Comment by patrickk | Hacker News Reader

Comment by patrickk | Hacker News Reader

"...and pay irrational amounts of money to experience. "

"Investors pay a shockingly high price to get into highly competitive funding rounds, but they're happy that they got in at all."

Surely investors are getting a good deal despite these statements? I mean they're going to pay more to invest in a company that's been through YC than if they invested in the exact same founders prior to them being in a YC class, but look at what they're getting in return:

- Vetting by pg and co.

- Plugged into an invaluable alumni network

- Automatic investment from Yuri Milner (in most cases) meaning the company has more runway with which to survive lean times

- Media coverage

- Massively reduced risk premium and due diligence due to the above factors

- Etc.

So surely the higher price is still a price worth paying?

Edit: spacing

The Milner point seems backwards: for an existing investor, cash is what they already have, and the presence of an existing investor means that their investment will be pre-diluted. If "runway" is all their startup needs, any investor would be happy to provide it.

The others seem right though, and really they all just come down to "reduced risk". The big problem for investors is that they have a hard time picking winners. YC and its community have a better track record.

Investors want you more when you need them less. When you're desperate, you get a bad deal (if any). Hence having cash is always helpful.

Helpful to the startup, not to the investor. My reply was to patrickk above who listed Milner's investment as a draw for other investors. From the investor's perspective a hungry startup is preferable. Thus startups that aren't hungry by virtue of someone else's investments are less desirable.

The fact that a startup isn't desperate makes it more desirable -> it may get to choose investors -> it ends up with top tier investors -> it is more likely to succeed (good investors are more than a check book) -> hence it's a good investment -> better for any given investor in the round (as well as the startup - it can and should be a win-win)

I agree. Just to add to that, AFAIK only a third of the convertible note comes from Yuri Milner. The rest comes from SV Angel (Ron Conway) and Andreesen Horowitz. These are great investors and having them back you goes beyond the cash they provide.

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