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> If your company is really successful, you may find yourself in a position where you need to negotiate some of those pro-rata rights in order to make the round
by dustingetz 6y ago
> If your company is really successful, you may find yourself in a position where you need to negotiate some of those pro-rata rights in order to make the round work (i.e., make enough room to accomodate new new investor demand). ... early seed-stage commitment may upset other investors. Other angel/seed/Series A investors can become unhappy when having to live on a cap table alongside YC.
What's this about?
- amacneil 6y agoYC takes 7%. Lead seed investor wants to take 15-20% to make it worth their while. Lead series A investor wants to take 15-20% to make it worth their while. Other investors and option pools each round increase dilution further. Founder doesn't want to give up 50-60% of company by their series A, so because they gave YC 7% they must either convince the lead investors to take a smaller percentage, or convince YC or seed investors to drop their pro rata rights. Of course, you could argue that the company wouldn't have seed or series A investment had they not joined YC, so in that sense it's a nice problem to have.
- deleted 6y ago[deleted]
- drodio 6y agoYep.