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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

#51

Post by darkerside »

atherton33 wrote: post #38
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.

Wouldn't a contract like this be considered unenforceable? There were no services rendered, no exchange of value

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

#54

Post by s1artibartfast »

paxys wrote: post #22
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…

At that point they are just hiring an employee. Once you get the $1M what incentive is there to continue to hustle while being a minority shareholder in your own company?

Yeah, what's the vc ROI here if they drop 1M and destroy each company. Do some of these go on to exit?

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

#55

Post by nl »

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…

> just released a kind of crappy messaging app that flopped.

I don't think releasing a messaging app that flops is bad? If getting a messaging app to succeed was easy then there would be more successes at it.

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

#56

Post by [deleted] »

moralestapia wrote: post #39
dtnewman wrote: post #36

Earlier quoted context omitted.

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 an…

[deleted]

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

#57

Post by IncreasePosts »

xpl wrote: post #47
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.

> They make an investment in your company on terms they can claw back the money at any time It is a loan then, not an investment.

Even worse - loans can't usually be clawed back at any time

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

#58

Post by IncreasePosts »

nl wrote: post #55
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…

> just released a kind of crappy messaging app that flopped. I don't think releasing a messaging app that flops is bad? If getting a messaging app to succeed was easy then there would be more successes at it.

Hell, google has released about 30 and 33 have failed

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

#59

Post by [deleted] »

pnw wrote: post #31
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.

[deleted]

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

#60

Post by [deleted] »

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"

[deleted]
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