Wednesday, May 11, 2011

A 10X change in VC business model

 TechCrunch reports about continuing expansion of Y Combinator, a VC firm that in direct competition with angel investors targets very early stage startups:

Y Combinator just gets bigger and bigger. They invest in batches, twice a year. The last batch had 44 startups, an all time high. But that record is about to be shattered – they’ve accepted 60+ startups for the Summer 2011 batch soon.

Why this is a 10X change? Three key reasons:

1. The size of each deal is 10 times smaller than a typical VC deal in the valley.
2. The number of startups funded is more than 10 times greater than in a typical VC firm of that size.
3. The portfolio turnover envisioned (6 months) is about 10 times faster than the 5-year exit strategy horizon prevalent in the industry.

Acceptance rate is 2.5-3.5%.

tags: innovation, 10x, velocity, business, model,  startup

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