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90% of Y Combinator Startups Have Already Accepted The $150k Start Fund Offer

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Re: 90% of Y Combinator Startups Have Already Accepted The $150k Start Fund Offer

#51

Post by ebaysucks »

aneesh wrote: post #28
ebaysucks wrote: post #22

Earlier quoted context omitted.

When offering convertible debt, the investor accepts the valuation at the next round of investments (in this case series A). The risk for the convertible debt investor is that this valuation will be very high and the series A can take a long time. To limit this risk convertible debt investors negotiate valuation caps and discounts. Cap: The convertible debt gets converted at min=[series A valuation, cap]. Discount: T…

I think you mean min(series A valuation, cap).

This is correct. Made the edit. I hope I didn't confuse anyone with my original post.

Re: 90% of Y Combinator Startups Have Already Accepted The $150k Start Fund Offer

#53

Post by yokumtaku »

pkrumins wrote: post #12

Can anyone explain the terms "no cap" and "no discount" in "$150,000 in convertible debt. With no cap and no discount."? I understand what a debt is, so how is "no cap and no discount debt" different from a regular debt? Also why would you as a startup would want to take a debt? Another question - what's the point of Yuri giving the debt, it seems he's not even asking for equity in return?

See http://www.startupcompanylawyer.com/2007/04/28/what-should-t...

and http://www.startupcompanylawyer.com/2010/01/11/what-is-a-con...

Re: 90% of Y Combinator Startups Have Already Accepted The $150k Start Fund Offer

#54

Post by mindcrime »

boucher wrote: post #46
mindcrime wrote: post #32

Earlier quoted context omitted.

All of this fueled by long nights pulled by young kids who's bodies can take the caffeine abuse for a while. Don't doubt for a minute that some of us old farts are staying up late, downing obscene amounts of coffee, Red Bull, Monster drinks, etc., trying to get in on things. Hell, if anything, when you start getting older, and you look around and realize "I haven't done anything yet" a certain sense of, hmmm... I won…

For whatever its worth, plenty of people in this gig don't abuse caffeine and often don't have any at all. I rarely have more than one coffee a day, and often have none. I don't drink energy drinks or soda (except perhaps when out to eat). Francisco doesn't drink any coffee. Tom, on the other hand, has a bit of a red bull addiction. I'd guess anecdotally that most of my friends in startups behave more like me than li…

Sure, it's just a stereotype, although I freely admit that I, for one, do kinda help perpetuate the old saw about how "a programmer is a biological machine for turning sugar and caffeine into code."

Or, to look at it another way.... "The four food groups for programmers are salt, sugar, fat and caffeine."

All joking aside, my diet has it's good days and it's bad days. But I do like my coffee, that's for sure.

Re: 90% of Y Combinator Startups Have Already Accepted The $150k Start Fund Offer

#55

Post by mindcrime »

Mz wrote: post #37
mindcrime wrote: post #32

Earlier quoted context omitted.

All of this fueled by long nights pulled by young kids who's bodies can take the caffeine abuse for a while. Don't doubt for a minute that some of us old farts are staying up late, downing obscene amounts of coffee, Red Bull, Monster drinks, etc., trying to get in on things. Hell, if anything, when you start getting older, and you look around and realize "I haven't done anything yet" a certain sense of, hmmm... I won…

Better to fuel your mind with the right foods, supplements, etc. B-complex, good quality sea salt, the right fats -- all good for the brain. And it isn't followed by a crash because it builds capacity rather than squeezing existing resources to get more out of them.

Yeah, I take fish-oil, a b-complex, a regular multi-vitamin, ginko-biloba and a couple of other supplements, and eat moderately healthy and least part of the time. I try not not totally fall into the programmer stereotype when it comes to diet, but the bit about late nights fueled by caffeine and sugar, well... what can I say?

Re: 90% of Y Combinator Startups Have Already Accepted The $150k Start Fund Offer

#56

Post by fooandbarify »

boucher wrote: post #49
fooandbarify wrote: post #45

Earlier quoted context omitted.

