
Announcing Start@Spark: Why are we doing this? - ivankirigin
http://startatspark.tumblr.com/post/89587841/why-are-we-doing-this
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asmithmd1
Not a whole lot of concrete detail - just announcing that they are open to
entertaining funding seed stage start-ups. They have a WuFoo application form
with some good questions you need to be able to answer:
<http://www.startatspark.com/start/start-apply-wufoo.html>

What evidence do you have that this is a severe problem or meaningful
opportunity?

What’s the next best alternative? Who are you competing against and why is
there still an opportunity?

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aditya
More detail here: <http://www.startatspark.com/start/start-index.html>

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daveambrose
Very impressed on a few items here:

1\. Timely turnaround in three weeks. It's clear that Spark values your time
and similarly, entrepreneurs value theirs.

2\. Leading legal counsel and open deal structure. Having solid legal advice
is something most early-stage companies overlook (not because the advice isn't
valued, but rather, it may not be a top priority to building/shipping your
product). In addition, Spark allows other investors to participate in the seed
round.

3\. Structure of investment. I was surprised to see that Spark was offering
the investment in a convertible loan, where the loan will later convert to
equity in the event of the company's next round of financing. The issue of
valuation or "pegging a company's valuation" is relatively mute with this
format.

Overall, this is a great step for innovation in the Northeast. Congratulations
Spark!

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froo
This looks like an interesting alternative for what I was going to be applying
to YC with during the next round.

Especially with the New York locale, as that was one of the 3 areas I've been
thinking about that would have the culture for what I'm attempting.

Interesting prospect that's for sure. I guess I'll have to keep it in mind as
we're gearing up to get going.

That being said, is this only financing and nothing else? If so it doesn't
look to be as attractive as YC in my personal opinion.

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mpc
I'd love to learn more about how convertible debt (like this) works for early
stage tech startups.

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asmithmd1
This is a very common structure for angel investments. Instead of trying to
determine a value for your company at the seed stage they give you money and
call it a loan. When you raise money at the A round the loan converts to a
stock purchase at the amount they loaned you plus some percentage - 20% in
this case, a little high but they are a brand name not some random angel.

For example they loan you $100k to get started. 6-9 months later you get a VC
to invest $1MM at a $1MM pre-money valuation. The VC now owns 50% $1MM/$2MM
post money and Spark owns 6% $120k/$2MM

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aditya
But what happens if (especially in this environment) you can't raise money?
Are you now legally on the hook to repay the loan?

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lincolnq
I would assume that if you go out of business, as creditors they get their
money back first during asset liquidation. But you aren't personally on the
hook. (Part of why it's a good idea to keep your business and personal
finances separate!)

Edit (think you were asking a different question) -- as I understand it,
convertible bonds usually have a low interest rate and long duration, so you
aren't supposed to feel like they need to be repaid immediately. If there's no
future financing, but your business starts making money slowly, you'll
eventually have to repay it, yeah.

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bravura
Do these convertible debt-style seed-funders typically take a board seat?

~~~
asmithmd1
Maybe they don't take a board seat but you still have to take their phone call
when they have an idea for you

