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Comment by EGreg | Hacker News Reader

Can someone elaborate on this? It makes no sense to me:

The risk profile of your company increases dramatically when you take VC funding. You start spending more money than you are earning, your focus shifts to raising your next round, and your VC now has veto authority over the sale of your company. Your company is now a ticking time-bomb.

You can literally NOT do those things. All the VC has is signaling. Theh can’t block your future raises, only have drag/tag along rights, first refusal or whatever.

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VCs purchase a different class of stock than you have as a founder, called preferred shares. It is standard to require a majority of the preferred shares to authorize a sale of the company.

See this article for a standard, clean series A term sheet. https://blog.ycombinator.com/a-standard-and-clean-series-a-t...

Approval of the Preferred Majority required to ... including a Company Sale.

However, that is a Series A term sheet. When you turned down YC, wasn't that at the seed stage? You would have still retained control until you converted later.

But are you saying that even only accepting a SAFE puts you on an inevitable path?

If you raise seed funding, the expectation is that you will continue to raise money to fuel your growth. Even if your SAFE or convertible note doesn't have those terms in it, your first priced round will and all previous investors will inherit those rights through their preferred stock.

Expectation is one thing and Term is another. Is it possible to raise seed funds with the expectation of early profitability? This is very much like your approach but still with a seed investment just without Series A handcuff terms.

Google did something like this. They wanted to avoid VC as much as possible and when they did get an A round it was on their terms.

It's more complicated than that.

Most companies that go through a program like YC are pretty early. Entering and accepting the funding means that often times companies have inflated valuations. Being accepted into a top tier program is not enough to pull in investors in many cases especially if it means that the valuation is inflated and the company is still working on product market fit or early revenue.

If you raise the expectation is you will spend that money in a certain timeframe (thats why you're raising)

Ultimately, the best analogy is baseball. Raising money is like going for home runs, higher chance of striking out.

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