YC is seed stage; you expect a higher failure rate and higher returns from your successes.
Basically, you can break VC firms down into categories based on the size and timing of their investment. Typically you have the following:
* Seed / angel funds. <$1M investment, 90-99% failure rate (failure rate is higher the less you invest). Astronomical returns because they buy equity when it is at its cheapest; a "home run" here can net you several thousand times your initial investment. Your founders are often very raw and you have to work with them on basic business fundamentals.
* Series A funds. ~$1-3M investment, 70-90% failure rate (though this is dropping as more funds move from Series A to seed funding.) Probably the riskiest of the bunch since you're placing pretty big bets on a lot of companies; this is typically what people think of when they think "VC". Returns for a "home run" are 10-100x initial investment. Your founders think they know what they're doing but they don't; good VCs will help the founders through their network and by letting them make enough mistakes to learn from.
* Growth funds. $10-25M investment, 50% failure rate. These guys go after companies that have proven a market exists and there's an opportunity for huge growth if only they can scale. Still risky because scaling a business is hard. Returns for a "home run" are closer to 10x, but these guys can pull their funding if things are starting to circle the drain so a "failure" doesn't always mean a loss. Good founders here are starting to realize they are in way over their head and ask their VCs for help.
* Pre-IPO funds. $25M+ investment, very low failure rate. Returns are relatively low but also much safer: investors here are basically funding you pending an inevitable IPO. This is basically your traditional private equity firms at this point. Founders here need guidance on how to take their company public (legal, cultural, etc.) -- hence why PE guys who are often ex-investment bankers play in this space.
Basically, you can break VC firms down into categories based on the size and timing of their investment. Typically you have the following:
* Seed / angel funds. <$1M investment, 90-99% failure rate (failure rate is higher the less you invest). Astronomical returns because they buy equity when it is at its cheapest; a "home run" here can net you several thousand times your initial investment. Your founders are often very raw and you have to work with them on basic business fundamentals.
* Series A funds. ~$1-3M investment, 70-90% failure rate (though this is dropping as more funds move from Series A to seed funding.) Probably the riskiest of the bunch since you're placing pretty big bets on a lot of companies; this is typically what people think of when they think "VC". Returns for a "home run" are 10-100x initial investment. Your founders think they know what they're doing but they don't; good VCs will help the founders through their network and by letting them make enough mistakes to learn from.
* Growth funds. $10-25M investment, 50% failure rate. These guys go after companies that have proven a market exists and there's an opportunity for huge growth if only they can scale. Still risky because scaling a business is hard. Returns for a "home run" are closer to 10x, but these guys can pull their funding if things are starting to circle the drain so a "failure" doesn't always mean a loss. Good founders here are starting to realize they are in way over their head and ask their VCs for help.
* Pre-IPO funds. $25M+ investment, very low failure rate. Returns are relatively low but also much safer: investors here are basically funding you pending an inevitable IPO. This is basically your traditional private equity firms at this point. Founders here need guidance on how to take their company public (legal, cultural, etc.) -- hence why PE guys who are often ex-investment bankers play in this space.