Kima Ventures Will Allow Startups to Raise $150K Within 15 Days Via AngelList(techcrunch.com)
techcrunch.com
Kima Ventures Will Allow Startups to Raise $150K Within 15 Days Via AngelList
http://techcrunch.com/2013/12/04/kima-ventures-will-allow-startups-to-raise-150k-within-15-days-via-angellist/
13 comments
I can see this as being great for inexperienced founders looking at getting funding for their first stab at being an entrepreneur. However, any founders that are talented and have worked as an engineer at at least one moderately or highly successful company should be able to raise money on much better terms. Giving up 15% for $150k seems pretty steep, especially when the investor in question is spread so thin. Money and maybe occasional introductions are going to be pretty much the only forms of involvement that the investor could realistically invest in you.
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I wondered why no firms were doing that:
https://news.ycombinator.com/item?id=6730152
What do you guys think about the terms of the deal? Isn't 15% a lot to give out for just 150k?
Y Combinator is $20k (+ $80k maybe) for ~6% equity.
The $80k is a convertible note though, so expect it to be converted into another ~25% equity at that valuation.
It doesn't convert at that valuation. It converts in a future equity round, usually the series A, valuations for which are on average over $10 million lately.
Thanks for the clarification. Thats what I thought. So convertible note is much better for the entrepreneur. It retains the optionality of doing well and consequently giving out less equity.
Notes aren't always better. It depends on the valuation cap at which they convert. A note with a low cap is just as dilutive as an equity investment at a low valuation. The YCVC note is uncapped, however, which means it's like getting part of your eventual equity round in advance.
IIUC a convertible note better for the investor in less-good outcomes because it's a note -- it's debt, not equity. In a bankruptcy equity holders are S.O.L. Creditors get to divvy up whatever is left. Which may not be much, but it's > 0 and they have a voice at the table.
Ok I see, so it's more like 8% at $10m.
I thought the convertible note is to be converted to equity in series A. If the company did well, it would presumably have a higher valuation, and they would have to give away far less than 25%.
YC gets those terms because of what it does for a company's reputation, and the contacts made through YC itself.
To dismiss fund raising as a "distraction" as they do belies the importance and seriousness of choosing good investors that benefit your company, on terms that won't hamstring your growth later.
A "one size fits all" approach like what they're pushing sounds more like a pay day loan than a legitimate business partnership.
I worked with a startup that took a $150k seed-stage investment on a $1m valuation, but the terms and the investors were terrible. My partners and I were too inexperience to know we were being ripped off until the time came to raise real money and our first investors were blocking every funding attempt and giving us "counter offers" at significantly worse terms.
I'm not saying these people are doing this, or even that it's a bad deal, but I would advise serious caution and diligence in matters of fund-raising. It's worth spending more than 15 days to get a deal right. Properly funding a business is not a "distraction;" it's a primary component in running a business.
A "one size fits all" approach like what they're pushing sounds more like a pay day loan than a legitimate business partnership.
I worked with a startup that took a $150k seed-stage investment on a $1m valuation, but the terms and the investors were terrible. My partners and I were too inexperience to know we were being ripped off until the time came to raise real money and our first investors were blocking every funding attempt and giving us "counter offers" at significantly worse terms.
I'm not saying these people are doing this, or even that it's a bad deal, but I would advise serious caution and diligence in matters of fund-raising. It's worth spending more than 15 days to get a deal right. Properly funding a business is not a "distraction;" it's a primary component in running a business.
Hello
Nope, we are not doing it ;-) Check my Angellist profile: http://angel.co/jberrebi
We have a very good reputation in this market and are helpful! You can check!
Nope, we are not doing it ;-) Check my Angellist profile: http://angel.co/jberrebi
We have a very good reputation in this market and are helpful! You can check!
Terrible terms will attract terrible companies.
Why do you think our terms are "terrible"?
Terrible is a strong word, but I don't think these terms are good for lots of companies. Each company is at a different stage when they first start raising seed funding. Some companies might just be worth 1 MM, but if you have a strong team, great technology, a workable plan, and early customer interest/revenue 1 MM is a horrible deal. In my opinion these terms are great for some ventures and absolutely horrible for others. I think the quick decisions are great, but I would think it would be more fair and equitable for you not to box the valuations. Perhaps offering a tiered option where higher value ventures take a little longer to evaluate, but I think boxing the valuation will have you miss the best companies. My two cents anyhow.
Agree with you that for it's not for everyone but for most early stage startups, it's a great deal.
