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37 YC Companies have valuations of or been sold for at least $40 Million (twitter.com/paulg)
122 points by mlinsey on May 27, 2013 | hide | past | favorite | 65 comments

Unless you're a total hater, this is an amazing achievement no matter how you look at it.

I just have one concern, however.

Like most people on HN, I have a ton of respect for PG i.e. how smart he is, his willingness to share his knowledge with the world, and the way he has helped change Silicon Valley for the better.

However, what happens if/when PG decides to hang it up? OR if "God forbid" he's forced to hang it up like e.g. Steve Jobs?

Some cynics accuse YC of essentially being a (benevolent) cult with PG as the guru with his own cult of personality. I wouldn't go that far, but you can't deny that PG essentially IS YC and without him it may be very difficult to maintain this kind of success, much less scale it.

I have no affiliation with any of these accelerators and forgive me for overgeneralizing, but it seems like 500 Startups and/or TechStars, while not quite as heralded as YC, have done a much better job of hedging this kind of risk via a much more decentralized network with multiple mentors/"gurus" in multiple cities.

So I have two questions - (1) PG, do you ever see yourself "moving on" and starting something brand new that is not YC-related, and if so, (2) what is the "Steve Jobs contingency plan" for YC?

The difference between me and the other partners is mostly that I got to be publicly known by writing. On most topics there are other partners who can give better advice than me. PB gives better advice about hacking. Geoff gives better advice about b2b questions. Jessica is a better judge of people. Garry and Kevin are better on design. Sam Altman is better on fundraising. If I were hit by a bus tomorrow, YC would be pretty much as good as it is today.

This business is more naturally decentralized than a company like Apple. It consists mostly of individual conversations between founders and YC partners, and most of those conversations already don't include me.

I have no inside knowledge of YC, but I get the impression that "PG essentially IS YC" is just not true. He is the public face, communicator and prime founder; but the other partners, the people who support them, and the YC alumni network, at this point, I would wager, together contribute more value than he does.

However, as the public face of YC, the public perception of YC would be greatly affected if he left that role. And this could potentially have an adverse effect on attracting the best startups, and thus over time weaken the whole structure.

When it comes to venture capital investing, you take your "unfair" advantage and leverage it to the hilt. It doesn't make sense to hedge your bets with a decentralized network of partners.

$40M+ Exits with Public Prices:

Heroku - W08 - $212M > Salesforce [1]

OMGPOP - S06 - $180M > Znyga [2]

SocialCam - W12 - $60M > Autodesk [3]

Loopt - S05 - $43.4M > Green Dot [4]

$40M+ Exits with Rumored Prices:

Parse - S11 - $85M > Facebook [5]

[1] http://techcrunch.com/2010/12/08/breaking-salesforce-buys-he...

[2] http://techcrunch.com/2012/04/26/zynga-ceo-mark-pincus-omgpo...

[3] http://techcrunch.com/2012/07/17/socialcam-autodesk-60-milli...

[4] http://www.forbes.com/sites/ericsavitz/2012/03/09/green-dot-...

[5] http://techcrunch.com/2013/04/25/facebook-parse/

CloudKick (to Rackspace) was probably over $40mm, or close to it.

I doubt your info is correct. IIRC, CloudKick had 10 employees and little revenue. $40M seems like a steep price.

If Cloudkick's product was generating material revenue, they wouldn't have shut it down recently.

My arm chair quaterbacking puts the deal closer to $10M for investors, and maybe a nice bit of earnout.


$30-50mm seems to be the consensus in this and some other places.

$30MM cash was in the 10-K filing.

Thanks, you are correct. I pulled the Feb 2011 10k, and it is clear -- $30M cash. No other acquisitions were mentioned, so that must be it. That being said, they show no earnouts for FY 2011 or 2012, but that could be because retention payments just got misclassified as comp. I stand by your >$40M comment as justifiable, likely accurate, and definitely more accurate than my estimation.

From the 10K > During 2010, except for the $50 million repayment of our line of credit and cash paid for an acquisition of $30 million, we were able to maintain a consistent level of cash and cash equivalents while growing our business by maintaining our disciplined use of capital.

I'm not arguing worth, just what they actually paid :) (There is no likely world where what Google paid for Slide was worth it, for instance)

I'd rather know the sum of the valuations of all 511 companies (with the ones tha closed down valued at zero of course).

while I am making wishes, I'd also like to know what percentage of that total valuation is owned by cofounders rather than investors.

The total valuation of those 511 is currently about $11.5 billion.

We ourselves don't know the percentage owned by founders. But considering that investors continually complain that YC companies are overpriced, it may be higher than the industry average.

