Can someone explain what is a "convertible debt. With no cap and no discount" ?
Yuri Milner, SV Angel Offer Every New Y Combinator Startup $150k
161–170 of 199 posts
Re: Yuri Milner, SV Angel Offer Every New Y Combinator Startup $150k
#162No more debates about whether YC is a "good deal" because of the low implied valuation of their initial investment.
This changes the character of the YC experience. YC companies can now spend their time on product, not fundraising. On the other hand, less financial pressure may mean the founders don't learn to hustle and act less lean.
Re: Yuri Milner, SV Angel Offer Every New Y Combinator Startup $150k
#163Earlier quoted context omitted.
I know the actual numbers for Heroku, and in that YC batch investors pursuing Ron and Yuri's strategy would have been net ahead on Heroku alone. And that batch also included 280 North, which has already been acquired for a significant amount, and several other startups which are likely to generate returns at some point.
How does it work out for all YC companies that have run and either exited or died to date?
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Re: Yuri Milner, SV Angel Offer Every New Y Combinator Startup $150k
#164Earlier quoted context omitted.
I thought rock bands got shitty contract deals from record labels. These terms seem pretty fair and very unlike the recording industry.
On the surface, YCombinator IS giving a shitty deal. 6% for a few thousand dollars? That's highway robbery. Except, of course, you're getting a lot more than money for your 6%. The difference is that YCombinator's promise are much less empty than that of a record labels. (I know, I deflected. Milner's terms are not shitty. It's YCombinator's that are, but only on the surface).
>On the surface, YCombinator IS giving a shitty deal. 6% for a few thousand dollars? That's highway robbery.
I think for most startups that haven't executed much, that's an incredible deal. Your idea that your two buddies just threw together, and maybe a prototype, is worth $250,000. Really?
(I know that some more mature companies have come to Ycombinator, companies likely worth more, but there are ycombinator companies that came fresh; so my assumption would be that the more mature companies would get a somewhat better deal than the brand-new companies. If that isn't the case, then it's possible that those more mature companies are getting the poor deal you are suggesting. But certainly for a fresh company, the ycombinator valuation, I think, is quite generous.)
Maybe it's just because I'm in a more traditional market, where people value you based on revenue, or maybe it's because I'm not that good, but it's taken me years of work to reach that kind of a valuation.
(on the upside, the valuations are somewhat, ah, less volatile in my industry. Assuming that my costs/revenues don't change sharply, the valuation of my company isn't going to change sharply. )
Re: Yuri Milner, SV Angel Offer Every New Y Combinator Startup $150k
#165Earlier quoted context omitted.
What are the terms of the deal, specifically? How much to startups have to pay back if they take the $150K, and when do they pay it? What about valuation of the startups (ie. $150k for 10% implies $1.5m valuation)? Or is this more like a loan ($150k, pay back over X years, or upon Y liquidity event)?
It means your plan IS to give some of your company away for money. Instead of holding 100%, getting ramen-profitable, working your butt off to make it.
Actually, even that isn't true. If a company were to take this money, and then never raise another round, they would simply have to pay the debt back, I'm guessing at a fairly modest interest rate.
Re: Yuri Milner, SV Angel Offer Every New Y Combinator Startup $150k
#166Convertibles with no-cap, frothy valuations, great time to be an entrepreneur. I wonder if this is going to pressure other angels into offering similar terms, and I think if they try to then ultimately angels have the potential to get severely diluted in follow on rounds. I do think that this is a great PR move. Given the hands-off terms from Yuri, I highly doubt that this is a kiss of death for other large VCs who are looking to invest in the follow on rounds, I think it puts much more pressure on Angels who are looking to get into the seed round.
Re: Yuri Milner, SV Angel Offer Every New Y Combinator Startup $150k
#167Honestly, I'm surprised that nobody did this sooner. Hell, didn't Conway invest in six of the last round anyhow? This is sort of like going to the race track and betting on every horse. Except at this particular race track, the horses are all above average and multiple horses can win each race. I'd take those odds.
The clever thing about this is that Yuri doesn't have any of the due-diligence costs of Ron Conway : He's outsourced it all. OTOH, maybe/probably Ron Conway actually enjoys the thrill of the hunt for new exciting stuff, so he doesn't consider it a particular cost. Right now, according to the article, YC (pg) is happy about the situation : it improves their brand, helps entrepreneurs, etc. But I'm sure that they'll re…
Why is he in at a better valuation than YC? From what I read it seemed like he loans 150k for an option to be repayed in stock at whatever valuation they take their first round of funding at? YC's 30k goes in at somthing like a 0.5 million valuation, so i would assume the rounds most of these companies are taking are higher than that?
Re: Yuri Milner, SV Angel Offer Every New Y Combinator Startup $150k
#168It sucks to be a graduate from Summer 2010. Missed it by 1 term.
No it doesn't.
Re: Yuri Milner, SV Angel Offer Every New Y Combinator Startup $150k
#169Earlier quoted context omitted.
I thought rock bands got shitty contract deals from record labels. These terms seem pretty fair and very unlike the recording industry.
On the surface, YCombinator IS giving a shitty deal. 6% for a few thousand dollars? That's highway robbery. Except, of course, you're getting a lot more than money for your 6%. The difference is that YCombinator's promise are much less empty than that of a record labels. (I know, I deflected. Milner's terms are not shitty. It's YCombinator's that are, but only on the surface).
When I first got into Y Combinator, our company with two founders straight out of college with no prior software engineering or startup experience and a prototype calendar demo was valued at 300k.
We were ecstatic. That was the best deal I've ever been offered in my life.
Re: Yuri Milner, SV Angel Offer Every New Y Combinator Startup $150k
#170It sucks to be a graduate from Summer 2010. Missed it by 1 term.
What would someone relentlessly resourceful do?