https://en.wikipedia.org/wiki/Tontine
I really like this idea, but it reminded me of the tontine episode of Archer.
FounderPool: A community for founders to share risk and diversify their equity
141–150 of 207 posts
Re: FounderPool: A community for founders to share risk and diversify their equity
#142I wouldn't be surprised if YC implements a version of this internally
I've heard that some YC founders approached them about it, but the management of this structure may be more work that distracts YC from it's focus. We hope every accelerator and VC film does this eventually, we want to power as many of them as we can under the hood.
lol im sure you do, as does pando.
and ya, that makes sense. it should be offered by YC and other accelerators, but it should be managed by alumni and pool members, not by the investing party.
edit: a word
Re: FounderPool: A community for founders to share risk and diversify their equity
#143Interesting. Does anyone know of anything else like this out there?
pando is seeking to expand outside of sports. id expect them to have something like this soon
Re: FounderPool: A community for founders to share risk and diversify their equity
#144One danger I see is that unlike an insurance company, which does a serious amount of due diligence and selection of the risks it takes on, this company/idea completely leaves it up to the founders/"investors" (however you wish to call it) to make judgement calls about their own and other people's risk, without much pooled knowledge or history. I doubt founders are very good at that.
When an insurance company sells a policy, they have something on the line in terms of risk themselves -- they have to pay out. Here, the company just acts as facilitator for founders to spread risk however they self-organize to do so. Is that likely to be right? Who cares if some people get burned when something inevitably goes bad in the pool?
It's much like the general tech company issue that thinks all the complexity and need for oversight, etc. can be externalized to others to deal with. It'll police itself. In the meantime, rake in your percentage for being the platform.
I think an idea like this will take much more work (or the verification / pooling / trust sides) than they expect -- for it to work well and people to be willing to join. Otherwise, bad money will drive out good.
Re: FounderPool: A community for founders to share risk and diversify their equity
#145As you get older without an exit, you start to freak out a bit about your retirement. At least that was true for me. I'm 1000x better as an entrepreneur at age 42 than I was at age 27. But I'm also 100x more worried about some basic financial things like whether I will be able to retire, maintaining a mortgage, keep up financially with my spouse's career and her changing life expectations. And what helped stabilize m…
> A 0.1% equity stake in a startup that ends up hitting is life changing.
For the vast majority of startups, "hitting" is $100-200M acquihire. 0.1% of that is only 200K. If you can get in on something like Beyond Meat, sure, but that's the kind of a company which won't be a part of something like this.
Speaking from the other end of this spectrum, BTW, my risk tolerance is higher now than it's ever been. I don't have to work at all, and my mortgage is paid off. But it's much more difficult now to convince me that some harebrained startup scheme will work. :-)
Re: FounderPool: A community for founders to share risk and diversify their equity
#146A few months' back, someone on Twitter criticized a similar platform, calling it an outright scam.
I said that was totally unfair, and that it's one thing to call it a bad deal (which really depends on the percentage given up and the quality of the companies in the pool), it's another thing to call it a scam.
That prompted the "pro-VC crowd" to start calling me stupid and naive - "startups need cash, not equity", "if you don't back yourself, I won't back you", etc etc.
If there's one thing I learned, it's that VCs have an almost irrational hatred for this model. Unsurprising, given the pool makes founders less reliant on them. No matter what, you retain your pool share, so your insurance policy is something other than "go back to VC cap in hand".
I also wonder if it may indirectly create a unionizing effect - if a non-negligible number of founders can start banding together, they can push back on onerous terms (liquidation preferences etc).
Re: FounderPool: A community for founders to share risk and diversify their equity
#147Earlier quoted context omitted.
Thats like saying you'd never drive with someone who uses a seatbelt because wearing one means they don't "believe" in their ability to drive safely.
Interestingly, pedestrian injuries went up significantly after seatbelt laws, for the reason you note/deride.
> Interestingly, pedestrian injuries went up significantly after seatbelt laws, for the reason you note/deride.
Source?
Re: FounderPool: A community for founders to share risk and diversify their equity
#148One danger I see is that unlike an insurance company, which does a serious amount of due diligence and selection of the risks it takes on, this company/idea completely leaves it up to the founders/"investors" (however you wish to call it) to make judgement calls about their own and other people's risk, without much pooled knowledge or history. I doubt founders are very good at that. When an insurance company sells a…
Village Capital has been testing out the model of having peer-selected investment for ten years now-- https://vilcap.com/entrepreneurs/peer-selected-investment
Re: FounderPool: A community for founders to share risk and diversify their equity
#149Does your platform accept early employees as well? The first 10 employees are essentially founders and while they typically do not receive as much of the upside as a founder, they do bear the same risk. Allowing an early employee to diversify that risk would be a huge value add to a much wider potential network.
Re: FounderPool: A community for founders to share risk and diversify their equity
#150I will never invest in a startup where the founder(s) don't believe in their companies. Moving forward all terms I negotiate will explicitly state that this (e.g. things like FounderPool) will not be a possible scenario.
Funny how VCs can diversify risks, but founders can't. Perhaps you can concentrate your bets a bet more and believe in them harder?