To Counter Investor Signaling, YC Partners Can No Longer Be The First Money Into The Incubator’s Startups

I wonder if well see and exodus of partners


Y Combinator has long allowed its partners to invest their own personal money in the incubator’s startups — often times partners put money into these startups before institutional investors and angels have a look. Unfortunately, whether a partner (or partners) put money into a YC company started to become a signal to outside investors of the good bets in the incubator.

It makes sense. These partners are often integrally involved in helping build these companies inside of Y Combinator. So they would know which startups have the legs to be successful, and potentially have insider knowledge into which startups have the potential for going the distance. To mitigate this signaling effect, Y Combinator is implementing a new policy whereby YC partners can’t be the first money into a startup from the incubator.

Specifically, YC partners can’t be in the first $500,000 a company raises unless it’s three weeks past Demo…

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