Today I wrote about Twice, a San Francisco startup that helps people buy and sell used clothes online. Turns out CEO Noah Ready-Campbell’s in the market for second-hand goods, too: Specifically, for second-hand startups backed by Y Combinator.
Ready-Campbell this morning announced the Restart Fund, a $1M pot that he plans to spend on “YC companies that are maybe going sideways.” And he’s not limiting the hunt to startups in the e-commerce space: “The idea,” he told me, “is to acquire an established team that can help us grow.”
Ready-Campbell figures the strict screening process Paul Graham and co. put YC applicants through provides “an excellent filter.” Still, he said, even the best hackers don’t always develop the best products, or don’t hit the market with the right velocity. Graham himself has said that at least half of the companies Y Combinator backs will fail. Ready-Campbell, for the record, says he’s also open to buying companies backed by 500 Startups or TechStars, or even those that haven’t gone the incubator/accelerator route.
When I asked how many startups he could realistically expect to buy for $1 million, Ready-Campbell admitted: “Probably one.” If it works, he said, he’s already talked with other CEOS about putting together a bigger Restart Fund going forward. Ready-Campbell also insisted the “any YC startup” pitch isn’t just a publicity stunt: “”If you look at what it costs to bring on a truly stellar engineer or UX designer,” he said, “you’re paying a premium for a proven team. Those are the kind of people we want to build out our company with.”
I also pointed out that a founding team probably can’t just up and sell themselves without bringing YC to the table, since Graham’s fund takes a percentage of every company it invests in. That’s even more true if the startup in question has taken money from Start Fund, which has offered $150K apiece to YC startups in recent batches. Ready-Campbell said he doubted those backers would block a deal if the startup really has come a cropper, since getting a percentage of something, however small, is better than owning a larger piece of nothing.
The folks at SV Angel, who make up part of the Start Fund partnership, declined to comment about Restart Fund’s offer. I have yet to hear back from YC. Update: Graham writes to say: “This doesn’t change much. There is already an active market in HR acquisitions of YC startups that don’t make it, and these transactions are often over a million each.”