Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

90% of Y Combinator Startups Have Already Accepted The $150k Start Fund Offer

techcrunch.com

Post reply on HN
Print view View original

61–70 of 90 posts

Re: 90% of Y Combinator Startups Have Already Accepted The $150k Start Fund Offer

#61

Post by jaredstenquist »

cft wrote: post #40
ebaysucks wrote: post #22

Earlier quoted context omitted.

When offering convertible debt, the investor accepts the valuation at the next round of investments (in this case series A). The risk for the convertible debt investor is that this valuation will be very high and the series A can take a long time. To limit this risk convertible debt investors negotiate valuation caps and discounts. Cap: The convertible debt gets converted at min=[series A valuation, cap]. Discount: T…

Can somebody give me an advice. We have a two person startup, that is making about 20k/mo and it's growing. I am the founder. The thing is, I do not currently plan to raise VC money. My goal is to achieve revenue of 200k/mo by 2013. It is very realistic, but the problem is that as the service grows, we spend more and more time on operations, since certain things were not timely automated. We need about 300k , so that…

I would seek out 2-3 angels who can provide the $300k investment. It's going to be (near) impossible to get a $300k loan on $20k/month gross revenue. Definitely not something any reputable bank will put forth in these times.

You'll likely need to part with 10-20% equity in the business, but the value of the $300k to take you to the next level should make sense. Think of it as - can we get to $200k/m by 2012 if we have $300k/$600k/$1mm. If you can 10x your revenue in a year and give up 20%, you're in a good place.

Re: 90% of Y Combinator Startups Have Already Accepted The $150k Start Fund Offer

#63

Post by jaredstenquist »

pkrumins wrote: post #25
ladon86 wrote: post #24

Earlier quoted context omitted.

Quick answer - he does get equity at the next funding round. What he gets is the amount of equity that $150,000 would buy at that valuation. So if someone else invests $250,000 for 25%, that's a valuation of $1m. Yuri would get 15% at that valuation. He'd get 7.5% at a $2m valuation and so forth.

What happens if there is no next funding round (startup fails)? Do the startup founders have to return the debt?

All is a loss. Entrepreneurs are not help personally liable for the debt in this case.

Re: 90% of Y Combinator Startups Have Already Accepted The $150k Start Fund Offer

#64

Post by brudgers »

rmorrison wrote: post #13
brudgers wrote: post #7

The $150k offer reminds me of a rumor about the way in which Subway selected franchise locations back in the 1980's. Subway wouldn't do extensive market research or study traffic counts. Instead, they would see where there was a McDonalds franchise and then open a franchise in the same catchment area. At least that was the rumor (not to compare YC to McDonalds or Hamburger University).

Supposedly the same thing happens with coffee too. Starbucks does the expensive market research, and then other chains build near Starbucks.

From what I've seen it's not just other chains that locate stores near Starbucks. Even Starbucks locates stores next to Starbucks.

Re: 90% of Y Combinator Startups Have Already Accepted The $150k Start Fund Offer

#65

Post by fosk »

philwelch wrote: post #15
brudgers wrote: post #7

The $150k offer reminds me of a rumor about the way in which Subway selected franchise locations back in the 1980's. Subway wouldn't do extensive market research or study traffic counts. Instead, they would see where there was a McDonalds franchise and then open a franchise in the same catchment area. At least that was the rumor (not to compare YC to McDonalds or Hamburger University).

I heard the rumor about Burger King (combined with the idea that McDonalds would do the extensive market research and study traffic counts and so forth.)

I think Burger King was the first to follow McDonalds - the others were just following Burger King

Re: 90% of Y Combinator Startups Have Already Accepted The $150k Start Fund Offer

#66

Post by Mz »

mindcrime wrote: post #55
Mz wrote: post #37

Earlier quoted context omitted.

Better to fuel your mind with the right foods, supplements, etc. B-complex, good quality sea salt, the right fats -- all good for the brain. And it isn't followed by a crash because it builds capacity rather than squeezing existing resources to get more out of them.

