The New Deal

http://blog.ycombinator.com/the-new-deal

by sama • 12 years ago

625 172 12 years ago

blog.ycombinator.com

sanj• 12 years ago

Getting accepted into YC immediately values your company at $1.7M.

fuddle• 12 years ago

Seems pretty ridiculous to be honest.

atmosx• 12 years ago

To me too. But then again, I'm European.

michaelochurch• 12 years ago

That actually makes sense. VC is a reputation-driven system. It shouldn't be that way, but it is. I'm not talking about YC but in general here: there are people way dumber than I am who can put in a good word for a startup and bump its perceived value (and, arguably, its expected return, because reputation is so big in this game) by 50% or more.

In fact, I always held a pretty negative view of YC's prior low valuations. It struck me as PG monetizing his (admittedly, well-earned, because his Lisp chops are really strong) reputation, and the low infusions, to me, indicated that the target audience was young people without families.

I'm afraid to say this, for fear that people are thinking I'm losing my edge by saying something nice about an investor, but I actually like Sam Altman so far. I think he's making a lot of really good decisions.

btrautsc4• 12 years ago

investors understand YC and don't utilize the investment for valuation purposes that I've seen. most companies I know were going backwards by that math to bring YC on board as an investor (which we did so willingly).

acjohnson554• 12 years ago

I'm not a finance guy, but I've always thought people put too much stake in trying to make realistic dollar values out of what is pretty much unquantifiable, i.e. startup equity. At the end of the day, if you're accepted to YC, you simply need to ponder "is 7% of my company worth the entire package?" and decide accordingly. Of course, these things have real consequences in future rounds, but as far as I know, that's just the agreed upon fiction, rather than some underlying financial truth.

To me, this kind of connects to the debate on employee equity that's been ongoing. Sure, intellectually we want to equate that with upfront salary and then compensate at the market rate. But in reality it can never be that way for a plethora of reasons -- tax concerns, option rules, difference in equity classes, etc.

Again, I don't really know what I'm talking about, but I don't think people should view equity as dollars. To me, equity is better thought of as an entirely separate finite resource of a company. One which has different value to different people, depending on ability to take on risk.

cpeterso• 12 years ago

Alternately, if your company is worth less than $1.7M then YC won't invest?

mcherm2• 12 years ago

As they made clear, YC is not necessarily out just to make a profit. (The investment in non-profits, for instance, is clearly not profit driven.) Sure, they'll make a profit, but that won't be the only driver.

Besides, at this stage, no company actually has a value. Companies have a probability distribution of possible values... and it's a very diffuse distribution.

arbuge• 12 years ago

This might actually have been a reality for some time. See some of the exit valuations on AngelList - all seem to be $5m+. So $1.7m value at entry isn't out of whack.

It does seem though that the primary aim here is to provide more for living expenses, which means that the $1.7m implicit valuation might need to be taken with a grain of salt. Not that it matters much anyway.

omarhegazy• 12 years ago

Pretty insignificant. You can't spend that money. No one can.

; YC, financially, is enough money for you to live in the Bay Area to work on your company for a fixed time in which you're expected to grow and acquire more capital and a probability assessment on your potential future value.

Keywords, 'potential' and 'future'.

You can't up and sell your company for $1.7M, Sam Altman can't, no one can because no one would buy it because YC isn't saying "You are now in possession of, and operating something, that is worth $1.7M to the world." At such an early stage, all they're really saying is, "There is a probability that your company will be worth $1.7M, and the probability is high enough such that we're willing to put our money where our mouths are."

cperciva3• 12 years ago

I can't help thinking that this seems a little bit unfair. While there's a nominal out for "exceptional cases", it seems to me that a company like Stripe deserves a much higher valuation than a company like Tarsnap... not to mention the difference between companies which are joining YC after they're already established and companies which are merely a twinkle in their founders' eyes.

What exactly is the problem being solved by having a standard deal which almost everybody gets?

steveklabnik3• 12 years ago

If they valued different companies differently, then it sends a certain kind of signal. The ones with the better valuation would end up getting a disproportionate amount of follow-on funding.

