500k$ for 7%

I

icandoallthings1

New member
Hi guys,

Apologies if I am too ignorant on this point, however, can someone clearly explain to me how the investors would like to have a return of this 500k? Mostly in how many years? And second question2)Let’s say you collect 2 M Euro after demo day. Can you set a condition as I will share max 30% more and investors who willing to do more will get higher ranking?
 
@icandoallthings1 The YC deal is $125 for 7% and the rest is an upfront payment for shares at whatever your first priced round is (that is, the first valuation you agree with another investor). The idea is that on day one, it's difficult to value a startup that has little revenue, so it's just a prepayment for future equity.

You can offer to issue as many notes as you like at the same terms as YC, and can limit the equity you eventually sell by setting a high valuation in your priced rounds. The problem is that VCs outside of preseed don't really do these types of notes (although convertible loans are common), and if you are doing a priced round at a $10 billion valuation, then you need to convince your counterpart that your company is worth $10 billion.

A good piece of advice is to take as much funding as you realistically need to grow to the size you want to grow to. VC-funded companies generally fail to return anything to founders when they take too much funding and spend it without managing to hit their growth targets.

Re VC expectations - 100x in 10 years, or bust
 
@mormarw
The YC deal is $125 for 7% and the rest is an upfront payment for shares at whatever your first priced round is (that is, the first valuation you agree with another investor). The idea is that on day one, it's difficult to value a startup that has little revenue, so it's just a prepayment for future equity.

You can offer to issue as many notes as you like at the same terms as YC, and can limit the equity you eventually sell by setting a high valuation in your priced rounds. The problem is that VCs outside of preseed don't really do these types of notes (although convertible loans are common), and if you are doing a priced round at a $10 billion valuation, then you need to convince your counterpart that your company is worth $10 billion.

A good piece of advice is to take as much funding as you realistically need to grow to the size you want to grow to. VC-funded companies generally fail to return anything to founders when they take too much funding and spend it without managing to hit their growth targets.
Click to expand...

Note - the terms of the 375K are for priced rounds and other SAFEs with terms. They have a MFN clause that lets them pick the best terms from any future round.
 
@icandoallthings1 For pre-seed investors will expect around 100x of the investment. Cause they invest in many companies, and want to spread the risk. If one company can do 100x it pays for many other startup investment that failed (and they know that most startups will fail). Even if successful it might just 1x or 2x.
I do believe that a lot of companies are not VC money worth, and it is OK for the founder (for a VC if your company makes “only” $1 million a year maximum, it is crap, but for you it is a lot of money). I mean, not every company should strive to be the next $1 to $10 billion startup (and it should be extremely difficult anyways).
Good thing about that money, it is not like a bank loan, you don’t owe anyone anything… if your company fails, they lose money, and that’s it. It is a high risk, high reward kind of a deal.
Now when it comes to raising money on your terms, ideally it should be in the best terms for you always, but it all depends on how hot and exciting your project is to investors.
 
@icandoallthings1 It is 125k for 7% of your company. So if you raise at a valuation of 1 million after YC, the additional 375k safe will convert and YC ends up taking an additional 37.5% stake in your company.

If you raise at a 10 million valuation, YC will take an additional 3.75% equity stake.
 
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