4 ms·
What kind of messy things happen with 150k that don't happen with 80k?
by debacle 14y ago
What kind of messy things happen with 150k that don't happen with 80k?
- rdl 14y agoI think the assumption is that only the most colossal implosions happen in the first 6mo after YC. It's much easier for 2-3 people plus 1-2 hires to burn through most of $80k in 6mo after YC, vs. 150k. Figure founders consume $3-4k/mo each, and hires cost $10-15k, and you spend $20-30k on corp/legal/etc.
- debacle 14y agoI was asking specifically about: > it sometimes caused messy disputes in the unsuccessful ones. I can't imagine a dispute that would occur at 150k but not at 80, except maybe of the cut-and-run variety, but the same could be said of any dollar amounts - you need to know when to cut your losses.
- rdl 14y agoThe dispute happens after some of the money is burned off. Only very exceptional people get divorced during their honeymoon. Assuming a constant burn rate, there's much less money left when you start with a smaller pile. (and, virtually anyone who can get into YC is passing on a $10-15k/mo income opportunity by just getting a job somewhere. Fighting for 1-2 mo of wages makes less sense than fighting for 6-12. The dispute would happen anyway, but it's not worth fighting if there's only a small balance left.)
- hosay123 14y agoVC loses $70k
- loceng 14y agoVC loses half the equity they would get otherwise..
- ridruejo 14y agoThe equity is insignificant, specially for the top startups. What those 20k buys the VC is first-hand knowledge of what is going on with the company and (hopefully) a better chance to invest additional money when/if the company takes off.
- loceng 14y agoOf course, though it's still half of what they'd get before. That is better for the startup. Don't take more money than you need, unless you're getting a really good deal - though then you could burn and piss off VCs and may look bad during future rounds.
- pramodgs 14y agoThe companies get into a habit of spending more than required on everything.
- pg 14y agoIt's a matter of degree. In the old days, when a startup fell apart, the founders would just go their separate ways. When every startup got $150k, sometimes they'd end up fighting over the carcass instead. Our hope is that now they'll fight half as hard.
- robryan 14y agoI would have assumed that the startups would pay whatever they had left of the $150k if they were folding? Or are you referring to cases where at least one founder wants to continue?
- pyoung 14y agoOut of curiosity, what does the 'carcass' usually consist of? Wouldn't any leftover money go back to investors? Or does that get divided out to founders (seems like that would be a bad incentive). Or is it mostly related to the product (domains, code, etc..)?
- shimon 14y agoTechnically if a company were to dissolve, its assets would belong to shareholders (investors, founders, YC, etc.). In practice, though, it's rare for everyone to agree to dissolution while there's still money in the bank. Instead, you have a guy who has given up arguing against a guy who wants to put in a few more months. Less money in the bank means less arguing about "another pivot" vs. "let's just move on to new things".
- drusenko 14y agoyou have to understand that YC & the start fund has little to no control over the companies, except perhaps moral authority. YC has common shares (and a small minority at that) while the start fund is arguably even worse off with a convertible note. so, if the founders decided to, they could just pay out the rest of the money as a bonus. immoral? yes. illegal? i don't think so.
- asr 14y ago
- amirhirsch 14y ago"Free money" is dangerous, it creates something like a moral hazard in early stage start-ups.