Apply HN: Hackinator – Allow hackers to invest in YC startups using code :-) | Hacker News Reader

Apply HN: Hackinator – Allow hackers to invest in YC startups using code :-)

39 pointstarekskr29 comments

Every startup has very tight resources, and yet they often need to add really bright highly paid individuals to their team. Hackinator will allow brilliant hackers to provide code development (or other similar services) to YC startups in exchange for shares in these companies. Startups would be submitting posts such as: "Develop our Android app for 0.1% shares of our startup". Since the startup has been selected by YC, the hacker will be somewhat confident that the startup has good potential.

Note: I am already involved with a startup of my own, but I am gladly offering this idea to anyone interested in pursuing it.

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I would like to see a place where I can micro invest in YC startups. e.g $500 - 10k. If YC takes 7% for 120k. It seems 1k is worth about 0.05%. Its a bet a lot of us are willing to take. e.g I don't mind spending 6k on 6 startups on a year, which are YC vetted and are in the space I think is very lucrative.

Offering dev time is very hard, but as someone who has worked in industry for so long, we can definitely help with guidance and advice.

This is also a really cool idea.

Startups shouldn't be handing out equity like candy. If you are asking for 0.05%, you better have a damn good reason to deserve it, because $1k is definitely not enough. Startups give 7% up to YC for way more than just 120k (network, brand name, etc). In fact if all you want is 120k, there are better ways to raise that money than giving up 7% to YC. So your calculation does not hold up, because the value of you as an investor is not the same as the value of YC as an investor. All cash is definitely not created equal.

This response is also valid for the main thread. Initially looks like a good idea but probably company that is willing to do this is in a more "desperate" position.

I think you need to allow people to follow an idea until it kicks. and maybe at first their just experiments and projects that get funded that can be reused.

The way equity is handed out to employees is BS. Yes, getting an investor to invest is hard work. But, if you can get past the momentum phase, employees are what make it work. Now, it's set up like a lottery. Investors and Founders get 90%. The rest of you few hundred people get 10% with most of the founders friends and early hires get a lot of that. No wonder the 1% own everything.

Correct. The YC valuation is a special case. An example valuation after totality of round A funding for a company can stand at around $1M for 1%. So that'd be $50,000 for .05% for an early-stage company.

If you are asking for 0.05%, you better have a damn good reason to deserve it, because $1k is definitely not enough.

To be clear, that's an easy 2mm valuation. That's also an incredibly tiny slice of the company, and that's also something that will get diluted to shit.

So, let's stop this meme that for an early-stage company that fractions of a point are somehow a big deal. That's how a lot of early employees--who do the hard work--get screwed.

> That's also an incredibly tiny slice of the company, and that's also something that will get diluted to shit

If you are truly investing in a company, dilution is irrelevant. The only two things that matter are share price and your ability to liquidate those shares. If I buy at 1-cent and sell at $1, I could care less about how much my original 0.05% has been diluted.

The OP is not talking about employee shares. He's talking about advisory shares, and maybe some 1099 work. What does a startup get out of that? Unless you're seriously qualified with relevant knowledge, why would a startup give precious equity to you? Sure it's "only" 0.05%, but it's still one more name on the cap table. And this attitude of "it's only 0.05%" is exactly what leads to the dilution you're talking about.

If a startup is valued at $2mm, they don't need your measly $1k. To make that worthwhile they would need to get $1k investment from dozens of different investors. And at that point they're no longer giving up "only 0.05%." Also, if they need an advisor, they can find one. If they need a contractor, they're not going to pay via shares, because the whole point of issuing options/equity is to align the long term incentives of the startup and the investor/employee. A contractor does not work long term, so there is no need to give away shares.

Also, the suggestion of the OP -- a place for investors to get advisory shares in companies -- already exists. It's called Angellist.

> If YC takes 7% for 120k. It seems 1k is worth about 0.05%.

What YC brings to a startup for their 7% is 120k + advice + connections + the YC brand itself, so just 1k will be worth only a fraction of 1/120*7% of the company (I'd say, about a half or a third, maybe even less).

