A significant part of how YC thinks about this deal has not yet been articulated in the thread. (This is just my personal interpretation, not anything official.)
Some comments are describing $500k as "not much". Most people would gasp at hearing that. Only a tiny slice of humans are a position to think that way—for example, people who have family wealth (or maybe an elite educational credential) to fall back on, or who have already managed to break into the fundraising scene (or maybe a FAANG job) and have gotten used to comparing themselves to all the $multimillion deals they keep hearing about.
A big part of what YC is about is to be a bridge for everybody else to enter this space—no matter who they are or where they live or what demographic they belong to. YC has a long track record, right from the beginning, of funding founders who never would be given a chance by more mainstream institutions [1]. The new YC deal is particularly important for these sorts of founders. Geoff said it in the post, but I haven't seen anyone pick up on this yet:
We also hope that this deal will encourage more founders of any age and from every demographic group and geographic location to take the leap into the startup world.
YC does that because it's in its interest to do it and because it's good for the world. The idea that those two things go together, and that the way to maximize them is to help founders as much as possible, is in YC's DNA: https://www.ycombinator.com/principles/.
Capital-rich climates notwithstanding, many founders are not necessarily in a position to step out of YC and raise millions right away. Geographic and demographic disadvantages don't suddenly disappear. (And let's not forget the disadvantage of just working on something weird.) Being in YC helps, of course, but all the same imbalances are still in play.
For those founders, YC going from $125k to a $500k deal is a gamechanger because it gives them a lot more runway—more time to build, to grow, and prove what they can do, before stepping back into fundraising. Then they can hopefully raise from a position of strength instead of potentially having to accept less favorable terms.
[1] Me, for example. I wouldn't be here right now if it weren't for that, and I could tell a long story about how most investors weren't interested in us even after we got into YC.
Some comments are describing $500k as "not much". Most people would gasp at hearing that. Only a tiny slice of humans are a position to think that way—for example, people who have family wealth (or maybe an elite educational credential) to fall back on, or who have already managed to break into the fundraising scene (or maybe a FAANG job) and have gotten used to comparing themselves to all the $multimillion deals they keep hearing about.
A big part of what YC is about is to be a bridge for everybody else to enter this space—no matter who they are or where they live or what demographic they belong to. YC has a long track record, right from the beginning, of funding founders who never would be given a chance by more mainstream institutions [1]. The new YC deal is particularly important for these sorts of founders. Geoff said it in the post, but I haven't seen anyone pick up on this yet:
We also hope that this deal will encourage more founders of any age and from every demographic group and geographic location to take the leap into the startup world.
YC does that because it's in its interest to do it and because it's good for the world. The idea that those two things go together, and that the way to maximize them is to help founders as much as possible, is in YC's DNA: https://www.ycombinator.com/principles/.
Capital-rich climates notwithstanding, many founders are not necessarily in a position to step out of YC and raise millions right away. Geographic and demographic disadvantages don't suddenly disappear. (And let's not forget the disadvantage of just working on something weird.) Being in YC helps, of course, but all the same imbalances are still in play.
For those founders, YC going from $125k to a $500k deal is a gamechanger because it gives them a lot more runway—more time to build, to grow, and prove what they can do, before stepping back into fundraising. Then they can hopefully raise from a position of strength instead of potentially having to accept less favorable terms.
[1] Me, for example. I wouldn't be here right now if it weren't for that, and I could tell a long story about how most investors weren't interested in us even after we got into YC.