The article operates under the assumption that all dollars are equal. The effect of being invested in by YC versus, say, my grandmother, are not the same. There are alot of other intangibles in play that are almost impossible to quantify. But that doesn't mean they can be safely ignored.
It reminds me of the assumption of statistical independence in various machine learning problems where the variables are most certainly not independent... its just that including it makes the problem completely intractable, so even though everyone knows its wrong, they have no choice but to assume it.
Are you making the smart money vs dumb money argument? Mark does address that:
YC argues their advice and connections are worth this premium. I respectfully disagree. 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. YC’s connections, Demo Day, and brand are indeed value-added, but it’s hard to argue they’re worth ten times an angel and free advice and connections.
Anyway, I think the real value YC brings is they give you an excuse to focus on your startup full-time like mad maniacs for 3 months. Try doing that outside of YC and people will just ridicule you. Being in YC also provides motivation during those post-idea-pre-prototype stages which are super hard.
He makes some great points. The ideal situation for entrepreneurs is to have VCs competing for equity in their companies: the more VCs out there, the better. OTOH, the ideal situation for VCs is to have tons of entrepreneurs competing for their dollars (hello TechCrunch 50).
So while there will probably always be more entrepreneurs than VCs, dollars are almost certainly the most non-unique aspect in the value equation. I guess it's when they get into the big numbers where the little percents equal a lot that a more in-depth analysis is called for.
I didn't -say- that was his argument, therefore its not a strawman . I was simply providing an example to illustrate (with hyperbole) the comment I made in the previous sentence. The one you snipped out.
You've essentially repeated my point, elsewhere in this thread, by claiming that the value added comes down the "network" of said angels not just the personal networks but all of the non-financial considerations.
Does being a YC versus an average angel-funded company get you more press? How many TC writeups, on average, do you think being YC funded gets you? How much money is that worth? How much page rank is that worth? This is important because he specifically talks about "marketing" as an important early expense, and yet YC provides quite a bit of it, for free.
It reminds me of the assumption of statistical independence in various machine learning problems where the variables are most certainly not independent... its just that including it makes the problem completely intractable, so even though everyone knows its wrong, they have no choice but to assume it.