I'd like to know the answer to your question but note the fact that sama says this:
"we believe investing in YC companies at post-YC valuations is still a great deal"
but also says this (from the post):
"And by doing this in every YC company, there will be no signaling issue of us supporting some companies and not others."
So how can you have both statements be true?
In other words how can you say "still a great deal" and also acknowledge that you are investing in all companies, not only ones that are a "great deal", simply so there is no signaling?
I assume that he's running the calculation as a whole, on the entire body of startups. In other words, given that these pro-rata investments must be all-or-nothing to avoid signaling risks, what're the financial returns of investing in the entire body of YC startups that raise follow-up funding, regardless of whether they're actually a good deal individually?
I can see how this could easily turn out in YC's favor. For one, the really obvious failures often flame out during YC itself and fail to raise follow-up funding, and so YC wouldn't have any obligation there anyways. And the really big successes become worth far more than $250M, enough to subsidize many failures.
The big question for me is what it does to incentive alignment - it seems like YC now has an incentive to ensure that companies it doesn't like don't raise follow-up funds, as well as incentives to get lower valuations on the early funding rounds. It also in theory should make them pickier about their application process, knowing they're committed to participating in any follow-up rounds. On the plus side, they have an incentive to ensure that promising startups do raise follow-up funding (rather than go out of business), it avoids some of their misaligned incentives relative to the rest of the investment community, and they have an incentive to keep helping their investments later in life.
>On the plus side, they have an incentive to ensure that promising startups do raise follow-up funding (rather than go out of business), it avoids some of their misaligned incentives relative to the rest of the investment community, and they have an incentive to keep helping their investments later in life.
YC already has incentive to do this; their post-dilution stake in wildly successful companies still shakes out as being far from trivial.
That said, it would certainly be fair to say that these changes probably do serve to strengthen existing incentives.
"we believe investing in YC companies at post-YC valuations is still a great deal"
but also says this (from the post):
"And by doing this in every YC company, there will be no signaling issue of us supporting some companies and not others."
So how can you have both statements be true?
In other words how can you say "still a great deal" and also acknowledge that you are investing in all companies, not only ones that are a "great deal", simply so there is no signaling?