According to the website, the incubator's prominent founder said: "If you're talking to Google Ventures you may be part of a pattern. The pattern is: you've already raised some money at a cap of $x. Then GV says they're interested and wants to invest at a cap of $x/2."
The article said Graham accused Google Ventures, which says it has made more than 100 seed investments, of capping the price at which the start-ups' loans would convert to equity. (Google Ventures managing partner Bill Maris blasted back, telling BI that Graham's accusations were "patently absurd.")
This isn't the first time Graham has weighed in recently on the changing funding climate in Silicon Valley: In June, he warned of Facebook IPO's negative effect on the funding market for start-ups. "If you haven’t raised money yet, lower your expectations for fundraising," he wrote at the time.
And, as BI points out, it's not surprising that venture capital firms and an advisor to entrepreneurs would be on the opposite sides of a funding negotiation--although, the article adds, "What is surprising is that whatever approach Google Ventures took to these Y Combinator startups caused enough friction to provoke Graham's cautionary note."
Graham is regarded as a bit of a guru in Silicon Valley; his incubator program has been touted by Wired as "the most prestigious program for budding digital entrepreneurs." Since launching in 2005, Y Combinator has advised and provided seed funding to 460 start-ups--including such prominent names as Reddit, Dropbox and Hipmunk.
Graham told NPR in June that he predicted half of start-ups funded by Y Combinator would fail. "Practically all start-ups internally are disasters," he told the outlet. "And they just hide this from the outside world."