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New Standard Deal

blog.ycombinator.com

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Re: New Standard Deal

#21

Post by unstuckdev »

mwseibel wrote: post #19
amirhirsch wrote: post #18

Nice to see the offer getting better! I wonder about moral hazard in early stage funding. What if YC were to offer rent and salary for founders for 12 months? This would similarly change the dynamics around founders worrying about money while avoiding some of the temptation to over-spend and generally waste funding before building a product.

Seems like the founder should be the one who figures out how to best spend the money no?

Someone should do a study to see if the lottery effect--where winning the lottery leaves you worse off because you don't know how to handle that much money--is at work with VC funding.

Re: New Standard Deal

#24

Post by amirhirsch »

mwseibel wrote: post #19
amirhirsch wrote: post #18

Nice to see the offer getting better! I wonder about moral hazard in early stage funding. What if YC were to offer rent and salary for founders for 12 months? This would similarly change the dynamics around founders worrying about money while avoiding some of the temptation to over-spend and generally waste funding before building a product.

Seems like the founder should be the one who figures out how to best spend the money no?

I would argue that founders generally figure out how to best spend investment during YC. At the beginning of the program there is enormous pressure to move fast and leverage the YC investment to show progress by demo day. This leads to wasteful spending and probably causes the majority of the financial stress you're trying to offset with an additional $30K.

Re: New Standard Deal

#27

Post by adw »

Kpourdeilami wrote: post #17
neom wrote: post #15

Earlier quoted context omitted.

Have you ever seen the legal fees of priced vs convertibles be the same? I certainly haven't.

I think convertibles cost around $2k at max while priced rounds will start at $20-30k. The $20-30k is not too much money if you are raising over a million but for a $150k round, it is a little bit too much

I had a priced round done (at startup rates, admittedly) by Orrick for a few thousand pounds Sterling – I forget the exact amount, but it was well under £5k – back in '09. They knew it was a loss-leader – lawyers want to build long-term relationships too.

Re: New Standard Deal

#28

Post by wasd »

How representative are the terms outlined in the example? 18.25% for 1.6M where the lead paid 1m for 6.25%? I've never raised money before so I don't know.

Re: New Standard Deal

#29

Post by adamzerner »

> But startup costs have undeniably increased over the past few years. We thought a $30K increase was necessary to help companies stay focused on building their product without worrying about fundraising too soon.

I didn't realize that this was true. I'm interested in hearing more about what has caused the increase in startup costs.

Re: New Standard Deal

#30

Post by stephenhuey »

I'd love to see YC or someone release a definitive recommendation on fair equity distribution among the employees of the company. Maybe there'd be a few variations on it to handle differing scenarios, and even if it's really hard to have a one-size-fits-all I think it'd be similar to their SAFE note which tries to offer a pretty good deal to all involved.
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