Comments on: Potpourri: Introductions, Auctions, Tranches, and Co-Investors

By: Andrew

Andrew — Mon, 27 Aug 2007 19:16:33 +0000

Tranches, when used with dual protections for both investor and entrepreneur, can effectively address the following quandary:

Investor: I can’t give you that high a valuation at the current state of your company.

Entrepreneur: I can’t give up that much ownership to get the funding I need.

Tranches, when used properly, can address this quandary. By used properly, protections can be built in so that entrepreneurs are not hung out proving and arguing that they made the milestone. Language can be used so that it is a put option instead of a call option. Money can be held in escrow, etc.

By: Dharmesh Shah

Dharmesh Shah — Sun, 12 Aug 2007 22:10:48 +0000

Thanks for the thoughtful analysis of Adam’s letter.

Also, for any YC founders reading this comment (because you are not only smart enough to track VentureHacks, but diligent enough to read the whole freakin’ thing *and* the comments), a note to you:

These guys at VentureHacks are the real deal and know their stuff. If you do get a financing offer (or something that smells like one), you’d be an idiot not to take them up on their offer for free advice. And, since you’re a YC founder, you’re probably not an idiot.

Best of luck with your ventures.