“A 30% revenue share can easily be the difference between a company that can afford to scale, hire new employees, and reinvest in its product, and one that is perpetually struggling to stay afloat.”

This brought up a fun thought exercise for me. Pretty sure that Y Combinator would argue that giving away 7% of one's company for access to intangible (but beneficial) things like funding, advisors, etc, is completely worth it for a company. Pretty sure that they also fund companies that pay salespeople fairly significant commissions on sales.

Interesting to see them argue that asking a company to give up 30% "commission" on revenue for access to a large market stifles competition and innovation.

Is Y Combinator's forcing companies to give up 7% of their companies for access to advisors and funding stifling innovation and competition? (Spoiler: I don't think so. I think both Y Combinator and apple should be able to capitalize on the access they provide.)

Startup founders can choose between many models of funding, VCs, etc. Starups cannot choose between different ways of accessing willing customers over iOS, they have to comply with a %30 cut and a jungle of regulations that act in Apple's interest.

These two examples aren't the same, even just on the basis of market power.

The dynamics of 7% of ownership and 30% of ongoing revenue are vastly different.

So different in fact that the comparison doesn't hold water.

If there were competition for App Stores, we could discover what the correct market price for App Stores is, but Apple doesn't want that.

Far be it from me to defend Y Combinator or VCs in general but IMO the situation is a bit different because of the monopoly (or at least duopoly) power that Apple and Google hold as gatekeepers over the only practical way to sell to iOS and Android device users.

Of course, I'd also assume most or all the people associated with YC were part of the "fire Lina Khan because our whole business model is actually just taking advantage of FAANG acquihire panic" squad, making them hypocrites (in a slightly different way) for helping to prop up these monopolistic gatekeepers and then acting put upon by the results of that.

Equity and revenue share are fundamentally different things. YC could be asking for 30% equity and it'd still be more reasonable than the 30% revenue cut modern gatekeepers demand.

I'm not sure how offering an investment in a highly competitive market (dozens of incubators, thousands of vcs) is comparable to raising the cost of payment processing 900%. Alongside all the other bad acts that Apple does, mostly inhibiting your ability to provide good customer service to your customers. Or even continue a billing relationship if they migrate from ios -> android/pc.

7% of equity is worth far less than 7% of gross, equity ultimately gets paid on what you can make net.

> I think both Y Combinator and apple should be able to capitalize on the access they provide.

Capitalizing, to the detriment of your competition (other paid software services) when you have a monopoly or duopoly on app distribution isn't legal.

I thought the standard advice is to target 80-90% gross margin at early stage so you can easily eat 30% CAC. It probably starts to hurt as you scale though.