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Student here. What confuses me is why 90% of the companies, according to TechCrunch, took the funding. From what it seems like, the $150k is for each YC compan

by kloncks 16y ago

Student here. What confuses me is why 90% of the companies, according to TechCrunch, took the funding. From what it seems like, the $150k is for each YC company to decide upon. Why now? Surely most (if not all) YC companies don't need an additional $150k after just a few weeks in the program. It's great that the $150k is there for everyone when they need it. Raising money, which is usually a distraction, is now much more easily expedited. While that's great, I just question the timing. Why did 90% accept the money now? No one needs it. Within the next few weeks, we might see better deals. Sequoia and others might want to compete. There might be better offers. That's my one concern so far with this.

fizx 16y ago
Who doesn't want free money? I don't need $150k, but if someone offered a zero-interest loan with a repayment date I can push off arbitrarily long, why wouldn't I take it before they changed their mind?
- kloncks 16y ago
  It's not like that. I offer you $150k to take anytime within the next few months. You can take them now...or wait and see if you get a better deal in a few weeks. The $150k is still here. For you, if you need it. Just don't rush is all I'm saying.
  - jackowayed 16y ago
    What better deal? This turns into an extra $150k of investment in any future deal you get. If someone takes this and then Sequoia knocks on their door the next day offering them $20M at a $100M valuation, the fact that they took this deal just means that they get $20M+$150k at a $100M valuation.
lacker 16y ago
Deals fall through. Money in your bank account doesn't. http://www.paulgraham.com/startupfunding.html http://www.paulgraham.com/startupfunding.html
patio11 16y ago
It is an extraordinarily generous deal, and I can imagine many reasons to accept on the spot, some of them good. That said, I might have gone and cooled my head somewhere while thinking things through, and possibly chatting with a lawyer or other advisor. I preface the following comment with "We're all businessmen and know how this game works, right?" because it may sound greedy or contrary-to-the-communal-spirit : if you have just told me you want to invest $150k at hyper generous terms without knowing anything about me, I have reason to suspect that a five minute conversation has a high probability of leading to a better offer. ("Hiya, you just offered 150k sight unseen. Salient fact: our traction is... Cool huh? Would you be interested in investing more than $150k at the terms mentioned earlier?") I suspect that $150k is the lowest possible outcome of that conversation.
- jnovek 16y ago
  I don't know much about Yuri, but I've never met anyone who regretted taking money from Ron Conway/SV Angel. He's one of the nicest and most founder-friendly investors in the valley.
webwright 16y ago
"there might be better offers." It's possible, but there just about CAN'T be a better offer. I guess investors could literally pay founders to take their investment. This is, quite literally, the best early stage investment deal that any entrepreneur will ever see. It also gives them tremendous leverage on demo day and beyond should they want to raise money... If there isn't strong interest and good terms, they can say, "screw this, we'll go hunker down and prove some of the theories that these investors are doubting... Or we'll just go lean and get profitable."
hristov 16y ago
Here is a life lesson. If someone offers you money, take it ASAP. If it is a deal this good, i.e., a zero interest loan that you can repay with equity, just take the money put it in your bank account and then you can figure out what to do with it. I mean it is not like you have to pay interest on it. You are not guaranteed that the money "will be there when you need it." Many things can happen. The economy can go south again, the investors may decide they need the money after all. A new hot investment class can emerge. A high profile startup may go down in flames and scare off all investors. Regarding better deals, nothing in this deal prevents companies from taking other investments.
jnovek 16y ago
$15k to 20k will probably get two to three founders four months the bay area when you consider additional expenditures such as moving, equipment, business costs, etc. Some YC founders are lucky enough to have savings or family to fall back on, but we weren't. We ended up having to focus on revenue before it would have been optimal; we had to consider raising before it would have been optimal. $150k would have probably meant better terms for us later and would have allowed us to focus 100% on our product during our YC months. Regarding the terms, they are fantastic. Because there is no cap on the note, the debt converts at whatever valuation you get in future funding. That means that you can receive this and pursue the proverbial fantastic deal from Sequoia later on without any cost (aside from the actual equity that you will spend on the deals). Effectively, it's not possible for there to be a "better" offer, because the note is as good as whatever other funding you take.

