I like the approach, but I don't understand why an investment that's so well defined ("based on the standard Seedsummit documents") requires legal fees at all.
Having standard terms should mean lawyers are only needed the very first time (to set up the standard terms).
The rest should be 'fill in the blanks', and since valuations/dollar amounts are not negotiated here, the only blank each investment should have to fill in is the company information (name, incorporation location, address, etc.)
Unfortunately, lawyers have to check that the company exists, request info from founders, check that the IP is owned by the company etc...So cost is 2.5K to $4K (and it's not expensive)
We HATE paying lawyers... :-( We are not investing in a company for that. So we will try to work with all good lawyers with great prices.
As you said, it's not so difficult.
Jeremie,
I don't know if that is part of an agreement you have with your LPs that you need to have a lawyer doing due diligence for you and that require you to spend 2.5k-4k but allow me to propose a perspective of a founder who finished fundraising and one of the thing that I did was to ensure to keep my lawyer out of the equation when it was not needed.
1. Checking if the company exists - meaning looking over incorporation documents, validating the bank details and other information to make sure you're funding who you think you're funding - could be done with someone with some common sense and not a lawyer - probably hiring a person who does administration and work full time for you (the high volume of seed deals you're making make me think you already have that person).
2. Checking that the IP is owned by the company is usually done by doing a TAA (Technology assignment agreement) and in that case this could be a standard doc that you let the founders sign on. I would believe that someone on your behalf could also check that the validity of the signatures.
3. Use a service like RightSignature to collect signature, IPs, timestamps and even Identification cards picture or something of the sort in order to check the legitimacy of the person signing on the docs - this will allow you to remove the lawyer from the equation as well.
4. Last but not least - try documenting the things you need from the company beforehand and post it somewhere on the site - knowing in advance what are the things you are requesting usually eliminate the unneeded ping-ping with lawyer.
On a personal note - I streamlined the fundraising process by creating a few templates (with wire details) and having forms on Rightsignature. I had all of my investors go through that process and closed very fast - including countersigning and dating the documents once the wire reach our account. I think every process could and should be streamlined especially if you deal with 200 companies. Lawyer like to interject in between deals because they can bill and in our case we were able to save around ~$10k in legal fees because we didn't let our lawyers talk with our investors and negotiate for us - and we used a standard note provided by our lawyers.
I'm not saying you could do that but if there's room to reduce the $4k to something like $500 or even nothing - that mean an extra $400k that can be re-invested into ~3 companies - imagine that!
EDIT: I know you have way more experience closing deals than me - I just wanted to offer a founder experience and perspective on that process.
Thanks a lot for your feedback
but here we are talking about an equity deal not convertible notes...
Did you really issued new shares without a lawyer ?
Why do you need a lawyer, if you have standard documents already? Maybe this is something with the Europe / Israel legal framework that I'm not familiar with?
Ok, that's interesting, but doesn't really answer the question. You don't need a lawyer in the U.S. for example. (You may want one, to make sure you're not shooting yourself in the foot, but that's what the standard docs are for. Never in these sorts of things is it actually required that you have someone with a law degree sign off on it in every instance.)
Most of the investment were notes and I understand it is way easier - however the first investment from 500startups were shares. we signed on a SPA (stock purchase agreement) and did some other stuff as well. Most of it were done using Right Signature and quite fast to close.
The person on the other hand handling this process was not specifically a lawyer.
I hope this can shed some light - I'm not saying you can necessarily remove your lawyer from the equation but I am quite sure you could reduce that number to be non-significant.
Perhaps you should talk to 500startups :) They are doing lot of deals and I never saw them charge anything for the deal - they must be doing something right :)
You mentioned you invest all over the world. How does the legal stuff work with companies incorporated outside well understood markets like the US, EU, Singapore etc. Do you require they reincorporate somewhere else? How fast do you make decisions in these cases?
Our decisions are fast for everyone.
Sometimes lawyers could need a little more time...
We are not requesting reincorporation most of the time but sometimes we are advising the company to do that for many reasons
Explaining the Seedsummit, term sheet, creating the bespoke shareholder agreement, handling small details over back-forth emails, creating employee contracts (for the directors), filing relevant forms with local companies registry....
Depending on the home country of the company will mean each deal will need customised docs too I guess
grellas (who posted in this thread) comes highly respected in the startup community and from what I've heard works on flexible terms. I don't think he actually works for "free" though.
Agreed - it was painful but worth the time to change background to teal w/ StyleBot Chrome extension. Really like how this is all laid out and the term sheet is right there at the bottom.
The darker red is definitely better, but generally red is a bad color to use excessively. Plenty of studies have shown that red can invoke the fight or flight response and increase stress.
Even the new red is painful on my eyes. I navigated away before I finished reading, and when coming back here, it still created an afterimage on my retina.
I recommend a much more muted background, especially for the textual portion of the site. Run red banners down the side if you must, but change the text section to a more readable contrast.
