The reason YC gave for the rejection was that Mexico was an unknown market, and they felt lending in there was too risky for them.
Makes me wonder what was the decision logic to accept this Stablegains, against that background it doesn't make any sense.
Was YC aware of the ponzi nature of this thing and decided to dip in? It just makes no sense.
YC was unique in that 15 years ago the narrative around raising money was radically different: YC was the only game in town that understood the amount of potential being ignored by traditional investors, and so they had a smorgasbord of excellent opportunities to pick from.
The world is very different now, YC demonstrated that their model worked and nowadays everyone has learned from YC…
…that means there’s no longer this vastly underserved market of brilliant teams that just need a little capital and a little faith and a little guidance, which is the market YC excelled in, nowadays everybody understands that and any competent team could raise money with their eyes closed.
Nowadays getting into YC remains perceived as prestigious but it’s not, really, compared to what it once was: the cycle sizes are huge and the quality has plummeted.
I don’t believe YC, as an organisation, is actively intending to benefit from ponzi-like companies, but YCs thesis (bet on a good team and they will do good things) is very vulnerable to a good team working on a god awful idea that has serious fallout when the market conditions have normalised insane behaviour: a decade ago, StableGains wouldn’t have made it into YC because no YC team would have thought it was sensible.
So, while YC should be held accountable, it’s ultimately a market problem, we’re in a market that values these awful predatory financial propositions, hence almost every prestigious investment organisation has some exposure to this sort of company (it’s just not blown up for all of them, yet, but soon come).
They don’t “understand” Mexico and are scared that their investment will get Pemex’d or something - and since that’s a known financial risk their backers would be like “wtf you doing?”
But “unknown” risks (even if actually quite easy to see) don’t have the same pushback from their investors. In fact, their investors may be demanding that they heavily invest in unknown risks.
It's extremely profitable to invest in a Ponzi if you are early to the scheme.
That's a fair and reasonable reason.
Countries have their own specificities and, very importantly, their own laws an regulations. If you're not familiar the wise move is to stay out.
Malcolm Gladwell had a phrase for this in a 1996 article about a vacation town that favoured hiring temp workers from the Caribbean (Gladwell is part-Caribbean) instead of black Americans who lived in nearby towns.
The employers made a decision on the basis known unknowns and unknown knowns. Gladwell described it thusly:
"Better the ghetto you don't know than the ghetto you know".