17 ms·

Kima15: $150K for 15% in 15 days

313 points by jber 13y ago

New offer from KimaVentures: Kima15 Raise $150,000 for your startup in 15 days for 15% equity

valvoja 13y ago
Nice and simple. Now who are Kima 15? Sounds like a Japanese girl band...
- tbassetto 13y ago
  That's a project by Kima Ventures: http://www.kimaventures.com/team/ http://www.kimaventures.com/team/
  - deleted 13y ago
    [deleted]
- pfraze 13y ago
  Answer here http://www.kima15.com/FAQ/#2 http://www.kima15.com/FAQ/#2. Venture site is http://www.kimaventures.com/ http://www.kimaventures.com/.
yurisagalov 13y ago
I like the approach, but I don't understand why an investment that's so well defined ("based on the standard Seedsummit documents") requires legal fees at all.
- jber 13y ago
  If you can find us a lawyer working for free, would love an intro ;-)
  - yurisagalov 13y ago
    Having standard terms should mean lawyers are only needed the very first time (to set up the standard terms). The rest should be 'fill in the blanks', and since valuations/dollar amounts are not negotiated here, the only blank each investment should have to fill in is the company information (name, incorporation location, address, etc.) Maybe I'm missing some steps in my mental model?
    - jber 13y ago
      Unfortunately, lawyers have to check that the company exists, request info from founders, check that the IP is owned by the company etc...So cost is 2.5K to $4K (and it's not expensive) We HATE paying lawyers... :-( We are not investing in a company for that. So we will try to work with all good lawyers with great prices. As you said, it's not so difficult.
      - adambenayoun 13y ago
        Jeremie, I don't know if that is part of an agreement you have with your LPs that you need to have a lawyer doing due diligence for you and that require you to spend 2.5k-4k but allow me to propose a perspective of a founder who finished fundraising and one of the thing that I did was to ensure to keep my lawyer out of the equation when it was not needed. 1. Checking if the company exists - meaning looking over incorporation documents, validating the bank details and other information to make sure you're funding who you think you're funding - could be done with someone with some common sense and not a lawyer - probably hiring a person who does administration and work full time for you (the high volume of seed deals you're making make me think you already have that person). 2. Checking that the IP is owned by the company is usually done by doing a TAA (Technology assignment agreement) and in that case this could be a standard doc that you let the founders sign on. I would believe that someone on your behalf could also check that the validity of the signatures. 3. Use a service like RightSignature to collect signature, IPs, timestamps and even Identification cards picture or something of the sort in order to check the legitimacy of the person signing on the docs - this will allow you to remove the lawyer from the equation as well. 4. Last but not least - try documenting the things you need from the company beforehand and post it somewhere on the site - knowing in advance what are the things you are requesting usually eliminate the unneeded ping-ping with lawyer. On a personal note - I streamlined the fundraising process by creating a few templates (with wire details) and having forms on Rightsignature. I had all of my investors go through that process and closed very fast - including countersigning and dating the documents once the wire reach our account. I think every process could and should be streamlined especially if you deal with 200 companies. Lawyer like to interject in between deals because they can bill and in our case we were able to save around ~$10k in legal fees because we didn't let our lawyers talk with our investors and negotiate for us - and we used a standard note provided by our lawyers. I'm not saying you could do that but if there's room to reduce the $4k to something like $500 or even nothing - that mean an extra $400k that can be re-invested into ~3 companies - imagine that! EDIT: I know you have way more experience closing deals than me - I just wanted to offer a founder experience and perspective on that process.
  - neurotech1 13y ago
    grellas (who posted in this thread) comes highly respected in the startup community and from what I've heard works on flexible terms. I don't think he actually works for "free" though.
zhuzhuor 13y ago
off-topic: the red background seriously hurts my eyes
- adamlj 13y ago
  Great offer I guess but I seriously had to shut down the page after looking at it for 30s..
- jcc80 13y ago
  Agreed - it was painful but worth the time to change background to teal w/ StyleBot Chrome extension. Really like how this is all laid out and the term sheet is right there at the bottom.
- jber 13y ago
  Thanks for your feedback. Better now?
  - rpedela 13y ago
    The darker red is definitely better, but generally red is a bad color to use excessively. Plenty of studies have shown that red can invoke the fight or flight response and increase stress.
    - loceng 13y ago
      Maybe that's what they're going for. :P
      - jber 13y ago
        Not at all ;-) What color do you suggest ? ;-)
        johnnyo 13y ago
        Even the new red is painful on my eyes. I navigated away before I finished reading, and when coming back here, it still created an afterimage on my retina. I recommend a much more muted background, especially for the textual portion of the site. Run red banners down the side if you must, but change the text section to a more readable contrast.
liamgooding 13y ago
Awesome, as a Kima company who took investment before this "Kima15" offer had been announced, I can say the biggest thing that attracted us over the other firm offers we had at the time was Kima's commitment to moving fast with the cash. We'd maxed out personal credit cards and we were literally on a ~2 month timebomb of personal runway. So yeah, awesome to see they've now put this "move fast" promise into a transparent offer. Sure there's limits on the cash and valuation but, I guess better to see it upfront. In our case, the fees were £1,800 (incl 20% VAT) for our lawyer, and €1,136 (inc 19% VAT) for Kima's lawyer.
matponta 13y ago
Love the "fast" approach! Now, it only it was a convertible note, possibly discounted but a convertible note...
- jber 13y ago
  Why?
  - matponta 13y ago
    Variability on the initial maturity of the startup, mostly. Reduction of adverse selection on your side, also. Based on your historic numbers, would it be a significant cap on your upside?
  - avifreedman 13y ago
    To get the potential of a better than $1m valuation is my guess.
miamidesign 13y ago
I'm blind, it's too red, what does the page say?
- jber 13y ago
  We just changed it. Better now?
  - salimmadjd 13y ago
    I didn't see the before one. But there is a strange delay to render time. Not sure if there is some heavy library or something is being loaded. Also impressed that Jeremie himself replied to this thread and not some intern.
    - jber 13y ago
      Thanks Salim ;-) We don't have any interns ;-) That's why ;-)
  - miamidesign 13y ago
    yes
yonim78 13y ago
Kima Ventures is probably the fastest and most efficient VC I had the pleasure working with. I recommend all companies pre-seed to try simply try it out. Jonathan Messika www.Vodio.com
kiwup 13y ago
Great!
gizmo 13y ago
From the FAQ: > [We] will continue to make investments via Kima Ventures at earlier/later stages or lower/higher valuations. Projects looking for funding outside Kima15 can be submitted via the Kima Ventures website. From the frontpage: > We will not invest in future funding rounds of your company to avoid signalling issues. That's not good communication. Otherwise, looks very good.
- jber 13y ago
  What do you mean? You're talking about 2 differents things.
  - cwilson 13y ago
    While it is two different things, the way it is worded is slightly confusing and I can see how someone might be confused.
    - JOnAgain 13y ago
      This makes perfect sense and is a good policy. As a policy, they won't invest in future rounds. So everyone else knows they won't, and no one asks "why isn't Kima investing in this round?". It can be bad when an investor who's already in a company doesn't participate in future rounds, as it signals that someone which more data isn't interested in putting more money in. They're avoiding this entirely, which is good for the startup. It's a really bad signal when you get seed funding from someone who does do follow-ons, but they don't want to follow-on with you. It can make it very hard to fundraise.
  - gizmo 13y ago
    When you say that you offer an investment based on default terms and in the next paragraph you say you also continue to make investments at later stages and at different valuations then people have no reason to assume that those investments are mutually exclusive.
