Y Combinator's Portfolio Performance - over $1MM in cash?

Y Combinator is a relatively new venture firm that's shaking up angel investing. Think of it as startup funding from a microfinance angle - except there's no debt involved.

These days everyone wants to know - is this new model financially viable? It's too early to be sure, but there is some telling data out there. To get an idea of how well YC is doing, I've tried to assemble it all below, making estimates as needed.

Fair warning: there's very little information available about YC's performance, and I've made a TON of educated guesses here. Most are probably wrong.

Methodology:

Valuation:
If acquired or sold, I used the purchase price (obviously). If the company received additional VC funding, I used the published value (if there was one), or made an estimate based on the amount of the funding.

Cost:
Initial funding of $5,000 + $5,000 / founder [1]. YC has been known to invest additional capital after the first 3 months, I made educated guesses about these amounts.

Equity
We don't have any equity data at all - everything has to be extrapolated. We know they generally take 1%-10%[2], so I based my equity estimates on the following criteria:

• 2% - Highest valuation. Rocking team & idea. Startup is already established w/ users. Demonstrated profit potential. Attractive acquisition target.


• 4% - High valuation. Proven, capable team OR solid beta at time of funding, but no significant user base.


• 6% - Standard valuation. Capable team, but possibly unproven. Somewhat functioning beta/alpha.


• 8%-10% - Lower valuation. YC is only valuing the team, and likely rejected the idea / beta (if one existed). If funded, YC probably asked the team to work on something else.

If the startups got additional outside funding, I diluted the numbers as appropriate.

YC Companies that have been acquired / sold:

Reddit
- Valuation: acquired by CondeNast for a reported $12.8 million [3].
- Equity: An initial 8% diluted to 7%, additional 3% in the first round of funding. Justification: They were initially rejected, & YC didn't like their initial idea (hence the high 8%). A year after starting, reddit did seek additional capital (<$100,000). At that time, I'm guessing that they had a premoney valuation of $1MM, meaning their the 8% would be diluted to approximately 7%. My guess is that YC provided at least $30,000 of the this funding, for an additional 3%.
- Invested capital: Initial $15,000 with an investment about a year later of ~$30,000

Kiko
- Valuation: Sold on eBay for $258,100 [4].
- Equity: Initial 6%. Justification: Guessing the average 6%, for lack of other data. Not sure if they got additional financing or not, but it probably wasn't a significant amount.
- Invested capital: Initial $15,000 (2 founders).

YC Companies that have been valued, but not sold:

Loopt
- Valuation: raised $5MM [5], estimating a $10MM premoney value.
- Equity: Initial 3%. Low because YC was apparently impressed with the team, Paul Graham described Loopt as "the most promising of all the startups we've funded so far" [6]. Diluted to 2% after first round financing.
- Invested capital: Initial $15,000. Not sure how they were financed after the first 3 months.

Scribd
- Rumored to have just finished their 1st funding round, valued by VC firm @ $20MM premoney [7].
- Equity: Guessing an initial 6%, diluted to 5.5%
- Invested capital: Initial $12,000. Scribd also got an additional $300,000 in March from Angel investors [7]. Lacking other data, I'm guessing that YC provided none of this. Also, based on the $10-20MM value today, I'm guessing the premoney value in March was pretty high - maybe around $3MM. Therefore, the $300K would dilute YC's current stake to about 5.5%.

Xobni
- Valuation: raised $4.26 million early, estimating a $4.26MM premoney value [8].
- Equity: 6%?
- Invested capital: $15,000 - two initial founders. Not sure if YC put in additional capital before first round financing.

Summary

Based on these numbers, YC has already earned $1.295 million pretax cash revenues on the stakes that have been sold ($1.28MM for reddit, and $15,486 for kiko).

I valued YC's stake in the 3 unsold startups at $1.64MM ($300k for Loopt, 1.08MM for Scribd, and $255,600k for Xobni).

Limitations: I am not at all sure about the equity percentages, which could drastically affect the value of YC's stake. Specifically, I am not sure about the amount of dilution during later funding rounds, and the amount of equity YC received in exchange for any additional operating capital that they provided after the initial $12-$20k.

Also, there are dozens of startups that I want to value, but don't yet haven't enough concrete information to do so. I'll update this post if that changes.

Finally, I have no idea what YC's expenses are. I tried to give them some perspective by including the estimated invested amounts, but obviously there are other operating expenses that YC incurs, which I haven't considered.

If you have any information that would help with these numbers, feel free to leave it in the comments.

Companies I want to value, when I get the chance:
- ClickFacts
- TextPayMe
- SnipShot
- Inkling
- Flagr
- Wufoo
- YouOS
- PollGround
- LikeBetter
- Thinkature
- JamGlue
- Shoutfit
- Weebly
- Buxfer
- Octopart
- Heysan
- Justin.tv
- Iminlikewithyou
- WriteWith