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So that's around $33k USD. They're only looking to be paid back if you reach profitability. 6% equity to get a $33k loan and some sort of training/advising fo

So that's around $33k USD. They're only looking to be paid back if you reach profitability. 6% equity to get a $33k loan and some sort of training/advising for 13 weeks at their facility, and office space afterwards? Could be a good deal, especially if you have a new business that requires medium amounts of capital costs to get started. If you're getting something manufactured and your first run/prototyping/etc is going to run you $15k, it might be good to do that on their dime. If it works out and you get profitable, you pay them back and they've got their equity. If it fails, they're out the money. Could be good, depending on your circumstance and the specific terms on it. I could see lots of cases where that'd add far more than 6% chance of success and value to the business. Edit: Gosh, a lot of reply comments. To clarify: -You should always, always read the terms carefully in any important contract you're going to sign, and strongly consider hiring a lawyer to give it a once-over. -In this particular deal, you'd want to make sure the loan isn't personally guaranteed and what the terms of calling it are. -I could see times where I'd be ecstatic to take this. Lots of brand new companies would have a much higher success chance and EV with 94% equity, $33k cash in the bank, and $33k in debt with flexible repayment terms than 100% equity, $0 cash, and $0 debt. -Money's worth a lot, and people often underestimate how much it's worth. Especially for an unproven, speculative venture. -It might or might not be a good deal depending on your specific circumstances, and the exact terms of the loan. Again, read contracts carefully and strongly consider hiring a lawyer to look it over. -As always, consider not making flippant comments on Hacker News? It's kind of tiresome to get ignorant and flippant replies when you're trying to do a neutral, factual analysis.

tomstuart 15y ago
It doesn't say anything about not having to pay it back if you don't reach profitability. Their answer to "Do I have to pay back the pre-seed funding?" is "Yes".
- lionhearted 15y ago
  Did you stop reading right there? Here's the next line - > When do I have to pay the pre-seed funding back? Don’t worry, we really don’t want you to hand over the keys to your house or car – this is a soft loan. Our interest is in your success and therefore will only look for the loan to be repaid when it makes sense for your business. This will be done on a case-by-case basis. It makes it sound like the loan is to the business - with limited liability, you don't have to pay it back if the business fails. They say they're flexible on being paid back, and do it on a case by case basis. Anyone doing it should read the contract/loan terms very carefully to make sure there's no personal guarantee and what Oxygen's rights to call the loan are. But assuming the contract terms match the general vibe they've got on their site, it could be a good opportunity. Again, depending on the specific terms and circumstances.
  - chernevik 15y ago
    It certainly _sounds_ that way, but the fine print is what matters. Is the loan a liability of the founder? or the company? Are these super-early ventures actually incorporated? Do they have the savvy to ask these questions? For the sums involved they certainly can't afford much legal advice. And the structure isn't necessary to meet the stated goal of an "evergreen" fund, as equity returns on successful venture should fill that need. It's an odd structure, at best.
    - lionhearted 15y ago
      I've seen loan-for-equity twice in real life, and both times it built profitable businesses. Though they were both older types of businesses with established business models that needed capital to get started, not technology. Anyways, yes, you should always read the terms on an important contract very carefully, and here's no different. Probably a bad deal if there's a personal guarantee on the loan. But assuming the contract is square, I could see circumstances that I'd take this deal in a heartbeat - starting a brand new company with 94% equity, $33k cash in the bank, and a $33k loan with very flexible repayment terms seems like it'd have a much higher chance of success than starting with 100% equity, $0 cash, and $0 debt.
      - armored 15y ago
        Thanks for being the voice of reason lionhearted. It's a little to early to condemn this incubator. The rush to judgement does highlight the need to be totally transparent these days. If you fail to spell out your terms clearly you're going to get raked over the coals by some blogger. BTW. I don't see what's wrong with a personal guarantee. It's nice that you are willing to risk other peoples money, but I think you should be ready to "make one heap of all your winnings, and risk it on one turn of pitch-and-toss". Then you'll be a man.
        cookiecaper 15y ago
        The problem with a personal guarantee is that the lender will always take everything they possibly can, and a personal guarantee leaves no boundaries. It makes it impossible to start up without risking fundamentals of life like housing and transportation, and almost definitely leads to bankruptcy in case things go south. This is OK for some people in the 18-25 age range when they can just go move back in with Mom, but it doesn't work for people with families, people without a safety net, etc. Your lender is not risking his house to loan your company money and you shouldn't risk your house either, especially if you have a family. It's not so easy to start over once you get married and have a couple of kids, and it's not worth risking getting thrown out on the street if it means your children are going to be sleeping in the gutter.
ryancarson 15y ago
The whole reason I wrote the post is because they're acting as if it's normal to ask for equity for a loan (and a tiny loan at that). YC, TechStars, Seedcamp, etc all invest in their companies - not loan them money. The whole thing smacks of a rich guy who just thinks he can throw around his money, call it an 'accelerator' and take candy from babies. I'm doubly angry because here in the UK, we're struggling to get support for new startups and entrepreneurs. Shady deals like this only make it harder for people who genuinely want to support startups (like Seedcamp) to gain traction in the mainstream media.
- random42 15y ago
  Slightly OT: You may want to remove hyper-linking to them in the article. You do not intent to promote them, right?
  - ryancarson 15y ago
    I can't make a valid argument without linking to the service I'm calling in to question.
    - ma2rten 15y ago
      You can use a rel:nofollow link. Then search engines won't take it into account.
      - ryancarson 15y ago
        Good point. Cheers.

