Y Combinator will now provide additional funding to the start-ups it invests in – with some new conditions for the extra capital.
When a start-up enters the Y Combinator batch programme, the accelerator will continue to invest $125,000 for 7pc of a company, but will also invest an additional $375,000 on an uncapped SAFE, or Simple Agreement for Future Equity, with ‘most favoured nation’ terms.
Under this agreement, there is no defined maximum price at which the SAFE investment will convert to shares. This decision will benefit Y Combinator as it will be able to receive equity in the future from successful start-ups that go through its programme.
Y Combinator said that the new standard deal will allow founders to focus on launching and scaling their company, while removing the immediate pressure to fundraise and accept less favourable terms.
“We also hope that this deal will encourage more founders of any age and from every demographic group and geographic location to take the leap into the start-up world, apply to YC, and build their own successful start-up,” the accelerator added in a statement on Monday (10 January).
The most favoured nation terms allow Y Combinator to take more favourable terms that are offered to future investors between the start of the batch and the next equity round.
“Simply put, we’re giving the company money now but at terms you’ll negotiate with future investors,” it explained.
Since 2005, Y Combinator has funded more than 3,000 start-ups. The famous accelerator has previously churned out major players such as Stripe, Airbnb, Dropbox, Coinbase and Reddit.
Some start-ups with Irish roots recently backed by Y Combinator include Milk Video, Inscribe, Klir and Quorum. Five more start-ups with Irish connections were selected in September 2021 for its prestigious programme.
The revamped NDRC accelerator in Ireland run by Dogpatch Labs also now operates using a SAFE model. Last June, it selected 11 early-stage start-ups to receive an investment of €100,000 under SAFE terms.
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