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The Cost of the Grove Network
For successful founders who join the Grove network and later build a unicorn: unambiguously, these founders contribute more to their peers than they’ll take out themselves from the network in the form of distributions. This begs the question: what does Grove actually cost?
The best way to quantify this is thinking about how much it would take for successful, exited founders to make their full contribution back at the risk-free rate.
As of Q4 2023, 12-month US treasuries yielded 5.3%. This means that if a founder sells their shares, contributes their 3% to Grove, and invests their remaining proceeds in short duration, risk-free US treasuries, they make the entirety of their contribution back in a little over 6 months.
This is an extraordinarily important feature of the Grove ecosystem: the top winners are “paying in” ~6 months of risk-free returns generated from their exit liquidity. This same amount being distributed to fellow network participants creates life-changing sums. Sums that in fact allow founders to remain founders and go on to start their 2nd, 3rd, or 4th venture which so often is the one that, at last, succeeds. The liquidity provided to them through Grove lets them afford to not sell out to a corporate job until they succeed. To provide founders with the financial resources to afford to remain founders is a key tenet of the Grove network.
As for those founders who unequivocally believe they will undoubtably be in the 0.125% - those 5 of 4,000 companies who generated 50% of the YC network value – we believe these founders hold a similar belief to homeowners who wholeheartedly believe that their house will not burn down to the ground, and that therefore they should not pay their fire insurance. The difference being, of course, that a founder’s startup is in fact much more likely to fail than their house is to burn to the ground.