    - jber 13y ago
clarky07 13y ago
Seems lots of people are calling the terms terrible, but for an early stage investment it seems pretty reasonable to me. Plenty of things are in the 1M valuation and under range. If you are shooting for something 8 figures or higher, in the long run this won't kill you, and in the short run it lets you get started and gives you a good bit of runway for say 2 founders. I'm not looking for funding at the moment, but the speed would be a huge bonus for me. There is a huge amount of value in being able to focus on making your business succeed instead of focusing on getting funding so that you can continue trying.
- valvoja 13y ago
  If you look at early stage investments in Europe, the terms are pretty good. Eg. compared to accelerators, seed round investors etc.
- acangiano 13y ago
  These terms are far from terrible. Outside of a few selected places like Silicon Valley, you can dream of getting $150K for 15% as an early stage startup with no sales. It could be argued that YC brings a lot of added value to the table, but if we are simply looking at the terms, their ~$20K for ~6% is far worse than $150K for 15%.
  - loceng 13y ago
    The remaining 9% though (that YC leaves on the table) could be worth at least $100k during next funding round, probably more if you expect to be successful.
    - noinput 13y ago
      Of course but with this said: > This should help you to launch the first version of your product and to test your initial hypothesis about the market before (potentially) raising more funding to grow the business. They are shooting for helping companies who know what they need to execute do it fast and not worry about the rest, at least for a bit. After personally going through almost 6 months of angel investing diligence hell to get a similar deal, this is completely something I appreciate.
loceng 13y ago
If you're this ready for funding, you should probably shop around.
- carlosrt 13y ago
  500 Startups offers $100,000 at a $2M valuation (i.e. 5%). Cheaper than $150,000 at $1M (i.e. 15%).
  - jber 13y ago
    As far as I know, it's $50K for 5% not $100K So exactly the same postmoney valuation.
    - carlosrt 13y ago
      500 offers $50k at $1M or $100k at $2M (~5% regardless of check size). Source: http://readwrite.com/2011/02/10/dave-mcclures-500-startups-ann#awesm=~opmYJqlHFthX3q http://readwrite.com/2011/02/10/dave-mcclures-500-startups-a... I added Kima15 to this investor database: https://docs.google.com/spreadsheet/ccc?key=0AszA0J0G-ptCdG1HRXNVS3dQMkhGaWZqaEJEU0dfSEE&usp=sharing https://docs.google.com/spreadsheet/ccc?key=0AszA0J0G-ptCdG1...
jkaljundi 13y ago
When we were looking for funding with Weekdone (https://blog.weekdone.com/weekdone-wins-slush-announces-200k-investment/ https://blog.weekdone.com/weekdone-wins-slush-announces-200k...) what attracted us to KIMA was the speed and ease of doing business with them. Looking at my notes, 6 days from the call to agreeing the terms, which is quite exceptional in Europe for a cross-border transaction. Speed was my no 1 goal in fundraising to get back to product and customers, so this was a blessing. You can follow KIMA portfolio day live on Monday, tune in: http://www.dailymotion.com/kimaventures#video=x17ww6i http://www.dailymotion.com/kimaventures#video=x17ww6i
deleted 13y ago
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pg 13y ago
I was curious how this compares to doing YC. YC usually asks for 7%, in return for which groups get in the average case $18k. Every startup also gets an $80k note that converts in the next equity round. In the last batch the median startup raised $795k after Demo Day. We'll conservatively assume a $5m valuation cap, and (very) conservatively assume the next round valuation (when the $80k note converts) is also $5m. So if you can get into YC, in the average case you'll end up afterward having sold 22% of the company for $813k. We do a lot more than help people raise money, of course, but financially that is what the median trajectory looks like.
- casca 13y ago
  A significant difference is that a major part of the value of getting into YC is having successfully completed the selection process. There's a reason that when hiring and looking for funding, companies will usually include the year they went into YC. Given the value of the brand, it's likely that YC could offer less for more equity and still be oversubscribed.
  - pa5tabear 13y ago
    Did you realize you're replying to Paul Graham? I thought it pretty funny telling pg about his program. Of course I understand there are many more readers of the comment, but it still seems directed at him.
    - lifeisstillgood 13y ago
      Honestly I cannot see casca's comment as trying to tell pg something about YC, more that casca is emphasising that YC is not exploiting its brand value; so a direct comparison (15% for 150K vs 22% for ~800K) could be seen either as pg does - "hey we are waaaaay better value", or as casca says "hey you are toooo cheap" Anecdotally Henry Ford was told that the drive shafts in Model T's were outlasting the chassis, so should they improve the chassis to match? Hell no, drop the quality of the drive shaft and save some money. I think pg would have made a bad Henry Ford. Edit: there is however a clear need for fast, time boxed, fund raising. Kima is part of the YC-inspired move in that direction, and there is far far more talent and money out there than YC can handle, so there is scope for them. They are just pricing in the middle market, away from the luxury brands :-)
jtchang 13y ago
It's surprising how transparent Kima is. The terms are reasonable and it's not like you have to take the money. Speed is a huge deal as well...knowing whether you can close or not can mean spending another 1-2 months working on your product and not have to worry about taking meetings from various VCs/angels.
Matt_Mickiewicz 13y ago
The partners are based in Israel + Paris (no one in the US), which makes things complicated with time zones of they are investing in North American companies. A request for "weekly updates" is also quite burdensome on founders, and they also have the optionality of a board seat (also unusual for investments at this stage).
- tinbad 13y ago
  My previous startup was based in the US and our investors were in Europe. The time difference wasn't an issue at all, an inconvenience at most (getting on a 7am call after a coding marathon, we've all been there). What I learned from getting an investor from Europe is lack of connections in the SV/USA which could be a disadvantage for some startups.
- midnitewarrior 13y ago
  I would think anybody who hands over $150k gets the courtesy of an hour phone call a week. Considering that you wouldn't have to spend weeks / months doing the show-and-tell to dozens of potential investors, I think that's a small price to pay.
- jber 13y ago
  I think we invested in 60 US companies ;-) No problem to discuss with them. We don't always need to do that in real time. Email is good for 99% of subjects.
- jber 13y ago
  About weekly updates, I think it's critical for founders to have to write a 3 lines weekly update but not only for us, investors, but also for their team , cofounders and themselves. It's helping focusing on the right thing each week and increase performance. Some of our founders are sending an update every 48 hours...
staunch 13y ago
This could be just as important as YC if it works. This is closer to what many people really want. It's enough money enough to seriously test an idea, but not enough that you could waste a lot of time going down a bad path.
ye 13y ago
I never understood why people bother with such tiny amounts of money. 1) It's the amount you can borrow from your family most of the time. Or just make it working in IT and saving like mad. 2) It's barely useful. $150K is not enough to hire even one great developer for a year.
- newsum 13y ago
  My thoughts exactly. Just save, bootstrap, launch and raise a large Series-A round. $150K for most companies is still not enough.
  - midnitewarrior 13y ago
    I wonder if Amazon would have existed today if Bezos had waited another 2 years while he worked a day job to scrape together $150k. Time = Money
    - newsum 13y ago
      Time = Money only for ideas that are easily reproducible. if you truly found a niche it's nearly impossible for another business to execute it the same way.
      - marcamillion 13y ago
        Except that most of the "best investments" that VCs make are not in companies in a niche that are not hard to reproduce. Twitter & FB are easily reproducible, and they provided awesome returns for their investors.
- jarjoura 13y ago
  It's a seed round meant for founders to get an initial product working enough prove the idea.
- pallandt 13y ago
