OpenAI Offers Tokens to All Y Combinator Startups in Exchange for Equity

OpenAI offered to invest $2 million worth of tokens in every startup in the current Y Combinator class in exchange for equity. The proposal was presented during a Y Combinator event on Tuesday night. Y Combinator has approximately 169 startups in this cohort. The equity percentage each startup will give up will be determined when the startup raises its first priced funding round.

The investment will be structured as an uncapped SAFE.

Under this agreement the token allocation converts into equity during the startup's next priced round, typically the Series A. An uncapped SAFE sets no maximum valuation at conversion. This structure allows the equity stake to shrink if the startup achieves a higher valuation.

Combinator normally takes a 7 percent stake for a $500,000 cash investment. The OpenAI offer adds token credits instead of cash while still requiring equity. Startups can use the tokens to reduce spending on AI infrastructure. The arrangement also encourages them to build products using OpenAI technology rather than competing services.

Some investors have raised concerns that OpenAI could study and replicate ideas from participating startups. Others note that OpenAI already has access to cohort ideas through its existing relationship with Y Combinator.