As a startup company, one of the most important steps you`ll take is finding investors to help fund your growth. One popular option is to participate in an accelerator program like Y Combinator, which is known for producing successful startups such as Airbnb, Dropbox, and Stripe.
If you are accepted into Y Combinator, you`ll be required to sign a subscription agreement. This agreement outlines the terms of investment from Y Combinator`s fund as well as other investors. Here are some important things to know about the Y Combinator subscription agreement:
1. Equity: In exchange for the investment, Y Combinator and other investors will receive equity in your company. This will be determined by the pre-money valuation, which is the value of your company before the investment.
2. Convertible notes: In some cases, the investment may be structured as a convertible note. This means that the investment will initially be a loan that converts into equity at a later date. The terms of conversion will be outlined in the agreement.
3. Dilution protection: The subscription agreement may include dilution protection, which means that if Y Combinator invests in future funding rounds, their ownership percentage will not decrease. This can be beneficial for the startup as it ensures that early investors are not diluted by later investors.
4. Board representation: Y Combinator may require a seat on your board of directors as a condition of the investment. This can provide valuable guidance and mentorship, but it`s important to consider the impact on decision-making within the company.
5. Other terms: The subscription agreement may include other terms such as restrictions on fundraising, intellectual property rights, and reporting requirements.
As with any investment agreement, it`s important to carefully review the terms of the Y Combinator subscription agreement and seek legal advice before signing. However, participating in Y Combinator can be a great opportunity for startups to gain financial support and valuable guidance from experienced investors.