by kloncks 16y ago

fizx 16y ago

Who doesn't want free money? I don't need $150k, but if someone offered a zero-interest loan with a repayment date I can push off arbitrarily long, why wouldn't I take it before they changed their mind?

kloncks 16y ago
It's not like that. I offer you $150k to take anytime within the next few months. You can take them now...or wait and see if you get a better deal in a few weeks. The $150k is still here. For you, if you need it. Just don't rush is all I'm saying.
- jackowayed 16y ago
  What better deal? This turns into an extra $150k of investment in any future deal you get. If someone takes this and then Sequoia knocks on their door the next day offering them $20M at a $100M valuation, the fact that they took this deal just means that they get $20M+$150k at a $100M valuation.

lacker 16y ago

Deals fall through. Money in your bank account doesn't. http://www.paulgraham.com/startupfunding.html http://www.paulgraham.com/startupfunding.html

patio11 16y ago

It is an extraordinarily generous deal, and I can imagine many reasons to accept on the spot, some of them good. That said, I might have gone and cooled my head somewhere while thinking things through, and possibly chatting with a lawyer or other advisor. I preface the following comment with "We're all businessmen and know how this game works, right?" because it may sound greedy or contrary-to-the-communal-spirit : if you have just told me you want to invest $150k at hyper generous terms without knowing anything about me, I have reason to suspect that a five minute conversation has a high probability of leading to a better offer. ("Hiya, you just offered 150k sight unseen. Salient fact: our traction is... Cool huh? Would you be interested in investing more than $150k at the terms mentioned earlier?") I suspect that $150k is the lowest possible outcome of that conversation.

jnovek 16y ago
I don't know much about Yuri, but I've never met anyone who regretted taking money from Ron Conway/SV Angel. He's one of the nicest and most founder-friendly investors in the valley.

webwright 16y ago

"there might be better offers." It's possible, but there just about CAN'T be a better offer. I guess investors could literally pay founders to take their investment. This is, quite literally, the best early stage investment deal that any entrepreneur will ever see. It also gives them tremendous leverage on demo day and beyond should they want to raise money... If there isn't strong interest and good terms, they can say, "screw this, we'll go hunker down and prove some of the theories that these investors are doubting... Or we'll just go lean and get profitable."

hristov 16y ago

Here is a life lesson. If someone offers you money, take it ASAP. If it is a deal this good, i.e., a zero interest loan that you can repay with equity, just take the money put it in your bank account and then you can figure out what to do with it. I mean it is not like you have to pay interest on it. You are not guaranteed that the money "will be there when you need it." Many things can happen. The economy can go south again, the investors may decide they need the money after all. A new hot investment class can emerge. A high profile startup may go down in flames and scare off all investors. Regarding better deals, nothing in this deal prevents companies from taking other investments.

jnovek 16y ago

$15k to 20k will probably get two to three founders four months the bay area when you consider additional expenditures such as moving, equipment, business costs, etc. Some YC founders are lucky enough to have savings or family to fall back on, but we weren't. We ended up having to focus on revenue before it would have been optimal; we had to consider raising before it would have been optimal. $150k would have probably meant better terms for us later and would have allowed us to focus 100% on our product during our YC months. Regarding the terms, they are fantastic. Because there is no cap on the note, the debt converts at whatever valuation you get in future funding. That means that you can receive this and pursue the proverbial fantastic deal from Sequoia later on without any cost (aside from the actual equity that you will spend on the deals). Effectively, it's not possible for there to be a "better" offer, because the note is as good as whatever other funding you take.