  You're overestimating and underestimating a lot of things at the same time. $150k is not 'tiny' by any measure, raising this much from family alone would mean you have a pretty well-off and trusting, loving family to begin with, not all developers reside in SF, U.S.A to demand or even need such a yearly salary etc. etc. I don't want to start tearing too much into your argument because I kind of like it that people are still able to think so...rosily on average.
conductr 13y ago
I don't see it being specifically limited to software startups. Some startup with a physical product/service might find this useful to finance inventory/growth. The terms don't sound so bad when you look at it from that perspective
- jber 13y ago
  Yep and we love IOT startups! Check some of our investments http://petnet.io http://petnet.io http//www.greenboxhq.com
deleted 13y ago
[deleted]
sylvinus 13y ago
I'll admit being skeptic at first but every time we asked @jberrebi for help in my previous Kima-backed company, he was both smart and fast. Impressive feat with so many startups in the portfolio+pipeline.
tptacek 13y ago
A board seat for 150k does not sound reasonable.
- jber 13y ago
  Check the SLA on the homepage: "-request the right to a board seat (2 founders, 1 investor) but we do not take the seat unless required to solve founder conflicts and have no intention to tell you how to run your company."
  - tptacek 13y ago
    The term sheet gives you the unconstrained option to appoint a director. Again: $150k doesn't sound like "appoint a director" money.
  - patio11 13y ago
    You're free to offer any terms you desire and if people accept them than may you find mutual success, but I've got two comments: 1) People who know what "the going rate" is will not be overwhelmingly enthusiastic about you asking for a board seat given the package deal here. An option on a board seat is, approximately, as expensive or more expensive than a board seat. For example, it's going to cause auto-failures of negotiations with later stage firms who would otherwise be prepared to pay market price for board seats (my SWAG from outside the Valley is "in the neighborhood of multiple millions currently"), because board seats have to be static and scarce to retain value. You also probably uniquely cause signaling risk because at least some actors are going to model your decision to take or not take board seats like they would themselves choose to take or not take board seats, and come to the conclusion "A prior investor has a free option on a board seat and has declined to exercise it, despite having had full knowledge of the business' deepest secrets for the last year? Wow, that makes my investing decision a lot easier: PASS!" 2) It seems to me that your strategic reason for asking for the option to a board seat is that you desire to take a personal hand in managing downside risk when some startups you fund implode. This implies that you both believe your contribution will help to manage downside risk when startups implode, and that rescuing imploding startups is a great use of your time. Many people in the community would advise that a startup which is imploding is almost immune to correctional action and accordingly valued at approximately zero, and that startups imploding is sort of the model and that your main source of risk reduction is having 7.5% invested in Google 2020 rather than tweaking twenty imploded companies to slightly-north-of-imploded. Or, to rephrase, if the successful outcome is "We do not get a board seat" then do not ask for a board seat.
deathflute 13y ago
A naive question to founders who have taken such seed funding before - can you directly take money out of a investment like this to pay for your living costs or you have to go through the headache of establishing payroll and a small salary for the founders?
- jber 13y ago
  Payroll is obligatory for tax reasons...
  - deathflute 13y ago
    I see. Any pointers to a cheap payroll processing company?
    - jber 13y ago
      Nope . It depends where you are. but really, it's very easy to find online.
    - prayag 13y ago
      www.zenpayroll.com
tinbad 13y ago
From the term cheat: "The Investor will invest up to US$150,000 and would hold no less than 15% of the Company on a fully diluted basis." I'm not a lawyer, but doesn't this say that their 15% never dilutes? If so, that would be a horrible scenario in case of future fund raising.
- kenrikm 13y ago
  Doing some research I found this: http://www.andrew.cmu.edu/user/fd0n/55%20Anti-dilution%20Protection%20Postscripts.htm http://www.andrew.cmu.edu/user/fd0n/55%20Anti-dilution%20Pro...
harichinnan 13y ago
Getting 150K and a company board with qualified people on day1 would be very attractive for an H1B engineer like me. So I could bootstrap a startup while having a paid job in a company and if Kima15 invests, this would qualify for an H1B transfer to my own company(Having a board to supervise your company would qualify for H1B transfer).
grellas 13y ago
While there is a pithy debate going on about Kima and how it fares in an economic comparison to YC, I will throw in my more technical assessment of what founders should consider in deciding whether the sort of up-front equity funding offered by Kima is right for them in the first place. Seed funding can be a tricky proposition for startups. The broad choices in dealing with the early expenses are: (1) self-fund by making founder loans/advances to the company, whether for demand or convertible notes; (2) get friends and family money, usually in the form of a convertible note; (3) go to institutional investors and either argue for an acceptable valuation as part of a seed equity funding or bypass that issue and hope to get bridge money via convertible notes. Of course, in the right cases, founders can also sell products and far-more-typically services to generate enough funds in the early going to fund development efforts tied to a longer-term strategy. In working with founders over many years, it has been my rule of thumb that they should not do too early of an equity round unless there was some very special reason for doing so. Equity rounds come with strings and complications. They require that you set a value on the venture. That in turn means you need to negotiate the issue of price precisely when you are at your weakest as a founder trying to build value. It also means you create tax risks and complications: if the equity round is too near the time of formation, the $.0001/sh pricing used by founders for their shares may look funny next to the much higher amount per share paid by investors, raising risks that the founders can be deemed to have received their shares at the higher valuation as potentially taxable service income; once you do an equity round, you will need to do 409A valuations in connection with doing option grants and that necessitates getting outside independent appraisals; equity rounds come with strings, including investor preferences, investor protective provisions limiting what you can do as a founder without investor approval, co-sale and first refusal rights favoring investors and concomitantly limiting founders, board seats and/or observer rights for investors, and the like. Much of the "distraction" that founders face in raising money exists precisely because a typical equity round can be a complex process and, apart from needing to sell the economic proposition behind their venture, founders must also make sure that any funds they do take in are taken on reasonable terms. Sorting through the issues of company valuation, preferences, and similar issues takes time and can be a grueling process. What is more, when you have emerged from the process, you will find yourself having to price your equity incentives to key people you are trying to attract at a much higher price than you otherwise would have if you had not done the equity round. So, in the early stage, it is usually best to defer all this and focus on building value with funds made available through some sort of bridge instrument such as a convertible note if possible. In such cases, with institutional investors, you may still find yourself arguing about valuation in negotiating caps but the process is nowhere near as involved as it is with a typical equity round and founders with leverage can usually dispense with caps as well. Apart from the cap issue, most of the other complications simply go away. You retain substantially complete founder independence with almost no strings on what you can do going forward (subject to normal legal rules involving fiduciary duty, of course). You retain virtually complete control of the timing and terms of your future funding choices without needing investor approval to make the choices as you like. And you basically eliminate the tax risks altogether. Finally, because you have not had to price your stock, you retain flexibility to continue offering very cheap equity incentives to others, including those who may become potential co-founders, without creating tax problems for