So, and I may have misunderstood, a company can now get into YC, but might not be invested in by YC?
So its a two tier system. We like you gorgeous, but not enough to sleep with you (sorry, invest in you).
Why not just pick the ones you will sleep with (sorry invest in). Why have the half way signal? If investors don't like investing pro-rata, that's not because they don't like making money - its because they think YC is not picking all winners.
Isn't that the problem? Competition?
Edit: Perhaps I need to understand raising finance better. But, re-reading the announcement as quoted, it still seems there is a two-tier system, and it looks to me that YC will have placed a bullseye on its shirt - if they will only pick 1/3 of companies, then any investor must assume YC has some extra information in the market for lemons - in which case the simple solution is just wait for YC to invest / SAFE / whatever, and invest in that. If a YC company tries to raise a round without a letter from YC, it just won't get anything ... ?
Instead of every investor now either making its own decisions, they just wait for YC to signal its own special knowledge.
I would like to see how many companies close a round without YC from now on?
But that does not matter - YC will always be assumed to know something extra than other investors. They will have seen something at the weekly dinner, whatever.
So YC's decisions will impact meaningfully on the ability to raise subsequent rounds.
That probably was true for series B anyway, but now its true at the priced seed round.
I get it - its silly to throw gobs of money at companies that will fold next week, especially if you know they will. But ...
It does matter because you misunderstood (like your first sentence in your first comment said). Every company that gets into a YC batch is still invested in by YC. You cannot be in YC without being invested in by YC.
What's changing is the follow-on investments are not automatic. It used to be they would automatically exercise their right to maintain their 7% stake by investing more. Now they're going to maintain a smaller stake, and it's not going to be for every company. Only about 1/3rd of them.
Why would YC know more than other investors? The required knowledge seems to be a function of ability to predict market outcomes and perform due diligence.
So its a two tier system. We like you gorgeous, but not enough to sleep with you (sorry, invest in you).
Why not just pick the ones you will sleep with (sorry invest in). Why have the half way signal? If investors don't like investing pro-rata, that's not because they don't like making money - its because they think YC is not picking all winners.
Isn't that the problem? Competition?
Edit: Perhaps I need to understand raising finance better. But, re-reading the announcement as quoted, it still seems there is a two-tier system, and it looks to me that YC will have placed a bullseye on its shirt - if they will only pick 1/3 of companies, then any investor must assume YC has some extra information in the market for lemons - in which case the simple solution is just wait for YC to invest / SAFE / whatever, and invest in that. If a YC company tries to raise a round without a letter from YC, it just won't get anything ... ?
Instead of every investor now either making its own decisions, they just wait for YC to signal its own special knowledge.
I would like to see how many companies close a round without YC from now on?