For the others, Kima Ventures still exists and we are investing at differents valuations (lower and higher)
For the others, Kima Ventures still exists and we are investing at differents valuations (lower and higher)
I think it's best for super early stage ventures. If you're much further along, it's going to be a bad deal and possibly deter any future investment in your company due to the dead money (lack of follow-on).
How did you guys arrive at 15% for 150K?
We wanted to call it Kima15 so it's 15%. Good answer? ;-)
More seriously. We know the market better than many angels and we are investing in any country of the world. This offer was already been accepted by a lot of awesome founders building big things.
More seriously. We know the market better than many angels and we are investing in any country of the world. This offer was already been accepted by a lot of awesome founders building big things.
In Canada most startup founders won't be able to score a deal like the one you offer. I really applaud your approach and willingness to fund companies all over the world. I was expecting this to be a US-only thing. I was pleasantly surprised.
We already invested in Pakistan too ;-)
so nope, it's for everyone ;-)
Which market? You mean the worldwide market. If I had to guess, I'd say you are probably 60% EU + Russia, 10% Israel, 10% US, 20% other. Certain things might make sense in other places that don't make sense in the US.
You can't imagine how most US startups will be happy to get that deal.
There are thousands of startups trying to get funding desperately in the US too
There are also founders who are not interested to lose their time by pitching many VCs...and prefer to get that term in 15 days instead of better terms in 5 months...
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Thanks for explaining. These deals are such an opaque market that first time entrepreneurs have no idea what is good and what is bad.
My worry would be the board seat.
If I were to go out on my own, I'd quite possibly take those numbers ($150k for 15%) pre-MVP if it meant 2 years of autonomy. I wouldn't give a board seat up, though. I also think $100-150k per founder is a more reasonable infusion (1-2 years).
If I were to go out on my own, I'd quite possibly take those numbers ($150k for 15%) pre-MVP if it meant 2 years of autonomy. I wouldn't give a board seat up, though. I also think $100-150k per founder is a more reasonable infusion (1-2 years).
These terms are so good that Kima may have put itself in a strange position of looking "too good to be true."
Standoffish arrogance in VCs is unpleasant, but it can signal that the VC is so successful that he or she doesn't need to be nice.
If only the straightforward approach worked!
Standoffish arrogance in VCs is unpleasant, but it can signal that the VC is so successful that he or she doesn't need to be nice.
If only the straightforward approach worked!
Ok, so the good strategy is to give a bad deal to entrepreneurs ? ;-)
No, my point was not that. My point is that sometimes, showing how tough you are makes you appear more successful and more desirable--a type of signaling.
I'd certainly prefer a situation where no one has to do this, much less VCs!
I'd certainly prefer a situation where no one has to do this, much less VCs!
I think it's an interesting move. I can tell most of HN seems to dislike this idea but I believe it's basically what incubators are offering without the usual smokescreen of "advice + intros"
I know nothing of Kima itself, they could be great or terrible investors - but that seems orthogonal to this idea which could makes sense for both parties in many cases.
I know nothing of Kima itself, they could be great or terrible investors - but that seems orthogonal to this idea which could makes sense for both parties in many cases.
I am a co-founder at a startup that just graduated from 500startups and as part of my fundraising process, I decided to approach Jeremie.
I think what's this post is missing is some context, Jeremie is running one of the most active seed fund in the world (200 investments is no feat) and they have a stellar reputation which is why I approached him - I did some due diligence with other entrepreneurs who provided me great recommendations as well.
Jeremie turned us down for various reasons but did in a timely manner and was being very honest about it (no sugar-coating or stalling the process to keep the door open like most VCs do).
I think if you're looking to take money from an unknown investor (who has made almost no investment), you should be doing your due diligence. However with a network of 200 backed companies - making a due diligence can be fast and take just a few days and I also think you should do that prior applying to Kima15 via Angellist.
Some cite the valuation not being favorable, however there are stages when your company is so immature and early that you shouldn't worry about over-optimizing for valuation and rather take some money at a lower valuation and move fast in order to make great progress that will let you close more money at a significantly higher valuation. If you are looking to build a company which might be the $100M-$1B valuation range then that low valuation will not have any significant impact on your outcome.
It is also very refreshing to see a seed fund publishing a SLA - I am looking at this as a very clever marketing feature - now people will remember Kima as the first seed fund that agreed to commit for a SLA for giving you an answer - one of the biggest pain in raising funds.
I think what's this post is missing is some context, Jeremie is running one of the most active seed fund in the world (200 investments is no feat) and they have a stellar reputation which is why I approached him - I did some due diligence with other entrepreneurs who provided me great recommendations as well.
