pro-rata

If you keep pro-rata it will be more concentrated among companies that are raising subsequent rounds, which is correlated with doing well.

However, I don't think pro-rata or participation rights are problematic as they encourage follow-on investment which is usually desirable.

The pro-rata provision is only for raises of $100M or more post-money.

If YC exercises pro-rata rights on just some of their companies, the ones that don't see the exercise are damaged goods.

And that is precisely what YC has done here with its pro-rata program.

So instead, YC is committing themselves to pro-rata all their companies (this is a lot of companies) so long as they can afford it.

Participating pro-Rata in all future rounds is a signal that YC continues to think its participants are a good investment even after demo day.

On demo day they get term sheets for (A) $10mm at a $20mm post-money valuation, and (B) $10mm at a $250mm post-money valuation In either case the pro-rata vehicle has to take down $700k of the $10mm to keep the 7%.

In other words, given that these pro-rata investments must be all-or-nothing to avoid signaling risks, what're the financial returns of investing in the entire body of YC startups that raise follow-up funding, regardless of whether they're actually a good deal individually?

"This" in the last sentence clearly refers to exercising the pro-rata that was added beginning in S14.

I think it was pretty clear: "this" in that sentence refers to exercising the pro-rata, described in the previous sentence, which in turn was described as being added starting in S14 in the sentence before that.