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The New Deal

blog.ycombinator.com

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Re: The New Deal

#151

Post by nostrademons »

logicallee wrote: post #73
tptacek wrote: post #60

Earlier quoted context omitted.

Sorry, I just don't agree. 120k barely makes expenses for 1 FTE. Not only that, but it's also an amount of money that a strong freelancer can generate on top of living expenses in a particularly well-utilized year.

You're simply empirically wrong [about the 'amount' of money that represents, whether it is large enough to make a substantial difference], and your anchors[1] are not only irrelevant and misleading in an early-stage context, but extremely toxic.[2] What was Google's first check in the amount of? $100K. It was a ton of money. As Wikipedia points out, "The first funding for Google as a company was secured in August 19…

$100K is a ton of money to a student or someone whose career hasn't really "launched" yet. It's peanuts to anyone working in tech with a track record. You can easily save that much money in 1-2 years working at a 9-5 in a big company, or consulting.

The skills to get that big company job or land those consulting clients are pretty much the same skills you need to make your product company successful. An understanding of what people will pay you money for. Ability to execute on a project. Collaboration and communication. And of course, solid coding skills. The difference is that a product company also requires a fair degree of business strategy, determination, and sheer resourcefulness that you don't need to get a job.

So if you want to found a successful company, you're much better off developing those skills, testing them by getting a job or someone else to pay you money, and then striking off on your own. If you just get the money, chances are you will lose the money pretty soon too.

Re: The New Deal

#152

Post by btrautsc »

paulhauggis wrote: post #121
btrautsc wrote: post #62

Earlier quoted context omitted.

Echoed from other places - but doing YC shouldn't be about the money or percentage ownership. Yes, one day you'll look at the cap table and say, "man it would be great to have that x% to give to employees" - but very likely you're company will be in a dramatically different place progress-wise and valuation-wise, so it's a major net-gain. Companies come into YC with nothing but wireframes and companies come in with s…

"Echoed from other places - but doing YC shouldn't be about the money or percentage ownership" If starting a business is not at least somewhat about the money, why not just have everything a non-profit? I've gotten told this very thing, only to have a business-minded company use it to make money on my hard work and effort (you should be happy you get to work on something you enjoy..for 1/2 market value and 50+ hours/…

rahimnathwani is spot on with my interpretation.

Absolutely only start a business because you are driven to make something people want, customers & users love, and to create wealth for you, your partners/ shareholders/ stakeholders involved.

My point re YC is that decision should not be made by weighing the pro's and con's of the money and equity stake you will give up for it (vs other investors for example). The investment money is a tiny fraction of the total value/ resources that YC brings to the table.

Re: The New Deal

#153

Post by eloff »

IgorPartola wrote: post #146
eloff wrote: post #125

Earlier quoted context omitted.

What about a startup that comes to YC with a product and customers already as opposed to just an idea? Surely they give up less than 7% equity? The risk for YC is maybe an order of magnitude less and the equity % should reflect that lowered risk (not saying .7% either, but lower.)

Why would a company like that approach YC and not raise a round on their own? Or better yet, reinvest every penny back into the business without giving up any equity? Won't these companies just self filter?

Well maybe my example is unlikely, although one could argue that the YC brand is worth something in that it will let you raise more from other investors. However, it doesn't need to be so extreme, just that companies that are further along are less risky to YC and it seems strange for YC to artificially offer higher than market prices to said company thus lowering demand. Why would YC want fewer lower risk companies and more high risk ones? The incentives don't seem rational to me.

Re: The New Deal

#154

Post by logicallee »

tptacek wrote: post #149
tptacek wrote: post #117

Earlier quoted context omitted.

Well, that's a whole lot of repeated assertion, and I respect the effort, but you're not making a great case for yourself. It would help if you read my comments more carefully. The one you just replied to was particularly simple. Almost the only thing it says is that being a part of YC improves the odds. But the 120k isn't what's doing that.

(I'd delete this comment too, if I could; I try to always do that when the upthread comment goes. But I don't seem to be able to anymore.)

