
A New Standard Deal - todsacerdoti
https://blog.ycombinator.com/a-new-standard-deal/
======
vikramkr
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/](https://blog.ycombinator.com/new-standard-deal/)

~~~
headcanon
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.

~~~
tlb
(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](https://zeusliving.com))

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

~~~
Chris2048
> 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.

~~~
ska
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?

~~~
monadic2
I mean the money is going to landlords either way is it not?

~~~
Chris2048
A larger entity would have more bargaining power?

------
jedberg
I know this is HN and jokes are shunned, but you wrote "We do not expect this
to be the last time we change the deal" and I can't help but think you missed
a golden opportunity to write,

"We have altered the deal. Pray we don't alter it any further".

~~~
itwy
The disclaimer killed the joke.

~~~
noah_buddy
Pray someone does not kill the joke further. Whoops...

------
rsweeney21
This is great for YC, not great for YC backed startups.

By giving each company $25K less, they can now place bets on 3,000 more
companies. Less money for you, less risk for them.

I wonder if their success rate has declined as their batch sizes have gotten
larger.

YC has become less and less attractive to me over the years. Is it just me?

~~~
ryanSrich
You do YC for the network and guaranteed funding post demo day. Getting $125k
is inconsequential and has almost no barring on YC’s value to a new startup.

~~~
lultimouomo
But they are saying that they now want to bring 3000 more companies to demo
day, which dilutes its value.

------
joshpadnick
Our startup is profitable, scaling, and in the single-digit millions of
revenue per year. We don't have any investors but are still capital
constrained. The default YC valuation of $125k/0.07 = ~$1.8M is way too low
for us, nor do we want the requirement of having to meet with other startups
once a week since we're already quite busy.

Does YC have a "funding offering" for startups at our stage?

~~~
mauriziocalo
> The default YC valuation of $125k/0.07 = ~$1.8M is way too low for us

This is the wrong way to look at it.

Instead, ask yourself: would you exchange 7% of your company to join the YC
community and be able to leverage their resources forever?

The answer should be a resounding yes if you think your company will be > 7.5%
more valuable if you join YC [1]. Which it should [2]. The $125K is just the
cherry on top and just one of many perks of joining YC (albeit a useful one
for companies that have no funding/revenues so they can focus 100% on building
their product instead of having to worry about paying for
housing/food/servers/SaaS).

The vast majority of us who have gone through YC would've done it even if it
wasn't for the monetary investment.

[1] See PG's Equity Equation essay:
[http://paulgraham.com/equity.html](http://paulgraham.com/equity.html)

[2] You'll likely even make up for the 7% almost immediately because you'll
likely raise your seed round at a significantly higher valuation (> 7.5%
higher for sure) than if you hadn't gone through YC. But it's very likely that
your company will _intrinsically_ be worth significantly more than that too.

~~~
maest
This reasoning would be true only if YC was the only investor in town. In
truth, the options actually are a superset of:

* Do not raise

* Join YC at a very low valuation and justify it with the nebulous value of the "YC network"

* Raise from any other investor at an appropriate valuation and benefit from the nebulous value of their network.

~~~
IncRnd
The options are a huge superset of those you listed. Some that you didn't list
are bonds, loans, and grants, but there are so many many avenues.

------
vincentmarle
> In 2011, Yuri Milner and SV Angel began offering an additional $150k to
> every startup in YC.

What happened to Yuri Milner, haven't heard his name in a while. Is he still
actively investing?

~~~
krasin
FT, June 2020: Instacart raises $225m from Yuri Milner’s DST Global and
others:
[https://www.ft.com/content/da9dfac9-8186-41c4-8a1c-9052c8bef...](https://www.ft.com/content/da9dfac9-8186-41c4-8a1c-9052c8bef4b5)

------
fizixer
As an outsider, is this for a 6-month very early angel investing, and is a
total offering (meaning that's all you get for 6-months for your startup?)

edit: Also I have no idea what a 'post-money safe' is.

~~~
throwaway1777
No offense, but some quick googling will answer those questions.

[https://www.ycombinator.com/documents/](https://www.ycombinator.com/documents/)

~~~
cheerlessbog
I appreciate when someone asks such questions as a post here saves 50 readers
googling. Also it might start an interesting discussion.

~~~
ShuckSchu
Agreed.

------
Havoc
Didn’t realize yc did so big batches. Surely it’s basically a shotgun approach
at that stage

~~~
Dacod
They are not going to do a batch with 3000 companies. They are saying all in
all this will allow them to fund more companies over the coming years - " In
the coming years, this will enable us to fund as many as 3000 more companies".

~~~
Havoc
Fair. Point still stands. My (misinformed) perception was that they were doing
like 15 hot deals a year.

------
phkahler
I figured the increase to over 100k is when non-technical people started doing
it. They hire people to make their MVP instead of the founders themselves. Or
am I wrong about that?

~~~
PragmaticPulp
$100K won't buy enough professional services to build, launch, and operate an
MVP unless the app is very simple. If it's simple enough that anyone can drop
$50K-100K on design services and have your business cloned, it's not a very
defensible startup idea.

There are occasional exceptions, but typically the founding team must have the
majority talent and skills required to launch the MVP.

~~~
Naac
That doesn't seem right.

In what timeframe?

By looking at plenty of the "Show HN:" posts we can see many examples of more
than just "simple" services that were made on a much smaller ( or $0 ) budget.

~~~
TheCoelacanth
"Show HN" posts are usually the result of people doing free labor, not the
result of people hiring out tasks to an agency.

------
ipnon
How many YC companies are "remote"? What is the optimal deal if the cost of
Bay Area located startups is balanced with the cost of distributed startups?

~~~
gustaf
In the Summer 2020 batch every company is remote. My guess would be that 25%
of the companies in the batch are currently based in the bay area.

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PaulWaldman
Per the blog post, this is to enable funding more companies in the future. How
is YC able to scale funding all these companies? Are the ratios of partners to
companies consistent? Does it scale linearly? Or as YC grows do they leverage
their outside network more?

~~~
snowmaker
We've kept the partner-to-company ratio consistent as we've grown.

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say_it_as_it_is
What if all the easy stuff has already been done and heavy lifting is
necessary for the next wave of impactful startups? This funding model looks
like it's going to continue fishing for guppies for the foreseeable future.

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mathattack
All considered this doesn’t seem as harmful as valuations could be in the
current environment.

Still valuations north of 1mm.

------
amitutk
What is "post-money safe" for a priced round like this?

