Y Combinator will now invest $500,000 in accelerator companies – TechCrunch

Startup Accelerator Y Combinator announced this morning that it has updated its terms, to provide participating companies with more aggregate funds. The group will now invest $500,000 in the startup pool.

Money comes in two different forms. The first is the well-known Y Combinator stock deal, worth $125,000 in exchange for 7% of the accelerating startups. The group will now also offer $375,000 in the form of an unrestricted safe note – a simple stock futures agreement – with a “most favored nation” clause.

“Unspecified” means that there is no set maximum price at which $375,000 SAFE will be converted into shares, while “most favored country” language ensures that Y Combinator gets as good a deal as everyone else in a subsequent transfer.

Not surprisingly, Y Combinator is now offering more capital to startups; In fact, the group taking this long to update their terms is the biggest surprise. However, half a million dollars is more in line with the trend that the pre- and seed-stage investment markets have taken in recent years, specifically to larger dollar amounts at higher prices.

The updated terms do not mean that the accelerator itself will have any less conservative upside in portfolio companies. In fact, you could argue that Y Combinator’s updated terms are defensive in that it offers more capital in addition to, but not instead of, its traditional stake in companies that pass through its doors. Therefore, an accelerator may be better able to attract the best early-stage startups with bigger checks, even as it puts its initial equity investment to work at a price point that has historically proven profitable.

As an organization, Y Combinator is modernizing itself as the startup market evolves. From focusing on personal work, YC has moved away during the pandemic. The result of this switch was more startups participating from other countries and markets, by TechCrunch’s account. The group has also moved on to the remote demo days, something we appreciate here at TechCrunch where we no longer have to drive from San Francisco to a large room with very few chairs.

It will be interesting to see how competing accelerators, if any, react to Y Combinator’s updated set of conditions.

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