There is a bit more to YC than just investing in a lot of companies. If that were all the secret sauce you needed, the VC industry would probably rack up impressive average return numbers like cough 0%. (It has not been a kind ten years to the industry, to put it mildly.)
"There is a bit more to YC than just investing in a lot of companies."
You're exactly right, investing isn't going to make those companies succeed as you said, doesn't increase your chance of getting a return at all. There's a ton of dynamics at work.
What we do know is that the YC team has a process that works. I'm not going to say they have a "formula," since that would imply that they take the same approach with every class and company. I imagine it's something they work to improve each time and adapt uniquely with each situation.
The recent bulk investment in YC companies rides on the YC team's decision making process, based on a good track record. Granted, you're likely to see a better return with investment in 40 YC companies over 40 that have been randomly picked.
That says it all. Instead of pumping it all into one company, diversify.
If you invest in 40 different companies, more than one is bound to come out on top. 40 x $150k = $6 million
http://techcrunch.com/2011/01/28/yuri-milner-sv-angel-offer-... http://www.crunchbase.com/financial-organization/start-fund