141–150 of 238 posts
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Nothing stops them from selling you back their share at close to zero if they really want to right it off.
They might have to prove to the IRS the share was actually worth that. Whereas if the business is bankrupt, it's obvious.
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>However YC gets preferential shares; It's not that YC specifically gets "preferred shares" -- it's that investors in general insist on liquidation preferences when buying non-liquid shares in unproven private companies. How would an alternative scenario of investors buying common shares of illiquid stock in a private company actually be realistic? Maybe the startup founders could hypothetically insist on selling onl…
Why is the risk being taken by investors greater than the one being taken by employees and founders? If anything, employees are taking a greater risk because you can replace money far more easily than years of your life.
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>However YC gets preferential shares; It's not that YC specifically gets "preferred shares" -- it's that investors in general insist on liquidation preferences when buying non-liquid shares in unproven private companies. How would an alternative scenario of investors buying common shares of illiquid stock in a private company actually be realistic? Maybe the startup founders could hypothetically insist on selling onl…
> The problem is that hypothetical VC fund will attract no rational limited partners with money because they know that startup founders can just take their invested dollars with no payback protection. YC famously claims it is not a VC fund because it invests their own money, they wouldn’t have this problem.
Th label "VC fund" can be imprecise because YC itself has changed its structure over the years.
The original 2005 YCombinator where Paul Graham & Friends used some of their personal Yahoo wealth from selling ViaWeb ... instead of raising outside money from "limited partners" ... was the period when they were more like "angel investors".
Today, YC is more institutionalized and has different funds that raise money from outside investors as limited partners -- very much like traditional VC funds. (https://www.google.com/search?q=YC+new+funds+raise+billions)
But YC still doesn't do all the typical "vc fund" procedures such as take a board seat or negotiate a different % with each startup founder on a case-by-case basis. The VC funds like Sequoia/a16z/etc will require a board seat and negotiate different ownership percentages.
So today's YC is a "semi" VC fund depending which aspects are salient to you.
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preferred shares prevent cookie cutter founder fraud. Founder raises $1M at 10 post. Founder decides to sell 6 months later for 2 mil. Investors get 200k back founder gets 1.8 mil. Now run this math for AI unicorns.
This is a valid concern. But shifting risk entirely to those without preferential shares (typically employees) is also unfair.
But as a potential employee interviewing for a new job, if you're being offered equity compensation then you might want to inquire about share classes and liquidation preferences. It could be a factor in your decision if you have multiple options.
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Nothing stops them from selling you back their share at close to zero if they really want to right it off.
They might have to prove to the IRS the share was actually worth that. Whereas if the business is bankrupt, it's obvious.
I'm onehundertpercent pissed off with YC: * The modal win for a founder is $0.00 * PG makes big talk about winner's average returns... Yayyyyy..... However YC gets preferential shares; YC is not aligned with the common shareholders (founders; builders). YC builds a story that they support creators however YC doesn't sit on the same table-side as creators. * I actually believe YC is worthwhile, but I wonder if Ize jus…
The quality bar for YC has been at an all time low. Hence why lots of “startups” are getting accepted into YC in 2024 screaming about AI and some that compete against each other over the same idea, but “open source”. > I actually believe YC is worthwhile, but I wonder if Ize just been brainwashed? Ask yourself, if you really need VC money in the first place. The moment you go to YC, they become your new boss and alwa…
There is nothing to learn from the SVB collapse. They mismanaged interest rate risk and overextended. So what.
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Welcome to capitalism. Of course there is an asymmetry between individual founders and one of the, if not the most famous VC firm on the planet. It's an individual decision to determine whether YC is worthwhile. If it wouldn't be, it wouldn't work.
Silicon Valley is not capitalism, it's financier-ism. It isn't about finding a gap in the market and providing a profitable service, but bandwagoning behind the latest trends so as to chase "scalability" and later using financial/political muscle to weaken regulations so as to better "disrupt" the market. Profits? That's a problem for whoever they manage to dump their shares on.
Many people think capitalism is simply a market economy. It's not. You can have a market economy without "capital" (investors) having special privileges that make all the money flow to them.
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Sure it is. If your business nets 3 million a year, it takes 5 people to run it, and your customer base is steady, that's lifestyle. Sucks for investors, pretty nice for you if you can keep it running.
In other sectors that's just called a "small business" and celebrated as the fullest expression of the American dream. I've always found it funny that tech treats the idea of a going concern with such distaste.
They also make the best story-driven RPGs I've played in my life. And they specifically went the story-driven route because it's cheaper to hire good writers than it is to wow people with AAA graphics or a giant open world or whatever.
More video game companies should be like Falcom.