In a message posted to its internal interactions channel previously this week, the enormous start-up accelerator Y Combinator said it will alter the terms of its own PPP( the YC pro rata investment program) and purchasing companies raising seed and Series A rounds on a case-by-case basis. The business started a policy of investing in every seed and Series A round for its portfolio companies back in 2015.

Since then, it has taken a 7% stake in every business that raised a priced seed and Series A round, investing in more than 300 Y Combinator companies over nearly 500 rounds

. Under its brand-new policy, the accelerator is lowering its investment size from 7% to 4% and is only investing on a case-by-case basis going forward.

The factor for the change is that the variety of business in its portfolio has gotten too big for it to invest and some of the minimal partners who back the accelerator’s operations are balking at making dedications to the professional rata financial investment program.

“We have actually significantly gone beyond the funds we raised for pro ratas, and the investors who support YC do not have the appetite to fund the pro rata program at the exact same scale,” the accelerator composed in a post seen by TechCrunch. “In addition, processing hundreds of follow-on rounds each year has actually created significant functional intricacies for YC that we did not expect. Said just, purchasing every round for every YC company needs more capital than we wish to manage and raise. We always tell startups to remain little and handle their spending plans carefully. In this circumstances, we failed to follow our own guidance.”

For business owners who take investments from the accelerator, the change is quite substantial. On the accelerator’s internal messaging board they stressed over the possible optics of having the accelerator not make a follow-on dedication.

YC addressed those concerns by stating it would not make a financial investment decision until a business had currently received a preliminary term sheet from a lead investor.

The changes will take effect on May 8, 2020, the investor said.

“In the future, we will no longer invest immediately in every priced seed and Series A/B round. Rather, we will work out pro rata rights on a case-by-case basis, like other investors on your cap table,” the accelerator wrote. “We have actually heard your feedback that YC’s professional rata allotment is larger than what a few of you would prefer. For those investments we do make, we will lower the size of our professional rata and streamline its calculation to be a flat 4% participation right in each priced round. To determine the size of YC’s pro rata investment in your round, simply increase the amount of capital you are raising by 4%. We will cap our investment in the round at our then-current ownership if our ownership right prior to the round is less than 4%. Our objective is not to have an extremely pro-rata right.”

Even with the lowered investment size, YC said it would just make financial investments in approximately one-third of its portfolio.

“The YC Connection team will manage these investment decisions and will work really hard to notify you within a day or 2 of getting your products,” the accelerator composed. “We will honor any pending pro rata financial investments for term sheets signed before May 8. However we wished to interact this message broadly so that founders can prepare accordingly.”

Article curated by RJ Shara from Source. RJ Shara is a Bay Area Radio Host (Radio Jockey) who talks about the startup ecosystem – entrepreneurs, investments, policies and more on her show The Silicon Dreams. The show streams on Radio Zindagi 1170AM on Mondays from 3.30 PM to 4 PM.