them or for your company. There are cases where founders prefer to do an equity round in spite of the complications. Maybe they can get the equity on good terms with a favorable valuation and even without the complications of doing it as preferred stock (e.g., in some friends and family situations). Maybe they prefer not to have debt on their balance sheet, with the legal obligation to pay it back in case they can't do a qualified funding round. Maybe they just need cash fast and the people they are dealing with it are ready to do it on oppressive terms that are easier swallowed than would be shuttering the venture. Or, on the positive side, maybe it means taking funds on less than ideal terms but from an investor who will add large value to the venture apart from the cash element. Who knows? It is a big world and people have all sorts of reasons for choosing one way or the other. The point is that they need to think through the pros and cons carefully and make a wise choice for their circumstances. The Kima offering offers fast cash to qualified ventures. This has an obvious advantage of being simple and fast for those who qualify. Whether it is the best choice for a given venture turns on how the founders in that venture see the trade-offs. If you take the Kima offer, you will wind up doing an equity round. It will be for preferred stock. It is for cash only, with no value-add. Thus, you will have the tax complications that attend an equity funding, including needing to price your stock and option grants based on the $1 million company valuation and the need to do 409A valuations. Moreover, the strings that appear in Kima's term sheet are not trivial: the valuation is based on no larger than a 5% equity pool; you give up a board seat; you give Kima a broad veto power on many of your future actions relating to fundraising and other important company matters; you agree to restrictions on how the value is shared in case you are acquired. If the answer to this is that it is worth it for many startups to make such tradeoffs in exchange for fast cash, I would add that these funds are not being offered to just any startup. Kima reserves the right to cull through the submissions and pick from the best only. While that is fine, of course, it does mean that the value of the offering must be weighed against other choices open to the same level of quality startup that it hopes to fund and not against the more limited choices open to just any startup. The biggest question I would have for those startups is this: fast and easy cash, yes, but are the complications worth it for $150K if other reasonable options are open to you? While they may be for some, for a good number the answer would very likely be no. How does Kima compare with YC? PG has assessed the broad economic proposition to which I would add the following: YC does take an immediate equity grant but does so with common stock and on terms that don't affect founder stock pricing. Thus, near-complete founder freedom is preserved and there are no special strings that come with the investment. This stands in pretty sharp distinction to the Kima terms, which involve preferred stock and a number of strings. But by the far the biggest differential that I see comes with the value-add piece: with YC, founders pay a price in terms of equity they give up but they get huge benefits from becoming part of a network that keys them in to relationships and solutions that can prove invaluable to an early-stage startup. In effect, founders pay (somewhat) dearly in early equity to partner with a powerful ally that may dramatically speed up and enhance their path to success. This sort of trade-off is not worth it for all companies but, for those that dream to do significant scaling and that need to have doors opened to future VC investors, the YC stamp of approval and the YC resources offer value that is not easily found elsewhere. Of course, no angel investor, Kima included, can match this in any comparison, though such investors can add value in various lesser ways from their relationships and the like. Different founders have different needs. What Kima is doing is new and innovative and the people behind Kima are savvy and sophisticated players in the startup investment world. Therefore, it is very nice to see this sort of slant on seed financing. But, again, there are always trade-offs and founders should weigh these carefully in deciding whether the Kima way is the way they want to choose.
soneca 13y ago
As this is looking like a AMA for jber, I will ask: How many brazilian startups have you funded? I understand that you are investing everywhere, but the country counts? I mean, bigger markets = better chances? Also, just to reassure me, can you completely guarantee that if I don't have an answer in 5 five workdays is because I didn't pass? Just to control my expectations and illusions here if that happens.
- jber 13y ago
  No investment in Brazil yet but some in Argentina. The country can count but we are investing everywhere and Brazil is an enormous market. About the 5 days, we will do our best to give an answer in 5 days. If not, it means that we are not doing our job well ;-)
  - soneca 13y ago
    thanks, and good luck!
bsiddiqui 13y ago
Giving up 15% of your company for $150k? That's the amount you'd expect to give up, roughly, in your seed round. It's hardly worth considering if you think your company has any value.
neurotech1 13y ago
Do you require startups to be legally incorporated, or can that be done during the funding process? Also, Is your preferred US Entity a Delaware C Corp?
ajju 13y ago
The 5% premoney pool is another thing that will dilute founders (unless I am reading this wrong). YC doesn't require a premoney option pool for employees.
robterrell 13y ago
I wish this had existed years ago. To raise a $150k round from an angel group, it took me 10x the time (150 days). I spent countless hours on dog-and-pony shows, negotiations, documents, contracts, lawyers, and ended up with ridiculous amounts of drama around the board composition, placating founders, and literally weeks of driving around to pick up individual checks from the angel club members... to ultimately gain investors whose interests weren't really aligned with ours and, aside from writing a check, did nothing to help to company. I'm not saying we walked uphill both ways in the snow to get a round of funding... but it's definitely easier right now. Hope YV and Kima is more representative of a new normal than a passing fad.
amolsarva 13y ago
@Kima testimonial -- these guys took a look at my recent venture very fast, very authoritative, read the docs and sent the money, and have been completely hands-off. Kima is not a startup school for "teach me" founders. It is a the model of a quick-decisions seed fund. In my case they followed a co-investor who they knew well. "He's in? We're in. Done." People say this but I rarely see it. As for what else they add -- I'll find out next week in Paris at their summit next to Le Web. I suspect the 100s of CEOs they have backed and big european network will be things I value. They are relevant for the company I'm building. I think the Kima pitch has a lot in common with the PG worldview -- founders want fast decisions, money, network. Maybe they want a school or maybe they can run a school; founders vary.
avifreedman 13y ago
Very interesting. Looks like a great option for those who understand and need it. For the founders 85% of something is better than 100% of nothing... Or, 85% * some risk of Kima behaving 'badly' (from the founders' perspective). Having read the term sheet, I'll say that the desire to get for Kima the post-acquisition excess benefit of any acq-huire exit seems a reasonable request in concept ("Equalization of financial terms") but it does make the 15% more expensive if there are others who would invest similarly without it and figure that N % will acq-huire instead of failing, stalling, or growing. And it potentially goes a bit too far if one of the founders grows to be a business unit head at a large company. Would need to see the actual document language that addresses that though. Also, sorry to be OCD - to be consistent, "financial terms" should be capitalized in the section title. The biggest issue I'd have is the "Important Decisions" clause. Incubators and many (but not all) angels don't typically look for this level of ability to control that can block the company from growing. There is some evidence that Kima doesn't use their rights maliciously but that's the clause to think carefully about - if there is any disagreement, the IP is in the company and you can't raise money, give distributions, or sell the company (among other things) without consent. However, they invite you to talk to other Kima family companies, so I'd definitely do that and talk about business operations and decision making in the context of those Kima rights with them.

