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Kima15: $150K for 15% in 15 days (kima15.com)
313 points by jber on Dec 4, 2013 | hide | past | favorite | 154 comments

While there is a pithy debate going on about Kima and how it fares in an economic comparison to YC, I will throw in my more technical assessment of what founders should consider in deciding whether the sort of up-front equity funding offered by Kima is right for them in the first place.

Seed funding can be a tricky proposition for startups.

The broad choices in dealing with the early expenses are: (1) self-fund by making founder loans/advances to the company, whether for demand or convertible notes; (2) get friends and family money, usually in the form of a convertible note; (3) go to institutional investors and either argue for an acceptable valuation as part of a seed equity funding or bypass that issue and hope to get bridge money via convertible notes. Of course, in the right cases, founders can also sell products and far-more-typically services to generate enough funds in the early going to fund development efforts tied to a longer-term strategy.

In working with founders over many years, it has been my rule of thumb that they should not do too early of an equity round unless there was some very special reason for doing so. Equity rounds come with strings and complications. They require that you set a value on the venture. That in turn means you need to negotiate the issue of price precisely when you are at your weakest as a founder trying to build value. It also means you create tax risks and complications: if the equity round is too near the time of formation, the $.0001/sh pricing used by founders for their shares may look funny next to the much higher amount per share paid by investors, raising risks that the founders can be deemed to have received their shares at the higher valuation as potentially taxable service income; once you do an equity round, you will need to do 409A valuations in connection with doing option grants and that necessitates getting outside independent appraisals; equity rounds come with strings, including investor preferences, investor protective provisions limiting what you can do as a founder without investor approval, co-sale and first refusal rights favoring investors and concomitantly limiting founders, board seats and/or observer rights for investors, and the like. Much of the "distraction" that founders face in raising money exists precisely because a typical equity round can be a complex process and, apart from needing to sell the economic proposition behind their venture, founders must also make sure that any funds they do take in are taken on reasonable terms. Sorting through the issues of company valuation, preferences, and similar issues takes time and can be a grueling process. What is more, when you have emerged from the process, you will find yourself having to price your equity incentives to key people you are trying to attract at a much higher price than you otherwise would have if you had not done the equity round.

So, in the early stage, it is usually best to defer all this and focus on building value with funds made available through some sort of bridge instrument such as a convertible note if possible. In such cases, with institutional investors, you may still find yourself arguing about valuation in negotiating caps but the process is nowhere near as involved as it is with a typical equity round and founders with leverage can usually dispense with caps as well. Apart from the cap issue, most of the other complications simply go away. You retain substantially complete founder independence with almost no strings on what you can do going forward (subject to normal legal rules involving fiduciary duty, of course). You retain virtually complete control of the timing and terms of your future funding choices without needing investor approval to make the choices as you like. And you basically eliminate the tax risks altogether. Finally, because you have not had to price your stock, you retain flexibility to continue offering very cheap equity incentives to others, including those who may become potential co-founders, without creating tax problems for them or for your company.

There are cases where founders prefer to do an equity round in spite of the complications. Maybe they can get the equity on good terms with a favorable valuation and even without the complications of doing it as preferred stock (e.g., in some friends and family situations). Maybe they prefer not to have debt on their balance sheet, with the legal obligation to pay it back in case they can't do a qualified funding round. Maybe they just need cash fast and the people they are dealing with it are ready to do it on oppressive terms that are easier swallowed than would be shuttering the venture. Or, on the positive side, maybe it means taking funds on less than ideal terms but from an investor who will add large value to the venture apart from the cash element. Who knows? It is a big world and people have all sorts of reasons for choosing one way or the other. The point is that they need to think through the pros and cons carefully and make a wise choice for their circumstances.

The Kima offering offers fast cash to qualified ventures. This has an obvious advantage of being simple and fast for those who qualify. Whether it is the best choice for a given venture turns on how the founders in that venture see the trade-offs. If you take the Kima offer, you will wind up doing an equity round. It will be for preferred stock. It is for cash only, with no value-add. Thus, you will have the tax complications that attend an equity funding, including needing to price your stock and option grants based on the $1 million company valuation and the need to do 409A valuations. Moreover, the strings that appear in Kima's term sheet are not trivial: the valuation is based on no larger than a 5% equity pool; you give up a board seat; you give Kima a broad veto power on many of your future actions relating to fundraising and other important company matters; you agree to restrictions on how the value is shared in case you are acquired. If the answer to this is that it is worth it for many startups to make such tradeoffs in exchange for fast cash, I would add that these funds are not being offered to just any startup. Kima reserves the right to cull through the submissions and pick from the best only. While that is fine, of course, it does mean that the value of the offering must be weighed against other choices open to the same level of quality startup that it hopes to fund and not against the more limited choices open to just any startup. The biggest question I would have for those startups is this: fast and easy cash, yes, but are the complications worth it for $150K if other reasonable options are open to you? While they may be for some, for a good number the answer would very likely be no.

