The New Deal • Hacker News Board

Re: The New Deal

#121

Post by paulhauggis » Tue, Apr 22, 2014, 9:50 PM UTC

btrautsc wrote: post #62

cperciva wrote: post #4

I can't help thinking that this seems a little bit unfair. While there's a nominal out for "exceptional cases", it seems to me that a company like Stripe deserves a much higher valuation than a company like Tarsnap... not to mention the difference between companies which are joining YC after they're already established and companies which are merely a twinkle in their founders' eyes. What exactly is the problem being…

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/week)

Re: The New Deal

#122

Post by iandanforth » Tue, Apr 22, 2014, 9:54 PM UTC

I really like this model. There are plenty of people who enjoy haggling and the finer points of contracts, but I'm not one of them. If all deals were this simple I think SV startups would save a lot of time, headache and money spent on lawyers.

Re: The New Deal

#123

Post by iRaj » Tue, Apr 22, 2014, 9:55 PM UTC

The simple truth is that the new deal is better than the previous one and there is no denying the value add on that YC brings to startups. Also, the fact that many accelerators and incubators would follow the YC lead and increase their initial investments augurs well for the startup ecosystem. Well done YC.

Re: The New Deal

#124

Post by espitia » Tue, Apr 22, 2014, 10:14 PM UTC

gomox wrote: post #102

espitia wrote: post #85

It would be great to see this annotated on RapGenius in order to learn all the terminology and how investment like these work.

Here you go: http://news.rapgenius.com/Sam-altman-the-new-deal-annotated Feel free to comment (it's not very intensive in terms of VC deal terminology, but I wanted to give RG a spin).

Wow, thank you so much. You made it really easy to understand.

Re: The New Deal

#125

Post by eloff » Tue, Apr 22, 2014, 10:17 PM UTC

sama wrote: post #16

cperciva wrote: post #4

I can't help thinking that this seems a little bit unfair. While there's a nominal out for "exceptional cases", it seems to me that a company like Stripe deserves a much higher valuation than a company like Tarsnap... not to mention the difference between companies which are joining YC after they're already established and companies which are merely a twinkle in their founders' eyes. What exactly is the problem being…

very few people do YC primarily for the money (though, as i said in the post, more money for less equity is definitely better than the opposite!), and whether a company is brand new or 6 months old, we think we can increase their valuation by more than 7%.

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.)

Re: The New Deal

#126

Post by DonGateley » Tue, Apr 22, 2014, 10:24 PM UTC

zmitri wrote: post #78

austenallred wrote: post #5

I'm more excited about the effect this will have in general than the effect it will have on YC companies. The difference for a YC company is that they don't have to give up an extra percentage as they raise their seed round to cover the convertible note/SAFE that they got from YCVC. With no discount, if a YC company raised at a $10M valuation that 80,000 would be worth .8% of the company - not enough to really move t…

Second point is spot on. Before it was kind of explicit that you should take the SAFE, but if you weren't familiar with financial instruments or how exactly MFN clauses worked, you could run into issues you weren't completely aware of. The new way smooths all that out.

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?

Re: The New Deal

#127

Post by ScottBurson » Tue, Apr 22, 2014, 10:25 PM UTC

logicallee wrote: post #51

tptacek wrote: post #15

Earlier quoted context omitted.

They obviously can, the same way that they can offset the dollars by paying for their childrens' living expenses. But $120k is just not a lot of money. The real value of YC is the signal that getting accepted sends to other seed investors.

> But $120k is just not a lot of money. The real value of YC is the signal that getting accepted sends to other seed investors. This idea (first quoted sentence) needs to die. It is toxic to the early-stage ecosystem. Any amount of money is a ton of money. Period. You can ignore the hustling that Jobs or Zuckerberg did for literally a couple of thousand dollars - read Zuckerberg's contracts at the time he was at Harv…

I don't think you're expressing yourself very well, but I do think you have an interesting point. I would put it this way: if you want to start a company, and you manage to raise, say, $30k from friends and family, you should be very much encouraged, not discouraged. That's not to say you won't want to raise more later, but this may very well be enough to get you off the ground.

Re: The New Deal

#128

Post by acjohnson55 » Tue, Apr 22, 2014, 10:28 PM UTC

morgante wrote: post #97

Beliavsky wrote: post #11

I have wondered if affluent parents can replicate at least the money part of Y Combinator. $120K is about the list price of two years of Harvard/MIT/Stanford . With a son who loves to program, I have wondered if sending him to a cheaper school and giving him the difference in installments after he graduates is better than paying for a "name" school. It depends on the quality of the cheaper school, of course. And I th…

As someone who essentially took that path, I can't recommend it. My parents and I had saved up a decent college fund ($100k or so), but instead of using that to go to Top School I took the chance on a school which offered me a full ride. Sure, I'll be graduating about ~$140k better off than most other students. But over the lifetime of a successful tech entrepreneur that amount of money is fairly meaningless. Having…

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 campus life. In the process, I'm fairly positive I built just as good of a network as if I had attended for undergrad.

Point being, everywhere you are has something to offer. Make the most of your situation!

Re: The New Deal

#129

Post by sara125 » Tue, Apr 22, 2014, 10:30 PM UTC

sama wrote: post #35

huslage wrote: post #18

Why do nonprofits get less money?

we tried asking some foundations if they would do a similar deal, and disappointingly they wouldn't. we will keep trying, but we wanted to get something in place for this batch. 100k is not that different 120k. i think it's pretty awesome that one of our startups is stepping up and being creative when traditional supporters of non-profits were reluctant to try a new approach.

What would be the benefit to foundations of doing a similar deal? Seems that they mostly have passed on YC-funded nonprofits including Immunity Project and Zidisha; and for good reasons. It seems that YC is a little behind when it comes to nonprofits - funding things that were very popular years ago like crowdfunding (Kiva comes to mind). These things are still exciting but they aren't at the edge of nonprofit innovation today. Organizations like Sanergy or GiveDirectly are really disrupting the nonprofit industry. Would love to see YC make a bet like one of those.

Re: The New Deal

#130

Post by _deh » Tue, Apr 22, 2014, 10:34 PM UTC

SocksCanClose wrote: post #89

logicallee wrote: post #51

Earlier quoted context omitted.

> But $120k is just not a lot of money. The real value of YC is the signal that getting accepted sends to other seed investors. This idea (first quoted sentence) needs to die. It is toxic to the early-stage ecosystem. Any amount of money is a ton of money. Period. You can ignore the hustling that Jobs or Zuckerberg did for literally a couple of thousand dollars - read Zuckerberg's contracts at the time he was at Harv…

... actually a "ton" of money is technically £2000, or $3365 at the 22APR14 exchange rate. $120,000 is therefore ~35.66 tons of money.

A ton is £100, you're thinking of an Archer.