shameless rumormongering

Rumors & Acquisitions: The Personalities Edition

rumormonger

CHEESE AND CRACKERS. Startup godfather Paul Graham was in town this week to promote Y Combinator, the accelerater program that remains the gold standard despite the fact that it does not have its own TV show. Living in New York makes his upper lip sweat, he shared, indicating a YC branch in the city is not in the cards. Entrepreneurs were salivating over the chance to meet the jolly and gracious Mr. Graham–”never seen so many dudes in a line” as someone on Twttr, we can’t remember who, tweeted. But Mr. Graham is not as beloved when it comes to the investor community. A notoriously fierce advocate of founder power, Mr. Graham pushes for extremely favorable investment terms for YC companies–namely in the form of uncapped notes, whereby the stake in the seed round converts to a proportionate amount of stock in the next round. “Angels and super-angels tend not to like uncapped notes,” Mr. Graham has written. “They have no idea how much of the company they’re buying. If the company does well and the valuation of the next round is high, they may end up with only a sliver of it.”

The main problem with this, one investor told Betabeat, is that Mr. Graham takes a straight six percent stake in YC companies even as he waxes righteous when those companies go out to raise. Entrepreneurs defer to Mr. Graham’s advice, this source said, even when there’s another investor they’d like to work with. “He’s protecting those two blockbusters,” this source said, referring to the relatively small number of mega-breakout YC startups such as Airbnb and Heroku.

It’s fine by some investors if Mr. Graham wants his companies to talk a big game, our source said–personally, this source plans to clean up by investing in YC companies later when they “have to do a down round” after the inevitable failure to meet their investors’ artificially inflated expectations. Read More

Demo Daze

Knights of the Roundtable: ER Accelerator Demos Long, But Compelling

Steve Gutentag from Sitesimon.

Betabeat moseyed up to Murat Aktihanoglu, the accented managing director of Entrepreneurs Roundtable Accelerator, after the program’s demo day this morning in a basement auditorium at NYU’s Stern School of Business. He had the overwhelmed, flushed face of a proud parent. “Oh, it was amazing,” he said, eyes widening. ERA put its ten startups through 1,500 meetings, he had calculated, and all the companies have users and 80 percent have revenue. One of them had just signed up 35 cities and two Dubai landmarks: the biggest mall in the world, which serves 47 million visitors, and the Burj Khalifa, the tallest building in the world.  Read More