In fairness, the next sentence is "If we fail, you get a check.", so I'm taking that more as an attempt at dry humour. Watching a random sampling of videos, the feedback is pretty thoughtful and polite. Of course the valuations aren't going to be the highest bearing in mind the tiny amount invested and absence of due diligence.
I agree. this is just a poor attempt at dry humor. That being said, If you read his manifesto, he sounds very angry about the need for connections to get investors and his anger comes off as crude and disrespectful in general. Maybe it's just me, but he can do without all the contempt and anger and net the same or a better result.
Reminds me of Vancouver VCs who would tell local technical founders that it would be better if they got hit by a bus so they can flip the company.
Nobody likes to work for sharks and it definitely sounds very aggressive, not the type of people that you would want for long term visioned business startups.
VCs are looking for one thing: return on their capital. They are not your friends.
20k ? Can you not just generate that much by consulting on the side? Thats what I am doing. But then I have no choice as I am old , unattractive and have an accent.
I don't want to be rude, but this is pretty elitist. Essentially:
"Can't you all just run your startup companies and make 220,000 a year like me?"
Some people are overvalued by the market, working in a good space, being attractive and having "reputation" or a lot of online prsence, fame, etc.
It sounds like you personally have a lot of accomplishments, old = "wisdom", and are attractive as a consultant. You have experience doing a lot ofthe things people pay you to consult on but they aren't willing (or you are not) to come on board full time.
tldr, some people can't just make large salaries, but they would take worse terms to bet on themselves.
Edit: to be clear i am being sincere here. If you are older and really really good at what you do, and have a lot of reputation thats great. There is ageism in tech for sure, they want young hungry devs AND older experienced architects to come in and provide advice.
So it is a doubleedged sword, there may be less opportunity for a 50-60 year old programmer to join the team, but opportunity to consult. There also may be a log of spots for a 20 y/o programmer to join, but no room to come in and provide sftwr engineering advice.
I am 26 and a so so dev. Would I take a shitty deal? Depends how shitty. Id give up 10-15% at poor terms, or I would think about it at least. It may end up being less risky than taking a while to build a prototype and trying to build a funding and legal structure with a SAFE and cryptocurrency and other shit.
So yeah, I am leery of deals like this main post, but there is a part of ne that would love beleive it would ve possible to cap up quick and painlessly and with a quick call and application. Terms would be reasonable and I could start working faster, etc.
Hiwever, it would be hard for me to believe that...
Maybe, depends on where you are located (outside any big tech hub, probably not) and your experience (if we go by the out of college starting a startup, I don't see a lot of companies paying consulting fees to 25 year olds with very narrow experience.
I was able to do two small websites at $5k per + $3.5k in design consulting in a month. It's not $20k but I also wasn't killing myself either. It wouldn't be easy, but it's certainly attainable.
I think the bigger issue here is that $20k is insignificant. If you've already got a full-time job and you're working on this venture as a side-hustle you don't need the $20k. If you're working on this venture full-time and it's your only gig you'll need more than $20k. So I'm not entirely sure where this model fits.
I once did a code review for $3,500 and it took about 8-12 hours. After I was done, they asked me to fix the few bugs I found. I told them I was super busy (which I was) and they offered me $10,000 to do the work ASAP. Since it would only take me 8 or so hours to fix the bugs I could hardly pass it up. For two days of work I walked away with $13,500 dollars, of course there is also tax on that, so I netted like $9,000.
Depending how hard I/you try to find consulting work, you can totally make 20k, of course it depends on the month. The best part, is that you can write off business expenses on your taxes. So, you pay significantly less (if any) tax on that 20k.
Protip: Have a high bill rate and work in a niche but critical area.
I've spent 20+ years helping people designing, build & move entire datacenters. Migration of one or two servers is easy. It's exponentially harder when you have to move hundreds or thousands of servers running many apps with minimal downtime.