Right, I just deleted what I could, which I tend to do when I disagree very strongly with the community here on some specific point. I emailed you answers to your remaining questions, happy to continue there.

Re: The New Deal

#155

Post by btrautsc »

austenallred wrote: post #148
DonGateley wrote: post #126

Earlier quoted context omitted.

If one isn't familiar with said financial instruments and all of the other terminology in these comments what is the best remedy for that? Is there any book whose content is pretty much constrained to the elements discussed here?

You don't really need a book. Here's how it breaks down. When an investor invests, he or she is buying a portion of a company. Say I invest $100,000 at a $1 million valuation - I'm actually buying 10% of the company (since 100k is 10% of 1M). There's technically pre-money valuation and post-money valuation, so the company was worth $900K pre and $1M post (depending on whether or not you're including the investor's mo…

I've described the safe (to angels/ some hesitant investors) as effectively an option to invest at the next equity round at a fixed price.

or more accurately a valuation ceiling.

Re: The New Deal

#156

Post by rpgmaker »

LukeWalsh wrote: post #96
chimeracoder wrote: post #20

I predict that this is going to lead to an increase in the number of applicants who have already raised some money (though not a full round). > Most people don’t do YC for the financial investment—they do it because they want the advice, the help of the network, the benefits of the program, etc. But still, more money for less equity is definitely better. This is good news for people who've issued convertible notes be…

I think it's also a great deal for first time founders and people who aren't all that familiar with startup funding. $120k for 7% is a lot clearer than $17k + $80k for 7% + converted shares no cap no discount. I also think this is great news for what it will force other accelerators to do. Many people out there claim to copy YC's model with much less friendly terms on the convertible note. This puts everything out in…

It's way clearer. Is there a book or a resource on the web to learn about startup funding?

Re: The New Deal

#157

Post by MaysonL »

morgante wrote: post #142
acjohnson55 wrote: post #128

Earlier quoted context omitted.

Get the best of both worlds and do a master's at a top notch school. That's my story. I went to good-but-not-world-renowned state school for undergrad on a full ride. I did my best to wring the absolute most out of that experience, and it paid off in many ways, including a fellowship that paid for my master's at an Ivy. Most grad students don't get plugged into "the network", but I went out of my way to engage in cam…

> Get the best of both worlds and do a master's at a top notch school. Glad that worked out for you. To be clear, my school is actually extraordinarily good academically (we're privately funded by an oil fortune)—it's just that the prestige of the name and student's isn't quite at Ivy quality. > Point being, everywhere you are has something to offer. Make the most of your situation! I'm doing my best, and doing prett…

If you're making 6 figures as a sophomore, have you considered putting in apps to transfer to some of the top tier selective colleges? Couldn't hurt.

Re: The New Deal

#159

Post by _delirium »

argonaut wrote: post #83
yahelc wrote: post #49

Earlier quoted context omitted.

Which is, incidentally, not dissimilar from the signaling effects of attending Harvard/MIT/Stanford.

In the tech world, the YC signal > H/M/S signal.

I don't think that's generally true. YC is very well respected in a very specific niche of tech, while H/M/S have much broader name recognition in tech generally. Depends to some extent on what you want to do. YC has great name recognition among VCs, so if you're going that route, it's a good name to have. A Stanford or MIT degree generally has better name recognition among people hiring for tech jobs, especially outside of the SF Bay Area and among people not culturally part of the "startup scene".

Re: The New Deal

#160

Post by asaddhamani »

rpgmaker wrote: post #156
LukeWalsh wrote: post #96

Earlier quoted context omitted.

I think it's also a great deal for first time founders and people who aren't all that familiar with startup funding. $120k for 7% is a lot clearer than $17k + $80k for 7% + converted shares no cap no discount. I also think this is great news for what it will force other accelerators to do. Many people out there claim to copy YC's model with much less friendly terms on the convertible note. This puts everything out in…

It's way clearer. Is there a book or a resource on the web to learn about startup funding?

This does not include a lot about startup funding, at least not the details, but still, for beginners, I'd say its pretty good. http://www.forbes.com/sites/brentbeshore/2013/02/19/the-non-...
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