> The problem for YC is that each YC batch has 30-50 companies in it, most of which will fail. When those companies go to raise later rounds, new investors want to know whether YC believes in them. If YC exercises pro-rata rights on just some of their companies, the ones that don't see the exercise are damaged goods. 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.
Does this mean a bunch of money is being thrown away on signaling?
Thrown away? YC will save time and energy required to analyzing the deeper aspects of each startup they might want to invest in. If a YC company raises then someone believed in them enough, so in a way for YC it is more of a positive where they can piggyback on someone elses' due diligence (hopefully).
Buying in later rounds if you think it is worth the investment, and spending money on 'signalling' - i.e. money spent to not reveal what you are really thinking.
(This is just an observation. I am not implying that this strategy is like gambling or anything like that)
Does this mean a bunch of money is being thrown away on signaling?