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Out 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 (seem
by pyoung 14y ago
Out 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 agoDefinitely illegal. http://en.wikipedia.org/wiki/Duty_of_loyalty http://en.wikipedia.org/wiki/Duty_of_loyalty Thought I'd doubt it would be litigated, unless the founders are particularly stupid in addition to being immoral.
- mgummelt 14y agoI don't see how fiduciary responsibility holds if the company is in the process of dissolving.
- kirillzubovsky 14y agoBesides, there are plenty of now very successful founders that didn't have any of the luxuries that we have with StartFund. Somehow they have survived. Survival of the fittest is a good thing.
- robryan 14y agoI seems weird to me, like the whole debt component of the convertible note pretty much ceases to exist unless it is able to be successfully converted to equity. I guess investors of the type investing in start fund tend to think of it more as a gamble that only converts to anything if the company raises and don't care much about recovering relatively small bits and pieces in the even the company fails.
- prostoalex 14y agoA Start Fund investment comes with a buy-in for next round. Don't think they're planning to generate huge returns on the initial investment, it will get diluted eventually anyways, but a buy-in gets its participants the front-row seats on next Dropbox and Heroku.