Jeremie turned us down for various reasons but did in a timely manner and was being very honest about it (no sugar-coating or stalling the process to keep the door open like most VCs do).
I think if you're looking to take money from an unknown investor (who has made almost no investment), you should be doing your due diligence. However with a network of 200 backed companies - making a due diligence can be fast and take just a few days and I also think you should do that prior applying to Kima15 via Angellist.
Some cite the valuation not being favorable, however there are stages when your company is so immature and early that you shouldn't worry about over-optimizing for valuation and rather take some money at a lower valuation and move fast in order to make great progress that will let you close more money at a significantly higher valuation. If you are looking to build a company which might be the $100M-$1B valuation range then that low valuation will not have any significant impact on your outcome.
It is also very refreshing to see a seed fund publishing a SLA - I am looking at this as a very clever marketing feature - now people will remember Kima as the first seed fund that agreed to commit for a SLA for giving you an answer - one of the biggest pain in raising funds.
Every 1% of a billion dollars is $10,000,000 ... just saying. :)
If it's your only option for money, then sure - though if you're that ready for investment where a firm will give you a response/money within 15 days (along with what due diligence are they doing on you?) then you should likely shop around. $150k for 14%, 13%, 12%?
Obviously it doesn't just come down to %. I'd rather give some people 10% or 15% or more if they were the right fit. :)
So overall it's a moot point, but it's also not in some circumstances. :)
If it's your only option for money, then sure - though if you're that ready for investment where a firm will give you a response/money within 15 days (along with what due diligence are they doing on you?) then you should likely shop around. $150k for 14%, 13%, 12%?
Obviously it doesn't just come down to %. I'd rather give some people 10% or 15% or more if they were the right fit. :)
So overall it's a moot point, but it's also not in some circumstances. :)
I've heard mostly negative things about Kima.
There's Jeremie's public negative statements about a company they invested in (Sparrow): https://news.ycombinator.com/item?id=4277331.
They're also very price sensitive, which can create resentment even in companies that take their money.
There's Jeremie's public negative statements about a company they invested in (Sparrow): https://news.ycombinator.com/item?id=4277331.
They're also very price sensitive, which can create resentment even in companies that take their money.
They're price sensitive and are quite open about it - I don't see why it would create resentment?
If they are approaching you and are trying to negotiate a lower price while other investors are on board on a higher valuation (I saw this happens quite a lot), I think that would be the kind of behavior that would create resentment both on the other investors and founders side.
However I haven't experienced it and my experience was that they turned me down because my valuation was too high for them and out of their comfort zone - did they try to negotiate me to a lower valuation? No.
If they are approaching you and are trying to negotiate a lower price while other investors are on board on a higher valuation (I saw this happens quite a lot), I think that would be the kind of behavior that would create resentment both on the other investors and founders side.
However I haven't experienced it and my experience was that they turned me down because my valuation was too high for them and out of their comfort zone - did they try to negotiate me to a lower valuation? No.
Use your main account if you want your comment to be taken seriously.
Thanks Adam for your kind words.
Still love a lot what you are doing at BinPress!
Good luck!
Good luck!
I know I wouldn't invest or accept an investment without being able to meet the founders face-to-face. That is part of why Y Combinator has been as successful as it has been, it offers less funding and more networking. The later being what a founder needs just as much OR MORE.
We raised money from Kima after our incubator. They have a fast process and understand technology well.
This is much better than incubator terms, and if I had this before committing to a incubator, I would have done this instead.
This is much better than incubator terms, and if I had this before committing to a incubator, I would have done this instead.
To the naysayers, the biggest downside of fundraising is just the insane distraction and time it takes to get through that process.
Kima Ventures has simply understood that and has solved that problem.
There are a lot of startups for whom it would be detrimental to have investors who want to have a say in their startup, but who would have a lot of benefit make big progress by getting $150k fast.
If you position yourself as the brand to get all these startups, you will inevitably scoop up some of the really big hitters.
Kima Ventures has simply understood that and has solved that problem.
There are a lot of startups for whom it would be detrimental to have investors who want to have a say in their startup, but who would have a lot of benefit make big progress by getting $150k fast.
If you position yourself as the brand to get all these startups, you will inevitably scoop up some of the really big hitters.
Any advice for someone in the early idea phase? What steps would one do before applying to this?
GSD (Get Shit Done) and get some traction. Without traction, you're just a guy with an idea in a queue of thousands...
I thought the purpose of this type of funding was to fund the idea stage, so you wouldn't need traction yet.