313 points by jber 13y ago

New offer from KimaVentures: Kima15 Raise $150,000 for your startup in 15 days for 15% equity

valvoja 13y ago

Nice and simple. Now who are Kima 15? Sounds like a Japanese girl band...

tbassetto 13y ago
That's a project by Kima Ventures: http://www.kimaventures.com/team/ http://www.kimaventures.com/team/
- deleted 13y ago
  [deleted]
pfraze 13y ago
Answer here http://www.kima15.com/FAQ/#2 http://www.kima15.com/FAQ/#2. Venture site is http://www.kimaventures.com/ http://www.kimaventures.com/.

yurisagalov 13y ago

I like the approach, but I don't understand why an investment that's so well defined ("based on the standard Seedsummit documents") requires legal fees at all.

jber 13y ago
If you can find us a lawyer working for free, would love an intro ;-)
- yurisagalov 13y ago
  Having standard terms should mean lawyers are only needed the very first time (to set up the standard terms). The rest should be 'fill in the blanks', and since valuations/dollar amounts are not negotiated here, the only blank each investment should have to fill in is the company information (name, incorporation location, address, etc.) Maybe I'm missing some steps in my mental model?
  - jber 13y ago
    Unfortunately, lawyers have to check that the company exists, request info from founders, check that the IP is owned by the company etc...So cost is 2.5K to $4K (and it's not expensive) We HATE paying lawyers... :-( We are not investing in a company for that. So we will try to work with all good lawyers with great prices. As you said, it's not so difficult.
    - adambenayoun 13y ago
      Jeremie, I don't know if that is part of an agreement you have with your LPs that you need to have a lawyer doing due diligence for you and that require you to spend 2.5k-4k but allow me to propose a perspective of a founder who finished fundraising and one of the thing that I did was to ensure to keep my lawyer out of the equation when it was not needed. 1. Checking if the company exists - meaning looking over incorporation documents, validating the bank details and other information to make sure you're funding who you think you're funding - could be done with someone with some common sense and not a lawyer - probably hiring a person who does administration and work full time for you (the high volume of seed deals you're making make me think you already have that person). 2. Checking that the IP is owned by the company is usually done by doing a TAA (Technology assignment agreement) and in that case this could be a standard doc that you let the founders sign on. I would believe that someone on your behalf could also check that the validity of the signatures. 3. Use a service like RightSignature to collect signature, IPs, timestamps and even Identification cards picture or something of the sort in order to check the legitimacy of the person signing on the docs - this will allow you to remove the lawyer from the equation as well. 4. Last but not least - try documenting the things you need from the company beforehand and post it somewhere on the site - knowing in advance what are the things you are requesting usually eliminate the unneeded ping-ping with lawyer. On a personal note - I streamlined the fundraising process by creating a few templates (with wire details) and having forms on Rightsignature. I had all of my investors go through that process and closed very fast - including countersigning and dating the documents once the wire reach our account. I think every process could and should be streamlined especially if you deal with 200 companies. Lawyer like to interject in between deals because they can bill and in our case we were able to save around ~$10k in legal fees because we didn't let our lawyers talk with our investors and negotiate for us - and we used a standard note provided by our lawyers. I'm not saying you could do that but if there's room to reduce the $4k to something like $500 or even nothing - that mean an extra $400k that can be re-invested into ~3 companies - imagine that! EDIT: I know you have way more experience closing deals than me - I just wanted to offer a founder experience and perspective on that process.
- neurotech1 13y ago
  grellas (who posted in this thread) comes highly respected in the startup community and from what I've heard works on flexible terms. I don't think he actually works for "free" though.

zhuzhuor 13y ago

off-topic: the red background seriously hurts my eyes

adamlj 13y ago
Great offer I guess but I seriously had to shut down the page after looking at it for 30s..
jcc80 13y ago
Agreed - it was painful but worth the time to change background to teal w/ StyleBot Chrome extension. Really like how this is all laid out and the term sheet is right there at the bottom.
jber 13y ago
Thanks for your feedback. Better now?
- rpedela 13y ago
  The darker red is definitely better, but generally red is a bad color to use excessively. Plenty of studies have shown that red can invoke the fight or flight response and increase stress.
  - loceng 13y ago
    Maybe that's what they're going for. :P
    - jber 13y ago
      Not at all ;-) What color do you suggest ? ;-)
      - johnnyo 13y ago
        Even the new red is painful on my eyes. I navigated away before I finished reading, and when coming back here, it still created an afterimage on my retina. I recommend a much more muted background, especially for the textual portion of the site. Run red banners down the side if you must, but change the text section to a more readable contrast.

liamgooding 13y ago

Awesome, as a Kima company who took investment before this "Kima15" offer had been announced, I can say the biggest thing that attracted us over the other firm offers we had at the time was Kima's commitment to moving fast with the cash. We'd maxed out personal credit cards and we were literally on a ~2 month timebomb of personal runway. So yeah, awesome to see they've now put this "move fast" promise into a transparent offer. Sure there's limits on the cash and valuation but, I guess better to see it upfront. In our case, the fees were £1,800 (incl 20% VAT) for our lawyer, and €1,136 (inc 19% VAT) for Kima's lawyer.

matponta 13y ago

Love the "fast" approach! Now, it only it was a convertible note, possibly discounted but a convertible note...

jber 13y ago
Why?
- matponta 13y ago
  Variability on the initial maturity of the startup, mostly. Reduction of adverse selection on your side, also. Based on your historic numbers, would it be a significant cap on your upside?
- avifreedman 13y ago
  To get the potential of a better than $1m valuation is my guess.

miamidesign 13y ago

I'm blind, it's too red, what does the page say?

jber 13y ago
We just changed it. Better now?
- salimmadjd 13y ago
  I didn't see the before one. But there is a strange delay to render time. Not sure if there is some heavy library or something is being loaded. Also impressed that Jeremie himself replied to this thread and not some intern.
  - jber 13y ago
    Thanks Salim ;-) We don't have any interns ;-) That's why ;-)
- miamidesign 13y ago
  yes

yonim78 13y ago

Kima Ventures is probably the fastest and most efficient VC I had the pleasure working with. I recommend all companies pre-seed to try simply try it out. Jonathan Messika www.Vodio.com

kiwup 13y ago

Great!

gizmo 13y ago

From the FAQ: > [We] will continue to make investments via Kima Ventures at earlier/later stages or lower/higher valuations. Projects looking for funding outside Kima15 can be submitted via the Kima Ventures website. From the frontpage: > We will not invest in future funding rounds of your company to avoid signalling issues. That's not good communication. Otherwise, looks very good.

