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Startup - January 12, 2022

Y Combinator Increases Investment to $500,000 for Startups

This new deal will provide more funding for start-ups in its accelerator program while also providing Y Combinator with potential stock options.

Startup accelerator, Y Combinator, has announced that it will increase its investment to $500,000 in a move to provide extra funding to participating startups. 

The fund will be split into two parts, with the first will be a $125,000 Y Combinator equity deal for 7% of accelerated startups, equating to roughly a $1.79 million post-money valuation, and the second will be a $375,000 uncapped Simple Agreement for Future Equity (SAFE) note based on “most favoured nation” clause.

The uncapped $375,000 SAFE, which means there is no set maximum price at which it can be converted to shares, while the “most favoured nation” clause assures that Y Combinator will receive the same deal as everyone else in the event of a later conversion.

In a blog post, Y Combinator president, Geoff Ralston stated that the investment and funding will be given upfront so that entrepreneurs may focus on establishing their startups rather than fundraising.  

He wrote, “This sum will enable founders to focus on launching, building, and scaling their company. It will remove the immediate pressure to fundraise and accept less than favourable terms.”

The startup market has developed to allow more startups from different nations and markets to participate. It provided terms of $20,000 for 6% when it originally debuted over a decade ago.

Although YC is established in the United States, successive cohorts have attracted a growing number of Canadian applicants. The Summer 2021 Demo Day attracted a new high of 16 Canadian businesses, including Toronto-based Bedrock AI, Vancouver-based Matidor, and Calgary-based CostCertified. Faire, Bonfire, and PartnerStack are among the previous Canadian YC alumni.

As an institution, Y Combinator has constantly developed itself as the startup industry has evolved. During the epidemic, YC shifted its focus from in-person labour to virtual work. The switch resulted in more participating firms from other countries and regions. The group has also transitioned to remote demo days.

It’ll be interesting to observe how competing accelerators react to Y Combinator’s amended terms set, if they react at all.

READ MORE: Silicon Valley’s Y Combinator Open Doors to 9 African Tech Startups

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