What people don't understand about YCombinator is that they are ultimately in the business of making friends. The few thousand dollars they invest in startups isn't meant to be seed money, or enough money for founders to sustain a business. It's a token of friendship and a reason to continue a relationship.
The fact is that relationships with successful people can be far more valuable than bags with dollar signs on them. Relationships can lead to inside information, help with making deals and most importantly, once in a lifetime investment opportunities. Most rich people spend a lot of their money and effort on access to information. At the higher levels, information and relationships rule all and powerful people will go far out of their way to get them.
Evaluating the success of YCombinator based on the total value of their portfolio is missing the point. Most of their value is in the form of soft currency, the massive network of grateful friends that they are building. The incubator model gives them the investment returns of a venture capital firm combined with the social returns of a fraternity. We won't know their true value for decades.
The fact is that relationships with successful people can be far more valuable than bags with dollar signs on them. Relationships can lead to inside information, help with making deals and most importantly, once in a lifetime investment opportunities. Most rich people spend a lot of their money and effort on access to information. At the higher levels, information and relationships rule all and powerful people will go far out of their way to get them.
Evaluating the success of YCombinator based on the total value of their portfolio is missing the point. Most of their value is in the form of soft currency, the massive network of grateful friends that they are building. The incubator model gives them the investment returns of a venture capital firm combined with the social returns of a fraternity. We won't know their true value for decades.