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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

#31

Post by pnw »

TimJRobinson wrote: post #17

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

I guess the argument is that a $250k warrant sitting in bankruptcy court is a potential liability that would turn off other investors. It's not something I've personally seen, but it doesn't really seem insurmountable for a hot startup. Losing a cofounder is a much more common and potentially painful problem.

The CEO's post on LinkedIn made it seem like they found it tough to get funding in general.

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

#32

Post by jltsiren »

emodendroket wrote: post #16
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?

Running a business is one of the most common things people do. The barrier of entry is lower than for most jobs. There are millions of entrepreneurs who are well below the average person in their ability to recognize and avoid scams, and scammers are well aware of that. And it doesn't help that businesses often don't have the same legal protections as employees and private individuals.

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

#33

Post by rvba »

sroussey wrote: post #10
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…

That paragraph makes no sense. A bank is offering her a grant? And this grant was supposed to remove the warrant holder from the cap table, so why would they have a problem with that? And having some unknown warrant holder is the reason to shut down? I call BS.

What is the business model of an "AI smart-matching tool for humanitarian aid"?

Spunds like a word salad, or a weekend project for a developer that could be hosted for few bucks per month.

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

#34

Post by fuzzythinker »

iamleppert wrote: post #6

Add TechStars to the list of accelerators to be avoided at all costs. They make an investment in your company on terms they can claw back the money at any time. Most of these accelerators provide little to no value, in my experience. Unless you need to know what “product market fit” means. Hilarious.

Any source to your avoid TechStars advice?

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

#35

Post by jojobas »

atherton33 wrote: post #19
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"

So the company was essentially signed away even before the bankruptcy.

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

#36

Post by dtnewman »

moralestapia wrote: post #23
iamleppert wrote: post #6

Add TechStars to the list of accelerators to be avoided at all costs. They make an investment in your company on terms they can claw back the money at any time. Most of these accelerators provide little to no value, in my experience. Unless you need to know what “product market fit” means. Hilarious.

Most VCs add zero value aside from the money. Bootstrapping is always better, if you can do it, of course. Exhibit A: Naval Ravikant, the flagship SV investor, widely regarded to as "a wise man", just released a kind of crappy messaging app that flopped. Imagine having unlimited leverage, unlimited money, unlimited reputation, a huge audience already in place and still that not being enough to put out a competent pro…

No one gives away 20% of a company for advice. He gives them capital. Hopefully connections. And founders can take or leave the advice.

Anyway, he is a successful entrepreneur having built AngelList. Sure, maybe he isn’t Midas, but a single failure in a startup doesn’t make someone an idiot. But assuming you are referring to AirChat, it seems too early to call it a failure anyway.

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

#37

Post by atherton33 »

jojobas wrote: post #35
atherton33 wrote: post #19

Earlier quoted context omitted.

"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"

So the company was essentially signed away even before the bankruptcy.

Yup. The bankruptcy just transferred the right to exploit it from the mildly incompetent to expertly ruthless.

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

#38

Post by atherton33 »

ultrasaurus wrote: post #26

> So she paid a $7,500 deposit and was all set to join Newchip when a founder friend told her to “never pay for introductions.” Hopefully everyone knows this here, but if you paid for an introduction it's a negative signal: just cold email. That being said, I'll make intros for only $6,500 and no warrants.

Of note from the article: she complained and was refunded the money after being stood up for the meeting, but they never cancelled the contract she paid to sign that gave them the right to buy her out of her own company for pennies, so once it passed to bankruptcy the creditors still took her company.

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

#39

Post by moralestapia »

dtnewman wrote: post #36
moralestapia wrote: post #23

Earlier quoted context omitted.

Most VCs add zero value aside from the money. Bootstrapping is always better, if you can do it, of course. Exhibit A: Naval Ravikant, the flagship SV investor, widely regarded to as "a wise man", just released a kind of crappy messaging app that flopped. Imagine having unlimited leverage, unlimited money, unlimited reputation, a huge audience already in place and still that not being enough to put out a competent pro…

No one gives away 20% of a company for advice. He gives them capital. Hopefully connections. And founders can take or leave the advice. Anyway, he is a successful entrepreneur having built AngelList. Sure, maybe he isn’t Midas, but a single failure in a startup doesn’t make someone an idiot. But assuming you are referring to AirChat, it seems too early to call it a failure anyway.

>No one gives away 20% of a company for advice.

You'd be surprised at how common that is.

Wouldn't you be inclined to believe that @naval wouldn't want to use that capital, connections and whatnot to support the single project of its own authorship in its lifetime? The results speak for themselves.

I have another theory, VCs freeride on the success and luck of other people's projects, which (sometimes) are so good and so profitable that they can even afford to have someone leeching off them. Just look at how many stories are there where the founders end up with zilch and regret ever taking VC money.

Any of the random guys on Twitter that are building and shipping stuff and making 4-5 figures on their side projects is worth more than a 1,000 Denpoks sharing their "wisdom" with you.

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

#40

Post by bbarn »

kayodelycaon wrote: post #30
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 was too worried about what it would look like to leave a company so soon after joining. You don’t have to put every job on your resume. :)

Exactly. I worked for 4 months at a company and just put "Contractor - various" in that spot because I did not want the stigma of that company on my resume.
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