"I call it buying more lottery tickets and it's not a sound investment strategy."
It is definitely a 'lottery ticket' strategy and it is definitely worth expanding.
If YC can establish itself as 'the place you do seed funding' in America, and can get kind of a monopoly on deal-flow ... then they should invest in anything and everything that even makes sense.
I'd argue the program is too big now to offer any really special value on an individual basis, it's a 'filter' with 'access'.
Like getting into Harvard is maybe more important than anything you actually do there. The H-bomb is what opens doors, just like the YC-bomb.
I personally think that YC companies are on average decent, but most of them are not particularly interesting. Nor do I buy that most of them could reach a $100M+ market.
That said, most of the 'successes' will be acquisitions by big companies paying often massive multiples for future earnings and 'strategic value' and the projects will go nowhere once absorbed.
You seem to be ignoring the simple fact that YC has invested in startups now worth over $80B in market value and the closest comparable is more than 10X less.
You're right that most have difficulty getting to $100M but frankly that is most of them. That's how the power law works. Investors who don't make money in VC spend all their time trying to avoid making mistakes. The best investors make sure they don't miss the billion dollar startups.
Your last statement is factually incorrect as well. Most of the YC portfolio value is from large standalone businesses on track for IPO. There are exits that are large and notable through acquisition but if you read PG's writings and talk to YC partners, acquisition is never encouraged. At other places that's the only chance they stand at returning their funds even 2X. Harsh but true.
I'm definitely not ignoring the fact that YC has invested in startups 'worth $80B'.
However - my last statement is correct.
Most YC businesses will NOT IPO, not even close. Most of the 'success stories' from YC will come from acquisitions, you can hardly deny this.
Sure - most of the valuation may derive from YC businesses that (eventually) do an IPO, but they are very small in number, so I think it would be disingenuous to use an $80B valuation, which is derived from a tiny number of companies (mostly one: AirBnB) - to describe 'successful YC companies'.
Also, to be fair, as far as I am aware, in the entire history of YC, none of their companies have done an IPO. So, there's that.
Sure - most of the valuation may derive from YC businesses that (eventually) do an IPO, but they are very small in number, so I think it would be disingenuous to use an $80B valuation, which is derived from a tiny number of companies (mostly one: AirBnB) - to describe 'successful YC companies'.
..isn't that the whole point of venture capital? Investing in a bunch of companies with high risk but high potential of return and having a tiny number of successes pay for the losses?
It is definitely a 'lottery ticket' strategy and it is definitely worth expanding.
If YC can establish itself as 'the place you do seed funding' in America, and can get kind of a monopoly on deal-flow ... then they should invest in anything and everything that even makes sense.
I'd argue the program is too big now to offer any really special value on an individual basis, it's a 'filter' with 'access'.
Like getting into Harvard is maybe more important than anything you actually do there. The H-bomb is what opens doors, just like the YC-bomb.
I personally think that YC companies are on average decent, but most of them are not particularly interesting. Nor do I buy that most of them could reach a $100M+ market.
That said, most of the 'successes' will be acquisitions by big companies paying often massive multiples for future earnings and 'strategic value' and the projects will go nowhere once absorbed.