Though this article is defending us, I disagree with it. What makes YC a good deal is not that we take common stock rather than preferred, but simply that we improve the average startup's outcome way more than the 6% we "cost."

6% is a bargain, IMHO. Obviously, if it weren't, YC wouldn't be so popular.

Those who argue that YC is expensive, are saying it's not worth the upfront capital of ~$6,000. They're right - it's not. $6,000 is easy to come by.

However it's the rest of the package that's so valuable - the press / support / mentorship / etc. Heck, I'd give YC 6% AND $6,000 for a chance to be part of that...

I think the bottom line is that the competition is envious - I don't know who could provide the kind of network that YC provides. There is also probably the fear that YC represents the new way to fund startups "sucking" all the talent from the old way. Fear and Envy are a powerful combination and a great motivator for lashing out with the hope that the lashing will create some dent in YC. But the effort on the part of the competition will come to no avail - in fact you could argue it is a sign of how successful YC is becoming.

Actually I think the reason people attack us is cleverer than that. We've gotten a lot of press lately. Anyone who can establish himself as the canonical YC critic can thereby use the both-sides-of-the-story reflex of reporters to get mentioned in any story that mentions us.

Ustream is doing this to Justin.TV right now. They have nothing; just off-the-shelf hardware hooked up to a streaming service. If they'd launched by themselves, no one would have cared. They've achieved what prominence they have entirely by getting themselves mentioned in articles about Justin.TV. They matter more as the antiJustin than in their own right.

Thanks for pointing that out. I guess the competing VC did use his moment to advertise his counter offer while bashing YC at the same time. Media savvy is probably not a bad thing to master, especially if you actually have a product with really good value. Your MS article is definitely an example of amazing media savvy.

I think 6% is a small price to pay. I am not sure why the blogosphere is making such a big deal about it. I would give away double of that to be part of YC.

YC is almost like a talent agent or broker -- finding the best hackers and setting them up with the logistical necessities, social connections, and advice. Taking a small cut of the transaction, entirely from the excess they create, is the only logical way to operate long-term.