Y Combinator Value

This has been answered before. YC isn't about the money; it's about the advice and connections. If those things increase the probability of your company's success by more than 5%, YC is a good deal. If you can do better on your own, do it.

People get much more than just funding from yc; I think people are happy to give 10% of their company for $6k plus all the connections and expertise that yc offers. If yc only offered money, they wouldn't get a 10% stake for $6k.

A significant difference is that a major part of the value of getting into YC is having successfully completed the selection process. There's a reason that when hiring and looking for funding, companies will usually include the year they went into YC. Given the value of the brand, it's likely that YC could offer less for more equity and still be oversubscribed.

I would guess that it has something to do with the increasing value of the YCombinator brand name. In 2006, a company that is already earning good revenues isn't going to give PG a chunk of equity in exchange for $15,000, some free meals, and advice. In 2010 a YC investment still offers $15,000, free meals, and advice, but it also guarantees that you will catch the eye of top flight VCs, be part of an alumni network laden with talent, and get great publicity. That's appealing even to companies t

Is there a catch? What does YC gain from this? A larger pool of applicants to chose from for YC? Or is this philanthropic?

True. If notable founders are willing to do Y-Combinator even though they could secure financing elsewhere without giving up a percentage, then there are many cases in which YC should accept (HipMunk, for example). That also speaks volumes of YC, if established entrepreneurs will come back to YC for a second time.

Unfortunately, I think that some companies are in it for the funding as opposed to the experience itself. The real value of YC has little to do with any checks you get, but the knowledge you earn. I would take a YC spot over a $5 million VC check in an instant. $5 million buys a lot of Heroku dynos, but the YC-knowledge/experience is something that can make you potentially 50x anything you could get without YC.

The reputational and institutional benefits of YC dwarf their actual investment (even now that they're investing $120k).

it's not about the % YC or any venture capital. it's about your judgment of what's added to your startups value. of all the startups applying, being select etc a few become hits. the question is how much of it was do to the founders and the work they put in, how much with the idea and how much with SPECIFIC things that YC brings in. Not the hype. Also can it be brought in otherwise and would it have become a sucess without YC. I would ask the same thing about veture capital. sure it feels good w

YC doesn't seem to invest in higher risk startups anymore (except exciting moonshots). They used to invest like an accelerator but recently they are more like a VC (More traction required before they even consider you) AND also has to be billion dollar target market.If you want bootstrap money you are better off applying to local accelerators or incubators.That said, with their signalling , 7% for $150k is a generous offer and not at all un-favourable.