How does Kima compare with YC? PG has assessed the broad economic proposition to which I would add the following: YC does take an immediate equity grant but does so with common stock and on terms that don't affect founder stock pricing. Thus, near-complete founder freedom is preserved and there are no special strings that come with the investment. This stands in pretty sharp distinction to the Kima terms, which involve preferred stock and a number of strings. But by the far the biggest differential that I see comes with the value-add piece: with YC, founders pay a price in terms of equity they give up but they get huge benefits from becoming part of a network that keys them in to relationships and solutions that can prove invaluable to an early-stage startup. In effect, founders pay (somewhat) dearly in early equity to partner with a powerful ally that may dramatically speed up and enhance their path to success. This sort of trade-off is not worth it for all companies but, for those that dream to do significant scaling and that need to have doors opened to future VC investors, the YC stamp of approval and the YC resources offer value that is not easily found elsewhere. Of course, no angel investor, Kima included, can match this in any comparison, though such investors can add value in various lesser ways from their relationships and the like.

Different founders have different needs. What Kima is doing is new and innovative and the people behind Kima are savvy and sophisticated players in the startup investment world. Therefore, it is very nice to see this sort of slant on seed financing. But, again, there are always trade-offs and founders should weigh these carefully in deciding whether the Kima way is the way they want to choose.

I can't begin to say how thankful I am for having you post this. I'm currently mulling over my options about whether or not to seek funding and what you had posted was eye opening. It truly changed my perspective on what you may have to give up if you do go the funding route.

To a business laymen like myself, giving up 15% may not seem like much but as you point out, the caveats can be quite extreme. So thanks again for your post.

Wow. This is an amazing comment. Thank you.

Woah thanks for this great post. I was considering doing an F&F equity round but had no idea about the potential tax implications. Reading this made me realize I need to tread a bit more carefully and do some more research.

This is a fantastic writeup and should be required reading for all founders. Thank you for taking the time to write it all up. Kudos!

I was curious how this compares to doing YC. YC usually asks for 7%, in return for which groups get in the average case $18k. Every startup also gets an $80k note that converts in the next equity round. In the last batch the median startup raised $795k after Demo Day. We'll conservatively assume a $5m valuation cap, and (very) conservatively assume the next round valuation (when the $80k note converts) is also $5m. So if you can get into YC, in the average case you'll end up afterward having sold 22% of the company for $813k.

We do a lot more than help people raise money, of course, but financially that is what the median trajectory looks like.

A significant difference is that a major part of the value of getting into YC is having successfully completed the selection process. There's a reason that when hiring and looking for funding, companies will usually include the year they went into YC. Given the value of the brand, it's likely that YC could offer less for more equity and still be oversubscribed.

Did you realize you're replying to Paul Graham?

I thought it pretty funny telling pg about his program. Of course I understand there are many more readers of the comment, but it still seems directed at him.

Honestly I cannot see casca's comment as trying to tell pg something about YC, more that casca is emphasising that YC is not exploiting its brand value; so a direct comparison (15% for 150K vs 22% for ~800K) could be seen either as pg does - "hey we are waaaaay better value", or as casca says "hey you are toooo cheap"

Anecdotally Henry Ford was told that the drive shafts in Model T's were outlasting the chassis, so should they improve the chassis to match? Hell no, drop the quality of the drive shaft and save some money.

I think pg would have made a bad Henry Ford.

Edit: there is however a clear need for fast, time boxed, fund raising. Kima is part of the YC-inspired move in that direction, and there is far far more talent and money out there than YC can handle, so there is scope for them. They are just pricing in the middle market, away from the luxury brands :-)

Henry Ford was cost conscious but not for the reasons one might think. Ford was once sued by his Shareholders because he was purposely selling his cars at a loss to the company. The Michigan Supreme Court held that Henry Ford owed a duty to the shareholders of the Ford Motor Company to operate his business to profit his shareholders, rather than the community as a whole or employees. http://en.wikipedia.org/wiki/Dodge_v._Ford_Motor_Company

While shareholders were worried about maximizing profits and dividends, Ford was thinking of bettering the World with $60M in capital surplus. Ford envisioned a World where every family could afford and benefit from a vehicle - he just intended to see to it they owned a Ford which simultaneously would have allowed him to employ more workers.

I think aggressively pursuing market share through subsidised products hardly counts as Nobel Peace Prize material. Bill Gates would not have needed to do all that exhausting philanthropy now...

I don't know... replace "car" with "water filter" and "America" with "Africa", and I think you might be able to see Ford's point of view.

I would love to see a Nairobi business woman become the next African billionaire selling water filters, mosquito nets and led lights to the whole continent, making a fortune and saving lives.

but I won't call her a philanthropist when she is picking out her next yacht. I will be pleased she lived however.

He's just commenting on it, and it's a reasonable comment at that. It's not like he's telling pg how to run his business.

Hello Paul

Great numbers, we really admire a lot what you're doing at YC but not all companies want to join an accelerator or relocate and not all companies are accepted by YC ;-)

We see Kima15 as a different offer for different founders all over the world who want to raise funding quickly and when they need it.