Still not sure how I ended up specializing in this but there was a need and still is. Turns out a lot of that experience is still applicable for customers moving to the cloud =)
I'm not really sure how I feel about SeedRamp but I love the published interviews. It's interesting to watch different personality types and how they all answer questions/explain their businesses.
Are there many resources like this anywhere else out there?
The only one I know of (but I'm a biologist...) was This Week in Startups, the podcast by Jason Calacanis. He had a segment in which he would critique pitches. Not sure if the podcast or segment exist anymore.
Before reading this comment I thought the strikethrough numbers on the homepage indicated the team got it. I wonder if anyone else thought the same. I'm also red/green colorblind though...
I can't speak to this idea, but these videos are PAINFUL to watch. In an age where we are inundated with mediocre content I would much rather watch interviews of carefully curated applicants and VCs than some random guy trying to get money to put his dad's piano music on an app (this is really in one of the videos).
The idea on paper sounds like a clever way to piggy back for a relatively low risk level on a lot of startups...and as much as contrarian thinking is pontificated, you have to wonder if there is a reason things are done the way they are in the first place.
I am not saying you can't disrupt an industry, but you have to first understand why the industry does it the way they do in the first place. It's not like a bunch of dumb people got together and said lets do this thing as backwards as possible. I have never met an idea for disruption that didn't at some point come to realize that there are often forces beyond control at play and it is very rare to be able to actually disrupt an industry just because intellectually it seems backwards.
I think it's time to dial back the disruption rhetoric and focus on the value creation as defined by people willing to pay more than it costs to make, sign, seal, and delivered.
I found the videos really interesting to watch because we see lots of polished pitches here on HN, but here we're seeing everything. These are mostly just going to a VC with a hand out - asking for money. But, that's what pitching a company is. I think a lot of people who haven't done it imagine a slick deck presentation in a boardroom. The reality is that you have to be able to sit down in a coffee shop and sell your idea to someone who has more money than you.
As far as the terms - I didn't look it over closely to see if it's a fair or predatory deal. Anybody know if it's a fair deal?
His terms are at your own discretion, but he assumes a few % points. (i.e you decide what to offer.)
I guess I am not everyone, so some people can find value where I might not. So, take everything I say with a grain of salt.
You have a point, but I've seen many non-polished, no pitch deck pitches that as rough as they were you walked away with a sense that they are on to something. They have some epiphany or insight and are attempting to turn it into something real. These videos (i didn't watch all) come off as people that have no idea what they are doing or even thinking other than, "I am going to make an app and be a founder."
The problem this guy has is that most serious entrepreneuers won't partake in his process, and this leaves over the large portion of people who don't have access to capital for a very good reason. Not to say there aren't many serious people who struggle with connections and who this guys offering is a good fit for, but his content strategy of sharing all these videos, even if a few have nuggets of gold is going to annoy viewers much like a listicle does after you click through to page 2 or 3 of a slide.
It's time to kill off this mantra of content, content content. We don't need more content, we need content that can't be found anywhere else. (admittedly, this guys content cant be found elsewhere, so that is a plus unless the content continues to be boring and lacking insights.
If you can hire a content writer to run a few searches and write a well written article...THAT IS NOT CONTENT WORTHY OF ROYALTY.
The only content that is king is content that you have to work hard to produce that cannot be found by reading half a dozen articles you found with 2-3 google searches.
Do they honestly believe that startups so close to death can actually turn around with a sufficiently high probability that this investment is worth it?
If so, all power to them. They obviously know something others don't.
I'm sure the valuation cap will be low, and maybe SAFEs with a discount too. It's corporate payday lending.
Not necessarily saying it's bad. Payday lending to poor consumers is scummy because you're addicting them to high interest debt, but corporate finance is different. A SAFE is not debt -- at least not to an individual -- and this might rescue a few good companies with a high enough probability that it would be worth it to the investors, founders, and economy as a whole. You're gonna take some dilution but if you believe in your venture and persevere then... well... as they say it's better to own 1% of success than 100% of failure. :)
>>A SAFE is not debt -- - at least not to an individual
There's a dissolution clause that requires payback before any other distribution of company assets. So, not an individual debt, but effectively the same if there are any assets.