Don't have the whole page one background color - use it as either side panels as suggested below, or as a focal element like this: http://imgur.com/hwsUhKI
More of a neutral background would be a good start, something like the Kima Ventures site where white-on-red is used as a bold title versus the whole page text.
Awesome, as a Kima company who took investment before this "Kima15" offer had been announced, I can say the biggest thing that attracted us over the other firm offers we had at the time was Kima's commitment to moving fast with the cash.
We'd maxed out personal credit cards and we were literally on a ~2 month timebomb of personal runway.
So yeah, awesome to see they've now put this "move fast" promise into a transparent offer. Sure there's limits on the cash and valuation but, I guess better to see it upfront.
In our case, the fees were £1,800 (incl 20% VAT) for our lawyer, and €1,136 (inc 19% VAT) for Kima's lawyer.
Kima Ventures is probably the fastest and most efficient VC I had the pleasure working with.
I recommend all companies pre-seed to try simply try it out.
Jonathan Messika
www.Vodio.com
> [We] will continue to make investments via Kima Ventures at earlier/later stages or lower/higher valuations. Projects looking for funding outside Kima15 can be submitted via the Kima Ventures website.
From the frontpage:
> We will not invest in future funding rounds of your company to avoid signalling issues.
That's not good communication. Otherwise, looks very good.
As a policy, they won't invest in future rounds. So everyone else knows they won't, and no one asks "why isn't Kima investing in this round?". It can be bad when an investor who's already in a company doesn't participate in future rounds, as it signals that someone which more data isn't interested in putting more money in. They're avoiding this entirely, which is good for the startup.
It's a really bad signal when you get seed funding from someone who does do follow-ons, but they don't want to follow-on with you. It can make it very hard to fundraise.
When you say that you offer an investment based on default terms and in the next paragraph you say you also continue to make investments at later stages and at different valuations then people have no reason to assume that those investments are mutually exclusive.
I'm saying the phrasing is unclear. Bad communication. If you don't reinvest in any deals then that should be mentioned clearly in the FAQ. Right now it isn't.
Second example:
> Will you consider my business if we are later stage (higher valuation)?
Answer:
> Kima15’s standard offer allows us to make decisions and close investments very quickly but we realise [sic] that not all companies will be at this specific stage so we also continue to accept submissions via Kima Ventures
This implies that yes, you do invest at a later stage. But the next sentence goes:
> We do still only invest at the earliest stages...
Which implies the opposite: that only early stage investments are an option.
So although I like the idea of Kima15, some extra proofreading wouldn't hurt.
I thought it was perfectly clear when I read it. If you are already at a later stage or want more money or a different valuation, this other part of the company is still into normal VC stuff. However, if we invest in you in this program we will not do another later investment to avoid signaling issues.
Seems lots of people are calling the terms terrible, but for an early stage investment it seems pretty reasonable to me. Plenty of things are in the 1M valuation and under range. If you are shooting for something 8 figures or higher, in the long run this won't kill you, and in the short run it lets you get started and gives you a good bit of runway for say 2 founders.
I'm not looking for funding at the moment, but the speed would be a huge bonus for me. There is a huge amount of value in being able to focus on making your business succeed instead of focusing on getting funding so that you can continue trying.
These terms are far from terrible. Outside of a few selected places like Silicon Valley, you can dream of getting $150K for 15% as an early stage startup with no sales.
It could be argued that YC brings a lot of added value to the table, but if we are simply looking at the terms, their ~$20K for ~6% is far worse than $150K for 15%.
The remaining 9% though (that YC leaves on the table) could be worth at least $100k during next funding round, probably more if you expect to be successful.
> This should help you to launch the first version of your product and to test your initial hypothesis about the market before (potentially) raising more funding to grow the business.
They are shooting for helping companies who know what they need to execute do it fast and not worry about the rest, at least for a bit. After personally going through almost 6 months of angel investing diligence hell to get a similar deal, this is completely something I appreciate.
I think YC does this too, though the costly expertise is internal, so the $20k pays for rent/food, etc..
It's definitely good to have these options, so people can make better choices for themselves / their needs - and hopefully be able to get access to what they need. :)
It's pretty good for two founders in the earliest stages (e.g. only a rough idea of what they want to build). It's not so attractive for startups that already have a prototype and a couple of customers.
Can you expand on why that is the case? If your runway is running out and taking a loss on operating costs is not an option how can it be better to just fold it?
We have a prototype and a couple of customers and still think this is a good deal. It would let us go from pure bootstrap mode (chasing money in any form) to longer-term thinking.
When we were looking for funding with Weekdone (https://blog.weekdone.com/weekdone-wins-slush-announces-200k...) what attracted us to KIMA was the speed and ease of doing business with them. Looking at my notes, 6 days from the call to agreeing the terms, which is quite exceptional in Europe for a cross-border transaction. Speed was my no 1 goal in fundraising to get back to product and customers, so this was a blessing.