I find it interesting that the current average valuation of a YC company is 22.5 million which is almost identical to what it was 2 years ago when there was 210 companys "the average value of startups we've funded is about $22.4 million" http://ycombinator.com/nums.html

That is interesting. The reason it hasn't changed is convertible notes. Now most of the fundraising immediately after Demo Day is on notes. Since a note doesn't establish a valuation, we add zero to the total valuation for those companies. So the number you get by dividing the total valuation by 511 ends up being pretty conservative; it's equivalent to assuming all the companies that have raised money on notes will go out of business.

The average valuation of the 268 of those 511 companies that have valuations (by being acquired, raising an equity round, or going out of business, in which case it's zero) is $43 million.

Why not use the valuation cap on the note (in cases where there is one) in place of the valuation? Is there a reason you wouldn't consider it equivalent to a valuation for the purposes of a rough calculation like this?

A valuation cap is merely an upper bound on a valuation. I'd rather be conservative and wait till there is a valuation.

We ourselves don't know the percentage owned by founders.

Isn't it almost always going to be the case that the founders got diluted by the same proportion as you did? In which case, based on your comment below of YC being diluted from about 6% to about 3%, presumably the founders (who started out owning almost all the stock) would now be around 50%.

I feel like I must be missing something obvious here.

That's an estimate of what will happen eventually in the biggest companies, based on industry norms. But we don't know how much we've been diluted so far in individual companies.

Bah. They're not "overpriced" as long as someone is willing to pay the price. Startup pricing is about as close to a frictionless transaction as we're going to see. What they're actually complaining about is that the YC companies are getting better terms from investors, thanks to PG/YC's deliberate efforts to shift the balance of power in favor of the founders. I'm not crying tears for them. They don't like the terms, they're welcome to walk away from the table.

I'm bad at math, anyone know what's 6% of $11.5 billion?

In all seriousness, congratulations pg. You've played your cards very well the past 10 years.

After dilution it will be more like 3%.

So arguably at least one of {pg, pb, etc.} could have made just as much value over the past ~10 years by starting another startup, instead of an YC, if that were the goal. 10 years is probably enough time to try/fail-fast at least 2 and maybe 4 times, each.

Probably, but you're only counting the tangible value. In my mind what they've done is far greater in intangible value. What about HN and the community it has nurtured? And let's not forget being a sort of pointer to true north to most of the people thinking of creating something out of nothing. Sure, money is easy to count and imagine, but there's plenty of people that make that, how many PG's appear every 10 years? To paraphrase Michael Scott - you think PG's grow on trees; well they don't; there is no PG tree.

Absolutely - I think YC's overall "consumer surplus" is over $10b, since it somewhat changed the game for early stage startups in general, not just startups in YC.

On money yes, but the overall impact is much bigger this way. And the experience is in a certain way more like founding 300 startups not only 2 or 3.

Google says:

3% of (US$ 11.5 billion) = 345 million U.S. dollars


6% of (US$ 11.5 billion) = 690 million U.S. dollars

>We ourselves don't know the percentage owned by founders.

When one of them goes public, we'll find out how much of that one is founder-owned :)

Thanks for the info.

There are some bits of information we can gather. For example, 60 of the 500+ YC companies have exited, with total exit values of $1.08 billion, according to http://www.seed-db.com/accelerators/view?acceleratorid=1011

Back in 2011, pg estimated the value of the top 21 YC companies at $4.7 billion (http://ycombinator.com/nums.html ).

EDIT: and my post is immediately obsolete, as pg has posted a current estimate in a sister comment.

I think it's safe to assume the sum of current valuations is nearly 2x the valuation of dropbox+airbnb, or essentially the 30*40 + known big exits (~$600mm in total) + airbnb + dropbox, as a first approximation.

There's enough uncertainty in how accurate the individual valuation numbers are for airbnb, dropbox, and the 30x40 club to dominate the error.

After meeting the Rap Genius guys, I'm not at all surprised they were over $40mm valuation.

can u elaborate a little more? i checked out the website, i'm not that impressed about the execution or the idea.

I met one of the founders around 6 or 7 months ago.

Honestly I felt like he was the first founder I'd met in NYC that wasn't a bullshitter. He was straight forward, and actually helpful.

Those guys have been working on Rap Genius for years and years -- before anyone in the tech industry had heard of it. They made it because they wanted it, and the site grew with the community.

They silently built an internet empire and didn't care about PR stunts or hype until they had REAL traction (because that's the only thing that really matters)... Which is a lot more than I can say for most NYC startups.

