Tom :
“Advice and connections for even idea-stage entrepreneurs are easy to find with a little initiative”
A big statement. It wasn’t easy for us here in Melbourne Australia,

Hi Tom, I just started http://startupmelbourne.com
maybe that helps in the future…

-Erik

A big statement. It wasn’t easy for us here in Melbourne Australia, and I dare say it wouldn’t be much easier for people in the USA who aren’t already in a startup hub. Establishing a network is “easy” for people to whom this skill comes naturally. YC is for everyone else.

The $15k we got for our 2-person startup lasted us perfectly for the 3 months. Had we received any more, we may have been tempted to waste it on stupid crap like, well, domain names and overpriced design work. As it was, we’ve been widely praised for our cool domain (which cost us $9.95 from GoDaddy), and our exceptional UI design (which cost us well under $2k fully coded).

The equation for YC is fairly simple; they could invest more per startup and invest in fewer startups accordingly. YC prefers to invest in as many startups as possible so they can give more founders a start and take more risks. But they have to take a big enough cut that the risk pays off to allow them to keep doing it.

Your assumption that they’re swimming in cash and can easily afford to more than quadruple the investment is utterly fallacious. The result of doing this would simply be to dramatically increase waste and reduce the number of startups – both of these outcomes are completely at odds with YC’s objectives.

Time will tell if we end up being successful, but so far we couldn’t be happier with the value YC has helped add to our business.

“Advice and connections for even idea-stage entrepreneurs are easy to find with a little initiative, and if you don’t have that, you’ll fail as an entrepreneur.”

You might fail the Fund Raising/Business Development stage of your business, and, in fact, I would argue that if you have a strong entrepreneurial team member on your team, someone like yourself, the value that YC can provide is greatly diminished, and needs to be analyzed on a more traditional basis (as you have done in your essay.)

What I think a lot of people continue to fail to understand (And I’m not sure why – that’s the hard part), is that YC targets Hackers.

People who create. People who can work hard and have great ideas. YC does NOT target MBAs, Finance Types, etc…. To some degree YC becomes a “Silent Employee” – the Shadow CEO/CFO/BizDev guy that also injects a tiny amount of Ramen Capital (to misuse the phrase) just to keep the bellies full for 90 days.

YC Makes no sense for people like yourself, and, I would suspect, that most successful YC entrpreneurs don’t typically avail themselves of YC seed funding again – because they no longer need to. Now angel funding makes more sense for all the reasons you outlined above. That’s the YC mission (from my perspective) – educate, develop, connect, and, to a small degree, fund hackers so that next time around, they can do it themselves.

I feel that YC is great for really inexperienced entrepreneurs, who would take this opportunity to learn. Maybe the company succeeds, but in their next ventures I doubt they’d ever need the tools of YC anymore, and an angel investor would be a smarter choice.

How easily found are the resources otherwise?

I would argue that with YC your premoney valuation in the next round is likely to be higher. This is because: 1) there’s likely to be more competition for the deal 2) you’ll get great strategic and tactical advice from PG, YC, YC alums, etc.

Let’s do an example. Company A takes YC(15k at a 250k post, leaving the founders with 94%), B doesn’t. All else equal.

They both raise a $1M series A.

Company A is able to get a $4M premoney thanks to YC, while Company B only gets a $3M premoney. Now Company A founders are left with 75.2% while company B has 75%.

In this (albeit contrived) example, taking YC money actually leads to more equity for the founders.

Disclosure: I’m a YC founder.

You’re missing the whole point right here.

Y-Combinator is like Twitter. Venture capitalists are like bloggers.

With Y-Combinator, like twitter, people just didn’t understand how so much value could come out of so little. At first, typing to someone in 140 characters is hopeless. Then you try it, and you realize how much can come out of so little–you become resourceful and cut out the fat you don’t need.

Hate to liken them to twitter, but hey, everyone’s doing it… (best reasoning ever)

- Scott from http://scottdig.com