I was curious how this compares to doing YC. YC usually asks for 7%, in return for which groups get in the average case $18k. Every startup also gets an $80k note that converts in the next equity round. In the last batch the median startup raised $795k after Demo Day. We'll conservatively assume a $5m valuation cap, and (very) conservatively assume the next round valuation (when the $80k note converts) is also $5m. So if you can get into YC, in the average case you'll end up afterward having sold 22% of the company for $813k.
We do a lot more than help people raise money, of course, but financially that is what the median trajectory looks like.
A significant difference is that a major part of the value of getting into YC is having successfully completed the selection process. There's a reason that when hiring and looking for funding, companies will usually include the year they went into YC. Given the value of the brand, it's likely that YC could offer less for more equity and still be oversubscribed.
I thought it pretty funny telling pg about his program. Of course I understand there are many more readers of the comment, but it still seems directed at him.
Honestly I cannot see casca's comment as trying to tell pg something about YC, more that casca is emphasising that YC is not exploiting its brand value; so a direct comparison (15% for 150K vs 22% for ~800K) could be seen either as pg does - "hey we are waaaaay better value", or as casca says "hey you are toooo cheap"
Anecdotally Henry Ford was told that the drive shafts in Model T's were outlasting the chassis, so should they improve the chassis to match? Hell no, drop the quality of the drive shaft and save some money.
I think pg would have made a bad Henry Ford.
Edit: there is however a clear need for fast, time boxed, fund raising. Kima is part of the YC-inspired move in that direction, and there is far far more talent and money out there than YC can handle, so there is scope for them. They are just pricing in the middle market, away from the luxury brands :-)
Henry Ford was cost conscious but not for the reasons one might think. Ford was once sued by his Shareholders because he was purposely selling his cars at a loss to the company. The Michigan Supreme Court held that Henry Ford owed a duty to the shareholders of the Ford Motor Company to operate his business to profit his shareholders, rather than the community as a whole or employees.http://en.wikipedia.org/wiki/Dodge_v._Ford_Motor_Company
While shareholders were worried about maximizing profits and dividends, Ford was thinking of bettering the World with $60M in capital surplus. Ford envisioned a World where every family could afford and benefit from a vehicle - he just intended to see to it they owned a Ford which simultaneously would have allowed him to employ more workers.
I think aggressively pursuing market share through subsidised products hardly counts as Nobel Peace Prize material. Bill Gates would not have needed to do all that exhausting philanthropy now...
I would love to see a Nairobi business woman become the next African billionaire selling water filters, mosquito nets and led lights to the whole continent, making a fortune and saving lives.
but I won't call her a philanthropist when she is picking out her next yacht. I will be pleased she lived however.
Useful data, PG! I agree the value of YC is far higher than Kima15. But given the level of competition to get into YC, I would say you have lower risk profile than Kima15.
I think they probably fit a nice spot for founders who can't get to YC but are looking for funding. Overall it's win for founders.
Great numbers, we really admire a lot what you're doing at YC but not all companies want to join an accelerator or relocate and not all companies are accepted by YC ;-)
We see Kima15 as a different offer for different founders all over the world who want to raise funding quickly and when they need it.
If you don't mind me asking, given that you claim to fund 2 startups every week, how much access would a startup have to either yourself or Xavier? One reason why Kima appeals to me surely is the fact that you two are heading it. Would you actively sit on a board? If so, do you ever sleep?
All our startups are discussing with me by email all day. Not sure will be able to answer to everyone when we will have 800 startups but for the moment, that's ok because working exclusively by email.
We are not board member but are here to help all the time not only during boards ;-)
How do you think your program stacks up when compared to YC directly? Do you think an Airbnb or Dropbox would choose your program vs YC primarily because of the lower friction to money in the bank?
Also, if a company already has a v1 of the product, are you planning to do the same deal? (YC often accepts people who are post seed pre series a.)
AirBnb & Dropbox were very risky projects like any other projects in this planet. There are many hidden awesome companies on this planet and we are targetting this one.
I'm sure we will invest in a future AirBnb or Dropbox. We just need a little time ;-)
Kima15 is not dedicated to fund prototype only. Some companies with V1 are also great targets for it. All the projects we received since the launch 3 hours ago are all startups with a real product.
If the startup is at a later stage, we will be happy to check it through Kima Ventures. It can take just a little longer.
A startup has to be in the same place as its investors if they want to talk face to face, and empirically we've found this to be a necessity when talking about the subtle and complicated problems startups face. Email and Skype are such poor substitutes that they're a qualitatively different thing. Which means if a startup wants advice from its investors as well as money, they either have to raise money from local investors or one of them has to go to where the other is, at least temporarily.
Ideally investors can give advice too besides money - it's nice to get two things instead of one. But there is some value to investors who can only provide money, as well as some value to investors who can provide money + advice-distorted-through-skype.
