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This article is absolute trash since it doesn't explain how the bankruptcy of the accelerator would change the amount of dilution the startups experience. Taki
by _cs2017_ 2y ago
This article is absolute trash since it doesn't explain how the bankruptcy of the accelerator would change the amount of dilution the startups experience.
Taking the information in the article at face value, the startups paid the accelerator (partially) with warrants. Those warrants have a fixed exercise price; the courts cannot change that. Whether those warrants are exercised by the accelerator or by the creditors, the dilution will be exactly the same. This is not at all affected by whether creditors bought the warrants for penny on the dollar or for a billion dollars.
Maybe there's some reason why warrant owner matters. But the article makes no attempt to state or even hint at such a reason.
I wish there was a way to blacklist domains from showing up on my Hacker News feed so I don't have to keep reading this type of junk journalism.
- hn_throwaway_99 2y agoWhy the diatribe? > Maybe there's some reason why warrant owner matters. It's a well understood fact by anyone in the startup world that it does matter, because future investors or acquirers care deeply about the structure of your cap table. Furthermore, the article gives an explicit example of this: > She had lined up a grant from a bank to help fund her offer, but it ultimately told her no because it was too risky for them to be involved with an unknown warrant holder on her cap table.
- sroussey 2y agoThat paragraph makes no sense. A bank is offering her a grant? And this grant was supposed to remove the warrant holder from the cap table, so why would they have a problem with that? And having some unknown warrant holder is the reason to shut down? I call BS.
- rvba 2y agoWhat is the business model of an "AI smart-matching tool for humanitarian aid"? Spunds like a word salad, or a weekend project for a developer that could be hosted for few bucks per month.
- b112 2y agoRead your comment and parent. The quote from the article doesn't explain why the warrant owner matters, and you suggest the cap table structure does, which makes sense. However, the structure has nothing to do with ownership of parts of that structure. Why would warrant ownership matter?
- llamaimperative 2y agoBecause as an investor in a company, you don’t want that company’s founders constantly distracted by a piece of shit investor who has a massive stake in their company. Pretty straightforward. Investors can create tons of havoc, and “bought equity from a bargain bin outside of a bonfire” is probably as good a warning sign as any.
- b112 2y agoThe size of the warrant is still the structure. In terms of investment, as the warrant is demonstratedly transferable, the investor ownership is always an unknown. This still sounds like structure(size and control of a single warrant) rather than who. The real issue seems to be any large warrant, that is, the uncertainty in the structure.
- _cs2017_ 2y agoSo your point is that a good investor should agree to a buyout offer but the bad investor doesn't? In other words, the original warrant holders (the accelerator) would have happily agreed to the founders buyout offer funded by the bank's grant? Why would they do that, if the whole point of an accelerator is to accumulate shares in the startups?