motti_s

We then discussed a middle ground between the two: the investor gets common stocks without any special rights except anti-dilution and an option to convert them to preferred at the time of the series A round. This way we could achieve many of the benefits of a convertible note, such as reduced legal costs and the ability to close faster. Eventually we didn't close that deal, but it seems that it could have been an interesting middle ground.

Has anyone ever done something like that? Is it common? I'm interested to know how it turned out and if you'd do it again.

I'm familiar with pg's essay about High Resolution Fundraising, but as stated in the essay, this can happen even without the use of convertible notes: "You may not need to use convertible notes to do it."

Is it a fact that it's much easier to get a higher dollar amount with a note deal compared to shares? When issuing the investor shares with an anti-dilution clause doesn't it have the same effect as a cap, so the investor is protected from a down round? Wouldn't this ultimately allow the investor to agree to the same dollar amount as in a cap?

Isn't determining the cap of the convertible note equivalent to negotiating the valuation when issuing stocks? The dilution won't occur until the conversion, but it will occur eventually and at the ratio that was determined at the time of issuing the note. I think the above applies to uncapped notes, but I don't believe those are very common.

I don't mean to sound negative but I see two scenarios, non of which is great:

1. You become a huge success and Apple is unhappy about people avoiding their scrutiny.

2. Apple doesn't mind you because you have limited traction.

Having said that, I love the way you implemented it. Very clever!

Good luck!

I wouldn't be surprised if many decades ago having a speedometer in a car was an expensive option. If HUDs catch on (and I hope they do), they'll become cheaper and who knows, maybe even standard equipment one day.

As mindcrime mentioned in his comment, Brad Feld's Venture Deals is a great book, though focused on raising from VCs.

Another great source is not books but YouTube. The "This week in venture capital" series is usually interesting. For example here is the most recent episode, with Naval Ravikant, co-founder of AngelList: http://www.youtube.com/watch?v=JP_MJCASwsY This way you don't only learn about startups and funding, but also about key players in the industry. I'm in the habit of watching those videos daily as I work out on my elliptical trainer... As I learn about a certain investor / founder in one video, I search for more videos of them. Some are more interesting than others. For example Mark Andreesen is always a pleasure to listen to.

If you prefer reading, some interesting relevant bloggers are Brad Feld, Fred Wilson, Chris Dixon and Mark Suster.

Disclaimer: if you're not sure what :) means, please google it before proceeding with the above suggestion.

Anyway I'm just joking. Your post is a nice way to get noticed. Good luck with your application!

Will you fund multiple startups working on the same idea?

Yes. If you fund as many companies as we do it's unavoidable you'll end up with some overlap. Even if you tried not to accept competing companies, you'd still get overlap because startups' ideas morph so much. The way we deal with it is that when two startups are working on related stuff, we don't talk to one about what the other's doing.

In practice it has not turned out to be a problem, because most big markets have room for several slightly different solutions, and it's unlikely that two startups would do precisely the same thing.

To be perfectly honest if I were in Y Combinator's shoes I'd be more concerned about you seemingly giving up (from your post: "this is basically a pre-mortem for ShopJoy"). If you believe in your idea and your team, then you'll succeed with or without Y Combinator. The path of a startup is filled with roadblocks and the question is how you handle them. So show that you haven't given up! Forget about this and focus on your product, and by the time you hopefully get an interview you can show progress.

Good luck!

If I'm not mistaken, for W2012 they interviewed 180 groups and accepted 65. That's 36% acceptance rate, but it shouldn't distribute evenly. If the applications were properly graded and the acceptance rate didn't get very low for the lowest graded applicants who were interviewed, then they need to increase the number of groups they interview. I guess that's the case, since pg previously commented that for S2012 they'd probably interview 270 groups. The "problem" is that for every new batch they probably get more applications (and most likely of higher quality), so this might be just playing catch up.

Maybe one day an Anybot robot will perform a preliminary interview so they can scale :)

Hackers without a degree are not uncommon today but were unheard of in the 90s, when I graduated. It made it very hard for me to get the first the job, but if anything made me more motivated to prove myself. Within less than a year I became a team lead and had no issues since, because I had the track record.

A time machine.

One important factor when valuating a company is the perceived risk. YC employs strenuous filtering (it has to reject 97% of the applicants), mentors and connects the founders, and already has a track record of success. This means lower risk which merits higher valuations. It has nothing to do with hype. It's the new way of creating startups combined with the old way of valuating them.

The "no idea" track makes total sense to me for several reasons:

1. Many YC participants changed their idea in the course of the program, some of them multiple times. As an extreme example, the founder of Greplin started working on his final idea three days before demo day.

2. The YC selection process has already been biased towards the team vs the idea.

3. YC is all about experimenting. They like to try and see what happens – this is how the whole thing evolved. Based on the above two, this seems like a logical experiment.

I actually believe the "no idea" track will be a success. Though a major disadvantage is that an idea helps evaluate the quality of the team, even if they end up pivoting. But PG and the rest of the YC team are smart; they’ll figure it out...