Agreed, most of the investors I've worked with provided zero benefit through advice. Often investors are out of touch with trends, they have their heads in the financial clouds and can rarely get past their infatuation with hockey sticks. Obviously some investors have a clue about the technology, but not in my experience - won't name names for obvious reasons.
Agree with you, it's certainly better to be at the same place, but there are hundreds of counterexamples of huge successes with VCs not living near the companies. In Europe, Israel, Russia, we have plenty of them.
We are also investing with a lot of local investors and they are sometimes managing the local relationship (or mostly making things worse :-()
Last but not least, many of our companies are targeting a local market (China, India, Pakistan, Switzerland, France, Argentina, UK, Germany...).
They have nothing to do in the Silicon Valley.
The YC model is awesome.
No doubt on that.
but there is room for many other models.
(and thanks God, we invested in Rapportive before they went to YC ;-)).
Check also what my partner is building : 1000Startups, the biggest incubator in the world in the center of Paris
http://1000startups.fr/en/
As far as I can tell, YC isn't much of an option if you aren't located in US. Besides most of the start-ups go down the drain not because they lacked advice but because they ran out of money. So congratulations for creating an option that can be considered by those who have no intention/ability of moving to US.
Kima is awesome for startups, who need a cash infusion RIGHT NOW. This can often save a startup and make the difference between the startup shutting down and it becoming a billion dollar company.
With YC, it's a very long process as it roughly takes 4 months from applying to money in the bank.
So Kima can give startups a fat cash injection, which is good for startups who know exactly what to do and just need cash, nothing else. YC is more for long-term startup building, getting into a community, relocating, becoming a Silicon Valley startup etc.
Ok true, then it would be 1 month application period, 2 weeks for an interview invite, 2 weeks to have the interview, so it would be around 2 months vs. 2 weeks, 4 times longer.
But that's fine, because your expertise is a more long-term approach over several months, Kima's expertise are burst-investments. You have completely taken up the "hatching investments" space, Kima will completely take up the burst-investment space.
I think is the next logical step of startup investments after accelerators. Just as we've now seen accelerators popping up everywhere (and now dying down), we could see Kima-clones popping up everywhere soon.
Let me disagree. Applications are 6 months apart, this makes it for new applicants statistically ~3months + the time until acceptance makes roughly 4months.
Considering that lots of startup founders apply many times before being accepted, the median is easily in the years range.
Are you referring to the median funded application or the median submitted application?
You had mentioned the day before the deadline applications are submitted at a rate of one per minute, which is bound to bring the median closer to the deadline, but only YC knows how many of the applications submitted during the last 2 days were funded. The median funded application could be submitted 2 months before that for all we know.
If it's the median funded application, shouldn't you be correspondingly alarmed YC-funded startups apply 2 days before the deadline? Would setting more deadlines (having more funding cycles) generate more YC startups?
It's not unreasonable to assume that founders receiving Kima15 funding also go on to raise a sizable equity round later. I think the offers can be simplified by saying YC is ($18k + YC program) for 7%, and Kima15 is ($150k + Kima15 network) for 15%.
That means the YC program needs to be worth $52k more than the Kima15 network/brand for the lower valuation to make sense. I wouldn't be surprised if it is, but we'd really need stats on the subsequent funding rounds of Kima15 companies to compare them in this way.
One of our companies FormLabs raised $19M after our seed round ;-)
You can imagine the kind of valuation they got...
Pret d'Union, French Lending Club clone raised $5M
Sparrow has been acquired by Google
Very difficult to compare both programs and it's not the goal to compete against anyone.
What about the novelty aspect? AngelList is cool right now. Who wants to be just another YC graduate, standing in a long line with teenage fart app founders dying to rub elbows with the Wizard of Oz.
Financially YC is a force multiplier. Not just incidentally, but by design. So it's misleading to treat it in isolation. And while anyone could raise additional funding after any round, in the YC case the numbers are known. Unless there is some fairly dramatic economic change, the median startup we fund can count on raising several hundred thousand dollars at a valuation (cap) of way more than a million.
The comparison of 15% for 150k vs 22% for 813k is unfair because it suggests that $5m valuation is entirely because of YC. The fact that many YC companies don't raise clearly indicates that YC helps but not a sufficient factor.
Since YC companies' approx valuation is $5m, the 80k note will take about 1.6% equity. So I would say YC is offering 98k for 8.6% (18k + 80k for 7% + 1.6%).
It's surprising how transparent Kima is. The terms are reasonable and it's not like you have to take the money. Speed is a huge deal as well...knowing whether you can close or not can mean spending another 1-2 months working on your product and not have to worry about taking meetings from various VCs/angels.
The partners are based in Israel + Paris (no one in the US), which makes things complicated with time zones of they are investing in North American companies.
A request for "weekly updates" is also quite burdensome on founders, and they also have the optionality of a board seat (also unusual for investments at this stage).
