To get accepted into YC, they want to see a path to becoming a unicorn ($1 billion+ valuation).
But after acceptance, what expectations does YC have? Do they pressure founders to become unicorns or are they okay with more modest exits?
Taking some examples: X years after investing $500k, say an exit would get them $2M back ($1.5M + their original $500k), a 4X multiple. If X is not too long, this is a good deal for them in terms of internal rate of return (IRR). As a benchmark, Angel investors get 25-30% IRR overall. Plugging in different X:
But after acceptance, what expectations does YC have? Do they pressure founders to become unicorns or are they okay with more modest exits?
Taking some examples: X years after investing $500k, say an exit would get them $2M back ($1.5M + their original $500k), a 4X multiple. If X is not too long, this is a good deal for them in terms of internal rate of return (IRR). As a benchmark, Angel investors get 25-30% IRR overall. Plugging in different X:
- For X=5 years, a 4X multiple = 32% IRR (slightly above industry average result for an angel)
- For X=3 years, a 4X multiple = 59% IRR (an excellent result for an angel investor)
- For X=1.5 years, a 4X multiple = 152% IRR (an unreasonably high IRR; I think rivaling even their AirBnb investment)