Not YC-specific, but this sounds a fair bit like OfferBoard: http://www.offerboard.com/

Love the idea. Would definitely participate, for the right startup.

However, I think successful projects would feel more like open source projects on Github. "Develop our Android app for 0.1% shares of our startup" sounds more like a non-technical team or something written by a PM.

"Collaborate with our dev team to help us improve the performance of our Android app for 0.05% shares of our startup" sounds more interesting.

What do you think about the past startup Assembly? [1] [2]

[1] https://web.archive.org/web/20140914042728/https://assembly....

[2] https://vimeo.com/80927859

Thanks for the link. It's sad to see something like this go.

I think they failed for a couple of reasons. 1. not enough respect for the marketing side of things. 2. free labor only gets you so far need actual cash to be contributed. 3. equity plan needs laid out early so people don't feel like equity is going to be hoarded. 4. 3. needs to be more like a holacracy and a benefits corporation.

This sounds like a pretty bad deal for the developer: Not only a really small percentage, but worth pretty much nothing when and if it is ever vested.

It would be better to just donate to an open source project.

There are a few legal hurdles both from SEC and IRS. You will need to figure out way around them.

There are limits on maximum number of stockholders in a private company (IIRC 500+). Once exceeded, private company is expected to do SEC filings similar to public companies. Same issue with a private company accepting small investments from lot of investors (even if investor is accredited). JOBS Act might help here.

Any non-monetary compensation for services will be a taxable event from IRS viewpoint and taxes will need to paid by service provider. As stock value will not be much in very early stage, tax liability might not be significant unless IRS want fair compensation for services as the tax basis (not a tax professional).

I think you would need legal contracts and templates. Also, things could be handled possibly by royalty payouts.

Interesting concept to help start-ups get essentially free labor but that's also its biggest issue. Shares are good and all but until there is an event in which a share holder can liquidate they're essentially worthless (there are obvious exceptions but only a few). Since a vast majority of start-ups fail this would amount to free labor.

Granted if the problem is interesting enough that could be okay but the percentage is going to need to be drastically higher. Like 50% in my opinion.

> Note: I am already involved with a startup of my own, but I am gladly offering this idea to anyone interested in pursuing it.

I feel like this isn't really in the spirit of Apply HN

This wouldn't work for most startups. Product development in the zero to x stage prior to product market fit has loads of abnormalities that require bigger engagements.

As well handling the cap table these days is still troublesome.

The spirit of YC is embodied by founding teams that can build product and talk to users. This suggestion might not be in line with that spirit by giving away equity for product building without cash.

Conceptually, I love this idea. A few questions:

1) How do you ensure that the work is valued fairly and that realistic expectations are set for scope, etc? When working for cash, these questions are resolved by market forces, but getting paid in something that is difficult to value, I'm concerned there's a lot of opportunity for unhappiness.

2) How do you ensure that the value doesn't get wiped out by liquidation preferences, or some future action dis-proportionally dilutes the value of the shares?

Reg 2: In my own thinking I have come to the conclussion, that the decision power of the Company has to be given to the developers of the project as well. This Means forming some kind of cooperative structure

1) I would think things could be put up for bid? 2)I think everyone has voting rights(plus legal rights think facebook co-founder). Plus you could have some pretty "contributor" terms drawn up in documents.

Using a lot of time of this concept.

It seems like the biggest hurdles are: 1: How do you messure the Development has value ? 2: Will you trust strangers ?

reg 1: Assembly worked with a Bounty driven system.

reg 2: Looking into Coop Companies it seems to be very common, that people knew each other in the beginning!

I would love to be part of a project doing expiriments with this thinking.

Note: Do you se any reason why salespeole couldn't be a part of this kind of business model

I think assembly used colored coins. I imagine some of it could be done managed with ethereum or block chain. Another possibility is an escrow service. As part of the base product.

I think other resources need to be able to be offered besides work. Hosting, domain names, marketing. Marketing specially. Look at Uber over the life of a customer they probably make hundreds of dollars or more. They offer you $5.

I, also, think to solve a lot of it is supply and demand and dilution. put tasks up for bid.

An enterprising guy named Ali Hamed is pursuing this model with coventure in NYC!

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