The YC business model (because it's a business, not a charity) is upselling their abilities to investors, and the financial institutions backing those, such that they continue to put up tens of millions in series A, B, etc. rounds for companies that would otherwise struggle to raise money because their business models, tech stacks, and product market fit are questionable at best.
Part of that business model is that in case a company doesn't work out (i.e. almost always), these losses are absorbed such that the investor can spin the investment as a success to their clients (e.g. pension funds). YC is good at this to the extent that even these failures are quite lucrative for everyone involved. The message with this article is that complete failure and loss of investment is quite rare for them but of course it happens. It's basically a "don't worry, we know what we are doing" kind of message.
Any time you hear the words acquihire, what happens is a controlled shut down of a failed business. Mostly these are actually complete failures in terms of the buying company spending money on a company that then gets unceremoniously killed or absorbed into the main company at a loss and is never heard from again. Quite often this is the whole point: kill the company as cheaply as possible with as little loss of face for founders and investors as possible. Mostly, services are shut down or mismanaged, people start leaving almost right away, and most of the "money" is actually just investors swapping one set of shares for another and high-fiving each other. Somebody just lost but it's not them.
Why would companies volunteer to do that? Well for that, you just have to follow the money and basically you'll find that these companies are typically backed by the same groups of investors and financial institutions. It's a form of creative bookkeeping and investors consolidating their assets and risk such that they can continue to up-sell their abilities to manage other people's money (because it is rarely their own cash).
Startup funding is mostly a pyramid scheme with smart investors at the top basically making money from increasingly more gullible investors the further down that pyramid you go. Sometimes it accidentally produces a profitable company that actually makes it to an IPO worth many billions. These unicorns then promptly start acquiring their less lucky siblings so that those too can be spun as a great success. But even some of those unicorns are questionable. E.g. Uber is a great success. So is Wework. But are they profitable and will they ever be and does that even matter? YC is successful in the sense that their network of investors has access to a great number of such unicorns. This means most of the companies they investment in are relatively safe investments no matter how silly the company is.
Part of that business model is that in case a company doesn't work out (i.e. almost always), these losses are absorbed such that the investor can spin the investment as a success to their clients (e.g. pension funds). YC is good at this to the extent that even these failures are quite lucrative for everyone involved. The message with this article is that complete failure and loss of investment is quite rare for them but of course it happens. It's basically a "don't worry, we know what we are doing" kind of message.
Any time you hear the words acquihire, what happens is a controlled shut down of a failed business. Mostly these are actually complete failures in terms of the buying company spending money on a company that then gets unceremoniously killed or absorbed into the main company at a loss and is never heard from again. Quite often this is the whole point: kill the company as cheaply as possible with as little loss of face for founders and investors as possible. Mostly, services are shut down or mismanaged, people start leaving almost right away, and most of the "money" is actually just investors swapping one set of shares for another and high-fiving each other. Somebody just lost but it's not them.
Why would companies volunteer to do that? Well for that, you just have to follow the money and basically you'll find that these companies are typically backed by the same groups of investors and financial institutions. It's a form of creative bookkeeping and investors consolidating their assets and risk such that they can continue to up-sell their abilities to manage other people's money (because it is rarely their own cash).
Startup funding is mostly a pyramid scheme with smart investors at the top basically making money from increasingly more gullible investors the further down that pyramid you go. Sometimes it accidentally produces a profitable company that actually makes it to an IPO worth many billions. These unicorns then promptly start acquiring their less lucky siblings so that those too can be spun as a great success. But even some of those unicorns are questionable. E.g. Uber is a great success. So is Wework. But are they profitable and will they ever be and does that even matter? YC is successful in the sense that their network of investors has access to a great number of such unicorns. This means most of the companies they investment in are relatively safe investments no matter how silly the company is.