YC tag teams to VCs who definitely game the system.

YC sells a good founder friendly story and it seems believable and YC is a repeat player so they care about their reputation: however the financial incentives of YC are not well aligned with founders (for example YC gets preferential shares, and founders get common stock).

The best writing on this is:

https://siliconhillslawyer.com/2019/02/18/relationships-and-...

https://siliconhillslawyer.com/2019/05/01/startups-shouldnt-...

https://siliconhillslawyer.com/2019/03/03/standard-term-shee...

The issues of control only really matter for the few unicorn winner companies. YC can afford to be very founder friendly to loser companies or to founders before the company becomes a clear winner. Founders of winning companies are not going to publicly complain if YC is less than fair.

If vc doesn’t get preferred shares, someone can just turn around and immediately sell the company for $400k and keep 90% of the money so that would seem like a silly thing to complain about

Don't be "silly": that is just the standard bullshit argument.

It is a poor argument because it is entirely possible to come up with terms that could be written into the contracts to prevent that obvious scenario.

I wouldn't be surprised if tag-along or preferential rights or other clauses don't already prevent that scenario. Anybody know?

Founders often invest $100000's of their time - yet they are not given equivalent value in preferential shares.

The game is rigged!