I don't understand. They aren't diluting shares, they aren't liable if the company fails to reach Series A, and by all accounts there do not seem to be any strings attached with regard to oversight (ie. the founders don't need to "answer to" the investor in any way). All they are doing is giving a portion of their future shares to that investor now, at the same value as they would later . It's a no-brainer - what is…

What people are pointing out is that nobody outside of this batch in Y Combinator has seen the paperwork, so nobody can actually verify that there isn't something hidden or sketchy present. I trust Paul implicitly, and I suspect most YC Founders do, and that probably has a lot to do with the acceptance rate. I wasn't in the meeting obviously, so I can't know how I would have reacted to the specifics, but I can say kn…

That makes sense. After re-thinking my previous comment, I suppose another potential downside might have to do with somehow missing out on the numerous copycat offers that I imagine will arise. At any rate, although I'm surprised that everyone has signed on so quickly it does seem like a really good deal for all involved.

Edit: phrasing.

Re: 90% of Y Combinator Startups Have Already Accepted The $150k Start Fund Offer

#57

Post by gojomo »

aneth wrote: post #43
rudiger wrote: post #35

Earlier quoted context omitted.

What happens if there is no exit or "liquidity event", but the startup is profitable and never takes additional funding? When does the $150K become equity?

Some notes have automatic conversion at a given valuation (usually the 'floor', which in this case does not exist.) Others have no such clause, presumably under the incorrect assumption that a "liquidity event" will always happen if there is a success. I've dealt with both types of notes before and always insisted on adding an automatic conversion clause.

Might there also be some far-out repayment date — say 10 years — and a small interest rate (even without a discount)? Then, if the company becomes a perpetually profitable independent growing concern the loan is still eventually repaid, though not with the kind of equity conversion and appreciation the investor is really hoping for.

Re: 90% of Y Combinator Startups Have Already Accepted The $150k Start Fund Offer

#58

Post by dacort »

cft wrote: post #40
ebaysucks wrote: post #22

Earlier quoted context omitted.

When offering convertible debt, the investor accepts the valuation at the next round of investments (in this case series A). The risk for the convertible debt investor is that this valuation will be very high and the series A can take a long time. To limit this risk convertible debt investors negotiate valuation caps and discounts. Cap: The convertible debt gets converted at min=[series A valuation, cap]. Discount: T…

Can somebody give me an advice. We have a two person startup, that is making about 20k/mo and it's growing. I am the founder. The thing is, I do not currently plan to raise VC money. My goal is to achieve revenue of 200k/mo by 2013. It is very realistic, but the problem is that as the service grows, we spend more and more time on operations, since certain things were not timely automated. We need about 300k , so that…

You may want to look into royalty/revenue based financing. I don't know if your revenue is where it needs to be for that (i.e. revenueloan.com's typical investment makes $1-5MM in revenue), but something to look in to.

Re: 90% of Y Combinator Startups Have Already Accepted The $150k Start Fund Offer

#59

Post by Devilboy »

waterlesscloud wrote: post #41
cperciva wrote: post #29

Earlier quoted context omitted.

Because there's no downside. You can take the $150k and stick it in a bank account and still be better off.

What's the downside to thinking about it for a week or two to see if there are any non-obvious problems?

Who says they didn't?

Re: 90% of Y Combinator Startups Have Already Accepted The $150k Start Fund Offer

#60

Post by gojomo »

jpwagner wrote: post #11
corin_ wrote: post #2

Going off on a tangent, one of the comments on the TC article seemed really odd - even by TC's standards for terrible comments. Am I the only one who finds Y combinator predatory? It preys on 20 year old kids who think they're building the next google. Am I crazy? On the actual subject of the article - if any of the four startups that haven't (yet) signed the paperwork don't end up accepting the offer, I hope they sh…

And on a pedantic note: 39/43 rounds to 91% rather than 90% Maybe they were going for one sigfig. This comment doesn't really add anything, so next time you find yourself typing "And on a pedantic note" press delete 22 times.

And to be really pedantic — only in the service of further demonstrating that the original pedantry was silly, I promise! — when the real percentage is 90.6something, it is also true that "90%" (and "80%", and "22%", etc.) "have already accepted", but it is not yet true that "91%" have.
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