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Throwaway account for obvious reasons: While the words of warning in this article may be true, they (sadly) sound like a thinly veiled complaint about competit
by throwmeplz700 7y ago
Throwaway account for obvious reasons:
While the words of warning in this article may be true, they (sadly) sound like a thinly veiled complaint about competition increasing pressure on YC's investment turf.
Founders should be grateful for, not skeptical of, increased funding and competition in early rounds as it should help them raise on better terms!
- clhodapp 7y agoThe complaint seems to be about the duplicity, not the raw interest in investing.
- tlb 7y agoThere is, of course, a potential conflict of interest anytime an investor gives advice about other investors. But not as much as you'd think, when the investors specialize in different stages. The rounds typically go: seed - angel - series A - series B - series C ... YC only does seed and series B onwards, so it can give unbiased advice about angel and series A. By the time a startup is doing series B, they should have in-house experts.
- Tomte 7y agoI've never understood these terms. Is there a clear definition for those? Seed is very little money, angel is more money, but still small enough that a wealthy individual can provide it? Series A, B and C are pretty much the same, it just so happens that companies usually re-capitalize three times before going bust or IPO? (The whole space is very perplexing, the idea of diluting earlier investors sounds outright fraud-like to me, but obviously it's well-accepted and probably priced in.)
- icedchai 7y agoAngels are often part of seed rounds. Differentiating between the two seems pointless. Also dilution is part of equity. There is nothing fraudulent about it.
- soup10 7y agounwanted dilutions, share issuance dilution scams, controlling share dilution schemes, clawbacks... there's a lot of unpleasant things that can happen to minority stakeholders
- deleted 7y ago[deleted]
- nabnob 7y agoNot sure I follow your reasoning. Even if YC only does seed and series B, investments in other stages have an impact their investment. YC has incentive to give advice that aligns with their interests.
- pge 7y agoI read the article differently. At the end, the warning seems to be less about lack of disclosure (i.e. funds masquerading as angels) and more about the consequences of taking large amounts of capital under a safe or convertible structure. That is very much a legitimate concern, and a mistake I have seen a number of startups make.
- akharris 7y agoTo me, more capital is a good thing. If that creates competition which forces us to improve, that's even better. My point is that investors who hide their incentives by obfuscating that they have outside sources of funding are exhibiting bad behavior. Founders should know about this pattern so that they can make decisions with as much information as possible.
- deleted 7y ago[deleted]