I'm puzzled by the reaction of "$5k per founder for 5% of equity?!"
I've been eagerly reading about YCombinator and it seems to me that they are offering a great deal more than money. It appears that the value of their consultation, connections and the other founders you end up spending time with are probably worth far more than the 20k-ish they invest in your company.
I can't imagine not taking their deal if I had an appropriate startup. 5% of equity in something that is currently completely speculative in return for what appear to be world class consulting and networking services? If they maintain their current success rate, I think it's safe to say that far from being expensive, YC is spectacularly cheap and leaves a lot of money on the table. Which is probably why they are getting 1400 applications for 10 slots.
IIRC this time they had about 500 applications and no fixed number of slots. In a previous round they had 30 interviewees and I think 13 were picked...
[3] There need to be some number of big companies to acquire the startups, so the number of big companies couldn't decrease to zero.
No there don't. There only needs to be some number of entities with deep pockets and marketing expertise. Those entities could be small companies and individuals, or networks thereof.
While it might turn out that a large black-box structure like today's multinationals is the most efficient organization for accomplishing certain important tasks, it doesn't seem obvious to me that it must be so.
I've been eagerly reading about YCombinator and it seems to me that they are offering a great deal more than money. It appears that the value of their consultation, connections and the other founders you end up spending time with are probably worth far more than the 20k-ish they invest in your company.
I can't imagine not taking their deal if I had an appropriate startup. 5% of equity in something that is currently completely speculative in return for what appear to be world class consulting and networking services? If they maintain their current success rate, I think it's safe to say that far from being expensive, YC is spectacularly cheap and leaves a lot of money on the table. Which is probably why they are getting 1400 applications for 10 slots.