5 ms·

Question for YC: if a solo founder fully intends never to take additional funding after YC, is that considered defrauding YC (or at least a bad faith applicatio

by _xnmw 5y ago

Question for YC: if a solo founder fully intends never to take additional funding after YC, is that considered defrauding YC (or at least a bad faith application)? I thought YC only invests in companies which it expects to go "VC-scale big", i.e. multiple series of follow-on funding to hit $100M+ annual revenue targets and huge teams?

sjroot 5y ago
I’ve been in this position myself. To be fair, you aren’t bootstrapping if you’re taking YC funds, right? They are seeking returns on this investment in the magnitude seen in previous YC company IPOs, as mentioned in the article. Is a bootstrapped company likely to have that outcome? Possibly, but much less likely than those that have swelled with additional funding rounds and more rapid/predictable public interest.
- _xnmw 5y ago
  Exactly, so if I apply to YC while intending to go big, but not raise additional funding rounds, am I defrauding them with a bad-faith application?
  - Kevin_S 5y ago
    Surely not. If you don't raise another round, YC may just write off this as a cost of doing business (similar to failed startups they've invested). It may be written into the terms some other backup for this situation.
ketzo 5y ago
This is a super valid question that I have seen asked multiple times with no clear answer. I don't really care what YC is expecting; I think that is already extremely clear. They're expecting VC unicorns. The question is what is legal, and what would be breach-of-contract or fraud? I think the answer to those questions 1) probably should not come from an internet forum comment 2) requires the actual documents in question.
snowmaker 5y ago
No. There is no requirement (or implied requirement) to raise more money after doing YC.
donnythecroc 5y ago
I think someone said it becomes debt. Not ideal for YC but not fraud either.
- r97teran 5y ago
  the instrument is a SAFE, which does not convert into debt. rather its just a promise for equity in the future

by _xnmw 5y ago

sjroot 5y ago

I’ve been in this position myself. To be fair, you aren’t bootstrapping if you’re taking YC funds, right? They are seeking returns on this investment in the magnitude seen in previous YC company IPOs, as mentioned in the article. Is a bootstrapped company likely to have that outcome? Possibly, but much less likely than those that have swelled with additional funding rounds and more rapid/predictable public interest.

_xnmw 5y ago
Exactly, so if I apply to YC while intending to go big, but not raise additional funding rounds, am I defrauding them with a bad-faith application?
- Kevin_S 5y ago
  Surely not. If you don't raise another round, YC may just write off this as a cost of doing business (similar to failed startups they've invested). It may be written into the terms some other backup for this situation.

ketzo 5y ago

This is a super valid question that I have seen asked multiple times with no clear answer. I don't really care what YC is expecting; I think that is already extremely clear. They're expecting VC unicorns. The question is what is legal, and what would be breach-of-contract or fraud? I think the answer to those questions 1) probably should not come from an internet forum comment 2) requires the actual documents in question.

snowmaker 5y ago

No. There is no requirement (or implied requirement) to raise more money after doing YC.

donnythecroc 5y ago

I think someone said it becomes debt. Not ideal for YC but not fraud either.

r97teran 5y ago
the instrument is a SAFE, which does not convert into debt. rather its just a promise for equity in the future