Sam Altman does a ‘mic drop’ offering for every startup at Y Combinator

During a Y Combinator event Tuesday night, Sam Altman had what YC partner Tyler Bosmeny called a “drop the mic moment.” Altman offered 2 million worth of OpenAI tokens to all startups in the current class for early equity.

In other words, he promised that OpenAI will invest in the entire class, not with money but with a share of AI tokens that startups can use to build their products.

IY Combinator has about 169 startups in this collection, according to its directory.

As for how much equity each startup can expect to give up, that can’t be determined at the time of signing the deal. It will depend on how much the startup is worth when it raises the first seed round – a funding round in which investors assign a company an official value.

Y Combinator Managing Director Jared Friedman tells TechCrunch that the deal will be offered as an “unlisted SAFE,” meaning, “it will roll over to the next funding round, which is usually a Series A,” he said.

A SAFE is YC’s standard agreement framework for its early-stage companies that are raising capital before their first “price” rounds that involve valuation. A non-consolidated SAFE does not limit that valuation, which can benefit founders because the higher the valuation at conversion, the smaller the piece of the company the investor gets.

We’ve seen some talk on X that this deal could amount to OpenAI holding around 2% equity if the startup reaches a $100M valuation, though without seeing the actual terms, we can’t confirm that.

For OpenAI, the agreement works on two levels. Obviously, it gains equity in this crop of emerging companies, meaning they make a profit if they succeed. But it also encourages them to build their business again with OpenAI. Whether or not this locks them in for a long time, it means they won’t automatically become open AI competitors, such as Anthropic’s Claude Code.

The tokens themselves may sweeten the deal: as notional costs continue to fall, what OpenAI offers today may cost a lot less to produce tomorrow — making the equity it gets in return look more expensive.

Unsurprisingly, there’s been a lot of commentary on X as to why this is so, and it’s not a good one to boot.

People who use the agreements believe that the agreement helps startups to eliminate one of their biggest costs – AI infrastructure debts, which can quickly grow and eat up a disproportionate share of startup budgets at a time when money, in general, is already scarce.

Buyer-beware folks have other caveats. Seed investor Jason Calacanis — who owns a competing accelerator and fund — went for a warning to fear Big-Tech.

“If you take these tokens, there’s a non-zero chance that OpenAI will learn exactly what your startup does, copy your idea and include your app in your free offering. This is a classic playground – watch out, innovators!” he sent.

The fear that OpenAI and Anthropic could swallow up all the good AI startup ideas is real.

The truth is, if OpenAI wants to do that, it can, even if startups just pay OpenAI for tokens. By taking an equity stake, OpenAI may have more incentive for startup success, not less.

And, as the former head of Y Combinator and a frequent guest speaker, Altman has as much access to the entire collective and its ideas as he wants, in charge or not.

The big question for this YC batch is whether the token budget from one AI player is worth giving up more equity. IY Combinator already takes a 7% share of the $500,000 investment in its regular offering. In exchange, startups gain access to YC’s powerful Silicon Valley network of VCs, potential customers, and other founders.

But balance is also valuable for beginners. Seed investors often take 20% or more, too. And startups need equity as compensation for their early employees.

The biggest risk is that the startup will blow its OpenAI token budget without enough to show for it, giving away equity in the process. Still, that may be better than paying for tokens with cash, a utility that appears less in that category.