The prominent placement of the "didn't fund this company" videos seems a bit harsh, there's even a red background striked text label showing you how much they were denied.
Sure, that's their marketing. I don't think it would be unfair if the terms were reasonable, right now they're not. But if there were a minimum cap and we were talking 3 months of funding instead of one month then this would totally be a viable option. Maybe not a first choice option, but at least a reasonable backup plan.
The agreement has a blank for the most meaningful term: the valuation cap. If you raise a round below that cap (or just above it) the SAFE ends up being a good deal. But if you raise the next round at a valuation significantly higher than the valuation cap, you could take a haircut. For example, a $1MM cap that's followed by a $15MM pre-money valuation at the Series A would give SeedRamp a 93% discount on their equity. That's the risk.
TLDR: No way to tell what they might get for their investment until they offer you a valuation cap (and even then it still depends on the future valuation put on the company by the next equity round).
So you are literally selling them futures on your next preferred series, except if the valuation comes in below the cap, then they get extra stock, so there's no downside for them except total equity wipe-out.
Why do I feel like this is a leading indicator of imminent bubble collapse?
Beware beware. The investors in your next round WILL NOT LIKE THIS DEAL. Why? Their money doesn't go to building your business, it goes to paying off this SAFE.
"We will ask you to give us some stock in your startup. You decide how much, but it has to be enough to make us interested. It all depends on your situation. A few percent, I'd guess."
I actually think this model fills an important need, but it's kind of a scam as is.
Readit News
And want to invest with a $1M valuation (http://goo.gl/2686da).
To my mind, not so interesting. Sounds more like shark loans
Nobody likes to work for sharks and it definitely sounds very aggressive, not the type of people that you would want for long term visioned business startups.
VCs are looking for one thing: return on their capital. They are not your friends.
"Can't you all just run your startup companies and make 220,000 a year like me?"
Some people are overvalued by the market, working in a good space, being attractive and having "reputation" or a lot of online prsence, fame, etc.
It sounds like you personally have a lot of accomplishments, old = "wisdom", and are attractive as a consultant. You have experience doing a lot ofthe things people pay you to consult on but they aren't willing (or you are not) to come on board full time.
tldr, some people can't just make large salaries, but they would take worse terms to bet on themselves.
Edit: to be clear i am being sincere here. If you are older and really really good at what you do, and have a lot of reputation thats great. There is ageism in tech for sure, they want young hungry devs AND older experienced architects to come in and provide advice.
So it is a doubleedged sword, there may be less opportunity for a 50-60 year old programmer to join the team, but opportunity to consult. There also may be a log of spots for a 20 y/o programmer to join, but no room to come in and provide sftwr engineering advice.
I am 26 and a so so dev. Would I take a shitty deal? Depends how shitty. Id give up 10-15% at poor terms, or I would think about it at least. It may end up being less risky than taking a while to build a prototype and trying to build a funding and legal structure with a SAFE and cryptocurrency and other shit.
So yeah, I am leery of deals like this main post, but there is a part of ne that would love beleive it would ve possible to cap up quick and painlessly and with a quick call and application. Terms would be reasonable and I could start working faster, etc.
Hiwever, it would be hard for me to believe that...
The original, year 1 YC program was targeting people who genuinely would struggle to get $6K (at the time) because it was mostly aimed at students.
When I was a student I couldn't afford text books, so the idea I could get $20k together by consulting was laughable.
Now I'm positively ancient the consulting route isn't too hard to do.
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I think the bigger issue here is that $20k is insignificant. If you've already got a full-time job and you're working on this venture as a side-hustle you don't need the $20k. If you're working on this venture full-time and it's your only gig you'll need more than $20k. So I'm not entirely sure where this model fits.
