Anyone helping early stage startups is doing god's work as far as I'm concerned. Technology is what pushes the world forward and anything that helps that is, with limited exceptions, a very positive thing.
My questions/comments/criticisms after a brief look, please correct me if I'm wrong:
1. It funds startups that already have growing revenue, which is fine, but that's the hardest part by far. So it might filter out all of the best startups who can just choose to grind it out a few more months, having already overcome the biggest hurdle. Taking the calculated risk of funding startups that are pre-product/market fit is where the real magic happens.
2. It's legally complicated which means a smart founder would definitely want a lawyer (unlike SAFE), which could be quite costly. It could (potentially) scare off future investment as well.
3. It converts to equity (optionally, which seems scary) to a hefty ~10% valuation, which is more than YC takes in exchange for a much, much better deal because they all but guarantee successful startups will raise a large amount of money at a very high valuation. In effect this costs a startup maybe 3-10x more than YC on the VC route.
4. Like TinySeed, I think it also ignores the inescapable fact that startup investing is a hits-based business regardless of what anyone wants it to be. One out of 50 investments is going to be worth more than the other 49, so it makes sense to align interests with reality. By focusing on getting paid from the biggest winners, you can afford to be much more generous and high-minded with the rest.
5. Also like TinySeed, it doesn't seem to account for just how high living expenses can be for founders with families, etc. Having to negotiate with your investors about paying rent is going to feel a lot like having a boss, which could be very demoralizing for founders. YC is extremely careful not to make founders feel like employees for good reason.
6. Having to negotiate the amount of investment also seems less then ideal. Knowing exactly what the deal is would be much better than having to haggle as the start of the relationship.
7. Wildcard: have you considered evolving this into an ICO-funder for startups? Equity crowdfunding with an initial seed investor seems like a huge idea.
I applaud the effort and hope it becomes huge. I wouldn't bother commenting if I didn't!
Unfortunately, after further analysis, my suspicion that this is a very bad deal for founders seems to be true. A founder would have to be desperate and ignorant to take this deal, and no one deserves to have years of hard work wasted by taking a predatory deal like this.
I hope they fix their terms but based on how misleading they've been, I would never personally do business with this person.
My questions/comments/criticisms after a brief look, please correct me if I'm wrong:
1. It funds startups that already have growing revenue, which is fine, but that's the hardest part by far. So it might filter out all of the best startups who can just choose to grind it out a few more months, having already overcome the biggest hurdle. Taking the calculated risk of funding startups that are pre-product/market fit is where the real magic happens.
2. It's legally complicated which means a smart founder would definitely want a lawyer (unlike SAFE), which could be quite costly. It could (potentially) scare off future investment as well.
3. It converts to equity (optionally, which seems scary) to a hefty ~10% valuation, which is more than YC takes in exchange for a much, much better deal because they all but guarantee successful startups will raise a large amount of money at a very high valuation. In effect this costs a startup maybe 3-10x more than YC on the VC route.
4. Like TinySeed, I think it also ignores the inescapable fact that startup investing is a hits-based business regardless of what anyone wants it to be. One out of 50 investments is going to be worth more than the other 49, so it makes sense to align interests with reality. By focusing on getting paid from the biggest winners, you can afford to be much more generous and high-minded with the rest.
5. Also like TinySeed, it doesn't seem to account for just how high living expenses can be for founders with families, etc. Having to negotiate with your investors about paying rent is going to feel a lot like having a boss, which could be very demoralizing for founders. YC is extremely careful not to make founders feel like employees for good reason.
6. Having to negotiate the amount of investment also seems less then ideal. Knowing exactly what the deal is would be much better than having to haggle as the start of the relationship.
7. Wildcard: have you considered evolving this into an ICO-funder for startups? Equity crowdfunding with an initial seed investor seems like a huge idea.
I applaud the effort and hope it becomes huge. I wouldn't bother commenting if I didn't!