7 ms·

Ask HN: Is $100k for 50% just a terrible idea?

• scottoreilly 13y ago
  Yes, it's a terrible idea. Giving up control of your company is never something you should do right out of the gates. With someone else owning 50%, it's not your company anymore.
• mooreds 13y ago
  What are they offering you? It seems awful to me, just because you could consult and make good money (not 100k, but 60k between the two of you) and bootstrap and then own 100% of your company. Note, I ran a solo consultancy for a few years and have been part of a couple of failed startups, so make sure you don't forget the salt.
  • fsk 13y ago
    That seems like the best plan. Get a regular job for a year or two and save up $100k, and work on the startup on the side.
• rpedela 13y ago
  Generally speaking, I don't think it is wise to give so much of your company away especially at an early stage. Most likely the company will need to change direction (pivot) multiple times before becoming successful and that can be hard to do if the founders only own half the company. In my experience, if someone is asking for that much ownership then they want to play a large role in decision making which can be a blessing but more often a curse. As another commenter suggested, consulting can be a good way to make money to then bootstrap the company. Another option is to enter competitions which isn't guaranteed money, but I know some companies have been initially funded by competition prizes.
• RealGeek 13y ago
  Giving up 50% to an accelerator will destory your company. It will make your company un-fundable for any Angel or Series A investment. Series A investors typically want 30% to 35% of your company. If you have already given 50% to an accelerator, there is no room left for another investor. You and your co-founder will loose motivation to work for the company. Let's say you give 50% to the investor, create a 20% options pool, and split rest of the 30% with your co-founder. Fast forward 1 year where you have 15% equity, your company is out of cash and unable to obtain next round of funding, and you are sleeping under your desk to run the company. You will have no motivation to continue working for the 15% equity you have, and will eventually give up.
  • celticninja 13y ago
    of course you could go "the producers" route, sell 50% for 100k then make such a balls up of it that it doesn't go any further than that initial funding. Take your $100k and use it to fund your own startup. ;)
    • RealGeek 13y ago
      I don't think you can do that. You can not cash out the $100k you just got as investment, it goes into company's account and remains under company's control. With 50% you not only give up equity, but even control. I believe this accelerator may also ask for multiple board seats. The investor here will have the biggest stake and control of the company.
      • sitkack 13y ago
        I think what parent means is mini vacation while you figure out your next move, but I am sure tongue in cheek. Seems like a waste of money and time all around. This loan shark territory.
      • deleted 13y ago
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        • 13y ago
• rememberlenny 13y ago
  This becomes similar to the "incubators" that existing pre-2005. The companies would fund startups for 80% equity and give a small amount of money, like 100k. Remember, your accelerator should give you much more than just a seed round.
• ubi 13y ago
  With any incubator/ accelerator you should perform due diligence. Have they backed/helped build any successful companies? Talk with some of those founders and ask. Off the cuff, 50% sounds like a bad idea.
• corkill 13y ago
  Does it help to look at the extreme examples? 1. You take the money and startup fails, investors lose 100k, you lose time. You prob won't realize your failing for longer because you have 100k and so lose more time. 2. You are wildly successful, Lightbank control your company and 50% of everything the business earns for life. The 100k is probably a minimal factor in your success can you live with that?
  • PeterisP 13y ago
    It's not even fair in pure monetary terms - even if it's a very rapid complete failure, you'd put in more than $100k worth of your time&sweat; and if it's anything better than that, then your personal investment is much larger than $100k. The only way it would make sense financially is if you're spending all that $100k in the first year on founder salaries; but at the end of that you've got a company with no cash that's probably not yet selfsustaining.
• ohsnap 13y ago
  Yes, high compared to the industry. However if you have no track record and no domain experience you probably won't get into the bigger accelerators. I'd suggest apply and consider their offer. At worst, going through their accelerator could be great experience for you and give you a better chance to get accepted to the famous accelerators down the road.
• jagath 13y ago
  Seems like a terrible deal to me. If your idea is any good, I'm sure you'll find 100K via AngelList or so as a convertible note. Giving up 50% to an incubator is unheard of. Incubators are great, but there is only so much they can help you with. Startups are filled with uncertainty and you may need more funding later on. And if you have already given up 50%, you are gonna find it real difficult to raise more capital.
• nashequilibrium 13y ago
  The fact that they want 50% off the bat should tell you something already, don't walk run away! I am really surprised that the people running this would actually put the pics & bios on the about page. This is daylight robbery and shameful. If i had to give half my company away for 100k at inception i rather not start it because you are going to need follow on financing. YC only takes like 6 or 7% and is way more prestigious.
  • sitkack 13y ago
    YC gets you access, the money is for burritos and new macs.
    • toomuchtodo 13y ago
      Exactly. Accelerators aren't primarily about money. They're coaches helping you across hurdles from the minor leagues to the majors.
  • juliangoldsmith 13y ago
    This. $100k won't even get you two decent programmers for a year.
    • Cookingboy 13y ago
      Two? It won't even get you one depends on geographical locations.
      • parasitius 13y ago
        Go ahead and keep your heads up in the clouds like a ten square mile area is "the real America" so the rest if us can wallow in shame at the money we wasted on our educations, you braggarts. In the real America, like say Ohio, that is the salary of almost three developers.
