That's the beauty of his approach, in my opinion. He deploys the money in one shot, to many companies (portfolio theory says this reduces risk), and does so with little diligence. He may be pricing many angels out of this type of deal because they won't have this same appetite for risk as Yuri does. What he finds acceptable for risk is not what most angels would, thus he can price out the risk premium with the uncapped convert.
The difference in appetite for risk isn't a real difference -- you just have to have the proper perspective. Angels only get to buy in during seed or A rounds. Yuri can double, triple, and quadruple down on the winning companies by following on in A, B, C, D, ... rounds.
If the companies don't allow him into later rounds at equal terms with the others on the round up to as much money as he wants to put in the round (up to the full amount the company is trying to raise) then I expect you'll see this experiment end. He's paying for access, for screened deal flow. Angels are there for a different reason.
So is Yuri's money better than another angels? It is better than PG's? No. No way. Yuri's money is just money. If the only thing stopping you from starting a successful company is access to capital you aren't getting creative enough. Taking money from an angel, from PG, gives you access -- to people with domain knowledge -- to people that will help you succeed with more than just piles of money.
That's just it - why is he more tolerant for risk than everyone else? Risk is not a personal thing - it just is. It's not like he gets his money cheaper than anyone else.
Either he's wrong and everyone else is right, in which case he's burning money, or he's right and everyone else is wrong, and he's burning less money.
Either way, I don't get it. These guys are very well connected. Is it so hard to participate in Y Combinator Series A round that they need to spend this much money just for the opportunity?
Everyone has a different level of risk aversion. Some people want to play it very safe, and others are willing to take large risks if the possible rewards appear worth it.
The other question is whether or not pg would ever put a cap on the amount of startups accepted into a batch. I am pretty sure that the next pool of applicant will be way larger, thus siphoning off talents from the other incubators/angels should pg chooses to accept all the good ones. This will then definitely trigger a defense mechanism by the others to then increase the amount of money funded, probably to more than 200k.
