Billionaire bandy: Y Combinator swaps out partners in its investment fund

Y Combinator is playing musical chairs with the billionaires behind its investment fund. 

The elite startup accelerator announced today that Khosla Ventures is replacing Yuri Milner in the YCVC program, which invests $80,000 in every startup that participates in Y Combinator.

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The board of YCVC now consists of Khosla Ventures, Andreessen Horowitz, General Catalyst, and Maverick Capital. Each partner will invest $20,000 in every Y Combinator startup, which amounts to around 90 a year.

Khosla Ventures is the investment firm founded by Vinod Khosla, one of the founders of Sun Microsystems. Khosla formed his own firm in 2004 and has since raised four funds, totaling $2.3 billion, as well as a $36.7 million seed fund. It is known for its investments in clean tech, as well as for making “bold technology bets.”

Milner was a founder of Russian Internet giant Mail.ru, and is reportedly abdicating his YCVC seat because he “has been spending less time focused on seed-stage investing.”

Billionaires Ron Conway and Yuri Milner formed Start Fund in 2011 to make a blanket investment of $150,000 in every single startup chosen for YC’s program. The money came in the form of convertible debt, which is basically the most entrepreneur-friendly funding out there.

Then in November 2012, YC announced that it was adopting a new way to invest in its portfolio startups.

“Although we didn’t organize [Start Fund] program, over the years we ended up de facto managing it, and it was awkward to manage something we hadn’t started. So we decided to take control of the situation and replace it with something of our own design,” YC said in a blog post.

The program rolled out YCVC, which cut the amount of investment down to $80,000, because $150,000 was “too much,”and it no longer involved Ron Conway.

Now the program’s other original founder is gone as well.

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This is the latest in a number of changes Y Combinator has made over the past year.

The YC Summer 2012 batch was the biggest yet, with 84 companies. YC founder Paul Graham said the size created bottlenecks and caused things to “break.” One of the biggest perks of participating in Y Combinator is access to a prestigious group of partners, mentors, and investors.  With more startups vying for attention, each ultimately gets less.

So YC shrunk its class size to around 50, and added a couple of new partners. 

YC also accepted its first non-profit startup this year and hosted its first-ever hackathon. Earlier this month, it announced  new alternative to convertible notes, called “safe.”

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It seems Y Combinator, like the startups its supports, knows how to iterate.