jber 13y ago
What do you mean? You're talking about 2 differents things.
- cwilson 13y ago
  While it is two different things, the way it is worded is slightly confusing and I can see how someone might be confused.
  - JOnAgain 13y ago
    This makes perfect sense and is a good policy. As a policy, they won't invest in future rounds. So everyone else knows they won't, and no one asks "why isn't Kima investing in this round?". It can be bad when an investor who's already in a company doesn't participate in future rounds, as it signals that someone which more data isn't interested in putting more money in. They're avoiding this entirely, which is good for the startup. It's a really bad signal when you get seed funding from someone who does do follow-ons, but they don't want to follow-on with you. It can make it very hard to fundraise.
- gizmo 13y ago
  When you say that you offer an investment based on default terms and in the next paragraph you say you also continue to make investments at later stages and at different valuations then people have no reason to assume that those investments are mutually exclusive.
  - jber 13y ago

clarky07 13y ago

Seems lots of people are calling the terms terrible, but for an early stage investment it seems pretty reasonable to me. Plenty of things are in the 1M valuation and under range. If you are shooting for something 8 figures or higher, in the long run this won't kill you, and in the short run it lets you get started and gives you a good bit of runway for say 2 founders. I'm not looking for funding at the moment, but the speed would be a huge bonus for me. There is a huge amount of value in being able to focus on making your business succeed instead of focusing on getting funding so that you can continue trying.

valvoja 13y ago
If you look at early stage investments in Europe, the terms are pretty good. Eg. compared to accelerators, seed round investors etc.
acangiano 13y ago
These terms are far from terrible. Outside of a few selected places like Silicon Valley, you can dream of getting $150K for 15% as an early stage startup with no sales. It could be argued that YC brings a lot of added value to the table, but if we are simply looking at the terms, their ~$20K for ~6% is far worse than $150K for 15%.
- loceng 13y ago
  The remaining 9% though (that YC leaves on the table) could be worth at least $100k during next funding round, probably more if you expect to be successful.
  - noinput 13y ago
    Of course but with this said: > This should help you to launch the first version of your product and to test your initial hypothesis about the market before (potentially) raising more funding to grow the business. They are shooting for helping companies who know what they need to execute do it fast and not worry about the rest, at least for a bit. After personally going through almost 6 months of angel investing diligence hell to get a similar deal, this is completely something I appreciate.

loceng 13y ago

If you're this ready for funding, you should probably shop around.

carlosrt 13y ago
500 Startups offers $100,000 at a $2M valuation (i.e. 5%). Cheaper than $150,000 at $1M (i.e. 15%).
- jber 13y ago
  As far as I know, it's $50K for 5% not $100K So exactly the same postmoney valuation.
  - carlosrt 13y ago
    500 offers $50k at $1M or $100k at $2M (~5% regardless of check size). Source: http://readwrite.com/2011/02/10/dave-mcclures-500-startups-ann#awesm=~opmYJqlHFthX3q http://readwrite.com/2011/02/10/dave-mcclures-500-startups-a... I added Kima15 to this investor database: https://docs.google.com/spreadsheet/ccc?key=0AszA0J0G-ptCdG1HRXNVS3dQMkhGaWZqaEJEU0dfSEE&usp=sharing https://docs.google.com/spreadsheet/ccc?key=0AszA0J0G-ptCdG1...

jkaljundi 13y ago

When we were looking for funding with Weekdone (https://blog.weekdone.com/weekdone-wins-slush-announces-200k-investment/ https://blog.weekdone.com/weekdone-wins-slush-announces-200k...) what attracted us to KIMA was the speed and ease of doing business with them. Looking at my notes, 6 days from the call to agreeing the terms, which is quite exceptional in Europe for a cross-border transaction. Speed was my no 1 goal in fundraising to get back to product and customers, so this was a blessing. You can follow KIMA portfolio day live on Monday, tune in: http://www.dailymotion.com/kimaventures#video=x17ww6i http://www.dailymotion.com/kimaventures#video=x17ww6i

deleted 13y ago

[deleted]

pg 13y ago

I was curious how this compares to doing YC. YC usually asks for 7%, in return for which groups get in the average case $18k. Every startup also gets an $80k note that converts in the next equity round. In the last batch the median startup raised $795k after Demo Day. We'll conservatively assume a $5m valuation cap, and (very) conservatively assume the next round valuation (when the $80k note converts) is also $5m. So if you can get into YC, in the average case you'll end up afterward having sold 22% of the company for $813k. We do a lot more than help people raise money, of course, but financially that is what the median trajectory looks like.

casca 13y ago
A significant difference is that a major part of the value of getting into YC is having successfully completed the selection process. There's a reason that when hiring and looking for funding, companies will usually include the year they went into YC. Given the value of the brand, it's likely that YC could offer less for more equity and still be oversubscribed.
- pa5tabear 13y ago
  Did you realize you're replying to Paul Graham? I thought it pretty funny telling pg about his program. Of course I understand there are many more readers of the comment, but it still seems directed at him.
  - lifeisstillgood 13y ago
    Honestly I cannot see casca's comment as trying to tell pg something about YC, more that casca is emphasising that YC is not exploiting its brand value; so a direct comparison (15% for 150K vs 22% for ~800K) could be seen either as pg does - "hey we are waaaaay better value", or as casca says "hey you are toooo cheap" Anecdotally Henry Ford was told that the drive shafts in Model T's were outlasting the chassis, so should they improve the chassis to match? Hell no, drop the quality of the drive shaft and save some money. I think pg would have made a bad Henry Ford. Edit: there is however a clear need for fast, time boxed, fund raising. Kima is part of the YC-inspired move in that direction, and there is far far more talent and money out there than YC can handle, so there is scope for them. They are just pricing in the middle market, away from the luxury brands :-)

jtchang 13y ago

It's surprising how transparent Kima is. The terms are reasonable and it's not like you have to take the money. Speed is a huge deal as well...knowing whether you can close or not can mean spending another 1-2 months working on your product and not have to worry about taking meetings from various VCs/angels.

Matt_Mickiewicz 13y ago

The partners are based in Israel + Paris (no one in the US), which makes things complicated with time zones of they are investing in North American companies. A request for "weekly updates" is also quite burdensome on founders, and they also have the optionality of a board seat (also unusual for investments at this stage).

tinbad 13y ago
My previous startup was based in the US and our investors were in Europe. The time difference wasn't an issue at all, an inconvenience at most (getting on a 7am call after a coding marathon, we've all been there). What I learned from getting an investor from Europe is lack of connections in the SV/USA which could be a disadvantage for some startups.
midnitewarrior 13y ago
I would think anybody who hands over $150k gets the courtesy of an hour phone call a week. Considering that you wouldn't have to spend weeks / months doing the show-and-tell to dozens of potential investors, I think that's a small price to pay.
jber 13y ago
I think we invested in 60 US companies ;-) No problem to discuss with them. We don't always need to do that in real time. Email is good for 99% of subjects.
jber 13y ago
About weekly updates, I think it's critical for founders to have to write a 3 lines weekly update but not only for us, investors, but also for their team , cofounders and themselves. It's helping focusing on the right thing each week and increase performance. Some of our founders are sending an update every 48 hours...

staunch 13y ago

This could be just as important as YC if it works. This is closer to what many people really want. It's enough money enough to seriously test an idea, but not enough that you could waste a lot of time going down a bad path.

ye 13y ago

I never understood why people bother with such tiny amounts of money. 1) It's the amount you can borrow from your family most of the time. Or just make it working in IT and saving like mad. 2) It's barely useful. $150K is not enough to hire even one great developer for a year.

