exw

Yes, this is exactly what the issue is. (I have worked on these types of deals before).

All of these types of media deals stipulate that the licensee has to implement appropriate technologies (often spelled out on the contract) that support the licensing restrictions of the content (usually something like "commercially reasonable efforts" which gives Netflix some wiggle room over what measure are "reasonable")

Part of the excitement around Theranos was that their finger prick approach opened up blood diagnostic technologies to situations (e.g., combat) and countries where it is difficult to get access to trained phlebotomists.

That is a great question - my guess is that they will just revert to the standard YC Core terms, given that YC states in their Fellowship terms that they are hoping that Fellowship companies will then also go through the YC core program.

Put a different way, I am assuming that YC believes that a company that also goes through the core program would have a higher chance of success, so they would not want to provide a disincentive that would reduce the chance of a Fellowship company also going through YC core...

> But how might subsequent investors feel about YC getting the same fixed percentage of a IPO'ing Series B vs. Series E stage company? Could this possibly complicate funding down the line? Is it "too good" of a deal for YC in the Series E case?

They won't care. Basically all later investors have anti-dilution provisions, to they get exactly the same deal (though they have to pay for it, while YC gets it "for free") - put a different way, if the company is doing well (and they would have to be for potential $100M+ exits), all they care about is that they have a certain % of the company to make their economics work, so YC getting 1.5% of proceeds won't matter to them.

Both of these businesses have what are called supply-side network effects (https://en.wikipedia.org/wiki/Network_effect), which are not as strong as demand-side effects, but can still lead to dominant market positions. In more concrete terms this means that for you as a consumer, there is no DIRECT additional value of someone else joining the service (you don't care if your friend joins Uber), but the value of the service does go up with every additional supplier that joins the network (for Uber, this would mean shorter wait times when you want a car, etc.) The defensibility of these types of services is created through their supplier network, and their ability to create more value for those suppliers (and consequently consumers as well) that the competition. Uber / AirBnB can then use the revenue from their leading market position to innovate faster than their competition, create more services for consumers, pay for distribution / new customer acquisition, spend money on marketing and awareness, etc. all of which leads to them creating a massive moat around their market that makes it nearly impossible for anyone to compete with them.

Exactly, and this is especially true for companies that are disrupting existing players by being more efficient (e.g., I would expect more travelers to turn to AirBnB during a recession as a cheaper alternative to a hotel, even if overall travel goes down).

<< There was one smart senior engineer there that had put options as insurance against all his shares.>>

Not sure what the rules were at that time, but most public companies restrict you today from owning any derivatives in their stock.

I don't think you are viewing this through the right lense. Valuations are a point in time vs. thinking about a company as a long-term investment - you should more think about which of these businesses has the best long-term potential to become the winner in a massive market, with a strong "moat" that makes it hard to compete, as well as extraordinary margins.

Based on that criteria, Uber & AirBnB should be on top of this list, followed by Palantir and Stripe. Zenefits has not really shown the type of defensible traction that Uber / AirBnB have (right now they are simply a rapidly growing insurance agent with a difficult-to-scale direct sales model). I would not add Spotify to this list - bad margins, and hard to defend against Google / Apple.

Google Ventures independent from Google (and goes through pains to point this out when you pitch them). While there is obviously a lot of synergy, Google Ventures employees are not Google employees, and do have not have Google stock options.

Also, if you want to look back through the annals of tech history, many larger companies partner with disrupters when a new technology emerges, only to enter the market when the new technology grows into a significant market.

<<I still think Uber has the right idea long-term with a completely autonomous fleet>>

I agree that this is probably the end state of this space, but I think this is much more Google's than Uber's vision - Uber is terrified of autonomous cars (since it eliminates the supply network effect of their driver network and opens up the space to anyone with deep pockets).

Once autonomous cars become a reality, I think you are going to see a fierce battle between Uber and Google.

Twitter actually encourages / supports these types of accounts, as detailed here, where they describe a bot that responds to airfare requests and another one that shares information about school closures: https://support.twitter.com/articles/76915

Because it is very difficult as an unknown individual to invest in any "real" startup vs the latest Uber/AirBnB clone on AngelList.

Even if they wanted to open source their system, it is likely is that they migrated their codebase to the Dropbox platform, and it would be difficult for them extricate their code. Most larger tech company (e.g., Google, Facebook, MSFT) have this problem when they want to open source products...

Seriously? You feel it is unfair that Google would talent acquire a company with a founder that revolutionized virtualization and dismiss this with an implication that she was acquired because she knew "the right people" (and you apparently don't) vs. being one of the most impressive people Google could hire to run their cloud business?

Great article by Bill Gurley that explains some of the factors that drive revenue multiples: http://abovethecrowd.com/2011/05/24/all-revenue-is-not-creat...

It depends on the state of the company. In the beginning, the share price between common (employee) and preferred (investor) stock can be very significant (10x or more), but as the company gets closer to IPO, the value between common and preferred stock converges to 1. Some unicorns get around this issue by issuing RSUs that retain some value even if the share price drops.

<<The question is why do we have the most talented people in a certain industry having to live in confined spaces while paying through the roof for it.>>

I think you making a pretty broad leap here... This is entirely his choice, and nobody is "making" them live in a confined space - most of my friends that are starting a family leave San Francisco and move to the suburbs to get more space at a lower cost (e.g., San Mateo) and take BART to get to their job in San Francisco.

> Same thing with a Visa card didn't go very well

I agree with the overall sentiment of your post, but unlike Amex, Visa does not issue credit cards, and relies on banks ("Issuing Banks") to deal with disputes. So if you had a bad experience with your Visa card, you should consider switching to a different issuer, vs. just assuming that all banks that issue Visa cards will act the same.

> deal with (possible) lower fuel economy and performance,

Not clear if these results will hold up, but CR ran some tests that seemed to indicate that running the car in "cheat mode" had a relatively small impact on performance - "both cars added less than a second in the 0 to 60 mph time. The Jetta saw fuel economy drop from 53 to 50 mpg, and the Sportwagen went from 50 to 46 mpg." http://www.wired.com/2015/10/vw-diesel-cheat-mode-mpg-perfor...

Agreed, that is the biggest challenge for them, and the First Data IPO (which is probably the best comp for them) has been challenging.

OTOH Square is on pace to hit $1B revenue / year and growing quickly vs. anybody else in the processing space, but it will all come down to how the market thinks about their business and their ability to cross the chasm from very small merchants (which makes up the majority of their business and they have locked up because other processors / ISOs cannot compete with their customer acquisition costs) into the next tier of small businesses...

Along those lines, great article from Bill Gurley about revenue multiples: http://abovethecrowd.com/2011/05/24/all-revenue-is-not-creat...

Good summary, but you are confusing First Data's role - First Data is a processor, not just a Gateway, and is actually the processor for BAMS, Wells Fargo, and many other banks. (http://digitaltransactions.net/news/story/First-Data_s-Allia...)

> Doing some back of the envelope calculations I can't see any scale where they are profitable given their current fee structure.

Here is a more optimistic analysis from Re/Code: http://recode.net/2015/10/14/squares-ipo-filing-its-complica... that looks at the numbers minus the Starbucks deal and concludes that their core business is healthy and has a path to profitability.

Starbucks is broken out explicitly - Revenue for SBUX $123 million and it cost them $150 million to process, so they were losing $27 million / year on the Starbucks partnership. The rest of their business is quite different, so losing that partnership makes them stronger, not weaker, as you are implying.