Right and I don't know the specifics of this situation so I really shouldn't conjecture.
Clearly the company didn't feel they had the option to take more time to decide. If that's the case that's on us and we can do better. I will absolutely assert though that if they needed the time they could have had it.
Not evading here, just don't want to go into unnecessary detail, but here it is if you are interested -
Our LOI is not a complex document. It's one page long and covers 7 points.
1- agreeing to supply an official version of the cap table
2- representing that documents supplied to us are are accurate to the best of their knowledge
3- acknowledging that the team must relocate for the duration of the program
4- committing to fully participate in the program (show up and not have another job outside of their company)
5- agreeing to the dates of the program
6- agreeing to our equity exchange
7- confidentially clause regarding the offer
And a final clause states that while signing the LOI executes your agreement to our terms that "your acceptance of our offer
is subject to your review and satisfaction with the formal contract provided". In other words signing the document is merely signaling your intent to participate in the program, but you aren't held to any specific clauses by signing.
This is not a document that is meant to be negotiated, there are really no terms here that we'd debate on, it's more of an outline of the deal so that you get it all in one place and have it in writing up front.
No worries at all, I don't take it to be antagonistic in any way. I'm hoping to accurately represent how we operate and I'm inviting your questions, so ask away!
>> Is Sam Altman involved with TechStars? If not, why is his name being evoked? It's great that you agree with him, but OP is saying that at least in his case, this point of view was not honored.
Sam is the president of YC. I'm invoking his name because it was a great post on a common accelerator tactic that we do not employ. The comments in that thread are very relevant. I wasn't invoking Sam so much as I was pulling in the context of that prior discussion on HN.
>> I understand, but this is simply the universal rationale behind pressure tactics. Your desire for quick resolution is understandable, but the specific claim made in the post needs to be addressed.
Actually not the case. As covered in the thread I referenced the reason that this pressure tactic is typically employed is that an accelerator is trying to force a company to make a decision before the deadline of a program that they view as a competitor, in essence front-running the selection process of another organization.
The point I'm making is that while we don't want to use that tactic, we can't afford to give an open ended offer up until the first day of the program because we'd risk having an 8 company cohort. It's less of an issue for YC to take an additional (or lose an additional) half dozen companies between their selection process and day one of the program because a) they don't offer workspace to their companies and don't have to do with those logistics and b) the uncertainty of +/- a few companies doesn't matter as much in a 60+ company batch as it does in a 10-12 company batch.
Sam Altman had a great post recently about YC's indictment of timing pressure tactics on accelerator offers. We completely agree with that position and try very hard to not give that impression. Clearly sometimes that pressure is still felt even if it's not intended.
One issue that is relevant to us given our fixed class sizes is getting a definitive answer from an offer as quickly as we can so that we know if should move down the list and give an offer to the next team instead. Having 10 offers out and finding out that only 8 want to accept would mean we are giving out 2 offers potentially much later than the others.
Purely as a practical timing matter we hope to have a set of offers out around the same time and have everyone accept or dismiss them pretty quickly so we know who the class will be.
There was good discussion of this on a prior HN thread when @sama posted that blog piece. If I can dig it up I'll add it here.
Given that I work with our cloud program and in Austin I'm not as intimate with the alumni from Chicago, but one that I am personally fond of is http://www.giveforward.com/
They've crowd-funded over 125 million dollars toward medical expenses for people in need.
Im an MD for Techstars in Austin and happy to answer specific questions on this for anyone about our programs and results.
I don't know the details of this specific company, so I won't comment on any of those particulars, but I can for sure comment on the structure of our terms.
As I mention in another reply on this thread, the OP appears to have misunderstood the note terms as presented. Currently the 100k note offered is a 3mil-5mil cap note, 20% discount. What causes it to be 5 vs 3 is whether or not the company has had a prior financing event. In other words the cap by default is 3, but it'll float up to 5 if a prior financing is above 3 for a particular company. Those terms are written in stone for all time, but as of this exact moment that's what they are and that's what the were at the time of this blog post.
One other thing I'll point out that wasn't covered in the post, likely due to the timing of the event, is our first >= 100 million exit, which happened in the last month.
Techstars in Chicago is actually less than 2 years old. Excelerate labs was 2 years old at the time it joined Techstars, so the oldest company connected to that city is less than 4.
Also important to control for cohort size. These are 10 company classes. A 100 million+ breakout seems to be somewhere between a 1 in 100 and a 1 in 50 occurrence.
And the real answer to this is that getting large exits takes a long time. Unless I'm mistaken YC, which is older than Techstars and has 50% more portfolio companies, has 3 exits over 100 million, OMGPOP, Heroku and Twitch. Granted the last one was a big one.
Agree! I was going to reply to some of Sam's comments, but stopped because this is not at all what Genius was designed for and my reply to his comments wouldn't fit the UX.
I'm an MD for Techstars and I completely agree. This is the approach we've always taken for the programs that I've run, (Techstars Cloud and the Austin TS program).
In several cases, just as a consequence of the calendar, the timing of when we've given offers out can create tension for a company, particularly if it lands in between the YC interview notification and the actual YC interview. When it's come up in the past I've aways encouraged founders to notify YC and see if they can either take the interview early or if our timeline permits, to let them take their YC interview knowing that they have a standing offer from me regardless.
I've had some people mention to me that this is merely bolstering these companies' applications to YC, but I don't view it that way and regardless of which program they end up in, it's the right thing to do imo. It's actually worked out quite well and I'm happy with the companies that chose Techstars in those scenarios over YC, and also completely happy for the companies that chose YC.
Seems like an odd theory on the heels of three counter examples. Bill Gates didn't create the first OS, Larry and Sergey didn't create the search engine, and Mark Zuckerberg didn't build the first social network.
I'm replying to this comment on a forum that PG built, so he deserves the courtesy of me being in his house.
Also I'll say that he was a phenomenal inspiration to Matt Tanase and me when we started Slicehost. I've learned so much from his writing. The guy is a giant. I had the great pleasure of meeting him one time at the YC office on a random Rackspace visit that I tagged along on and I considered it to be a 'bucket list' item.
That being said, YC just has a different strategy than we do. And in addition when you are talking about the act of creation there really aren't limiters, so the net-net is that they can kick ass and we can too.
The most important point on the topic to me is the one he made at 9:30- "even though we've funded a lot of startups it's still only a small percentage of the total number of startups".
There is a lot of work out there to do on building great businesses. Given historical evidence, not all of it is going to originate from Mountain View.
The way that it scales is to not try and spread the 'most high profile mentors' to all cities, but to source effectively orthogonal sets of high value people that support each program. Horizontal vs vertical scaling as dandrewsen mentions.
Clearly the company didn't feel they had the option to take more time to decide. If that's the case that's on us and we can do better. I will absolutely assert though that if they needed the time they could have had it.