Now, that may be a good thing, but it also might be a bad thing. At a certain point, this is a numbers game, and you want the market to sort things out, not YC management.

tptacek8• 12 years ago

Didn't Altman just say that they sometimes do value companies differently?

What was bad about the signaling problem with YCVC was that it probably often had nothing whatsoever to do with the value of the company, and was instead just an artifact of circumstance. But other investors might not be savvy enough (or just might not have the time to think through it) to understand that that was all that was happening.

tptacek8• 12 years ago

If you're trying to fund 30+ companies per batch, having valuation negotiations with each of them is probably a dealbreaker in terms of overhead.

cperciva3• 12 years ago

Has YC ever had valuation negotiations? I've never been through the process, but if PG's past essays and comments are to be trusted, they started out by making offers for different amounts of equity from different companies -- but those were still take-it-or-leave-it offers.

sama3• 12 years ago

very few people do YC primarily for the money (though, as i said in the post, more money for less equity is definitely better than the opposite!), and whether a company is brand new or 6 months old, we think we can increase their valuation by more than 7%.

mcherm2• 12 years ago

...or more specifically, if you CANNOT increase their valuation by more than 7% then they probably should be looking elsewhere, to someone who CAN increase their value substantially.

blazespin• 12 years ago

The money matters, of course. But I think you are attracting a certain stage company that is somewhere in the ballpark of your standard offer + what they expect you to accelerate. Companies outside that ballpark, should probably look elsewhere. Also, it must be thrilling that other accelerators are competing with you guys. YCombinator has birthed a very critical industry to the new economy. Exciting times.

eloff2• 12 years ago

What about a startup that comes to YC with a product and customers already as opposed to just an idea? Surely they give up less than 7% equity? The risk for YC is maybe an order of magnitude less and the equity % should reflect that lowered risk (not saying .7% either, but lower.)

jonknee• 12 years ago

YC is meant for very early stages (with an idea and not much else). Stripe wasn't worth much when it was just an idea--a better payment gateway--but is now worth a lot because they executed. YC wants to help teams better execute and starts things off with enough money to let the team live in the Bay area for a short time.

nedwin2• 12 years ago

More and more they're funding startups that have traction, customers, revenue - sometimes substantial revenue.

btrautsc4• 12 years ago

Echoed from other places - but doing YC shouldn't be about the money or percentage ownership.

Yes, one day you'll look at the cap table and say, "man it would be great to have that x% to give to employees" - but very likely you're company will be in a dramatically different place progress-wise and valuation-wise, so it's a major net-gain.

Companies come into YC with nothing but wireframes and companies come in with six digit revenues. Both will exit dramatically further along, hyper-focused, and with higher valuations (in my experience). Companies that are unicorns or growing like crazy or have crazy utility get even higher valuations, and it all works out pretty well.

IMO standard deal makes things incredible simple and easy on the front end, without the massive majority of potential pitfalls (signaling, jealousy, negotiating time, etc)

paulhauggis• 12 years ago

"Echoed from other places - but doing YC shouldn't be about the money or percentage ownership"

If starting a business is not at least somewhat about the money, why not just have everything a non-profit?

I've gotten told this very thing, only to have a business-minded company use it to make money on my hard work and effort (you should be happy you get to work on something you enjoy..for 1/2 market value and 50+ hours/week)

GFK_of_xmaspast• 12 years ago

"a standard deal which almost everybody gets"

Worked for Henry Ford.

diziet2• 12 years ago

There are many, many great companies of a certain age or size that will do yc for free. In fact, due to the equity piece companies are 'paying' to get into yc. If you are going for venture / seed funding, the stamp and brand is quite worth it.

austenallred3• 12 years ago

I'm more excited about the effect this will have in general than the effect it will have on YC companies.

The difference for a YC company is that they don't have to give up an extra percentage as they raise their seed round to cover the convertible note/SAFE that they got from YCVC. With no discount, if a YC company raised at a $10M valuation that 80,000 would be worth .8% of the company - not enough to really move the needle.

The difference for the industry as a whole is that most accelerators are trying to mimic YC to a certain extent, and as YC now gives $120K straight-up others might follow suit. It's really easy to say, "We give you 20K for 6-7% because that's YC does." That seems to be almost industry standard, despite the fact that $20K for 3-5 months can be really hard to live on. It will be interesting to see how other accelerators react.

