Y Combinator, a leading American seed money startup accelerator launched in March 2005, has reduced the ticket size of its investment in startups from $150,000 to 125,000. Despite the cut, the equity it takes in a startup still remains at 7%.
The investment cut was announced by Y Combinator’s president Geoff Ralston in a blog post. According to him, the cut will enable Y Combinator to fund 3000 additional companies.
Ralston wrote: “We are making two changes to our standard deal in conjunction with a recent fundraise.
“Starting with the Winter 2021 batch, our deal will be $125,000 for 7% equity on a post-money safe, and we will reduce the amount of our pro rata right to 4% of subsequent rounds. In the coming years, this will enable us to fund as many as 3000 more companies.
“For background, YC originally gave about $20,000 for 6% of a company. In 2011, Yuri Milner and SV Angel began offering an additional $150k to every startup in YC.
“We continued this program with new investors and reduced the deal to about $100k for 7%. In 2014, we increased that amount to $120k, and in 2018 to $150k when we raised our last fund.
“We have changed our deal several times over the years as we have raised new funds, modified budgets, and to match the current environment and economy. We do not expect this to be the last time we change the deal, but we do feel this is the right place to be for the next several years.“
On why the change or cut was made, a Y Combinator spokeswoman told Techcrunch: “The future of the economy is unpredictable, and we feel it is prudent during these times to switch to a leaner model.
“In our case, we want to be set up to fund as many great founders as possible — especially during a time that is creating an unprecedented change to consumer and business behavior; with these changes comes endless opportunities for startups. And with the changes made to our standard deal, we can fund as many as 3000 more companies.”
It might interest you to know that a total of 23 Nigerian startups have participated and received investment from Y Com PetaSales, Paystack, Flutterwave, Kudi, Aella Credit, RelianceHMO (formerly Kangpe), Tizeti, Buypower, Releaf, Helium Health, Buycoins, Cowrywise, Kobo360, 54gene, CredPal, Thrive Agric, Wallet Africa, Schoolable, Bamboo, CrowdForce, Eze, SEND, and Termii.