newsum 13y ago
My thoughts exactly. Just save, bootstrap, launch and raise a large Series-A round. $150K for most companies is still not enough.
- midnitewarrior 13y ago
  I wonder if Amazon would have existed today if Bezos had waited another 2 years while he worked a day job to scrape together $150k. Time = Money
  - newsum 13y ago
    Time = Money only for ideas that are easily reproducible. if you truly found a niche it's nearly impossible for another business to execute it the same way.
    - marcamillion 13y ago
      Except that most of the "best investments" that VCs make are not in companies in a niche that are not hard to reproduce. Twitter & FB are easily reproducible, and they provided awesome returns for their investors.
jarjoura 13y ago
It's a seed round meant for founders to get an initial product working enough prove the idea.
pallandt 13y ago
You're overestimating and underestimating a lot of things at the same time. $150k is not 'tiny' by any measure, raising this much from family alone would mean you have a pretty well-off and trusting, loving family to begin with, not all developers reside in SF, U.S.A to demand or even need such a yearly salary etc. etc. I don't want to start tearing too much into your argument because I kind of like it that people are still able to think so...rosily on average.

conductr 13y ago

I don't see it being specifically limited to software startups. Some startup with a physical product/service might find this useful to finance inventory/growth. The terms don't sound so bad when you look at it from that perspective

jber 13y ago
Yep and we love IOT startups! Check some of our investments http://petnet.io http://petnet.io http//www.greenboxhq.com

deleted 13y ago

[deleted]

sylvinus 13y ago

I'll admit being skeptic at first but every time we asked @jberrebi for help in my previous Kima-backed company, he was both smart and fast. Impressive feat with so many startups in the portfolio+pipeline.

tptacek 13y ago

A board seat for 150k does not sound reasonable.

jber 13y ago
Check the SLA on the homepage: "-request the right to a board seat (2 founders, 1 investor) but we do not take the seat unless required to solve founder conflicts and have no intention to tell you how to run your company."
- tptacek 13y ago
  The term sheet gives you the unconstrained option to appoint a director. Again: $150k doesn't sound like "appoint a director" money.
- patio11 13y ago
  You're free to offer any terms you desire and if people accept them than may you find mutual success, but I've got two comments: 1) People who know what "the going rate" is will not be overwhelmingly enthusiastic about you asking for a board seat given the package deal here. An option on a board seat is, approximately, as expensive or more expensive than a board seat. For example, it's going to cause auto-failures of negotiations with later stage firms who would otherwise be prepared to pay market price for board seats (my SWAG from outside the Valley is "in the neighborhood of multiple millions currently"), because board seats have to be static and scarce to retain value. You also probably uniquely cause signaling risk because at least some actors are going to model your decision to take or not take board seats like they would themselves choose to take or not take board seats, and come to the conclusion "A prior investor has a free option on a board seat and has declined to exercise it, despite having had full knowledge of the business' deepest secrets for the last year? Wow, that makes my investing decision a lot easier: PASS!" 2) It seems to me that your strategic reason for asking for the option to a board seat is that you desire to take a personal hand in managing downside risk when some startups you fund implode. This implies that you both believe your contribution will help to manage downside risk when startups implode, and that rescuing imploding startups is a great use of your time. Many people in the community would advise that a startup which is imploding is almost immune to correctional action and accordingly valued at approximately zero, and that startups imploding is sort of the model and that your main source of risk reduction is having 7.5% invested in Google 2020 rather than tweaking twenty imploded companies to slightly-north-of-imploded. Or, to rephrase, if the successful outcome is "We do not get a board seat" then do not ask for a board seat.

deathflute 13y ago

A naive question to founders who have taken such seed funding before - can you directly take money out of a investment like this to pay for your living costs or you have to go through the headache of establishing payroll and a small salary for the founders?

jber 13y ago
Payroll is obligatory for tax reasons...
- deathflute 13y ago
  I see. Any pointers to a cheap payroll processing company?
  - jber 13y ago
    Nope . It depends where you are. but really, it's very easy to find online.
  - prayag 13y ago
    www.zenpayroll.com

tinbad 13y ago

From the term cheat: "The Investor will invest up to US$150,000 and would hold no less than 15% of the Company on a fully diluted basis." I'm not a lawyer, but doesn't this say that their 15% never dilutes? If so, that would be a horrible scenario in case of future fund raising.

kenrikm 13y ago
Doing some research I found this: http://www.andrew.cmu.edu/user/fd0n/55%20Anti-dilution%20Protection%20Postscripts.htm http://www.andrew.cmu.edu/user/fd0n/55%20Anti-dilution%20Pro...

harichinnan 13y ago

Getting 150K and a company board with qualified people on day1 would be very attractive for an H1B engineer like me. So I could bootstrap a startup while having a paid job in a company and if Kima15 invests, this would qualify for an H1B transfer to my own company(Having a board to supervise your company would qualify for H1B transfer).