Edmond2• 12 years ago

POEM alert :affect...think you want effect :)

austenallred3• 12 years ago

Thanks :)

saraid216• 12 years ago

What does POEM expand into? Urban Dictionary failed me.

suyash5• 12 years ago

I'm sure you know that it's not a 1-1 relationship between YC startup and accelerator startup.

There are major differences between Incubator like YC and other Accelerators: http://en.wikipedia.org/wiki/Seed_accelerator

arfliw• 12 years ago

YC is not an incubator

zmitri3• 12 years ago

Second point is spot on. Before it was kind of explicit that you should take the SAFE, but if you weren't familiar with financial instruments or how exactly MFN clauses worked, you could run into issues you weren't completely aware of. The new way smooths all that out.

DonGateley• 12 years ago

If one isn't familiar with said financial instruments and all of the other terminology in these comments what is the best remedy for that? Is there any book whose content is pretty much constrained to the elements discussed here?

ig1• 12 years ago

Techstars is already at 118k (18k + 100k convertible)

tc_• 12 years ago

sama: While you have our attention, you might as well explain the details about the $120k/7% happening in two chunks.

[Edit 1:] Thanks; OK. I had read it as potentially indicating the money came at two different times rather than just from two different sources. All clear now.

sama3• 12 years ago

not much to explain--the reason for this is so that YC itself still has no LPs, and can do new things like fund non-profits without being restricted by an LPA. mechanically, the company gets two separate checks form two separate legal entities--one for 20k and one for 100k--but they work with YC for both of them.

cperciva3• 12 years ago

Is the 7% equity split pro rata between those two entities?

jscheel• 12 years ago

Props for cleaning things up. Startups have enough difficulties to overcome, without having to spend time and brain cycles navigating a complex funding structure.

Beliavsky• 12 years ago

I have wondered if affluent parents can replicate at least the money part of Y Combinator.

$120K is about the list price of two years of Harvard/MIT/Stanford . With a son who loves to program, I have wondered if sending him to a cheaper school and giving him the difference in installments after he graduates is better than paying for a "name" school. It depends on the quality of the cheaper school, of course. And I think school prestige matters more for investment banking than tech, so I'd be less inclined to suggest a cheaper school to a budding banker.

tptacek8• 12 years ago

They obviously can, the same way that they can offset the dollars by paying for their childrens' living expenses. But $120k is just not a lot of money. The real value of YC is the signal that getting accepted sends to other seed investors.

yahelc• 12 years ago

Which is, incidentally, not dissimilar from the signaling effects of attending Harvard/MIT/Stanford.

logicallee2• 12 years ago

But $120k is just not a lot of money. The real value of YC is the signal that getting accepted sends to other seed investors.

This idea (first quoted sentence) needs to die. It is toxic to the early-stage ecosystem. Any amount of money is a ton of money. Period. You can ignore the hustling that Jobs or Zuckerberg did for literally a couple of thousand dollars - read Zuckerberg's contracts at the time he was at Harvard making facebook. Look at the timing jobs "Stole" $5000 from Woz and founded Apple with it (making his friend a multimillionaire in the process). The reality is that no windfall bonus from Atari of less than $4300 - which is money that Jobs had 0, absolutely 0, access to, from any other source - equals no Apple. Look at the dates.

You can also ignore what companies actually spend the YCombinator seed money on when it was $14K-$20K, at a time that the YC badge easily added $200K+ to a YC company's average valuation - a badge that doesn't bring instant liquidity. How many YC companies would not exist if YC only added its badge to the valuation, and not actually given any money.[1]

What you can't ignore is that there are people who are working a day job while owning and building a company - working that day job because any amount of money, even part of a single full time earner's after-tax salary, is a ton of money.

Just try raising it.

[1] Imagine if the YC admission read: "Congratulations! This admission is easily worth $200K in extra valuation. With the YC badge, you should have no trouble raising money. We are therefore not making any cash investment, not even $12K, but rendering only services. We welcome you to the bay area on (date)."

sailfast• 12 years ago

While the education is one thing (and surely valuable), I think you also have to look at the connections and network you develop at a "name" school vs. other schools. Those are not things you see on a bill, but they are extremely valuable.

