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Well, if your startup starts to generate significant cash, giving up even a fraction of a percentage of equity as preferred stock (with typical preferred stock
by gyardley 17y ago
Well, if your startup starts to generate significant cash, giving up even a fraction of a percentage of equity as preferred stock (with typical preferred stock rights) is the difference between paying yourself a startup founder's salary and paying yourself as much as you possibly can. In other words, you're shutting the door on a very common way of getting wealthy, the one the vast majority of successful small business owners use.
Certain things about taking investment are binary - percentage ownership is nothing, investor's rights are everything.
- aberman 17y agoI believe YC takes common stock, not preferred stock.
- gyardley 17y agoI've heard that this is so. I've also heard that a YC investment also carries certain contractual terms that approximate the investor's rights that come with preferred stock. I'd have to see actual deal docs to judge. If YC is truly taking only common stock and has only the rights of a common stockholder, it's a good deal.