[otikik]

The fact that they cite the current market means that at some point in their process they borrow money. And now that’s more expensive to do.

That doesn’t mean necessarily that they are “funded by debt”. It could just mean that getting into some temporary debt is part of how they work.

[q-big]

> at some point in their process they borrow money

I would be somewhat careful with such claims.

As an investor who has money available, you have two options (in this example) where none involve borrowing money:

a) invest in some startups

b) lend this money to other entities

Increased market interest rates mean that b) becomes more attractive. In other words: the startups that you invest in for a) have to be much more promising than in a market environment with lower interest rates. This means less investing in startups.

[yunohn]

Sure, but we’re talking about a VC fund. I’m not convinced that YC reduces investing in startups to pivot and profit from increased lending rates.

[q-big]

A VC fund will only get money if the risk-adjusted rate of return is greater than the rate of interest; otherwise backers of the VC fund invest their money elsewhere.

This means that VC have to become more selective with respect to the startups that they invest in, as I described.

[Spooky23]

YC is qualifying and preparing startups for VC. If the funnel is narrowing at the end, it doesn’t make sense to put more companies into it.