Y Combinator’s New Deal Sparks Fear in Seed Investors

Y Combinator’s change to the deal terms it grants startup founders has given the famed startup accelerator more firepower than ever. And that’s causing an outcry among the seed investors who comb through its graduating classes to find the next Stripe and Airbnb.

On Monday, Y Combinator said that in addition to its usual $125,000 investment in startups in exchange for 7% equity, the organization would provide another $375,000 at a valuation determined by a company’s later investors. The arrangement, which reflects a trend in venture capital toward much bigger checks, should help founders seeking more cash upfront. It’s also a boon for YC, which will get more equity ownership in nearly 1,000 startups that graduate from its training program each year.