[HN Gopher] They thought they were joining an accelerator - inst...
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They thought they were joining an accelerator - instead they lost
their startups
Author : e2e4
Score : 72 points
Date : 2024-05-02 21:24 UTC (1 hours ago)
(HTM) web link (techcrunch.com)
(TXT) w3m dump (techcrunch.com)
| _cs2017_ wrote:
| This article is absolute trash since it doesn't explain how the
| bankruptcy of the accelerator would change the amount of dilution
| the startups experience.
|
| Taking the information in the article at face value, the startups
| paid the accelerator (partially) with warrants. Those warrants
| have a fixed exercise price; the courts cannot change that.
| Whether those warrants are exercised by the accelerator or by the
| creditors, the dilution will be exactly the same. This is not at
| all affected by whether creditors bought the warrants for penny
| on the dollar or for a billion dollars.
|
| Maybe there's some reason why warrant owner matters. But the
| article makes no attempt to state or even hint at such a reason.
|
| I wish there was a way to blacklist domains from showing up on my
| Hacker News feed so I don't have to keep reading this type of
| junk journalism.
| hn_throwaway_99 wrote:
| Why the diatribe?
|
| > Maybe there's some reason why warrant owner matters.
|
| It's a well understood fact by anyone in the startup world that
| it _does_ matter, because future investors or acquirers care
| deeply about the structure of your cap table. Furthermore, the
| article gives an explicit example of this:
|
| > She had lined up a grant from a bank to help fund her offer,
| but it ultimately told her no because it was too risky for them
| to be involved with an unknown warrant holder on her cap table.
| sroussey wrote:
| That paragraph makes no sense.
|
| A bank is offering her a grant?
|
| And this grant was supposed to remove the warrant holder from
| the cap table, so why would they have a problem with that?
|
| And having some unknown warrant holder is the reason to shut
| down?
|
| I call BS.
| bbarnett wrote:
| Read your comment and parent. The quote from the article
| doesn't explain why the warrant owner matters, and you
| suggest the cap table structure does, which makes sense.
|
| However, the structure has nothing to do with ownership of
| parts of that structure. Why would warrant ownership matter?
| llamaimperative wrote:
| Because as an investor in a company, you don't want that
| company's founders constantly distracted by a piece of shit
| investor who has a massive stake in their company.
|
| Pretty straightforward.
|
| Investors can create tons of havoc, and "bought equity from
| a bargain bin outside of a bonfire" is probably as good a
| warning sign as any.
| binbag wrote:
| Terrifying.
| hn_throwaway_99 wrote:
| What a psychopath.
|
| To anyone who may be in this kind of situation, _trust your
| instincts and leave_. It will not get better. You will find
| other, better opportunities elsewhere. Best lesson I ever learned
| was from a high level exec that had just started at the company
| where I worked. He quit in 2 weeks. Impressively, he did it
| without drama or really even causing bad will - he just told the
| CEO it wasn 't a match, and that the longer he stayed the more
| detrimental it would be to both himself and the company. I wish I
| had followed his lead - I was too worried about what it would
| look like to leave a company so soon after joining.
| paulryanrogers wrote:
| What was the truth? Really just bad fits or something more
| sinister?
| dylan604 wrote:
| I once worked at a place where an employee started their first
| day at the start of the shift. They mumbled their way through
| it to lunch where they never returned. That's the shortest I've
| personally seen. Absolutely not a c-suite role or anything
| management related though.
| kcartlidge wrote:
| Years ago I took a dev role at a very well known UK
| organisation, a prestigious brand supposedly good for the
| career. Their systems turned out to be smoke and mirrors of the
| most braindead kind. One and a half days in I'd seen enough and
| I quit. If you know, you know.
| blueboo wrote:
| the stupendous risk taken on by founders confounds instincts,
| and we're already filtering to folks who have resorted to
| taking money from third- or fourth-tier options
| iamleppert wrote:
| Add TechStars to the list of accelerators to be avoided at all
| costs. They make an investment in your company on terms they can
| claw back the money at any time. Most of these accelerators
| provide little to no value, in my experience. Unless you need to
| know what "product market fit" means. Hilarious.
| CPLX wrote:
| What a fucking mess.
|
| I got tons and tons of outreach from these guys for my company.
| It was pretty well written didn't come off as overtly scammy
| unless you already know to run screaming from an accelerator or
| any other "investor" that wants you to give _them_ money up
| front.
| emodendroket wrote:
| If you don't know that what are you doing trying to run a
| business?
| ldjkfkdsjnv wrote:
| A popular venture studio based out of NYC is like this. They take
| 60% of the equity from the start, and provide 1M in capital
| (which is decent amount). The narrative is that they provide
| significant guidance, follow on capital, etc. But in reality,
| none of their guidance or follow on capital comes through. For a
| first time founder its okay for a year, any longer and its really
| a financial disaster versus just working your way up the
| corporate ladder.
|
| People have no idea how few startups really cash out, and how
| hard it is when you start from low equity percentages/have bad
| terms.
|
| The horror stories usually dont arise until a startup is actually
| worth something and has a future. This is usually 2 years+ into
| the journey.
|
| I think the typical founders doing this are actually just people
| that want to say they own a company at dinner parties.
| CharlieDigital wrote:
| > A popular venture studio based out of NYC is like this
|
| Sounds like Fractal. Supposedly, the value add is that they've
| already done the due diligence and market research on some
| product idea. They match a team (CEO + CTO) to the idea and
| provide the funding. Do not know of any well known companies to
| have come out of this model, but if they're still around, it
| must be generating _some_ returns for it to be worthwhile.
| presidentender wrote:
| Fractal seems to have addressed the entire market they had
| identified. It doesn't appear that they're still recruiting
| founders.
|
| I was in their pipeline and interviewing potential business
| cofounders, but chose to go the traditional venture route -
| it didn't work out, but I don't think I'd have succeeded at
| the Fractal business either.
| paxys wrote:
| At that point they are just hiring an employee. Once you get
| the $1M what incentive is there to continue to hustle while
| being a minority shareholder in your own company?
| TimJRobinson wrote:
| I don't understand how they lost their startup though? Doesn't
| the accelerator only take a small percent?
| atherton33 wrote:
| "Startups also granted Newchip the right to buy $250,000 worth
| of shares in the company at a later date, but at their current
| valuation"
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(page generated 2024-05-02 23:00 UTC)