5 ms·

They're still going to get 7% for $125k. The $375k extra will convert on the same terms of the next financing.

• throw1234651234 5y ago
  I don't understand at all. I know nothing about startups - so is it an additional 7% that YC owns for every additional 125k, so 28% for 500k? Disclosure - I did not watch the SAFE video.
  • sokoloff 5y ago
    Roughly: The additional converts at the best deal another investor gets at/before the next priced round. If the next priced round is at $7.5M, their $375K converts at that price (so it buys them another 5%). If your next round is not above $1.8M, it’s already an unfavorable sign. The only downside I see is it doesn’t let you raise another small amount without valuing YC’s follow-on $375K. You might want to do such a raise for strategic rather than financial reasons and this would be an overhang against that. (I don’t think it’s that big a deal in practice and the additional committed money is probably better by way more than this detriment.)
    • vl 5y ago
      In practice for small round you will be raising SAFEs instead anyway, so it might be fine for early companies.
    • mizzao 5y ago
      I think you can just do more MFN SAFEs for small follow-on, if an investor is willing (maybe not though if there is no discount)
  • istinetz 5y ago
    Nope. It's $125k for 7%; then the 375k are on terms of next equity round. So the first tranche values your company at 1.78 million; if, afterwards, you raise more money at 6 million valuation, YC gets another 6.25% for 375k. Correct me if I'm wrong.