And Sequoia backed startups now have a combined valuation of almost a trillion. These statistics are a bit meaningless. I'll wager that the median YC company has a negative opportunity cost for the founders.
You complain about meaningless statistics and in the next breath introduce one of your own.
The median outcome of asking someone out, applying for a job, learning an instrument, starting a side project, writing a novel, picking up a sport, learning a language and any other of the thousands of things that make life interesting are all negative.
You fail, yielding zero value, and you could have done something safer with your time instead. But that's not a reason to not take chances.
If your startup fails, you can always go back to that cushy job at Microsoft. You're out 6-12 months - who cares?
Do you believe that the median YC graduate regrets their decision to enter the program?
The number quoted is anything but meaningless - it's the best estimate out there of the value of these companies right now.
Sequoia has been at work for alot more time than YC, and put alot more money to work than YC in that time. YC has a stake of at least several percent of that $13.7B figure, translating into about a billion of its own now by my reckoning. Doing pretty well I'd say.
With incubators, as with musicians, things seem to gravitate towards a superstar economy with rich rewards for the top handful of players in the Valley, and peanuts for your average village incubator in the sticks.
As some body here already mentioned, the "unsuccessful" founders can always go back to work at Microsoft/fb/google etc, unlike the unsuccessful musicians...
But I agree with the analogy.
It's about showing that YC startups success rate it much higher than the none YC startups. Several statistics support this claim, such as the average seed round for YC company (see: https://angel.co/valuations)
It's a great headline for TC, but looking at the numbers from a slightly different perspective it wouldn't be hard to make a negative case either. Airbnb+Dropbox probably account for at least $8 billion, perhaps more. Figure that another 10 companies probably have Heroku-sized valuations and you're close to $11 billion. Now you're down to $2.7 billion spread among 500 or so companies. In any case, YC is in great shape, but don't be surprised if you see headlines equating YC founders to share croppers if YC is ever perceived to stumble.
Holy negativity. Why is the overall sentiment of the comment pool so cranky and skeptical?
1) YC startups have a combined valuation of $13.7B. Fact - groups of investors have valued YC startups individually, and in aggregate the current known valuation of the collective is $13.7B.
Does that number mean that much by itself? Perhaps not. Let's see what else we know.
2) That valuation has grown by $2B since June. Also fact. And pretty incredible, that's a 17% growth on valuation in 4-5 months.
Without making any comments on whether or not YC's success rate is higher/lower than average and whether or not YC is a benefit to the entrepreneurs it invests in (there's no data presented here to make that assessment, but I'm sure it wouldn't be hard to do), what YC has done in a short amount of time in helping build a tremendous amount of value in its companies is noteworthy - and that's what I take away from this article.
These statistics are very meaningful because of YC's transparency. The math is simple: YC has invested in 511 companies, this calculation uses an investment of $18,000 (the max YC investment) per company, equaling $9,198,000 total YC investment. YC investment results in an average of 6% ownership, 6% of $13.7B is $822,000,000. That ROI is phenomenal.
I personally believe YC is in a more enviable than Sequoia. Further, YC or at least the partners are in a position to participate in future rounds of funding for the YC companies, of course they will likely be paying a lot more for a lot less at that point...just like Sequoia.
"YC investment results in an average of 6% ownership, 6% of $13.7B is $822,000,000." - this statement is not actually correct.
YC ownership averages 6% at the time when YC enters but that doesn't mean that YC gets 6% of $13.7B. Companies contributing most of these $13.7B have probably gone through additional financing rounds diluting YC's stake. But even if YC is diluted 10x, it's still remarkable ROI.
As I am writing this your comment is the top comment. The comment below it reads:
> And Sequoia backed startups now have a combined valuation of almost a trillion. These statistics are a bit meaningless. I'll wager that the median YC company has a negative opportunity cost for the founders.
When reading your comment first I agreed and thought, Wow! YC is killing it. Then I read the next comment and thought, Hmm, perhaps not? Now I don't know what to believe.
If I own one share of Apple, Exxon, and Wal-Mart, then benmanns-backed companies have a valuation of 481.19B+387.73B+246.74B = 1.12 trillion dollars, but my personal stake is less than one thousand dollars.
YC has a diluted 6% of 13.7B. I would have an estimated 8.9286 x 10^-8% of 1.12 trillion.
You are correct about the diluted 6%. That was not so much an oversight, I was outright wrong I did not believe it was subject to dilution, but I stand corrected.
I would argue that they're definitely made up, but not completely bullshit. It's a yardstick for a sale price: if the investors need to get out at least X, then that's a good starting place to start shopping the company around. If the entrepreneur is forward thinking it also means they know they need to find a way to get annual revenues up to $Y to justify the investment and give back any semblance of a return. So not a great judge of a company's "worth", but outside of revenue, probably the best thing we have.
Doesn't PG use a pretty conservative mechanism for valuing companies? If I remember correctly, he has said that there a significant number of YC companies that he simply doesn't include in the value since there is no reliable mechanism for valuing them.
Relevant quote: "either because they died, got acquired, or sold stock at a specific valuation."