satellites is one of the most outstanding accelerator in the world, it was recently launched the “equity withdrawal plan”. As the name suggests, if to hatch startups feel the accelerator did not provide enough value for them, they can apply for equity withdrawal.
David Cohen is one of the founders of the satellites, he always complain about startups is wise after the event, think, before to hatch after attending to understand the value of satellites. Put forward the withdraw system’s purpose is to reduce the start-up, make sure they don’t have to worry too much about the waste of time and in the process of incubation.
if satellites are going to be a very competitive accelerator market, this is undoubtedly a great option. Of course, is not only a great, this also is a nearly crazy.
think about it: a living venture capitalists are helpless to equity returns to those who don’t like his investment start-ups. This almost every article in violation of the risk investment industry “discipline”, I can imagine that even other venture investment companies just saw the news, what kind of stone is started up. Like your friend Peter and Tom are going to get married, the Pope appeared suddenly, to help them presided over the wedding, is a big surprise ever. But you have to think twice before you do, don’t mind a fever to make any hasty decisions.
if this is a one-time deal, we can simply respond to all investors, whether have quirks or kindness, and then everything will be like today’s business market, invariably. David Cohen, however, is not the only one crazy to dare to allow startup the withdrawal of quotation rights.
Kent Goldman recently launched a new seed fund, called the Upside, he is going to offer his startup investment part of such funds. Of course, provide this part of the fund is actually the investment profits, is often used as a performance bonus distribution to the partner. Goldman wants to inspire his hands this way startups, because he believes that provides a bit of money to them will make them in investment activities to create a culture of cooperation.
of course, is not it! Upside is not the only one to give up a new fund investment profits, such as Jonathan Teo and Justin Caldbeck recent launch of the Binary Capital is going to the part of profits donated to charity. It can not help but to think back to a few years ago Andreessen Horowitz made similar promises, namely half to charity donation A16Z cooperation income. Binary contemptuously pointed out that Andreessen Horowitz is not purely want to do charity, he is really focused on cooperation tasks, because they promised their contributions and performance incentives are inseparable.
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look, the somebody else good, venture capitalists should often netting start-ups. The equity withdrawal is an excellent means of ensuring obligation to investors, because of this, they will not be able to play immediately after the signing of risk investment agreement “missing”. The gift part of start-up fund was of a fiscal stimulus for them, so as to promote their mutual cooperation, by the securities portfolio development for small groups. What’s more, nobody will oppose donations to charity, even the corporate earnings and even it up.
at the same time, however, the incentive program began to let me a little concerned about the health of the venture capital business. If special rich resources, in the highly competitive market, through the project is the only way to differentiate between the various funds. Venture capital firms really have reached saturation point?
in short, don’t venture capital firms in a bubble trap?
I still hold several different point of view. In most cases, the startup of the personal assessment is ahead of the open market, it is obvious, because in the initial public offering (IPO) before the start of the Box and the Square of the IPO news uproar passed already. Practitioners need to be careful market bubble is wanton, whenever the vc, the rapid influx of hot money, startup valuations are unusually rapid growth.
as the chairman of the board of the Y Combinator Sam Altman discussed before, although on the face of these new project made it clear that the market has entered a bubble, but we can’t find venture capitalists to abandon any equity share, they are still in love with it. These investors will try to get about 20% on the sale, even more than 33% of the equity, in that case, those who focus on ownership percentage will push up prices. If a startup only need $2 million, but the valuation estimates 50 million, so most of the risk investment company will demand more money, the purpose is, of course, in order to make their equity shares in accordance with the investment strategy is more.
this kind of circumstance appears on many top accelerator, because they are required to get the unit number of equity (usually 7%). Accelerator and does not require any shares of fierce competition between nonprofit accelerator seems to add to the huge market price pressures.
if the implied what enlightenment, that is good news for start-ups, because things so, the real victims only venture capital firms. On the contrary, the startup is the biggest beneficiaries. These rewards program is financed by a management funds, or risk investment profits, or both, and these new incident did not affect the limited venture partners. Even equity withdrawal policy doesn’t change anything, because of development of the worst company don’t know how to grow, of course, they also can’t see the value of the investment, so they are most likely to withdraw their equity.
this is why the competition in the capital market in general is good. Venture capital firms are used to years of poor performance at first, and then get millions of dollars of funds management, which is by the Kauffman Foundation deeply believe in entrepreneurship. Faced with enormous pressure of competition, capital market as a venture capitalist as early as easy and stable income. Through these new business friendly projects, the new rules also arises at the historic moment. The risk investment house with poor vision can double whammy, is not just for the sake of equity is not withdrawn, but to get the pay check, they are more difficult to fight every day.