Hi there - this is not a pro-rata investment, we are investing this 375K right away

I understand that it’s invested right away, but it buys you more pro rata in future rounds than founders currently give up to YC under the deal.

I'm not very familiar with VC funding/equity structures; would you mind expanding on this?

Not OP, but in one sentence: YC will give you an additional $375k now, in exchange for the promise to give them equity at the same terms you give other investors when you raise your next round of funding.

The criticism here is that you need to give up a higher % of your company down the road.

How so? Because later investors force more cash than founders need?

Why would you need to give up a higher percentage of your company? Can't you just give those later investors a smaller share in exchange for $375k less money?

And getting the money now instead of later sounds to me like an amazing deal; you can continue for longer before you need to find those later investors, and by that time, you'll be worth more and get a better deal from them, and therefore also get a better deal from YC.

I don't know much about startup financing, but to my layman's eyes, this sounds like a good deal.