7 ms·

What a horror story. What sort of program offers $100k to that many groups and doesn't follow through? "Whoops, we were $500k short." That goes beyond just be

• cperciva 17y ago
  What sort of program offers $100k to that many groups and doesn't follow through? Not to be facetious, but: A program which doesn't have as much money as they're offering people. The founders of Bootup Labs put some of their own money in, but they're raising money (or trying, at least) from VCs for the rest. They're paying themselves [EDIT: or not -- see reply from dannyrobinson below] from the $50k/startup management fee, not just from expected future profits. Are there any other startup accelerators which do things this way? I'm not aware of any.
  • jey 17y ago
    > $50k/startup management fee What?!
    • cperciva 17y ago
      Bootup Labs is structured as an investment plus a services contract. They give you $50k in exchange for 5% equity, then you immediately pay the $50k back to them in exchange for the office space, accounting services, legal services, mentoring, et cetera. Then they give you a $100k line of credit which converts (at their option) at 1% equity per $10k. It's a very effective way of protecting themselves from downside risk -- if all the startups bomb, the startup founder have nothing and the investors have nothing, but Bootup Labs still has their $50k/startup -- which might be part of the reason why they've had trouble convincing VCs to invest. I think many VCs would be skeptical of a startup CEO who said "we have no revenue and a completely untested business model, but we're going to pay ourselves $100k salaries with your money".
      • gridspy 17y ago
        Incubators that ask you for money _and_ equity make me a little bit sick. Either sell me a service or give me cash for equity. Don't do both.
        • realitycheques 17y ago
          the ____ giveth and the ____ taketh away!
      • rdl 17y ago
        It's pretty common for VCs to have the company being invested in pay for legal/research/etc. expenses out of the investment amount -- so you raise $500k and immediately pay $50k back to the VC for their costs. It's weirder here due to the small scale of investment relative to the costs, and the non-cash services, but not totally implausible.
      • chris11 17y ago
        So would that imply that the founders could try to collect part of the $50k from Bootup Labs? It sounded like when they got kicked out of the program, Bootup Labs only covered the previous months rent, when Statusly should have already paid for rent and services for the entire length of the program. Now if Statusly was only in the program for 2 out of the 8 months, then it seems like the founders could be owed around $35k (50k2/8.95) for the money that they paid to be in the program for the rest of the 6 months.
        • cperciva 17y ago
          I would assume that Statusly never paid Bootup Labs the $50k, due to Bootup Labs never giving them the $50k to give back.
        • bmann 17y ago
          You guys are getting confused with the "rent" word. We paid Statuslys out of pocket expenses (i.e. their apartment and food) because they had no money.
  • dannyrobinson 17y ago
    As a manager of Bootup, I can assure you that we haven't been personally paid anything. The $50k is funnelled through the company to maximize canadian tax credits, which can amount to a meaningful amount of money. And it's used to pay for rent, legal, accounting, and other services that are for the benefit of the startup.
    • cperciva 17y ago
      As a manager of Bootup, I can assure you that we haven't been personally paid anything. My apologies. I had understood that you were drawing a salary from Bootup Labs based on a conversation I had with Boris a few months ago, but I can't remember exactly what he said, and it's quite possible that I misinterpreted him. Even if you're not personally getting paid anything, I think $50k is a rather generous fee given that other startup accelerators don't seem to need any such fee at all.
      • dannyrobinson 17y ago
        Other accelerators get the same fee as well. There are expenses to operate the accelerator plus an investment in the startup, which is exchanged for % in the startup. Often 5%-6%. If you add this up, effectively, the companies are getting $60k of real money spent on them for 6% of the company. That's a $1M post money value. (note: YC is probably an exception to this math since it has no physical space) But, that's how it works for most accelerators. In Bootup's case, we simply funnel the operating costs through the company in order to maximize canadian R&D credits which can amount to 50%+ of development costs. It's just a smart way to leverage more money into the startup, but in the end, the math works out to be the same and those fees are paid to operate the accelerator.
        • fnid2 17y ago
          So essentially what you are doing then is taking money from investors who give you money to put into startups, giving two thirds to the startup and taking one third for yourself. At this rate, what do you care if the startup succeeds or fails? You get $50k no matter what. I can't fathom how you think this is a good deal for anyone but you. This kind of behavior is why vancouver will be better without you.
• realitycheques 17y ago
  ditto that. gong show. The main skilz were self promotion and beer drinkin'.