During a Y Combinator event on Tuesday night, Sam Altman had what YC partner Tyler Bosmeny called a “mic drop moment.” Altman offered $2 million worth of OpenAI tokens to each startup in the current category in exchange for equity in the startup.
In other words, he promised that OpenAI would invest in the entire category, not with cash but with an allotment of AI tokens that startups can use to build their products.
Y Combinator has about 169 startups in this cohort, according to its data telephone directory.
As for how much equity each startup can expect to give up, that can’t be determined at the time it signs the deal. It will depend on how much the startup is worth when it raises its first round of pricing — a funding round in which investors assign the company a formal valuation.
Y Combinator CEO Jared Friedman tells TechCrunch that the deal will be offered as “uncapped,” meaning it “will roll into the next round of pricing, which is usually the Series A,” he said.
SAFE is YC’s standard deal structure for early-stage companies raising money before the first rounds of “pricing” with valuations. An uncapped SAFE puts no cap on that valuation, which can benefit founders because the higher the conversion valuation, the smaller the portion of the company the investor receives.
We’ve seen some talk on X that this deal could equate to OpenAI owning around 2% equity if a startup reaches a $100 million valuation, though without seeing the actual terms, we can’t verify that.
For OpenAI, the deal works on two levels. Obviously, he’s gaining equity in this crop of early-stage companies, which means he wins if they succeed. But it also encourages them to build their business on and with OpenAI. Whether that locks them in long-term or not, it means they won’t default to OpenAI competitors like Anthropic’s Claude Code.
The tokens themselves may further sweeten the deal: As inference costs continue to fall, what OpenAI delivers today could cost very little to produce tomorrow – making the equity it receives in return seem increasingly cheap.
Unsurprisingly, there’s already a lot of commentary on X about why this is happening and it’s not a good deal for startups.
Supporters of the deal believe the deal helps startups eliminate one of their biggest costs — AI infrastructure bills, which can quickly add up and eat up a disproportionate share of an early-stage startup’s budget at a time when money is typically already scarce.
Buyer-beware folks have other warnings. Seed investor Jason Calacanis — who has his own competing accelerator and fund — called for the be-fear-of-Big-Tech warning.
“If you get these tokens, there’s a non-zero chance that OpenAI will study exactly what your startup does, copy your idea, and put your app in their freebie. This is the classic platform bully — be careful, founders!” he was posted.
The fear that OpenAI and Anthropic could swallow every good AI startup idea is real.
The truth is, if OpenAI wants to do that, it can, even with startups just paying OpenAI for the tokens. By taking an equity stake, OpenAI can be more incentivized for the startup to succeed, not less.
Additionally, as the former head of Y Combinator and frequent guest speaker, Altman has as much access to any team and their ideas as he wants, whether he’s involved or not.
The biggest question for this YC batch is whether it’s worth giving up a token budget from an AI player. Y Combinator already has a 7% stake for a $500,000 cash investment in it formal agreement. In return, startups gain access to YC Silicon Valley’s powerful network of VCs, potential clients, and other founders.
But equity is also valuable to startups. Startup investors often get around 20%. And startups need equity to compensate their first employees.
The biggest risk is that a startup will go over their OpenAI budget without having enough to show for it, having surrendered equity in the process. However, this may be better than paying for the chips with cash, an even scarcer resource at this stage.
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