I would think anybody who hands over $150k gets the courtesy of an hour phone call a week. Considering that you wouldn't have to spend weeks / months doing the show-and-tell to dozens of potential investors, I think that's a small price to pay.
I think we invested in 60 US companies ;-)
No problem to discuss with them. We don't always need to do that in real time. Email is good for 99% of subjects.
About weekly updates,
I think it's critical for founders to have to write a 3 lines weekly update but not only for us, investors, but also for their team , cofounders and themselves.
It's helping focusing on the right thing each week and increase performance.
Some of our founders are sending an update every 48 hours...
My previous startup was based in the US and our investors were in Europe. The time difference wasn't an issue at all, an inconvenience at most (getting on a 7am call after a coding marathon, we've all been there).
What I learned from getting an investor from Europe is lack of connections in the SV/USA which could be a disadvantage for some startups.
This could be just as important as YC if it works. This is closer to what many people really want. It's enough money enough to seriously test an idea, but not enough that you could waste a lot of time going down a bad path.
Time = Money only for ideas that are easily reproducible. if you truly found a niche it's nearly impossible for another business to execute it the same way.
You're overestimating and underestimating a lot of things at the same time. $150k is not 'tiny' by any measure, raising this much from family alone would mean you have a pretty well-off and trusting, loving family to begin with, not all developers reside in SF, U.S.A to demand or even need such a yearly salary etc. etc. I don't want to start tearing too much into your argument because I kind of like it that people are still able to think so...rosily on average.
1)
- Never borrow from your family when you're launching a company. You have more chance to fail and will never be able to reimburse.
- You need to have a rich family if you want to do that. Did you already borrowed 150K to your family to launch your startup?
2)
-We are investing in team when at least one founder is a developer if not all... So $150K is not to hire people.
-All developers are not in the Silicon Valley. You can find developers at much lower price in many countries and we are investing everywhere.
I'm sorry but I absolutely hate your response because it seems to come from such a high and privileged position. In my opinion, 150K is quite bit of money, especially if the team has technical founders or can find a "mediocre" developer.
Some people have financial obligation or living situation where they could save like mad and it would still take them years to accumulate 150k.
Barely useful? This is that SV bullshit mentality. There are thousands of great entrepreneurs all over the world who could turn 150k into a profitable little company. Might not make millions in the first few years (or ever) but if they love it and people love their product/service, that is very useful. Surviving off very little is an admirable characteristic, you don't need millions to build something meaningful and if that's the way you think, I would never work with or invest in you.
Not in our case, we love startups reaching profitability by just raising a seed round. It's most of the time the best way to confirm that the business model is right.
It's also easier to raise a big round after that, invest a lot and grow.
Okay, how do you suppose to exit then? I take $150K from you, create a small SaaS service a la @patio11 and then start slowly crank up customer base, showing stable 10-25% y/y growth. I see no exit for your 15%
We sold Sparrow to Google with this model and the founders are now millionnaires.
but this is not what I'm saying. You're reaching profitability first and you're building a big company just after.
Market Size is the most important but it's not because your market size is big that you have to take risk and hit the wall without enough cash to survive. Profitability/Breakeven is giving you the time to raise as much money you need/want
I don't see it being specifically limited to software startups. Some startup with a physical product/service might find this useful to finance inventory/growth. The terms don't sound so bad when you look at it from that perspective
I'll admit being skeptic at first but every time we asked @jberrebi for help in my previous Kima-backed company, he was both smart and fast. Impressive feat with so many startups in the portfolio+pipeline.
Check the SLA on the homepage:
"-request the right to a board seat (2 founders, 1 investor) but we do not take the seat unless required to solve founder conflicts and have no intention to tell you how to run your company."
You're free to offer any terms you desire and if people accept them than may you find mutual success, but I've got two comments:
1) People who know what "the going rate" is will not be overwhelmingly enthusiastic about you asking for a board seat given the package deal here. An option on a board seat is, approximately, as expensive or more expensive than a board seat. For example, it's going to cause auto-failures of negotiations with later stage firms who would otherwise be prepared to pay market price for board seats (my SWAG from outside the Valley is "in the neighborhood of multiple millions currently"), because board seats have to be static and scarce to retain value.
You also probably uniquely cause signaling risk because at least some actors are going to model your decision to take or not take board seats like they would themselves choose to take or not take board seats, and come to the conclusion "A prior investor has a free option on a board seat and has declined to exercise it, despite having had full knowledge of the business' deepest secrets for the last year? Wow, that makes my investing decision a lot easier: PASS!"
2) It seems to me that your strategic reason for asking for the option to a board seat is that you desire to take a personal hand in managing downside risk when some startups you fund implode. This implies that you both believe your contribution will help to manage downside risk when startups implode, and that rescuing imploding startups is a great use of your time. Many people in the community would advise that a startup which is imploding is almost immune to correctional action and accordingly valued at approximately zero, and that startups imploding is sort of the model and that your main source of risk reduction is having 7.5% invested in Google 2020 rather than tweaking twenty imploded companies to slightly-north-of-imploded.