EDIT: I'm not saying this can't be achieved at other schools - I didn't attend a "name" school, but the network definitely matters and can be a huge bonus especially if you know what industry you want to target.

karamazov• 12 years ago

Off topic, but if your son has the chance to go Harvard/MIT/Stanford, he absolutely should. The difference is primarily in the caliber of the other students, and it makes a world of difference to have such a concentration of talent in one place.

(Note that I'm not saying there isn't talent elsewhere, just that there's an incredible concentration of it in the top n schools.)

kapilkale• 12 years ago

It doesn't necessarily make world of difference. When you compare students who attended top private schools vs. those who were admitted but attended state schools, they actually have equivalent incomes down the line.

What's likely happening is that really smart kids at good state schools end up finding the pockets of talent there anyway.

Pretty scary implications for the value of a Harvard degree.

source: http://www.newyorker.com/archive/2005/10/10/051010crat_atlar...

ericd• 12 years ago

Yeah, the difference in peers alone is worth the cost delta. Especially true if you go to MIT - the student body and culture there is absolutely wonderful. One of my favorite places on Earth.

ZachPruckowski• 12 years ago

Most likely, your kid's startup you dropped $120K into is going to fail. Make sure you consider that case very carefully - what are his chances like at 26 with a less prestigious degree and a failed startup under his belt compared to a Harvard/MIT/Stanford degree plus 5 years in a salaried job that those can get you?

mbesto• 12 years ago

And I think school prestige matters more for investment banking than tech

It has less to do with prestige and more to do with risk.

IMHO, there are only two routes to becoming part of today's tech elite. You either build something that gets traction or you join a team that has already done so. These are IMHO the two strongest signals today, especially given the increase of noise. Don't believe me? Just search around AngelList for 30 min. If your son gets a CS degree from Stanford or MIT, it will automatically put him in that basket of "join a team who has already done so", just as working for Google, Facebook, Twitter, etc does.

morgante8• 12 years ago

As someone who essentially took that path, I can't recommend it. My parents and I had saved up a decent college fund ($100k or so), but instead of using that to go to Top School I took the chance on a school which offered me a full ride.

Sure, I'll be graduating about ~$140k better off than most other students. But over the lifetime of a successful tech entrepreneur that amount of money is fairly meaningless. Having spent a significant amount of time on top campuses (where most of my friends went), I often regret making that decision—the caliber of students is truly higher, and the friends/networks you have from a school like Harvard will pay dividends throughout life.

acjohnson554• 12 years ago

Get the best of both worlds and do a master's at a top notch school.

That's my story. I went to good-but-not-world-renowned state school for undergrad on a full ride. I did my best to wring the absolute most out of that experience, and it paid off in many ways, including a fellowship that paid for my master's at an Ivy. Most grad students don't get plugged into "the network", but I went out of my way to engage in campus life. In the process, I'm fairly positive I built just as good of a network as if I had attended for undergrad.

Point being, everywhere you are has something to offer. Make the most of your situation!

FD3SA• 12 years ago

Listen to this man. Going to a top school has a massive effect on your luck surface area.

Given that the best course materials can increasingly be found online, the only benefit of a school is its social network, in which the elite schools have a formidable monopoly.

hga• 12 years ago

In the case of "a son who loves to program", if the target is a Computer Science degree, if your son can get into any one of Stanford, UC Berkeley, CMU or MIT, go for it. These are the top CS schools in the US and I gather the world, and there's a big quality gap between them and those below them.

jedberg• 12 years ago

Back in the 90s, I had a friend who was an instructor for Sun Certification classes. He told us of a kid who, when he turned 18, was given his college savings by his parents to do with as he pleased. He chose to spend the ~200K getting every Sun cert available.

He then became a consultant at 21 making about $500K a year, at least for a few years. Don't know what happened to him after those certs became useless, but I hope he converted somehow.

nostrademons2• 12 years ago

I also know a family whose father gave them their inheritance when they turned 22. Instead of getting jobs after college, all but the eldest (who already had a job) spent several years bumming around their apartments, paid for by their dad, and failed to launch. Their careers still haven't recovered.

