Y Combinator will now provide additional funding to start-up founders 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 but will also add an additional $375,000 on an uncapped SAFE or Simple Agreement for Future Equity.
Under these terms, 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 more equity ownership from successful start-ups that use its program.
Y Combinator said that the new sum 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 extra funding will be under Most Favoured Nation (MFN) terms, which allows 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.” The accelerator said.
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 recent Irish start-ups to be backed by Y Combinator include Milk Video, Inscribe, Klir and Quorum. Five start-ups with Irish roots were selected in September 2021 for the prestigious programme.
The revamped NDRC accelerator under Dogpatch Labs also 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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