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MS

Michael Seibel

12/17/21

@ Y Combinator

Founders sometimes agree to terms like 'participating preferred' or 'super pro rata' without fully understanding their implications, which can be detrimental.

Video

YC

Understanding Investor Terms & Incentives || Rookie Mistakes with Dalton Caldwell and Michael Seibel

@ Y Combinator

Understanding Investor Terms & Incentives || Rookie Mistakes with Dalton Caldwell and Michael Seibel

12/17/21

Related Takeaways

YC

Y Combinator Cast

10/29/22

@ Y Combinator

Many founders are shocked when investors agree to simple terms like signing a SAFE without demanding board seats or pro-rata rights, which contrasts sharply with their previous experiences.

YC

Y Combinator Cast

03/09/18

@ Y Combinator

Founders sometimes prioritize their own interests over the company's, which can lead to poor governance and decisions that harm investors, such as structuring deals that favor themselves disproportionately.

MS

Michael Seibel

08/16/24

@ Y Combinator

In cases of unequal equity splits, a common mistake is assuming that one co-founder deserves a significantly larger share simply because of an agreement, which can lead to imbalances and conflicts.

AC

Allison Cooper

05/20/25

@ a16z

Founders should resolve any issues regarding ownership in writing early on, such as confirming if a friend does not want to be involved anymore.

MS

Michael Seibel

12/17/21

@ Y Combinator

Investors know that founders want high valuations and often leverage this by offering a desired valuation while asking for unfavorable terms.

YC

Y Combinator Cast

03/07/18

@ Y Combinator

Founders often lack understanding of the complexities of SAFE conversions and dilution, which can lead to confusion during fundraising.

MS

Michael Seibel

05/07/22

@ Y Combinator

Investors often have different incentives than founders, which can lead to misalignment in priorities.

MS

Michael Seibel

08/16/24

@ Y Combinator

Dynamic equity agreements can be confusing and demotivating; founders are more motivated when they know exactly what equity they have from the start.

YC

Y Combinator Cast

03/07/18

@ Y Combinator

Investors should exercise their pro-rata rights to maintain their ownership percentage during subsequent funding rounds, as early investors can face significant dilution otherwise.