What if their terms of that Series A funding are not favorable? You have to take their financing, so you won't have much leverage for negotiations. The only thing you can do is get funded by a larger number of VC firms, so that you dilute their share (since they ask for 1/Nth where N is the number of VC firms).
If your company fails, you are not obliged to pay the money back, you can walk away. However, if you succeed to the point of getting your first round of funding, then you have to pay back the money with interest. But I'm glossing over an important point. They really don't want their money back--they want equity in your company. So they will convert the loan to equity, however, they want up to a 25% discount on that equity.
From an example on their web site, if they lend you $100,000 and you end up getting Series A funding, then they can convert that $100,000 loan into $137,333.33 of equity in your company. Your company's valuation will ultimately determine just how much of your company you are giving up for this money.
People actually have a pretty good track record of building companies from loans. If you don't know how to make money from your idea then it sounds scary but if you actually have a way to get revenue then it's not. I would guess not having faith in your idea would keep someone away from taking a loan, but if that's the case why are you looking for any kind of funding?
most business get started with loans. While there seems to be a high aversion to putting your own money in or borrowing money to get off the ground in tech and web firms, it pretty common in the small biz space as a whole.
One advantage is that it is fast, and you remain in control.
"The loan is a convertible note made to the entrepreneur's company. It is unsecured debt. If the company goes out of business, the entrepreneur is not personally liable in any way."
This seems to indicate that it's a NOT a personal loan, FWIW.
Quickstart or otherwise it would still seem like better idea to figure out how to get an introduction. I could be missing the point of the program, but my guess is that an unsolicited email to a VC firm is still an unsolicited email to a VC firm.
Do you, or anyone, have experience to the contrary?
they are pretty responsive, this is not a typical VC deal where anything off the wire is in the garbage, they are actively soliciting you to contact them, much like the YC app.
