I was really expecting to see what kind of product they would launch. Did they just not launch at the demo day but still working on it, or did they actually pivot into something else?
I asked this question before: http://hackerne.ws/item?id=4391638 and still wondering:
1. Does Y Combinator then own a stake in Makr.io or Disapora?
2. When a company pivots, does YC own a stake in the pivot?
3. How about side projects?
YC owns a stake in Diaspora. Diaspora owns Makr.io, therefore YC owns a stake in Makr.io, as long as the Diaspora team set it up as an entity separate from Diaspora, not owned by Diaspora (the company, not the team).
When a company pivots, it's the same thing. It's usually the same company legally and fiscally, in which case YC still has a stake. If the company pivots and the founders decide to set up a new company, and the old company does not own the new company, then YC does not have a stake in the new one unless the founders are good sports and cut them in.
Side projects are usually built under the corporate umbrella, in which case the profits/losses from the side project count as part of the owning company's. In this case, YC's stake in the parent company carries over to all side projects (unless, again, they set it up as something separate from the company).
What's stopping someone from using the lessons learned from a failed company over to a new entity - IP ownership? E.g. I'm pretty sure Waterloo Velocity doesn't own a stake in Pebble (the iPhone watch) even though the project began there as Allerta (a Blackberry watch) and was admitted into YC as inPulse. Wondering if these are just company name changes, or product name changes, or separate entities? As the founder would have therefore received funding for R&D from Velocity, YC and Kickstarter without necessarily putting out a product. (Though I'm sure there's some intellectual property claims made). That would mean a +1 in favour of patents, to protect the interests of the accelerator.
Well, lessons != assets. I would say that if the founders create a new entity, and use assets from the old company in the new one, that it's reasonable for investors to claim a stake in the transferred assets/IP.
A good example of what usually happens with pivots is the case of Firebase (http://firebase.com). They used to be Envolve (https://www.envolve.com), but they saw demand for what they're doing now, and took the real-time technology behind Envolve to power Firebase.
I don't know if they kept the old company or set up a new one, but YC still has their stake in them.
I guess for a startup, it would hard to track what was done on company time, and what was done as a side project. For example, coding a side project on my 9-5 job would require a consent form signed by my manager to claim they had no ownership on my project. But a startup founder working on the weekend on YC's project only to realize a need for something else that needed to be coded and monetized. That's gray area of who owns the assets.
My only concern is if Product A is failing, and you want to work on Product B, there would be a conflict of interest in killing Product A (there's people vested in), and it'll be hard to split your time to work on both products. There's the option to incorporate under the umbrella, but the fear of spreading yourself too thin. A dilemma nonetheless.
I was really expecting to see what kind of product they would launch. Did they just not launch at the demo day but still working on it, or did they actually pivot into something else?