tomstuart 15y ago

It doesn't say anything about not having to pay it back if you don't reach profitability. Their answer to "Do I have to pay back the pre-seed funding?" is "Yes".

lionhearted 15y ago
Did you stop reading right there? Here's the next line - > When do I have to pay the pre-seed funding back? Don’t worry, we really don’t want you to hand over the keys to your house or car – this is a soft loan. Our interest is in your success and therefore will only look for the loan to be repaid when it makes sense for your business. This will be done on a case-by-case basis. It makes it sound like the loan is to the business - with limited liability, you don't have to pay it back if the business fails. They say they're flexible on being paid back, and do it on a case by case basis. Anyone doing it should read the contract/loan terms very carefully to make sure there's no personal guarantee and what Oxygen's rights to call the loan are. But assuming the contract terms match the general vibe they've got on their site, it could be a good opportunity. Again, depending on the specific terms and circumstances.
- chernevik 15y ago
  It certainly _sounds_ that way, but the fine print is what matters. Is the loan a liability of the founder? or the company? Are these super-early ventures actually incorporated? Do they have the savvy to ask these questions? For the sums involved they certainly can't afford much legal advice. And the structure isn't necessary to meet the stated goal of an "evergreen" fund, as equity returns on successful venture should fill that need. It's an odd structure, at best.
  - lionhearted 15y ago
    I've seen loan-for-equity twice in real life, and both times it built profitable businesses. Though they were both older types of businesses with established business models that needed capital to get started, not technology. Anyways, yes, you should always read the terms on an important contract very carefully, and here's no different. Probably a bad deal if there's a personal guarantee on the loan. But assuming the contract is square, I could see circumstances that I'd take this deal in a heartbeat - starting a brand new company with 94% equity, $33k cash in the bank, and a $33k loan with very flexible repayment terms seems like it'd have a much higher chance of success than starting with 100% equity, $0 cash, and $0 debt.
    - armored 15y ago
      Thanks for being the voice of reason lionhearted. It's a little to early to condemn this incubator. The rush to judgement does highlight the need to be totally transparent these days. If you fail to spell out your terms clearly you're going to get raked over the coals by some blogger. BTW. I don't see what's wrong with a personal guarantee. It's nice that you are willing to risk other peoples money, but I think you should be ready to "make one heap of all your winnings, and risk it on one turn of pitch-and-toss". Then you'll be a man.
      - cookiecaper 15y ago
        The problem with a personal guarantee is that the lender will always take everything they possibly can, and a personal guarantee leaves no boundaries. It makes it impossible to start up without risking fundamentals of life like housing and transportation, and almost definitely leads to bankruptcy in case things go south. This is OK for some people in the 18-25 age range when they can just go move back in with Mom, but it doesn't work for people with families, people without a safety net, etc. Your lender is not risking his house to loan your company money and you shouldn't risk your house either, especially if you have a family. It's not so easy to start over once you get married and have a couple of kids, and it's not worth risking getting thrown out on the street if it means your children are going to be sleeping in the gutter.

ryancarson 15y ago

The whole reason I wrote the post is because they're acting as if it's normal to ask for equity for a loan (and a tiny loan at that). YC, TechStars, Seedcamp, etc all invest in their companies - not loan them money. The whole thing smacks of a rich guy who just thinks he can throw around his money, call it an 'accelerator' and take candy from babies. I'm doubly angry because here in the UK, we're struggling to get support for new startups and entrepreneurs. Shady deals like this only make it harder for people who genuinely want to support startups (like Seedcamp) to gain traction in the mainstream media.

random42 15y ago
Slightly OT: You may want to remove hyper-linking to them in the article. You do not intent to promote them, right?
- ryancarson 15y ago
  I can't make a valid argument without linking to the service I'm calling in to question.
  - ma2rten 15y ago
    You can use a rel:nofollow link. Then search engines won't take it into account.
    - ryancarson 15y ago
      Good point. Cheers.