Ask YC: Can other investors join the round of funding with YC?

[elfin2]

We've applied for YC this round. We've had two [one very prominent angel & one large seed fund] contact us asking if they could (maybe) invest.

We would love their money (small amounts initially - enough for Q2 2010 with growth), and we'd love the YC mentorship, branding and community.

Is there a way to make it work? Or do we just ask to speak to them after YC? Sorry for posting on an alt, with this stuff I'm really paranoid.

[pg]

It's not in your interest to have them join the same round. The valuation YC invests at would be a bad one if we were only supplying money. So what we'd recommend is doing another round after YC's at a higher valuation. If you were in YC we'd obviously help you arrange that. Your call whether you want to take the money during YC or have your potential investors come to Demo Day with everyone else (assuming they don't already).

[netsp → pg]

How would other investors react to this? It seems an obvious case of letting one investor in at valuation A & another at valuation A+B with anchoring in the relative value of the company at these two points.

Is the socially correct in the investment world?

[ALee]

From the YC startups I have spoken to, you can raise more money from outside investors, but it cannot change the fundamental terms and amount you receive from YC.

If you talk to YC, I'm sure they have a pretty good strategy on that since they're very entrepreneur-friendly.

[YuriNiyazov]

Probably a direct e-mail to the YC partners would've been more appropriate

[ph0rque]

No reason you can't take both I think... but I'd wait for PG to weigh in.

[barry-cotter]

Why would you want to take both? It would seem to me that if people are approaching you asking to invest you're in a fantastic position. The money they're offering seems (Q2 2010) to be more than the standard YC offer but what you're getting there is (mentorship + community + brand + Demo Day + MONEY) whereas all you're guaranteed from the Angel/Seed Fund is money. You will more than likely get mentorship as well but the community and brand are not availabler outside YC.

It sounds like you're being offered ~double YC standard investment, but how much stock your potential investors want is not mentioned.

You're obviously in a good position with people looking to invest in you already but why would YC take on the pain of having others in on the round with them on anything resembling an equal basis unless they think you're so fantastic a bet that they'd be fools not to take it, like when Sequoia and Kleiner (bastards who invest in patent trolls) Perkins went in together on Google, which didn't need the money?

[ALee → barry-cotter]

It is not that much money and if you can double the team and have a better product by Demo Day, you may be in a better position.