Or, to rephrase, if the successful outcome is "We do not get a board seat" then do not ask for a board seat.
1/ For next rounds, we are almost all the time leaving our seat to the new investor (if it's a good/great one. Not if it's a shark VC)
More than 50% of our 2010/ 2011/2012 investments raised a Series A, Series B and more. So nope, you're not right. We have excellent reputation in the ecosystem.
We invested in 220 startups. Had this right to join board everywhere and never used it until now but I still prefer to keep this right.
2/ Discordance between cofounders (in case they are not sharing the same strategy) is not always a startup implosion. Sometimes we just need to come and become the 3rd vote who can decide which founder strategy we will choose.
A naive question to founders who have taken such seed funding before - can you directly take money out of a investment like this to pay for your living costs or you have to go through the headache of establishing payroll and a small salary for the founders?
Getting 150K and a company board with qualified people on day1 would be very attractive for an H1B engineer like me. So I could bootstrap a startup while having a paid job in a company and if Kima15 invests, this would qualify for an H1B transfer to my own company(Having a board to supervise your company would qualify for H1B transfer).
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[ 122 ms ] story [ 4209 ms ] threadSounds like a Japanese girl band...
The rest should be 'fill in the blanks', and since valuations/dollar amounts are not negotiated here, the only blank each investment should have to fill in is the company information (name, incorporation location, address, etc.)
Maybe I'm missing some steps in my mental model?
We HATE paying lawyers... :-( We are not investing in a company for that. So we will try to work with all good lawyers with great prices. As you said, it's not so difficult.
1. Checking if the company exists - meaning looking over incorporation documents, validating the bank details and other information to make sure you're funding who you think you're funding - could be done with someone with some common sense and not a lawyer - probably hiring a person who does administration and work full time for you (the high volume of seed deals you're making make me think you already have that person).
2. Checking that the IP is owned by the company is usually done by doing a TAA (Technology assignment agreement) and in that case this could be a standard doc that you let the founders sign on. I would believe that someone on your behalf could also check that the validity of the signatures.
3. Use a service like RightSignature to collect signature, IPs, timestamps and even Identification cards picture or something of the sort in order to check the legitimacy of the person signing on the docs - this will allow you to remove the lawyer from the equation as well.
4. Last but not least - try documenting the things you need from the company beforehand and post it somewhere on the site - knowing in advance what are the things you are requesting usually eliminate the unneeded ping-ping with lawyer.
On a personal note - I streamlined the fundraising process by creating a few templates (with wire details) and having forms on Rightsignature. I had all of my investors go through that process and closed very fast - including countersigning and dating the documents once the wire reach our account. I think every process could and should be streamlined especially if you deal with 200 companies. Lawyer like to interject in between deals because they can bill and in our case we were able to save around ~$10k in legal fees because we didn't let our lawyers talk with our investors and negotiate for us - and we used a standard note provided by our lawyers.
I'm not saying you could do that but if there's room to reduce the $4k to something like $500 or even nothing - that mean an extra $400k that can be re-invested into ~3 companies - imagine that!
EDIT: I know you have way more experience closing deals than me - I just wanted to offer a founder experience and perspective on that process.
Depending on the home country of the company will mean each deal will need customised docs too I guess
I recommend a much more muted background, especially for the textual portion of the site. Run red banners down the side if you must, but change the text section to a more readable contrast.
http://www.smashingmagazine.com/2010/01/28/color-theory-for-... is the knockoff answer, but you should get the input of an actual designer - I've used yellow-on-red AND the <blink> tag before, both at the same time.
We'd maxed out personal credit cards and we were literally on a ~2 month timebomb of personal runway.
So yeah, awesome to see they've now put this "move fast" promise into a transparent offer. Sure there's limits on the cash and valuation but, I guess better to see it upfront.
In our case, the fees were £1,800 (incl 20% VAT) for our lawyer, and €1,136 (inc 19% VAT) for Kima's lawyer.
Also impressed that Jeremie himself replied to this thread and not some intern.
Now, it only it was a convertible note, possibly discounted but a convertible note...
Reduction of adverse selection on your side, also.
Based on your historic numbers, would it be a significant cap on your upside?
> [We] will continue to make investments via Kima Ventures at earlier/later stages or lower/higher valuations. Projects looking for funding outside Kima15 can be submitted via the Kima Ventures website.
From the frontpage:
> We will not invest in future funding rounds of your company to avoid signalling issues.
That's not good communication. Otherwise, looks very good.
As a policy, they won't invest in future rounds. So everyone else knows they won't, and no one asks "why isn't Kima investing in this round?". It can be bad when an investor who's already in a company doesn't participate in future rounds, as it signals that someone which more data isn't interested in putting more money in. They're avoiding this entirely, which is good for the startup.
It's a really bad signal when you get seed funding from someone who does do follow-ons, but they don't want to follow-on with you. It can make it very hard to fundraise.