YMMV. I do think it's better to give money to people who are already succeeding and could just use a bit of acceleration or a chance to do something riskier, though. At earlier stages advice and introductions are often more useful in the long term.

ZenPro2• 12 years ago

If your son has co-founders or would like them then this is an idea with the potential to be disastrous.

If the startup (company) goes the distance then whatever equity you bought with investment would convert to your son as part of his inheritance altering the partnership drastically.

The legal and financial ramifications can be quite complex.

huslage• 12 years ago

Why do nonprofits get less money?

sama3• 12 years ago

we tried asking some foundations if they would do a similar deal, and disappointingly they wouldn't. we will keep trying, but we wanted to get something in place for this batch. 100k is not that different 120k. i think it's pretty awesome that one of our startups is stepping up and being creative when traditional supporters of non-profits were reluctant to try a new approach.

morgante8• 12 years ago

Have you tried reaching out to other companies (or even VCs) to see if they'd do something similar?

Not that $20k is a huge difference, but it seems like the dividends from funding a YC non-profit for nearly any player in the tech scene far exceed $20k.

sara125• 12 years ago

What would be the benefit to foundations of doing a similar deal? Seems that they mostly have passed on YC-funded nonprofits including Immunity Project and Zidisha; and for good reasons. It seems that YC is a little behind when it comes to nonprofits - funding things that were very popular years ago like crowdfunding (Kiva comes to mind). These things are still exciting but they aren't at the edge of nonprofit innovation today. Organizations like Sanergy or GiveDirectly are really disrupting the nonprofit industry. Would love to see YC make a bet like one of those.

chimeracoder• 12 years ago

I predict that this is going to lead to an increase in the number of applicants who have already raised some money (though not a full round).

Most people don’t do YC for the financial investment—they do it because they want the advice, the help of the network, the benefits of the program, etc. But still, more money for less equity is definitely better.

This is good news for people who've issued convertible notes before YC, since the implicit valuation is now $1.7MM instead of ~$300K. This is great for PR purposes (read: bragging rights), but can also have concrete implications:

I know at least one company that had a sticky situation[0] when they were accepted into an accelerator after already raising money from an angel investor - the investor ended up owning a huge chunk (the majority?) of the company on paper, because the note converted[1]. They didn't even need the money (it was just a standard part of the accelerator).

[0] it was resolved in the end - but it caused extra headache and legal costs

[1] A well-written conversion clause in original note can also avoid this problem (e.g. by including a threshold), but hindsight is 20/20 - I know a number of companies that would have been impacted in a similar way.

LukeWalsh• 12 years ago

I think it's also a great deal for first time founders and people who aren't all that familiar with startup funding. $120k for 7% is a lot clearer than $17k + $80k for 7% + converted shares no cap no discount.

I also think this is great news for what it will force other accelerators to do. Many people out there claim to copy YC's model with much less friendly terms on the convertible note. This puts everything out in the open if they want to keep up.

rpgmaker• 12 years ago

It's way clearer. Is there a book or a resource on the web to learn about startup funding?

hauget• 12 years ago

Forgive my ignorance, but what does LP stand for?

rmah• 12 years ago

LP = Limited Partners

It's how many VC funds are structured. General Partners run the thing, while Limited Partners are investors with limited liability.

steveklabnik3• 12 years ago

http://en.wikipedia.org/wiki/Limited_partner

suyash5• 12 years ago

There is nothing to be forgiven for, it's a very common question. It stands for Limited Partnership - type of Business Entity. In this post, Sam seems to be referring it in context to Limited Partner.

Read more about it here: http://en.wikipedia.org/wiki/Limited_partnership

danielweber• 12 years ago

Things I had to look up because I never knew or had forgotten:

LP is Limited Partner, basically an investor.

A safe is like a convertible note but better. http://ycombinator.com/safe/

Goopplesoft• 12 years ago

Most people don’t do YC for the financial investment—they do it because they want the advice, the help of the network, the benefits of the program, etc. But still, more money for less equity is definitely better.

