5 ms·

I really like the idea behind this, but I take issue with the fact that if someone does start a company, Pioneer will take 3% with the option of buying 5% more

I really like the idea behind this, but I take issue with the fact that if someone does start a company, Pioneer will take 3% with the option of buying 5% more of the company for $20,000. That seems pretty unfair. I would be inclined to participate if this term didn't exist, or if it were either more financially generous or took less equity. But I wouldn't want to develop any idea through Pioneer if any future idea (for the next 8 years) could be poached for so little. It almost strikes me as a lazy way of running a semi-accelerator. I do think it's great that you're giving $5000 grants to help people develop projects and themselves, but this seems to disproportionately penalize people who want to commercialize their current or any future ideas (Edit: why was my comment moved from being the top reply to the danicgross comment to a reply to the top level article?)

rndmwlk 8y ago
I could swallow the 3%, the networking opportunities are probably worth that to be honest (especially for a 'project' that isn't a tangible company or product yet), but the option is ridiculous. I also don't understand the system. I have to put my idea for a project on some leader board for other people to vote on? If I feel my idea has any worth why would I do that? I actually just planned on starting up a project, and I'd be interested in applying - but I don't want to put my plans out on a forum full of ambitious, eager, and talented people.
- opportune 8y ago
  I agree on the 3% although the fact that it applies to any company founded over the next 8 years seems a little bit of a stretch. If you meet someone 5 years later who wants a cofounder, seems like it could be not-insignificant penalty. I would honestly prefer to not take the $5000 if it meant I could get the networking opportunities without the 3% equity. The option is just egregiously not worth it and represents a major liability to anyone looking start a company that needs to raise significant amounts of capital
  - rndmwlk 8y ago
    I didn't see the 8 year part until after I had commented. That is completely absurd.
- thaumaturgy 8y ago
  Ambitious, eager, and talented people that are likely already working on their own projects. "Idea theft" is a thing that happens sometimes, but the far more common problem is "idea stillbirth", where people are willing to put ridiculous barriers up in front of themselves for fear of their idea being stolen. If there's valuable help available that will improve the chances of turning an idea into a tangible thing, then people should accept it and let go of the fear that they're risking some kind of innate value in the idea itself. I don't see that the ask from Pioneer is all that onerous either, although I'm not a cut-throat business guy. They seem to be pursuing people for whom this would be a fantastic opportunity regardless. I think HN is a being a bit quick to judge this through the lens of, "I already have lots of opportunities and this one just isn't good enough for me."
danicgross 8y ago
I agree and I disagree. I agree if you're a Silicon Valley tech entrepreneur who knows they can raise a seed round together. If that's you, you shouldn't take our offer. Raise the seed round; you'll get great terms. There are about 7.4 billion people who aren't Silicon Valley tech entrepreneurs. Most of them do not have a convenient line to investors, because investors don't happily fund writing the next great American novel, working on a demo tape, trying to prototype out an undergraduate research paper, or running companies in their neck of the woods. Pioneer could potentially fund all of those things. We're going to be making bets on folks substantially before they have the indicia of success that investors screen for... substantially before anyone could even say "This person will someday found a company." The math for this to be sustainable requires that the equity slice be higher than someone would ask for if they knew 100% of their investments were in high-potential companies.
- opportune 8y ago
  I see the logic behind this. I guess part of me wishes that the fact that this is investment, rather than philanthropy, were made more clear. I didn't realize that financial sustainability was contingent on bringing in non-donated money.
- kxyvr 8y ago
  I think there are a couple of reasons for the reactions here: 1. By using Einstein's name in your marketing, you're using the name of a scientist who worked for a university whose ostensible mission is to create and disseminate knowledge for the public good. By contrast, you're seem to be running a small investment firm. 2. If we accept that you're looking to make a financial investment in a company, the amount of money that you're offering is astoundingly low given the terms that you propose. Yes, if someone doesn't like your offer, they don't have to accept it. However, at the same time, you seem to be targeting people who don't know how to obtain their own money, which suggests young and naive. From that perspective, your investment seems exploitative. Candidly, from my own personal opinion, these sort of arraignments are not OK. Learning to run a business is hard, but in my opinion, ultimately rewarding. Offers like these attempt to normalize a behavior that experienced business people would scoff at. Unfortunately, $5k is not going to pay many bills. If I'm in a position to take advantage of the networking that you imply, that means that I already need to have enough money to support myself until the business gets off the ground. If I have that much money laying around, then I'm already a good position to make a go at business and giving up that much equity is exploitative. Further, there are details implied in the offer that are generally not good for a new business. Equity means I need to have shares, which probably means an S-corp or a C-corp. Most starting businesses should probably file as a sole-proprietorship (as an LLC or not) because the accounting is vastly easier, which means cheaper. How does your arrangement work if someone has a business structure with no shares? In case someone else asks how to get money for a new business if not for programs like this: There are others depending on where you live. In the U.S., both government SBIR and STTR grants are, in my opinion, good sources of money and don't require equity. A phase-1 grant gives about $80-100k, phase-2 $400-500k, phase-3 low millions. In Norway, I've seen good things from Innovasjon Norge. Certainly, I appreciate when people try to help others learn business. It just seems like this strategy isn't it.
starlingforge 8y ago
I am glad I read the comments first, the 8 years clause is not at all obvious at first and that is a huge deal. Even if you are a starving genius in Africa with access to the internet, that hardly seems lucrative assuming you will go on from your first effort (with just $5k to run on you must really be a genius). Then this vulture fund takes and takes and takes. This reeks of exploitation.