Depending how hard I/you try to find consulting work, you can totally make 20k, of course it depends on the month. The best part, is that you can write off business expenses on your taxes. So, you pay significantly less (if any) tax on that 20k.
I've spent 20+ years helping people designing, build & move entire datacenters. Migration of one or two servers is easy. It's exponentially harder when you have to move hundreds or thousands of servers running many apps with minimal downtime.
Still not sure how I ended up specializing in this but there was a need and still is. Turns out a lot of that experience is still applicable for customers moving to the cloud =)
Are there many resources like this anywhere else out there?
So far, they've rejected every single startup except one, which they gave just $5k to.
http://www.seedramp.com/history.html
The idea on paper sounds like a clever way to piggy back for a relatively low risk level on a lot of startups...and as much as contrarian thinking is pontificated, you have to wonder if there is a reason things are done the way they are in the first place.
I am not saying you can't disrupt an industry, but you have to first understand why the industry does it the way they do in the first place. It's not like a bunch of dumb people got together and said lets do this thing as backwards as possible. I have never met an idea for disruption that didn't at some point come to realize that there are often forces beyond control at play and it is very rare to be able to actually disrupt an industry just because intellectually it seems backwards.
I think it's time to dial back the disruption rhetoric and focus on the value creation as defined by people willing to pay more than it costs to make, sign, seal, and delivered.
As far as the terms - I didn't look it over closely to see if it's a fair or predatory deal. Anybody know if it's a fair deal?
I guess I am not everyone, so some people can find value where I might not. So, take everything I say with a grain of salt.
You have a point, but I've seen many non-polished, no pitch deck pitches that as rough as they were you walked away with a sense that they are on to something. They have some epiphany or insight and are attempting to turn it into something real. These videos (i didn't watch all) come off as people that have no idea what they are doing or even thinking other than, "I am going to make an app and be a founder."
The problem this guy has is that most serious entrepreneuers won't partake in his process, and this leaves over the large portion of people who don't have access to capital for a very good reason. Not to say there aren't many serious people who struggle with connections and who this guys offering is a good fit for, but his content strategy of sharing all these videos, even if a few have nuggets of gold is going to annoy viewers much like a listicle does after you click through to page 2 or 3 of a slide.
It's time to kill off this mantra of content, content content. We don't need more content, we need content that can't be found anywhere else. (admittedly, this guys content cant be found elsewhere, so that is a plus unless the content continues to be boring and lacking insights.
If you can hire a content writer to run a few searches and write a well written article...THAT IS NOT CONTENT WORTHY OF ROYALTY.
The only content that is king is content that you have to work hard to produce that cannot be found by reading half a dozen articles you found with 2-3 google searches.
If so, all power to them. They obviously know something others don't.
Not necessarily saying it's bad. Payday lending to poor consumers is scummy because you're addicting them to high interest debt, but corporate finance is different. A SAFE is not debt -- at least not to an individual -- and this might rescue a few good companies with a high enough probability that it would be worth it to the investors, founders, and economy as a whole. You're gonna take some dilution but if you believe in your venture and persevere then... well... as they say it's better to own 1% of success than 100% of failure. :)
There's a dissolution clause that requires payback before any other distribution of company assets. So, not an individual debt, but effectively the same if there are any assets.
This is pretty clever though, can't wait to see where it goes.
This particular thumbnail caught my eye...ouch: http://i.imgur.com/03f63JZ.png
I skimmed the agreement, but I don't quite know how to interpret it.
TLDR: No way to tell what they might get for their investment until they offer you a valuation cap (and even then it still depends on the future valuation put on the company by the next equity round).
Why do I feel like this is a leading indicator of imminent bubble collapse?
I actually think this model fills an important need, but it's kind of a scam as is.
http://www.yegor256.com/2015/12/16/investors-are-too-scared....
'The "Valuation Cap" is [Cap]'
All of the important info is "fill in the blank" :)