Yo

What makes you think this is an either-or proposition? There's a glut of capital chasing startup opportunities today. No entrepreneur is entitled to money, but every entrepreneur can compete for it. Sure, some entrepreneurs are better connected than others, which often makes fundraising easier. But at the end of the day, why should investors be implicitly blamed for a failed startup led by an entrepreneur who was unable to convince said investors to provide his or her company with funding?

Sales is an integral part of building a successful business, and if you need capital, you had better be prepared to sell your company to the people you're asking to provide it.

> Congratulations to the Yo team for furthering the research to the origins of the term 'dumb money'.

Even if you subscribe to the notion that there really is "smart money" and "dumb money" when it comes to angels and venture firms, let's not pretend that there isn't such a thing as "dumb entrepreneurship." Entrepreneurs who start businesses without lining up the capital they need to execute are taking a risk. In many cases, especially among young entrepreneurs, that risk is not at all calculated.

On this note, it's sad that so many startup entrepreneurs bet the farm on day one by putting themselves in a position where they believe they need to sell equity to raise capital. There are a variety of ways to fund a business and early on, selling equity is often one of the least attractive despite the sex appeal that Silicon Valley has given it.

In this thread I've seen lines like: "Filling a communication niche", "It reduces that friction of opening your SMS app and typing 'Yo'"

What a surreal thread. It literally could have come straight from a script from HBO's 'Silicon Valley'.

Well there is a seedier way think about it, and I don't like it but I recognize that it is not uncommon.

I would not be surprised if some investor gave the company a 'high' valuation (ie lead the round), invested in their preferred shares, and demanded a 2x or 3x liquidation preference. Let's say you are right and that I am right and there are 3 employees, and lets guess that they are sharing in say 80% of the "equity" but there shares are "common" not "preferred." The employees and founders feel awesome! "Look its worth $12M and we are millionaires!" and they go about their business trying to make it more awesome and cool. Except they can't make it more awesome enough and they need more money. The original investor says "Oh sure, I'm in but I don't want to lead this round." and the founders go out stumping for money, but they can't find anyone who agrees with their original valuation much less an even higher one. What to do? what to do! And the money is running out, and there are people to feed and spouses or significant others who are getting worried. And the "Blam!" the investor mentions they could use an exit to his pal a BigCorp who offers to buy them out in an acqui-hire "terms of the deal not disclosed" and the founders are hired and given 'earn out' packages that force them to work at BigCorp of 3 maybe 4 years, meanwhile our investor clears their liquidation preference, doubles (or maybe triples the cash) in their pocket and if they are participating preferred takes another bite at what ever is left over for the common stock.

Ok so all this evilness speculation speaks poorly for the folks who just invested $1.2M in Yo. Neither I nor probably anyone else really knows what they saw in the company to make them feel that they could get their money back, but it is critical to remember that investors are in it to make money, if the founders get some too that is a "nice to have" but isn't essential. This lack of alignment gets sometimes missed when people like Jacques are wondering "What the heck is going on here?" An investor doesn't care if its a 'down round' if they are getting 2x their money back in under 5 years. Using the rule of 72[1], getting double your money in 4.8 years is a 15% rate of return. A "win" in anyone's book.

[1] https://www.directinvesting.com/drip_learning_center/rule_of...