rndmwlk 8y ago

I could swallow the 3%, the networking opportunities are probably worth that to be honest (especially for a 'project' that isn't a tangible company or product yet), but the option is ridiculous. I also don't understand the system. I have to put my idea for a project on some leader board for other people to vote on? If I feel my idea has any worth why would I do that? I actually just planned on starting up a project, and I'd be interested in applying - but I don't want to put my plans out on a forum full of ambitious, eager, and talented people.

opportune 8y ago
I agree on the 3% although the fact that it applies to any company founded over the next 8 years seems a little bit of a stretch. If you meet someone 5 years later who wants a cofounder, seems like it could be not-insignificant penalty. I would honestly prefer to not take the $5000 if it meant I could get the networking opportunities without the 3% equity. The option is just egregiously not worth it and represents a major liability to anyone looking start a company that needs to raise significant amounts of capital
- rndmwlk 8y ago
  I didn't see the 8 year part until after I had commented. That is completely absurd.
thaumaturgy 8y ago
Ambitious, eager, and talented people that are likely already working on their own projects. "Idea theft" is a thing that happens sometimes, but the far more common problem is "idea stillbirth", where people are willing to put ridiculous barriers up in front of themselves for fear of their idea being stolen. If there's valuable help available that will improve the chances of turning an idea into a tangible thing, then people should accept it and let go of the fear that they're risking some kind of innate value in the idea itself. I don't see that the ask from Pioneer is all that onerous either, although I'm not a cut-throat business guy. They seem to be pursuing people for whom this would be a fantastic opportunity regardless. I think HN is a being a bit quick to judge this through the lens of, "I already have lots of opportunities and this one just isn't good enough for me."

danicgross 8y ago

I agree and I disagree. I agree if you're a Silicon Valley tech entrepreneur who knows they can raise a seed round together. If that's you, you shouldn't take our offer. Raise the seed round; you'll get great terms. There are about 7.4 billion people who aren't Silicon Valley tech entrepreneurs. Most of them do not have a convenient line to investors, because investors don't happily fund writing the next great American novel, working on a demo tape, trying to prototype out an undergraduate research paper, or running companies in their neck of the woods. Pioneer could potentially fund all of those things. We're going to be making bets on folks substantially before they have the indicia of success that investors screen for... substantially before anyone could even say "This person will someday found a company." The math for this to be sustainable requires that the equity slice be higher than someone would ask for if they knew 100% of their investments were in high-potential companies.

opportune 8y ago
I see the logic behind this. I guess part of me wishes that the fact that this is investment, rather than philanthropy, were made more clear. I didn't realize that financial sustainability was contingent on bringing in non-donated money.
kxyvr 8y ago
I think there are a couple of reasons for the reactions here: 1. By using Einstein's name in your marketing, you're using the name of a scientist who worked for a university whose ostensible mission is to create and disseminate knowledge for the public good. By contrast, you're seem to be running a small investment firm. 2. If we accept that you're looking to make a financial investment in a company, the amount of money that you're offering is astoundingly low given the terms that you propose. Yes, if someone doesn't like your offer, they don't have to accept it. However, at the same time, you seem to be targeting people who don't know how to obtain their own money, which suggests young and naive. From that perspective, your investment seems exploitative. Candidly, from my own personal opinion, these sort of arraignments are not OK. Learning to run a business is hard, but in my opinion, ultimately rewarding. Offers like these attempt to normalize a behavior that experienced business people would scoff at. Unfortunately, $5k is not going to pay many bills. If I'm in a position to take advantage of the networking that you imply, that means that I already need to have enough money to support myself until the business gets off the ground. If I have that much money laying around, then I'm already a good position to make a go at business and giving up that much equity is exploitative. Further, there are details implied in the offer that are generally not good for a new business. Equity means I need to have shares, which probably means an S-corp or a C-corp. Most starting businesses should probably file as a sole-proprietorship (as an LLC or not) because the accounting is vastly easier, which means cheaper. How does your arrangement work if someone has a business structure with no shares? In case someone else asks how to get money for a new business if not for programs like this: There are others depending on where you live. In the U.S., both government SBIR and STTR grants are, in my opinion, good sources of money and don't require equity. A phase-1 grant gives about $80-100k, phase-2 $400-500k, phase-3 low millions. In Norway, I've seen good things from Innovasjon Norge. Certainly, I appreciate when people try to help others learn business. It just seems like this strategy isn't it.

starlingforge 8y ago

I am glad I read the comments first, the 8 years clause is not at all obvious at first and that is a huge deal. Even if you are a starving genius in Africa with access to the internet, that hardly seems lucrative assuming you will go on from your first effort (with just $5k to run on you must really be a genius). Then this vulture fund takes and takes and takes. This reeks of exploitation.