their
positions in some companies (unknown). Twitch, heroku, reddit, omgpop,
others... YC may (or may not) still hold Dropbox, and many others.

------
sova
what does full partnership entail? -- thanks, newbie me

------
larrys
These comments I've reproduced below make me wonder again at what point will
YC have their hands in to many pots and risk straying from the original
formula which has worked so well. There is of course a need to evolve, change
and add products. However in a small organization you also have to be able to
manage all of that without having existing or new employees (or management)
choke on the added complexity. Sama only has so many hours in a day. Even if
there are more partners there is still glue that holds everything together.
People at the top.

sama: "In the same way YC was able to make the early-stage ecosystem better
for founders, we think we can do the same for the late-stage ecosystem."

rdl: "Curious if in 5 years YC figures out a way to OpenIPO YC companies,
solving the private/public market impedance mismatch which seems to be
happening now."

dshankar: "Instead, I wonder if YC can formalize & self-regulate a secondary
market as an intermediate step before IPOs. "

rdl: "I wonder how long until YC goes upstream of fellowship/startup school:
consolidated remote/mini internships for high school students, or some other
"get involved with YC companies early" kind of thing."

Many things going on. No way of knowing all of this could work out fine. Just
to me, from my observation of business over many years (not specific to
startups) I say "DWR" [1]

[1] Danger Will Robinson.

