Photo: JD Lasica/Flickr
'You haven't seen the pain' yet

Hello, and welcome to Protocol Pipeline! I'm Biz Carson, Protocol's venture capital and startup reporter, and this is my new weekly column about that community. Protocol Pipeline is a work in progress, so I'd love to hear your feedback; email me at biz@protocol.com. If you like what you're reading, sign up here to get it in your inbox.
Anyway, on with business. This week: Y Combinator's new investing strategy, why one VC thinks Q1 2021 will be when startups really start to feel the pain, and the funniest trash-talk over the Midas List.
Sure, startup CEOs are facing the new reality. But many are still struggling to comprehend the gravity of the current situation, says MaC Venture Capital partner Marlon Nichols.
But the real pain hasn't even started, warns Upfront Ventures' Mark Suster. There are a lot of funding rounds now and a lot of companies laying off employees, but those are only the companies either in true crisis or really opportunistic positions, he says.
"Come Q1, a bunch of companies won't have been able to raise money — not all, but a bunch," said Suster. "And you're going to see a lot more bankruptcies."
Y Combinator is switching up how it invests in portfolio companies, opting to give at a smaller scale to favorites, and ditch its blanket approach of investing in every priced seed and series A round — something it's done since 2015.
In an internal memo seen by Protocol, YC said the change means it will be investing in a third or less of the rounds — so a lot of its portfolio companies that expected backing will be disappointed. It's a change that was in the works pre-COVID-19, a YC spokesperson said, and the amounts are too small that the pullback won't kill a company.
It's kind of YC's own fault. The size of its recent classes means it's now graduating nearly 400 companies a year. Big batch sizes and more companies raising rounds meant it quickly exhausted its finances.
In theory, YC could've scaled back the number of companies it funds: It's practically doubled in the last five years to nearly 200 companies per batch.
I've heard that some founders are unhappy about the change — particularly at a time when cash on hand is king. "The startups that need this pro rata funding to fill their rounds are likely the same ones who won't get this capital," House Fund's Jeremy Fiance told me. "YC, our firm and others are getting increasingly faced with bridge rounds and asking ourselves, 'Is this a bridge to nowhere?' And unfortunately, in many cases, it will be."
That's how much Airbnb raised — again. It's now secured $2 billion in the last two weeks in a combination of debt and equity from investors like Silver Lake, Sixth Street Partners, BlackRock and Fidelity, according to Bloomberg. And the deal terms aren't great. The Information has a profile worth your time on how CEO Brian Chesky is navigating the crisis and where he may want to make cuts.
More money: Stripe banked an extra $600 million in a series G (!) extension. Robinhood is reported to be raising at an $8 billion valuation. Vast Data became a unicorn after raising $100 million. Australia's Airwallex, another unicorn, raised $160 million. Mayfield has a new $750 million across two funds. Lightspeed refilled its coffers with $4.2 billion across three new funds. And the only other person in Silicon Valley to share my name, Biz Stone, may be raising a $200 million fund.
What are some areas you're currently looking at for a company to fund?
Future of dating, especially in the corona or post-corona world, and helping all those people who are unemployed or under-employed get back to work.
Picked up any new habits in quarantine?
I cook a lot more. Double dates on Zoom and Google hangouts — I never thought I would do these, but I do two or three of these a week. The millennial generation, we don't chat much on the phone, but I find myself doing a lot more phone calls to portfolio founders and partners and my parents. They're pretty happy with me.
Who in tech don't you know but want to have dinner with?
I'd like to have dinner with the soon to be famous scientist/founder who will discover the COVID-19 vaccine — or Mr. Bitcoin, Satoshi Nakamoto.
What's the first check you signed as an investor?
Game Closure. This was back in spring 2011. The company is still around right now, and it's a gaming infrastructure company. It's had many, many lives. They have passed the test of perseverance and persistence.
What's over-hyped and under-hyped right now?
Over-hyped: Sectors like online education, telehealth, remote work companies, enterprise security, some of the essential services like supply chain, food delivery and alcohol delivery. They are all going gaga. These companies are leading their best lives right now.
Under-hyped: Travel. The live events world. Anything with SMBs. If you're thinking about investing in those, you might be visionary, or crazy, or both. These are also where the opportunities are.
Thanks for reading the first Protocol Pipeline. Send what you loved, hated and thought I missed to biz@protocol.com. Otherwise, stay safe, stay healthy and stay home. See you next week.
To give you the best possible experience, this site uses cookies. If you continue browsing. you accept our use of cookies. You can review our privacy policy to find out more about the cookies we use.