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?
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.
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, how does this commitment to fund companies for life, up to $300 million valuation combine with your own belief that current funding rounds might be bubbly: specifically does this not substantially raise the bar for applicant companies that you are not sure about, by eliciting in you the natural reasoning while you're thinking about YC applications: "Interesting idea. On the other hand this idea may suck. I'm not decided. But if it does suck they may still continue to raise rounds until the overvaluation climate is corrected, and we are committed to funnelling them money while they do. Then it will correct, and since the idea sucks we will lose money. So, we won't invest now, it's too big of a commitment. If they build the idea elsewhere and it turns out not to suck, we can reconsider then."
The direct effect of this is that "backtesting" this reasoning would have resulted in many of your biggest successes, simply not being funded at all. (Because they were too large gambles.)
Note: due to the provocative question I would have preferred to ask you by email, but I think it just gets routed away and you don't see my emails.
Also, there is a secondary market for private stock. It's possible for YC to sell some of their position in the big successes that haven't yet IPO'ed.
In the early days, YC raised money from VCs to fund their seed investments. That ended because YC doesn't need the money anymore. This continuity fund might be different in that regard.
As early investors of AirBNB and Dropbox, YC is fairly well known across in the financial circles and they don't have any problem getting outside investments. In fact, I believe they have so much money coming in that they can afford all those new explorations (YC continuity, YC fellowships, YC Research, and so on).
To prove that they are very well known, suffice to say that the French news [0] spoke about them back in 2012.
"Y Combinator has just closed $8.25 million new fund led by Sequoia Capital with Ron Conway, Paul Buchheit, Aydin Senkut, XG Ventures, and Geoff Ralston participating." -- TechCrunch, 2010.
I would like to know too. I know asking is like slapping your generous uncle, who just loves to give you money, but the fountain seems unending?
It must be tied to this free money that only certain individuals can play with, and this stock market that isn't playing by the fundamentals?
Or the wealthy have more play money than I dreamed of?
I'm not knocking it, and would gladly accept funding. I just think it's going to end, and as Willie Brown echoed , 'What are we going to do with all these unemployed Tech workers?'
Then again maybe it won't, and rent for a one bedroom in San Francisco Bay Area will be $15,000/month in a few years?
I obviously don't know much about investing in tech. I just see a lot of money thrown around, and certain CEO's seem clueless about their product, or even if their tech product is better than what we currently have.
Maybe I will never know? Why should I? I'm not investing in these companies. It's not my money, or is it? I do know my investment income is tied to the interest rate. No, I can't afford to gamble, so my investment income relies on Janet Yellen raising the interest rate, and hoping inflation doesn't eat it up.
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?