[2pasc]

It's worth noting that Sequoia invested in YC early on, which gave them a preferential portfolio access I assume.

The beauty of the model is not that YC has a portfolio worth $1B of gain - but that they spent less than $15M to get there: A staggering 67x. Why?

Because they are good at picking Companies for sure - but most importantly because the % they own for the money they put is very high ("founder level" almost)... and is all a consequence of their brand and processes and its power on entrepreneurs, investors + the network effect of their community. Amazing jobs guys!

[blobbers]

http://techcrunch.com/2009/03/16/y-combinator-gets-the-sequo...

[nostrademons]

For those who don't like to read articles, the one in the parent comment says:

"Y Combinator says that the investment by Sequoia and the angels won’t change how they do business (other a projected increase in the number of investments). The new investors won’t get any special investment rights in the new startups, or have any obligation to invest further in them."

Having talked with one of the founders of the startups listed in this article, the reason Sequoia led their round is because Sequoia "got" their idea - they instantly understood the product, the business, and why it would be a big hit - and then moved quickly to invest, getting a term sheet to them within a week of Demo Days. Other VC firms hemmed and hawed and said "Well, maybe once you show more traction", and that's why they missed out on those billions. Sequoia didn't have preferential access, just better decision-making.

[2pasc]

that's true and they are impressive - and I know that because one of my previous Companies got a term sheet from them and they made their decision super fast.

[argonaut]

What does "preferential portfolio access" even mean? I don't think that's the reason they invested, or a benefit of having invested. Sequoia is one of the top VC firms (that and a16z and Benchmark). They have preferential access to everyone already.

[2pasc]

Sure. But YC was started in 2005 or something. this was a very different market. Sequoia benefitted from he YC deal flow early on from founders who might have not even considered them at that time. Sequoia missed FB and twitter and the social media thing.

Of course, now everybody has the same access, so there is no advantage whatsoever.

[argonaut]

If anything, the reverse is true. In 2005, Sequoia was considered the preeminent VC firm. Nowadays they probably share that mantle with a16z and Benchmark

[mathattack]

They also add a lot of value to the companies along the way.

If the partners instead created a high tech strategic consulting firm, what would their daily rate be?

This method allows them to share the upside and downside of the advice, as they help choose who can get the most benefit from it.