We are never reinvesting in one of this deals.
I'm saying the phrasing is unclear. Bad communication. If you don't reinvest in any deals then that should be mentioned clearly in the FAQ. Right now it isn't.
Second example:
> Will you consider my business if we are later stage (higher valuation)?
Answer:
> Kima15’s standard offer allows us to make decisions and close investments very quickly but we realise [sic] that not all companies will be at this specific stage so we also continue to accept submissions via Kima Ventures
This implies that yes, you do invest at a later stage. But the next sentence goes:
> We do still only invest at the earliest stages...
Which implies the opposite: that only early stage investments are an option.
So although I like the idea of Kima15, some extra proofreading wouldn't hurt.
I'm not looking for funding at the moment, but the speed would be a huge bonus for me. There is a huge amount of value in being able to focus on making your business succeed instead of focusing on getting funding so that you can continue trying.
It could be argued that YC brings a lot of added value to the table, but if we are simply looking at the terms, their ~$20K for ~6% is far worse than $150K for 15%.
> This should help you to launch the first version of your product and to test your initial hypothesis about the market before (potentially) raising more funding to grow the business.
They are shooting for helping companies who know what they need to execute do it fast and not worry about the rest, at least for a bit. After personally going through almost 6 months of angel investing diligence hell to get a similar deal, this is completely something I appreciate.
It's definitely good to have these options, so people can make better choices for themselves / their needs - and hopefully be able to get access to what they need. :)
So exactly the same postmoney valuation.
Source: http://readwrite.com/2011/02/10/dave-mcclures-500-startups-a...
I added Kima15 to this investor database: https://docs.google.com/spreadsheet/ccc?key=0AszA0J0G-ptCdG1...
You can follow KIMA portfolio day live on Monday, tune in: http://www.dailymotion.com/kimaventures#video=x17ww6i
We do a lot more than help people raise money, of course, but financially that is what the median trajectory looks like.
I thought it pretty funny telling pg about his program. Of course I understand there are many more readers of the comment, but it still seems directed at him.
Anecdotally Henry Ford was told that the drive shafts in Model T's were outlasting the chassis, so should they improve the chassis to match? Hell no, drop the quality of the drive shaft and save some money.
I think pg would have made a bad Henry Ford.
Edit: there is however a clear need for fast, time boxed, fund raising. Kima is part of the YC-inspired move in that direction, and there is far far more talent and money out there than YC can handle, so there is scope for them. They are just pricing in the middle market, away from the luxury brands :-)
While shareholders were worried about maximizing profits and dividends, Ford was thinking of bettering the World with $60M in capital surplus. Ford envisioned a World where every family could afford and benefit from a vehicle - he just intended to see to it they owned a Ford which simultaneously would have allowed him to employ more workers.
but I won't call her a philanthropist when she is picking out her next yacht. I will be pleased she lived however.
I think they probably fit a nice spot for founders who can't get to YC but are looking for funding. Overall it's win for founders.
Great numbers, we really admire a lot what you're doing at YC but not all companies want to join an accelerator or relocate and not all companies are accepted by YC ;-)
We see Kima15 as a different offer for different founders all over the world who want to raise funding quickly and when they need it.
If you don't mind me asking, given that you claim to fund 2 startups every week, how much access would a startup have to either yourself or Xavier? One reason why Kima appeals to me surely is the fact that you two are heading it. Would you actively sit on a board? If so, do you ever sleep?
I'm not sleeping enough and have 10 children ;-)
All our startups are discussing with me by email all day. Not sure will be able to answer to everyone when we will have 800 startups but for the moment, that's ok because working exclusively by email.
We are not board member but are here to help all the time not only during boards ;-)
Also, if a company already has a v1 of the product, are you planning to do the same deal? (YC often accepts people who are post seed pre series a.)
I'm sure we will invest in a future AirBnb or Dropbox. We just need a little time ;-)
Kima15 is not dedicated to fund prototype only. Some companies with V1 are also great targets for it. All the projects we received since the launch 3 hours ago are all startups with a real product.
If the startup is at a later stage, we will be happy to check it through Kima Ventures. It can take just a little longer.
We are also investing with a lot of local investors and they are sometimes managing the local relationship (or mostly making things worse :-()
Last but not least, many of our companies are targeting a local market (China, India, Pakistan, Switzerland, France, Argentina, UK, Germany...). They have nothing to do in the Silicon Valley.
The YC model is awesome. No doubt on that. but there is room for many other models. (and thanks God, we invested in Rapportive before they went to YC ;-)).
Check also what my partner is building : 1000Startups, the biggest incubator in the world in the center of Paris http://1000startups.fr/en/
Wow! That's twice as powerful as 500 Startups
Kima is awesome for startups, who need a cash infusion RIGHT NOW. This can often save a startup and make the difference between the startup shutting down and it becoming a billion dollar company.
With YC, it's a very long process as it roughly takes 4 months from applying to money in the bank.