grellas 13y ago

While there is a pithy debate going on about Kima and how it fares in an economic comparison to YC, I will throw in my more technical assessment of what founders should consider in deciding whether the sort of up-front equity funding offered by Kima is right for them in the first place. Seed funding can be a tricky proposition for startups. The broad choices in dealing with the early expenses are: (1) self-fund by making founder loans/advances to the company, whether for demand or convertible notes; (2) get friends and family money, usually in the form of a convertible note; (3) go to institutional investors and either argue for an acceptable valuation as part of a seed equity funding or bypass that issue and hope to get bridge money via convertible notes. Of course, in the right cases, founders can also sell products and far-more-typically services to generate enough funds in the early going to fund development efforts tied to a longer-term strategy. In working with founders over many years, it has been my rule of thumb that they should not do too early of an equity round unless there was some very special reason for doing so. Equity rounds come with strings and complications. They require that you set a value on the venture. That in turn means you need to negotiate the issue of price precisely when you are at your weakest as a founder trying to build value. It also means you create tax risks and complications: if the equity round is too near the time of formation, the $.0001/sh pricing used by founders for their shares may look funny next to the much higher amount per share paid by investors, raising risks that the founders can be deemed to have received their shares at the higher valuation as potentially taxable service income; once you do an equity round, you will need to do 409A valuations in connection with doing option grants and that necessitates getting outside independent appraisals; equity rounds come with strings, including investor preferences, investor protective provisions limiting what you can do as a founder without investor approval, co-sale and first refusal rights favoring investors and concomitantly limiting founders, board seats and/or observer rights for investors, and the like. Much of the "distraction" that founders face in raising money exists precisely because a typical equity round can be a complex process and, apart from needing to sell the economic proposition behind their venture, founders must also make sure that any funds they do take in are taken on reasonable terms. Sorting through the issues of company valuation, preferences, and similar issues takes time and can be a grueling process. What is more, when you have emerged from the process, you will find yourself having to price your equity incentives to key people you are trying to attract at a much higher price than you otherwise would have if you had not done the equity round. So, in the early stage, it is usually best to defer all this and focus on building value with funds made available through some sort of bridge instrument such as a convertible note if possible. In such cases, with institutional investors, you may still find yourself arguing about valuation in negotiating caps but the process is nowhere near as involved as it is with a typical equity round and founders with leverage can usually dispense with caps as well. Apart from the cap issue, most of the other complications simply go away. You retain substantially complete founder independence with almost no strings on what you can do going forward (subject to normal legal rules involving fiduciary duty, of course). You retain virtually complete control of the timing and terms of your future funding choices without needing investor approval to make the choices as you like. And you basically eliminate the tax risks altogether. Finally, because you have not had to price your stock, you retain flexibility to continue offering very cheap equity incentives to others, including those who may become potential co-founders, without creating tax problems for them or for your company. There are cases where founders prefer to do an equity round in spite of the complications. Maybe they can get the equity on good terms with a favorable valuation and even without the complications of doing it as preferred stock (e.g., in some friends and family situations). Maybe they prefer not to have debt on their balance sheet, with the legal obligation to pay it back in case they can't do a qualified funding round. Maybe they just need cash fast and the people they are dealing with it are ready to do it on oppressive terms that are easier swallowed than would be shuttering the venture. Or, on the positive side, maybe it means taking funds on less than ideal terms but from an investor who will add large value to the venture apart from the cash element. Who knows? It is a big world and people have all sorts of reasons for choosing one way or the other. The point is that they need to think through the pros and cons carefully and make a wise choice for their circumstances. The Kima offering offers fast cash to qualified ventures. This has an obvious advantage of being simple and fast for those who qualify. Whether it is the best choice for a given venture turns on how the founders in that venture see the trade-offs. If you take the Kima offer, you will wind up doing an equity round. It will be for preferred stock. It is for cash only, with no value-add. Thus, you will have the tax complications that attend an equity funding, including needing to price your stock and option grants based on the $1 million company valuation and the need to do 409A valuations. Moreover, the strings that appear in Kima's term sheet are not trivial: the valuation is based on no larger than a 5% equity pool; you give up a board seat; you give Kima a broad veto power on many of your future actions relating to fundraising and other important company matters; you agree to restrictions on how the value is shared in case you are acquired. If the answer to this is that it is worth it for many startups to make such tradeoffs in exchange for fast cash, I would add that these funds are not being offered to just any startup. Kima reserves the right to cull through the submissions and pick from the best only. While that is fine, of course, it does mean that the value of the offering must be weighed against other choices open to the same level of quality startup that it hopes to fund and not against the more limited choices open to just any startup. The biggest question I would have for those startups is this: fast and easy cash, yes, but are the complications worth it for $150K if other reasonable options are open to you? While they may be for some, for a good number the answer would very likely be no. How does Kima compare with YC? PG has assessed the broad economic proposition to which I would add the following: YC does take an immediate equity grant but does so with common stock and on terms that don't affect founder stock pricing. Thus, near-complete founder freedom is preserved and there are no special strings that come with the investment. This stands in pretty sharp distinction to the Kima terms, which involve preferred stock and a number of strings. But by the far the biggest differential that I see comes with the value-add piece: with YC, founders pay a price in terms of equity they give up but they get huge benefits from becoming part of a network that keys them in to relationships and solutions that can prove invaluable to an early-stage startup. In effect, founders pay (somewhat) dearly in early equity to partner with a powerful ally that may dramatically speed up and enhance their path to success. This sort of trade-off is not worth it for all companies but, for those that dream to do significant scaling and that need to have doors opened to future VC investors, the YC stamp of approval and the YC resources offer value that is not easily found elsewhere. Of course, no angel investor, Kima included, can match this in any comparison, though such investors can add value in various lesser ways from their relationships and the like. Different founders have different needs. What Kima is doing is new and innovative and the people behind Kima are savvy and sophisticated players in the startup investment world. Therefore, it is very nice to see this sort of slant on seed financing. But, again, there are always trade-offs and founders should weigh these carefully in deciding whether the Kima way is the way they want to choose.

soneca 13y ago

As this is looking like a AMA for jber, I will ask: How many brazilian startups have you funded? I understand that you are investing everywhere, but the country counts? I mean, bigger markets = better chances? Also, just to reassure me, can you completely guarantee that if I don't have an answer in 5 five workdays is because I didn't pass? Just to control my expectations and illusions here if that happens.

jber 13y ago
No investment in Brazil yet but some in Argentina. The country can count but we are investing everywhere and Brazil is an enormous market. About the 5 days, we will do our best to give an answer in 5 days. If not, it means that we are not doing our job well ;-)
- soneca 13y ago
  thanks, and good luck!

bsiddiqui 13y ago

Giving up 15% of your company for $150k? That's the amount you'd expect to give up, roughly, in your seed round. It's hardly worth considering if you think your company has any value.

neurotech1 13y ago

Do you require startups to be legally incorporated, or can that be done during the funding process? Also, Is your preferred US Entity a Delaware C Corp?

ajju 13y ago

The 5% premoney pool is another thing that will dilute founders (unless I am reading this wrong). YC doesn't require a premoney option pool for employees.

robterrell 13y ago

I wish this had existed years ago. To raise a $150k round from an angel group, it took me 10x the time (150 days). I spent countless hours on dog-and-pony shows, negotiations, documents, contracts, lawyers, and ended up with ridiculous amounts of drama around the board composition, placating founders, and literally weeks of driving around to pick up individual checks from the angel club members... to ultimately gain investors whose interests weren't really aligned with ours and, aside from writing a check, did nothing to help to company. I'm not saying we walked uphill both ways in the snow to get a round of funding... but it's definitely easier right now. Hope YV and Kima is more representative of a new normal than a passing fad.

amolsarva 13y ago

@Kima testimonial -- these guys took a look at my recent venture very fast, very authoritative, read the docs and sent the money, and have been completely hands-off. Kima is not a startup school for "teach me" founders. It is a the model of a quick-decisions seed fund. In my case they followed a co-investor who they knew well. "He's in? We're in. Done." People say this but I rarely see it. As for what else they add -- I'll find out next week in Paris at their summit next to Le Web. I suspect the 100s of CEOs they have backed and big european network will be things I value. They are relevant for the company I'm building. I think the Kima pitch has a lot in common with the PG worldview -- founders want fast decisions, money, network. Maybe they want a school or maybe they can run a school; founders vary.

avifreedman 13y ago

Very interesting. Looks like a great option for those who understand and need it. For the founders 85% of something is better than 100% of nothing... Or, 85% * some risk of Kima behaving 'badly' (from the founders' perspective). Having read the term sheet, I'll say that the desire to get for Kima the post-acquisition excess benefit of any acq-huire exit seems a reasonable request in concept ("Equalization of financial terms") but it does make the 15% more expensive if there are others who would invest similarly without it and figure that N % will acq-huire instead of failing, stalling, or growing. And it potentially goes a bit too far if one of the founders grows to be a business unit head at a large company. Would need to see the actual document language that addresses that though. Also, sorry to be OCD - to be consistent, "financial terms" should be capitalized in the section title. The biggest issue I'd have is the "Important Decisions" clause. Incubators and many (but not all) angels don't typically look for this level of ability to control that can block the company from growing. There is some evidence that Kima doesn't use their rights maliciously but that's the clause to think carefully about - if there is any disagreement, the IP is in the company and you can't raise money, give distributions, or sell the company (among other things) without consent. However, they invite you to talk to other Kima family companies, so I'd definitely do that and talk about business operations and decision making in the context of those Kima rights with them.