Is Y Combinator Asking For Too Much Equity For 120k Worth Of Funding?

I don’t think it’s a bad deal. $120k is decent seed funding, 7% is reasonable equity for that amount. Their previous deal, I thought, sucked (6-10% equity for $15k-20k). This one is reasonable.

Recently, Sam Altman released some statistics … they’ve funded about 900 companies of which about 7 unicorns have emerged. That part of the story is great.

The problem is, 300 / 900 went out of business. That’s 33%. My analysis is that most companies are not fundable, and if funding is your criterion for success, many companies would fail. That’s where the extremely high Infant Entrepreneur Mortality statistic comes from.

I prefer working with a different philosophy: Bootstrap First, Raise Money Later. That’s what we practice in 1M/1M. In my recently published book, Billion Dollar Unicorns, this theme is one of the recurring ones that has yielded success after success.

So it depends on who you are, what you are looking for. If it’s okay for you to play the kind of odds YC offers, then their deal is as good as any other equity-based accelerator. Most others do not offer their level of support, network, branding.

But remember, while for YC, this is a portfolio, for you, it’s your life. You get to do one company at a time, and if you go out of business, then you write off several precious years of your life.

With that background, 33% infant mortality rate is not very attractive. You first need to survive, then succeed.

Looking For Some Hands-On Advice?

I receive many emails from entrepreneurs who want to discuss their specific businesses. I’m very happy to discuss your situation during my free online 1M/1M Roundtables, held almost every Thursday. During each roundtable, up to five entrepreneurs can pitch their businesses and receive my immediate and straightforward feedback.

To give entrepreneurs all over the world access to Silicon Valley’s knowledge, methodology, and network, I founded the One Million by One Million (1M/1M) global virtual incubator. 1M/1M aims to nurture a million entrepreneurs to reach a million dollars each in annual revenue and beyond, thereby creating a trillion dollars in global GDP and ten million jobs.

For those still testing the waters of entrepreneurship, I’ve written my Entrepreneur Journeys book series to inform and inspire. My newest book, Billion Dollar Unicorns, is now available from Amazon.

If you are interested in entrepreneurship topics and my writings, you can follow me here. I hope to publish articles on LinkedIn every week.

Photo credit: Paul Miller/Flickr.com.