So Kima can give startups a fat cash injection, which is good for startups who know exactly what to do and just need cash, nothing else. YC is more for long-term startup building, getting into a community, relocating, becoming a Silicon Valley startup etc.
That's not true. Startups get the initial $18k + $80k on acceptance.
But that's fine, because your expertise is a more long-term approach over several months, Kima's expertise are burst-investments. You have completely taken up the "hatching investments" space, Kima will completely take up the burst-investment space.
I think is the next logical step of startup investments after accelerators. Just as we've now seen accelerators popping up everywhere (and now dying down), we could see Kima-clones popping up everywhere soon.
Considering that lots of startup founders apply many times before being accepted, the median is easily in the years range.
It seems misleading to consider multiple applications, since we're talking here about the time between applying and getting money or a no.
You had mentioned the day before the deadline applications are submitted at a rate of one per minute, which is bound to bring the median closer to the deadline, but only YC knows how many of the applications submitted during the last 2 days were funded. The median funded application could be submitted 2 months before that for all we know.
If it's the median funded application, shouldn't you be correspondingly alarmed YC-funded startups apply 2 days before the deadline? Would setting more deadlines (having more funding cycles) generate more YC startups?
That means the YC program needs to be worth $52k more than the Kima15 network/brand for the lower valuation to make sense. I wouldn't be surprised if it is, but we'd really need stats on the subsequent funding rounds of Kima15 companies to compare them in this way.
Very difficult to compare both programs and it's not the goal to compete against anyone.
Since YC companies' approx valuation is $5m, the 80k note will take about 1.6% equity. So I would say YC is offering 98k for 8.6% (18k + 80k for 7% + 1.6%).
A request for "weekly updates" is also quite burdensome on founders, and they also have the optionality of a board seat (also unusual for investments at this stage).
Some of our founders are sending an update every 48 hours...
What I learned from getting an investor from Europe is lack of connections in the SV/USA which could be a disadvantage for some startups.
1) It's the amount you can borrow from your family most of the time. Or just make it working in IT and saving like mad.
2) It's barely useful. $150K is not enough to hire even one great developer for a year.
Time = Money
Twitter & FB are easily reproducible, and they provided awesome returns for their investors.
2) -We are investing in team when at least one founder is a developer if not all... So $150K is not to hire people. -All developers are not in the Silicon Valley. You can find developers at much lower price in many countries and we are investing everywhere.
Some people have financial obligation or living situation where they could save like mad and it would still take them years to accumulate 150k.
Barely useful? This is that SV bullshit mentality. There are thousands of great entrepreneurs all over the world who could turn 150k into a profitable little company. Might not make millions in the first few years (or ever) but if they love it and people love their product/service, that is very useful. Surviving off very little is an admirable characteristic, you don't need millions to build something meaningful and if that's the way you think, I would never work with or invest in you.
Alas, VCs are not after profitable little companies. They just plainly would not allow you to become a little company, profitable or not.
It's also easier to raise a big round after that, invest a lot and grow.
1) People who know what "the going rate" is will not be overwhelmingly enthusiastic about you asking for a board seat given the package deal here. An option on a board seat is, approximately, as expensive or more expensive than a board seat. For example, it's going to cause auto-failures of negotiations with later stage firms who would otherwise be prepared to pay market price for board seats (my SWAG from outside the Valley is "in the neighborhood of multiple millions currently"), because board seats have to be static and scarce to retain value.
You also probably uniquely cause signaling risk because at least some actors are going to model your decision to take or not take board seats like they would themselves choose to take or not take board seats, and come to the conclusion "A prior investor has a free option on a board seat and has declined to exercise it, despite having had full knowledge of the business' deepest secrets for the last year? Wow, that makes my investing decision a lot easier: PASS!"
2) It seems to me that your strategic reason for asking for the option to a board seat is that you desire to take a personal hand in managing downside risk when some startups you fund implode. This implies that you both believe your contribution will help to manage downside risk when startups implode, and that rescuing imploding startups is a great use of your time. Many people in the community would advise that a startup which is imploding is almost immune to correctional action and accordingly valued at approximately zero, and that startups imploding is sort of the model and that your main source of risk reduction is having 7.5% invested in Google 2020 rather than tweaking twenty imploded companies to slightly-north-of-imploded.
Or, to rephrase, if the successful outcome is "We do not get a board seat" then do not ask for a board seat.
We invested in 220 startups. Had this right to join board everywhere and never used it until now but I still prefer to keep this right.
2/ Discordance between cofounders (in case they are not sharing the same strategy) is not always a startup implosion. Sometimes we just need to come and become the 3rd vote who can decide which founder strategy we will choose.
"The Investor will invest up to US$150,000 and would hold no less than 15% of the Company on a fully diluted basis."
I'm not a lawyer, but doesn't this say that their 15% never dilutes? If so, that would be a horrible scenario in case of future fund raising.