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They thought they were joining an accelerator – instead they lost their startups

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Re: They thought they were joining an accelerator – instead they lost their startups

#11

Post by b112 »

hn_throwaway_99 wrote: post #5
_cs2017_ wrote: post #2

This article is absolute trash since it doesn't explain how the bankruptcy of the accelerator would change the amount of dilution the startups experience. Taking the information in the article at face value, the startups paid the accelerator (partially) with warrants. Those warrants have a fixed exercise price; the courts cannot change that. Whether those warrants are exercised by the accelerator or by the creditors,…

Why the diatribe? > Maybe there's some reason why warrant owner matters. It's a well understood fact by anyone in the startup world that it does matter, because future investors or acquirers care deeply about the structure of your cap table. Furthermore, the article gives an explicit example of this: > She had lined up a grant from a bank to help fund her offer, but it ultimately told her no because it was too risky…

Read your comment and parent. The quote from the article doesn't explain why the warrant owner matters, and you suggest the cap table structure does, which makes sense.

However, the structure has nothing to do with ownership of parts of that structure. Why would warrant ownership matter?

Re: They thought they were joining an accelerator – instead they lost their startups

#12

Post by [deleted] »

dylan604 wrote: post #8
hn_throwaway_99 wrote: post #4

What a psychopath. To anyone who may be in this kind of situation, trust your instincts and leave . It will not get better. You will find other, better opportunities elsewhere. Best lesson I ever learned was from a high level exec that had just started at the company where I worked. He quit in 2 weeks. Impressively, he did it without drama or really even causing bad will - he just told the CEO it wasn't a match, and…

I once worked at a place where an employee started their first day at the start of the shift. They mumbled their way through it to lunch where they never returned. That's the shortest I've personally seen. Absolutely not a c-suite role or anything management related though.

[deleted]

Re: They thought they were joining an accelerator – instead they lost their startups

#13

Post by kcartlidge »

hn_throwaway_99 wrote: post #4

What a psychopath. To anyone who may be in this kind of situation, trust your instincts and leave . It will not get better. You will find other, better opportunities elsewhere. Best lesson I ever learned was from a high level exec that had just started at the company where I worked. He quit in 2 weeks. Impressively, he did it without drama or really even causing bad will - he just told the CEO it wasn't a match, and…

Years ago I took a dev role at a very well known UK organisation, a prestigious brand supposedly good for the career. Their systems turned out to be smoke and mirrors of the most braindead kind. One and a half days in I'd seen enough and I quit. If you know, you know.

Re: They thought they were joining an accelerator – instead they lost their startups

#14

Post by llamaimperative »

b112 wrote: post #11
hn_throwaway_99 wrote: post #5

Earlier quoted context omitted.

Why the diatribe? > Maybe there's some reason why warrant owner matters. It's a well understood fact by anyone in the startup world that it does matter, because future investors or acquirers care deeply about the structure of your cap table. Furthermore, the article gives an explicit example of this: > She had lined up a grant from a bank to help fund her offer, but it ultimately told her no because it was too risky…

Read your comment and parent. The quote from the article doesn't explain why the warrant owner matters, and you suggest the cap table structure does, which makes sense. However, the structure has nothing to do with ownership of parts of that structure. Why would warrant ownership matter?

Because as an investor in a company, you don’t want that company’s founders constantly distracted by a piece of shit investor who has a massive stake in their company.

Pretty straightforward.

Investors can create tons of havoc, and “bought equity from a bargain bin outside of a bonfire” is probably as good a warning sign as any.

Re: They thought they were joining an accelerator – instead they lost their startups

#15

Post by ldjkfkdsjnv »

A popular venture studio based out of NYC is like this. They take 60% of the equity from the start, and provide 1M in capital (which is decent amount). The narrative is that they provide significant guidance, follow on capital, etc. But in reality, none of their guidance or follow on capital comes through. For a first time founder its okay for a year, any longer and its really a financial disaster versus just working your way up the corporate ladder.

People have no idea how few startups really cash out, and how hard it is when you start from low equity percentages/have bad terms.

The horror stories usually dont arise until a startup is actually worth something and has a future. This is usually 2 years+ into the journey.

I think the typical founders doing this are actually just people that want to say they own a company at dinner parties.

Re: They thought they were joining an accelerator – instead they lost their startups

#16

Post by emodendroket »

CPLX wrote: post #9

What a fucking mess. I got tons and tons of outreach from these guys for my company. It was pretty well written didn’t come off as overtly scammy unless you already know to run screaming from an accelerator or any other “investor” that wants you to give them money up front.

If you don't know that what are you doing trying to run a business?

Re: They thought they were joining an accelerator – instead they lost their startups

#18

Post by CharlieDigital »

ldjkfkdsjnv wrote: post #15

A popular venture studio based out of NYC is like this. They take 60% of the equity from the start, and provide 1M in capital (which is decent amount). The narrative is that they provide significant guidance, follow on capital, etc. But in reality, none of their guidance or follow on capital comes through. For a first time founder its okay for a year, any longer and its really a financial disaster versus just working…

    > A popular venture studio based out of NYC is like this
Sounds like Fractal. Supposedly, the value add is that they've already done the due diligence and market research on some product idea. They match a team (CEO + CTO) to the idea and provide the funding. Do not know of any well known companies to have come out of this model, but if they're still around, it must be generating some returns for it to be worthwhile.

Re: They thought they were joining an accelerator – instead they lost their startups

#19

Post by atherton33 »

TimJRobinson wrote: post #17

I don't understand how they lost their startup though? Doesn't the accelerator only take a small percent?

"Startups also granted Newchip the right to buy $250,000 worth of shares in the company at a later date, but at their current valuation"

Re: They thought they were joining an accelerator – instead they lost their startups

#20

Post by blueboo »

hn_throwaway_99 wrote: post #4

What a psychopath. To anyone who may be in this kind of situation, trust your instincts and leave . It will not get better. You will find other, better opportunities elsewhere. Best lesson I ever learned was from a high level exec that had just started at the company where I worked. He quit in 2 weeks. Impressively, he did it without drama or really even causing bad will - he just told the CEO it wasn't a match, and…

the stupendous risk taken on by founders confounds instincts, and we're already filtering to folks who have resorted to taking money from third- or fourth-tier options
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