I know advice is a big part of it but this is a exaggeration right? Most of that network/benefits/etc that surrounds YCombinator is about the financial investment.

suyash5• 12 years ago

Seems like YC has come to realize how easy it is out there to get massive seed funding. About time they upped their seed amount.

ebabchick• 12 years ago

How can Teespring afford / justify giving every non-profit $50k?

bitsweet• 12 years ago

they clearly are doing very well

diziet2• 12 years ago

They are a company with real revenue that's growing and they think the publicity will sort of make up for it, so they don't end up losing too much on it.

If yc does 5 nonprofits per batch, $500k is not a lot of money.

richardjordan• 12 years ago

Exactly right. It's great to see a company which is growing fast, generating real revenue and quietly establishing itself as one of the most exciting startups in the valley, giving back like this.

Note to founders - this is the kind of thing you can do when your startup makes money!

mikeg84• 12 years ago

I think your math is off. 5 NP's per batch * 50k = 250k from teespring which makes your point even stronger.

nlh• 12 years ago

This seems great - simple, better terms, higher valuation. Kudos @sama and YC.

Stepping back a bit, it's also a sign of the times -- especially given the tone of the last paragraph, it's clear there's pricing pressure on incubators/accelerators and the competition is heating up a bit. There are more competitors in the space, valuations are rising, and YC is adjusting accordingly. This isn't a good or bad thing per se -- just an observation of a byproduct of capitalism and the realism of the market in 2014.

thatthatis• 12 years ago

I have trouble deciding which part I like more: the simplicity or the better valuation.

Unanimously positive move.

debacle• 12 years ago

Is this going to change what the YC cycle looks like for the funded companies?

rdl• 12 years ago

The old terms weren't bad, but this is unquestionably better: simpler, and higher valuation. Great news for everyone in YC.

I don't know if any other accelerators had the same core + YCVC investment model, so I don't know what changes it will have elsewhere except maybe pushing valuations at the accelerator stage a little closer to the demo day amount. (Still higher than $1mm pre, in all but exceptional cases.)

(Also, WOW. The teespring guys are doing $50k for each non-profit? That is amazing.)

Patrick_Devine2• 12 years ago

The 17k for 7% is what always stopped me from considering the Y Combinator route. It's a huge chunk of your company for not very much money. If the new deal had been in place when we started, I think we would have been very tempted to join.

The real benefits of YC though are the focus it brings you, and being able to get access to the YC ecosystem. Oh, and being able to attend Demo Day, but with so many companies in the YC program, I think Demo Day isn't what it used to be (I think you get 90 seconds now?).

We would have loved to have had access to those resources, but since we had already invested far more into our company in terms of cash, it's hard to justify giving up that much equity for so little. Kudos to Sam for the new program.

zmitri3• 12 years ago

17K for 7% isn't as raw a deal as you think when you realize that at an "acceptance" into YC essentially doubles your valuation to most seed investors.

Patrick_Devine2• 12 years ago

Absolutely. Being vetted by YC certainly won't hurt your company, but it's still tough though when you've dumped $100k-$200k of your own money plus your time and energy (which is not insignificant when you're an engineer in the Silicon Valley), and you're giving up that amount of equity.

suyash5• 12 years ago

Sam: Time to update the 'New Deal' on the home page. It still mentions the 'Old Deal'.

mikikian• 12 years ago

@Sama, is YC still encouraging founders to use SAFEs for their seed round or is that dead?

jcchee88• 12 years ago

What does it mean for a startup to be non-profit? When YC and Teespring each invest 50k into a non-profit, do they expect a return on investment? or is it purely a donation?

frakkingcylons• 12 years ago

A donation to fund operations.

wiwillia2• 12 years ago

Purely a donation

billclerico• 12 years ago

hey sam - is it 7% of common stock or preferred?

maxbrown2• 12 years ago

My understanding was that it was always common stock.

I believe this is the agreement: http://ycombinator.com/documents/YC_CSPA.docx

wiwillia2• 12 years ago

Just wanted to say that we're excited to be a part of the non-profit side of YCombinator.

