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Property Management

The Y Combinator Standard Deal

Y Combinator invests $500,000 in every company accepted to the program. This investment gives YC 7% of your company plus an incremental equity amount that will be fixed when you raise money from other investors.

The YC investment is not contingent on hitting any milestones. The day a company is accepted to YC, we commit to investing our standard deal and begin the process immediately.

In addition to the YC investment, YC companies receive access to a wide range of resources. Here is a full list of the benefits and resources available to YC founders.

How the Investment Works

YC invests $500,000 across two separate safes:

  • $125,000 converts into a fixed 7% of your company
  • $375,000 is invested on an uncapped MFN (Most Favored Nation) safe

In a typical scenario where you raise your next safes at a $15M post-money valuation cap, the $375,000 MFN safe would convert into approximately 2.5% of the company ($375,000 / $15,000,000).

YC also gets a pro rata right to continue investing in subsequent rounds of financing you raise. In many cases, YC has invested millions of dollars in companies by continuing to support them in later rounds.

Investment Details

Our $500K investment is made on 2 separate safes at the same time, with an accompanying YC Agreement:

  • We invest $125,000 on a post-money safe in return for 7% of your company (the "$125k safe")
  • We invest $375,000 on an uncapped safe with a Most Favored Nation ("MFN") provision (the "MFN safe")
  • The YC Agreement sets out YC-specific guidelines and rights, including a participation right to invest in the company's future financing rounds

Safe Conversion in a Priced Round

In a Safe Conversion Financing, assuming all of the company's outstanding Safes were issued on a post-money basis, three things happen simultaneously in the round:

  1. All Safes and other convertible instruments convert into preferred shares
  2. A stock option pool is created or increased to a pre-agreed percentage of the company
  3. New money is invested in the company

YC's $125k Safe will convert in the priced round into 7% of the company's equity (including any existing option pool) after all the Safes and other convertible instruments have converted in conjunction with the priced round.

YC's MFN Safe will automatically convert in the priced round on the terms of the lowest cap Safe (or other most favorable terms, such as a discount) issued between the specific MFN start date (around the start of the batch) and the priced round.

The priced round itself, and the creation or increase of the stock option pool, will dilute YC's ownership.

The pro rata right means YC has the right to purchase a portion of the new money securities issued in the financing in order to help maintain our ownership stake. If we exercise the pro rata right, our additional new money investment is included in step #3.

When you conduct subsequent rounds of financing, we continue to have a participation right to help maintain our ownership stake.

Fees and Terms

We don't charge any fees to the companies to be part of YC. While some accelerators charge fees to participating companies, founders should deduct those fees from the investment when comparing offers. We also try hard to avoid any "gotcha" terms like enhanced returns in downside exit scenarios and similar provisions.

Incorporating Your Company

We invest in US, Canada, Cayman, and Singapore corporations. If you haven't incorporated a company yet, we will help you do that if you are accepted to YC.

Many startups that apply to YC have already incorporated in their home countries. If you've incorporated your startup in another country that is not one of the four above, you will need to "flip" your corporate structure to have a parent company in one of those four countries. We introduce founders to lawyers who can work out the best process for doing this. Often, the original entity will become a subsidiary of a new parent company and will continue to operate in the startup's home country; the parent company will be the ultimate owner of all your startup's intellectual property and assets, but IP can be held at the subsidiary or parent level – that's your choice.