      • cgore 13y ago
        $90k is an "average" developer in the US (not the Valley, the US: you can easily make that here in St Louis where I am.) A multiplier of 1.5 - 2.0 is common when you bill out, to account for offices, chairs, electricity, health insurance, etc. And it isn't just software, actually it is often higher in other fields: an auto mechanic might make $25/hour and be billed out at $75/hour. So $100k will get you ONE run-of-the-mill Java programmer for 6-9 months tops. This accelerator is just looking for idiots. http://money.usnews.com/careers/best-jobs/software-developer/salary http://money.usnews.com/careers/best-jobs/software-developer...
• dwightc 13y ago
  Terrible. Just for reference, Kima15 offers $150,000 for 15%. www.kima15.com
• salahxanadu 13y ago
  How much money is your startup making right now?
• deleted 13y ago
  [deleted]
• koah 13y ago
  As RealGeek stated, it will destroy your company, and it removes the incentives for you to work hard and win. You are going to be doing the hard work of running your company. An investor who wants to take 50% or more of your company is saying, "I want control." They may argue that the deal provides opportunity to technical founders. I would argue the deal is unethical and exploits unexperienced entrepreneurs.
• Jugurtha 13y ago
  Is it Lightgangstart or Lightbankster? Is it a penetrator or an accelerator ? I don't have my glasses. Do you need the $100k ? Like do you really need it. I've heard that Genentech got started with about $250 grand. And that's medical research that led to changing the world. Unless you're doing something bigger than what these guys did, I doubt you really need the money.
• robk 13y ago
  Lots of (negative) reactions from when they started in 2012: http://blogs.wsj.com/venturecapital/2012/09/21/readers-react-to-lightbank-start-asking-for-50-of-new-companies/ http://blogs.wsj.com/venturecapital/2012/09/21/readers-react... I'm surprised it's still going.
• wasd 13y ago
  Funny enough, this is kinda how accelerators/incubators used to be before YC. They took bigger portions and were more involved. PG said this was the anti-model for YC. Source PG @ Launch Festival: http://www.youtube.com/watch?v=0rVpAKziQJA&feature=share&t=10m25s http://www.youtube.com/watch?v=0rVpAKziQJA&feature=share&t=1...
  • bryanlarsen 13y ago
    Bigger portions and more involved can be a good model. The Wesley Clover program is highly recommended: http://www.wesleyclover.com/technologies-ict/recruitment/ http://www.wesleyclover.com/technologies-ict/recruitment/ But notice the phrasing: it's quite clear that what they're doing you is hiring you to work in a company that you will help to create.
• markolschesky 13y ago
  You're going to get raked over the coals if this is your first time and you have absolutely nothing built yet. Ideas are pretty cheap in the grand scheme of things. If you can manage it, you should turn your idea into some kind of a product and try to get it out there. Win some awards, get some press. With nothing, you're in a position where you can't negotiate anything right now, but you can change that.
• smita622 13y ago
  seems more like a scam.. http://blogs.wsj.com/venturecapital/2012/09/21/readers-react-to-lightbank-start-asking-for-50-of-new-companies/ http://blogs.wsj.com/venturecapital/2012/09/21/readers-react...
• angersock 13y ago
  So, two important questions: First, what does Lightbank offer to your business? Do they have network connections that will actually help you? Do they have mentorship which actually fits your problem domain? Do they have customer connections for your first market tests? Second, what do you need the money for? What do you need to spend it on? That will barely pay for a fulltime engineer and a saleperson, including healthcare and excluding salaries for the founders. EDIT: Why not check out Startup Chile: http://startupchile.org/about/the-program/ http://startupchile.org/about/the-program/ ~$40K in equity-free seed funding, and all you have to do is be part of their community for a few months/a year. It's basically a paid vacation to try and be a startup.
• chrisgoman 13y ago
  Lightbank is a fund by the "Groupon guy", Eric Lefkofsky. He was the guy behind Mason (the younger CEO) and was Chairman
• gesman 13y ago
  They won't give $100k to untested business idea. Tested business won't gove up 50% for $100k. It's a lose-lose business model. Whenever transaction happens - someone loses.
• IndieDevClub 13y ago
  I think what most developers need is mentors, direction and a community... that's why we'd do almost anything to get into an accelerator. We think "if 50% stake for $100k is the best offer I can get, I should take it because I want to go where things happen." There should really be an alternative. Something where we could just help each other out. That's why I'm making a club... it's called Indie Developer Club. I just had the idea this weekend so the website isn't operational yet, but anyone can send me an email if they like the idea and want to join.
  • DenisM 13y ago
    You'll do better if you announce location. In Seattle, I encourage veryone to join SURF.
    • IndieDevClub 13y ago
      I'm way too broke for a co-working space. The plan is to initially use Google Hangouts because the cost is $0 and there's no time wasted travelling to a physical location. If more than 10 people join there will need to be more than one regularly scheduled Google Hangout, so it makes sense to break them up by geography. I just have to make a system that let's people add their own Google hangouts to the system and let other members RSVP for them.
• thisNeXTguy8487 13y ago
  No. Just no.
• crystaln 13y ago
  Unless you are incredibly desperate, this is a terrible, terrible idea, as is dealing with any VC or organization that demands these terms. Even if you are successful, you will end up with nothing. The investor will dictate subsequent terms, you will be diluted severely, and you will have poor liquidation terms. Don't waste years of your life with these losers. On a side note, Lightbank has screwed around with investing in quite a few companies I've heard of. They are as arrogant and incompetent as the terms they demand imply.
• bfrog 13y ago
  Chicago accelerators suck for a lot of reasons. This is one of them.