Y Combinator, the top accelerator program in Silicon Valley, is boosting the standard deal it offers startups this year after a banner 2021.
According to a blog post by President Geoff Ralston, Y Combinator will now invest a total of $500,000 to any company accepted into its batch program. It will still invest $125,000 for 7% stake and now also invest an additional $375,000 on an uncapped safe with an Most Favored Nation (MFN) status.
MFN means that this safe will take on the terms of the lowest cap safe (or other most favorable terms) that is issued between the start of the batch and the next equity round. Simply put, Y Combinator is giving the company money now but at terms you’ll negotiate with future investors.
Dalton Caldwell, YC’s Managing Director, Architect, and long-term Group Partner, who first suggested that now was the right time to make this change, also pointed out that if founders stay lean, this is more than enough capital to survive for years, regardless of the economic environment.
Ralston said this is the type of deal that it has wanted to offer YC founders for years — and with the recent success of YC companies, including ten IPOs in 2021 and more to come this year, it is now able to do so. 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 favorable terms.
Coinbase, Gitlab were among the Y Combinator alumni that went public in 2021.
Doordash and Airbnb went public in 2020.
Private companies Reddit, Brex, Stripe and Instacart are also alumni and all four could go public this year.
Ralston also said he hopes this deal will encourage more founders of any age and from every demographic group and geographic location to take the leap into the startup world, apply to YC, and build their own successful startup.