YCombinator startup application form

I came across this very cool and simple set of criteria or rules to apply for funding from YCombinator. Not sure how well it works for them but they are quite reasonable. Here's a sample:

"(4) Yes decisions will include the amount we'll invest and the percent of the company we'd want for it. We usually invest $5000 + $5000n, where n is the number of participating founders (i.e. 2 founders get $15,000, 3 get $20,000), in return for between 1% and 10% of the company. The median is 6%."

Cool. Does it work?

Comments

[Jered]

As an entrepreneur, I see $15k for 6% of a company nothing short of highway robbery. If you have a good idea, you'll do much better looking elsewhere. Given how piddling Y-Combinator's investments are, you should just get a bank loan or get a low-interest credit card.

[Dharmesh Shah]

That's not the complete story. Although the amount invested is small, there are definitely other benefits to the program -- particularly the network and peer group that gets built.

Further, I believe that the equtiy that YC takes for their investment is common shares (not preferred shares as is the practice in most angel and VC deals). This changes the economics of the deal in the favor of the entrepreneur.