Honestly, I think there's so much potential in the idea -- it's a rocketship. If you're an engineer in NYC looking for a job, you should hit them up.

I was in the same batch of YC with them, so I saw them fairly frequently. We had a discussion about Gettier Problems ("justified true belief") entirely sober, as well as normal startup stuff, so they are obviously smart.

The "rapper/swag" thing is not all of their personality.

Oh man Gettier problems! That takes me back :)

The founders on stage at TC Disrupt NYC http://www.youtube.com/watch?v=4NAzQPll7Lo

skipping through that video without sound gives me the impression that this is a video about all thats wrong with the startup scene. Everybody on that stage looks like a complete douche, even the TC guy.

I know they probably want to portray a certain image, but gawd...Sunglasses WTF ?

They're nice guys. It's mostly a gimmick.

It does look like and feel like Doucheville on stage. But if you hold your nose through the first part, there's some interesting stuff in there (like how they bootstrapped by finding a passionate niche and targeting them initially)

Wow yeah, I'm sure they're brilliant, but they seem like massive douchebags

"ballersourcing", however, is an awesome idea.

In academia there's an author metric called the H-index

> A scientist has index h if h of his/her Np papers have at least h citations each, and the other (Np − h) papers have no more than h citations each.

I wonder if you could apply this same methodology to VC (the v-index)

> A VC firm has index v if v of his/her Nc funded companies have had valuations of at least $v million, and the other (Nc − v) funded companies have had valuations of no more than $v million. (In some inflation adjusted dollars.)

$mm 0 0 0 0 5 10 10 15 22

v-index = 5

$mm 2 4 4 5 8 8 8 10 14 17 20 22 25 50 55 60 100 200

v-index = 10

Python snippit for calculation.

    def vindex(valuations):
        return max(v if sum(x >= v for x in valuations) >= v else 0 for v in range(len(valuations)))

Your metric uses the arbitrary unit of 1 million dollars/company. The h-metric uses the imperfect but substantially less arbitrary unit of a citation/paper.

From another comment:

> pg says in a later tweet reply [1] that it is 37 out of 511.

So ycombinator's v-index is likely 37.

A 'valuation' and a sale are completely different things. Silicon Valley VCs are annoying as all hell. They get lucky once and all of a sudden they're Warren Buffett.

pg says in a later tweet reply [1] that it is 37 out of 511. Which is 7.24%.

[1] https://twitter.com/paulg/status/338809374459977729

40 million is an arbitrary number, but it's still interesting that 7% is also the average YC equity stake.

Why is that interesting?

The way you justify taking x% equity is by offering to improve the odds of success by at least x%. 40 million is definitely above any basic notion of success, so it would indeed appear that YC is delivering.

It's really amazing how well YC selects their companies, and how effectively they propel their startups forward. When talking to YC founders, you can just tell that there is something different about them.

We need a YC mutual fund to invest in

Although I do question what being "acquired" means?

I know a friend of mine who sold his YC company and left. So I guess for him he was just wanted to make a quick exit.

Disqus is worth way more than $40 million. It's going to become one of the largest ad networks on the web with its insane publisher base.

I'd like to - but I doubt ever will - see the full distribution of their 511 valuations.

Incredible - even though it's 37 out of 511 companies.

how many have done more than $40M in net income?

Don't know. However, $40M valuation implies 7% of YC companies have revenue run rates greater than ~$2.7M per year (i.e. assuming a price of ~15x revenue) In other words, 93% of YC companies have not made it to ~$2.7M per year in revenue.

what does that translate to in YC dollars?

I value myself quite highly as well.


@heynavid "@paulg which one was the biggest surprise to you?"

@paulg "@heynavid Since I suspect they won't mind me saying so, Rap Genius."

@RapGenius "@paulg @heynavid WOOP! I was surprised that PG is tight with NWA, personally.. http://rapgenius.com/Nwa-express-yourself-lyrics#note-318551 "

For anyone curious, the NWA lyrics:

> "Now, getting back to the PG, that's program, and it's easy"

Means "Parental Guidance".

> Unlike most songs on the album and by N.W.A, the song is almost devoid of profanity and violent content.


It also builds on perhaps the greatest bass line sample ever, from Charles Wright's "Express Yourself".

The circle jerk never stops, does it? Anyone want to post the visualization of various amounts of cash that front paged a couple months ago?

This kind of blind worship of money makes hackers look like wise-guy could-have-been doctors but instead were lazy and decided to make a business around popular markets for some dollars.

Wait hold on. I'm doing an evaluation of Rap Genius so I can cure cancer.


The dollar will collapse soon.

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