Yeah, I take fish-oil, a b-complex, a regular multi-vitamin, ginko-biloba and a couple of other supplements, and eat moderately healthy and least part of the time. I try not not totally fall into the programmer stereotype when it comes to diet, but the bit about late nights fueled by caffeine and sugar, well... what can I say?

Trying not to belabor the point, but you didn't mention "good quality sea salt". I really think that does important things for the brain and nervous system.

Not really trying to butt in. I've just seen my quality of life go up so much and it's hard to resist sharing my enthusiasm.

EDIT: Oh, and I meant better to feed your brain better than to try "smart drugs". I consume caffeine like it's going out of style. So I didn't mean that.

Re: 90% of Y Combinator Startups Have Already Accepted The $150k Start Fund Offer

#67

Post by mindcrime »

Mz wrote: post #66
mindcrime wrote: post #55

Earlier quoted context omitted.

Yeah, I take fish-oil, a b-complex, a regular multi-vitamin, ginko-biloba and a couple of other supplements, and eat moderately healthy and least part of the time. I try not not totally fall into the programmer stereotype when it comes to diet, but the bit about late nights fueled by caffeine and sugar, well... what can I say?

Trying not to belabor the point, but you didn't mention "good quality sea salt". I really think that does important things for the brain and nervous system. Not really trying to butt in. I've just seen my quality of life go up so much and it's hard to resist sharing my enthusiasm. EDIT: Oh, and I meant better to feed your brain better than to try "smart drugs". I consume caffeine like it's going out of style. So I di…

Interesting... I've never really thought about "sea salt" as being something to seek out specifically. I do consume some, because I eat a lot of nuts (cashews, pecans, almonds, etc.) that are often salted with sea-salt. I have no idea whether or not that constitutes "good quality sea salt" though.

I'll have to do some research, thanks for the pointer.

Re: 90% of Y Combinator Startups Have Already Accepted The $150k Start Fund Offer

#68

Post by waterlesscloud »

Devilboy wrote: post #59
waterlesscloud wrote: post #41

Earlier quoted context omitted.

What's the downside to thinking about it for a week or two to see if there are any non-obvious problems?

Who says they didn't?

The offer was just made to them last night.

Actually, the TC article says many of them signed papers at the offer meeting itself.

I understand the offer sounds fantastic, but surely they'd want some advice first?

Obviously they didn't, but it seems a little rash.

Re: 90% of Y Combinator Startups Have Already Accepted The $150k Start Fund Offer

#69

Post by mcmc »

I was curious about the potential for returns so I considered a scenario: the successful YC companies take series A investment at an average $10 mm pre-money valuation (which is reasonable for a YC company starting off with $150k), and no series B is ever needed before exit. This gives the original investors a 1.5% stake at the time of exit.

In order to return the $6 mm there needs to be $400 mm of exits.

But I don't think it's reasonable to assume that the successful companies wouldn't take additional funding past series A. More likely, any successful company would also take series B funding. Then we'd need to see ~$500 mm - $800 mm to break even.

My guess is that these investments aren't really intended to be profitable. I would guess that they're instead a gateway into future deals that will be profitable.

Re: 90% of Y Combinator Startups Have Already Accepted The $150k Start Fund Offer

#70

Post by ekanes »

mcmc wrote: post #69

I was curious about the potential for returns so I considered a scenario: the successful YC companies take series A investment at an average $10 mm pre-money valuation (which is reasonable for a YC company starting off with $150k), and no series B is ever needed before exit. This gives the original investors a 1.5% stake at the time of exit. In order to return the $6 mm there needs to be $400 mm of exits. But I don't…

I think your logic is generally right, but I'd say in addition to being a gateway into future deals, it's also a guarantee that they'll be in for any truly huge wins.

There's a solid chance that the next Google or Facebook-level company will come through YC, and this deal means they'll get a piece of it.

Post reply on HN