"Before, if somebody offered to invest in your company, you just jumped at the chance," says Harjeet Taggar of Y Combinator. "It meant your idea is not going to die. But for the first time, people are starting to grill investors on why they should take the capital, if they can get the capital elsewhere."
Taggar is a venture partner at Y Combinator, a VC that makes small investments in startups (rarely more than $20,000) in exchange for small stakes in the companies (around 2% to 10%). Rather than seduce startups with offers of millions in seed money, Y Combinator is part of a growing trend of investors that offer what Taggar describes as a mix of mentorship, networking, leverage, and brand value.