American seed accelerator Y Combinator has a long-standing tradition of hedging its bets and investing in a large amount of very small startups.
It will soon fund its 1000th company, and has produced at least six companies worth over $US1 billion.
But YC president Sam Altman now wants to move into the later-stage funding game, and has a big tool at his disposal: a recently raised $US700 million fund.
Ali Rowghani is coming on board as a full-time partner and advisor for the YC Continuity Fund, which will be providing capital in every funding round of a YC graduate that’s worth less than $US300 million, and also investing in others with discretion, as the Wall Street Journal first reported.
It’s a break from YC’s motto of treating all startups as equals, and means it’s now all about picking the next big winner.
In a blog post, Altman says it’s about supporting a company through its entire life cycle.
“We believe we generally pick good companies for YC, and we want to be able to continue to support them in future financing,” he says.
“We look forward to being a very long-term focused investor in a sector where most players are not.”
The fund won’t be pursuing investments outside of the YC portfolio though, so the entire $US700 million will be going towards graduates of the three-month accelerator program.
Altman tells the WSJ that it could change the way in which YC interacts with startups.
“It may change founders’ willingness to tell us really bad things because they’re treating us as a potential investor,” he says.
But according to Altman, it’s all in-line with YC’s primary aim.
“Our mission at YC is to be the organisation that enables the most innovation in the world,” he says.
“Capital – especially long-term capital willing to invest outside of the current trends – is an important ingredient in that mission, and I’m excited we are now able to better support some of our companies.”
Want to grow your business with Instagram? StartupSmart School can help.