YC partners can no longer fund startups’ first $500k in order to avoid undue investor signals

Y Combinator has unveiled a new policy that is restricting partner investments in companies that the organization funds. In a blog post, Paul Graham says that this move was spurred because it didn’t want to have their decisions influence other venture capitalists into thinking a particular startup was good.

Under the new policy, YC partners will not be able to participate in the first $500,000 a companies raises unless it’s 3 weeks past Demo Day. In doing so, Graham hopes that startups will be approached by unbiased investors and will have successfully fundraised by then.

According to Graham, as YC brought on more partners, other investors began looking at their funding decisions as signals to determine which startups were good — this ultimately was hurting those that didn’t receive YC investments.

How does this affect the rest of the world? It’s mostly an internal policy, but YC said that it wants to be “as public about it” in order to educate investors.