It's been humbling to have Watsi working with us in our office and watching the amazing things they achieve on a daily basis. I have no doubt that amazing non-profits will continue to emerge from YC.

morgante8• 12 years ago

You guys are awesome. It's rare to see a company willing to put real commitment behind their talk of social good, and to see a startup doing so is even more inspirational.

hemantv• 12 years ago

You guys are simply awesome :)

nsxwolf• 12 years ago

This will help applicants cover the ever increasing SV rent.

samstave• 12 years ago

$120k, which we hope is enough for the founders to run their business and pay their living expenses for at least 6 months, and sometimes longer.

So, do you provide personal expense guidance to the founders?

How can I get, without joining YC, just this portion of the program ;)

espitia2• 12 years ago

It would be great to see this annotated on RapGenius in order to learn all the terminology and how investment like these work.

gomox• 12 years ago

Here you go: http://news.rapgenius.com/Sam-altman-the-new-deal-annotated

Feel free to comment (it's not very intensive in terms of VC deal terminology, but I wanted to give RG a spin).

espitia2• 12 years ago

Wow, thank you so much. You made it really easy to understand.

chaseadam172• 12 years ago

A lot of companies talk about changing the world, but Teespring really puts their money where their mouth is. Not only have they been quietly supporting us (Watsi) since the beginning, but to commit $50k to every YC non-profit is truly incredible. Teespring is setting the standard for the next generation of startups, and we're proud to call you guys our friends.

tomasien2• 12 years ago

Agreed it's amazing - are they getting anything in return? I'm not asking this in a skeptical way, I just mean do the non-profits run tee-springs or are they just donating money?

Either way, bravo!

chaseadam172• 12 years ago

They're not asking for anything in return.

nedwin2• 12 years ago

I now have three Watsi tshirts which I guess is thanks to Teespring. I hope you guys aren't out of pocket there!

akcreek• 12 years ago

I ended up with 3 Watsi blue logo t-shirts from Teespring because they said they weren't happy with the quality of the first 2. I kept the 3rd for myself but gave the other two away. They are certainly committed to delivering quality.

_xhok• 12 years ago

Can someone explain what the difference is between before and now? Is it that before you could only spend $17k until you raised your next round but now you get it all at once?

devinmontgomery• 12 years ago

This says a lot about the alternatives YC says it's really competing with - the other things people who could build great startups would otherwise be doing.

$17k is what two engineering students might have made at a summer internship in Boston in 2005.

$120k is now what two entry-level engineers might make in six months in the Valley.

iandanforth• 12 years ago

I really like this model. There are plenty of people who enjoy haggling and the finer points of contracts, but I'm not one of them. If all deals were this simple I think SV startups would save a lot of time, headache and money spent on lawyers.

iRaj• 12 years ago

The simple truth is that the new deal is better than the previous one and there is no denying the value add on that YC brings to startups. Also, the fact that many accelerators and incubators would follow the YC lead and increase their initial investments augurs well for the startup ecosystem. Well done YC.

midas007• 12 years ago

That's an immediate average valuation boost of around 5x.

(1.5 mil vs 300-ish k previously)

crystaln• 12 years ago

While going through YC for no money and 7% would probably be worthwhile for many startups, simply for the exposure and advice, I know for a fact the ostensibly terrible terms have deterred many good applicants. I tried for years to apply to YC with a partner who insisted on not taking such terms. While I think he was wrong (and perhaps that signaled some other problems with the partnership,) I'm happy to see the issue go away. A valuation of $1.5-$2M is quite fair for an early stage startup, particularly with the value-add of YC.

shawn-butler• 12 years ago

Has YC / Teespring taken a position on whether a L3C is a "non-profit"?

tsenkov• 12 years ago

I don't know how much of this idea comes from Sam Altman, but YC looks better and better since he took over.

snambi• 12 years ago

this sounds simpler than the previous one.

ycaspirant• 12 years ago

Upon getting accepted to YC, your company is promised $120K for 7%. Does this imply that if your company is accepted to YC, then it is worth $1.7M (because 7% of $1.7M is $120K)? Or is this not the right way to look at it? Why / why not?

jlevy• 12 years ago

There are two chunks (as Sam mentions in his post) -- one chunk is for common stock and the other is in the form of a Safe that converts to Preferred stock.

The New Deal

Related Stories