A startup has to be in the same place as its investors if they want to talk face to face, and empirically we've found this to be a necessity when talking about the subtle and complicated problems startups face. Email and Skype are such poor substitutes that they're a qualitatively different thing. Which means if a startup wants advice from its investors as well as money, they either have to raise money from local investors or one of them has to go to where the other is, at least temporarily.

Agree with you, it's certainly better to be at the same place, but there are hundreds of counterexamples of huge successes with VCs not living near the companies. In Europe, Israel, Russia, we have plenty of them.

We are also investing with a lot of local investors and they are sometimes managing the local relationship (or mostly making things worse :-()

Last but not least, many of our companies are targeting a local market (China, India, Pakistan, Switzerland, France, Argentina, UK, Germany...). They have nothing to do in the Silicon Valley.

The YC model is awesome. No doubt on that. but there is room for many other models. (and thanks God, we invested in Rapportive before they went to YC ;-)).

Check also what my partner is building : 1000Startups, the biggest incubator in the world in the center of Paris http://1000startups.fr/en/

As far as I can tell, YC isn't much of an option if you aren't located in US. Besides most of the start-ups go down the drain not because they lacked advice but because they ran out of money. So congratulations for creating an option that can be considered by those who have no intention/ability of moving to US.


Wow! That's twice as powerful as 500 Startups

Ideally investors can give advice too besides money - it's nice to get two things instead of one. But there is some value to investors who can only provide money, as well as some value to investors who can provide money + advice-distorted-through-skype.

Agreed, most of the investors I've worked with provided zero benefit through advice. Often investors are out of touch with trends, they have their heads in the financial clouds and can rarely get past their infatuation with hockey sticks. Obviously some investors have a clue about the technology, but not in my experience - won't name names for obvious reasons.

I'm just guessing trust is a big factor here. I'm more likely to trust someone I've met.

How do you think your program stacks up when compared to YC directly? Do you think an Airbnb or Dropbox would choose your program vs YC primarily because of the lower friction to money in the bank?

Also, if a company already has a v1 of the product, are you planning to do the same deal? (YC often accepts people who are post seed pre series a.)

Oups, for your second question.

Kima15 is not dedicated to fund prototype only. Some companies with V1 are also great targets for it. All the projects we received since the launch 3 hours ago are all startups with a real product.

If the startup is at a later stage, we will be happy to check it through Kima Ventures. It can take just a little longer.

AirBnb & Dropbox were very risky projects like any other projects in this planet. There are many hidden awesome companies on this planet and we are targetting this one.

I'm sure we will invest in a future AirBnb or Dropbox. We just need a little time ;-)

Wow, cool that you also read Hacker News.

If you don't mind me asking, given that you claim to fund 2 startups every week, how much access would a startup have to either yourself or Xavier? One reason why Kima appeals to me surely is the fact that you two are heading it. Would you actively sit on a board? If so, do you ever sleep?

Ah ah ;-) I love HN.

I'm not sleeping enough and have 10 children ;-)

All our startups are discussing with me by email all day. Not sure will be able to answer to everyone when we will have 800 startups but for the moment, that's ok because working exclusively by email.

We are not board member but are here to help all the time not only during boards ;-)

It's not unreasonable to assume that founders receiving Kima15 funding also go on to raise a sizable equity round later. I think the offers can be simplified by saying YC is ($18k + YC program) for 7%, and Kima15 is ($150k + Kima15 network) for 15%.

That means the YC program needs to be worth $52k more than the Kima15 network/brand for the lower valuation to make sense. I wouldn't be surprised if it is, but we'd really need stats on the subsequent funding rounds of Kima15 companies to compare them in this way.

Financially YC is a force multiplier. Not just incidentally, but by design. So it's misleading to treat it in isolation. And while anyone could raise additional funding after any round, in the YC case the numbers are known. Unless there is some fairly dramatic economic change, the median startup we fund can count on raising several hundred thousand dollars at a valuation (cap) of way more than a million.

One of our companies FormLabs raised $19M after our seed round ;-) You can imagine the kind of valuation they got... Pret d'Union, French Lending Club clone raised $5M Sparrow has been acquired by Google

Very difficult to compare both programs and it's not the goal to compete against anyone.

What about the novelty aspect? AngelList is cool right now. Who wants to be just another YC graduate, standing in a long line with teenage fart app founders dying to rub elbows with the Wizard of Oz.

I'd say the difference is all about time.

Kima is awesome for startups, who need a cash infusion RIGHT NOW. This can often save a startup and make the difference between the startup shutting down and it becoming a billion dollar company.

With YC, it's a very long process as it roughly takes 4 months from applying to money in the bank.

So Kima can give startups a fat cash injection, which is good for startups who know exactly what to do and just need cash, nothing else. YC is more for long-term startup building, getting into a community, relocating, becoming a Silicon Valley startup etc.

"With YC, it's a very long process as it roughly takes 4 months from applying to money in the bank."

That's not true. Startups get the initial $18k + $80k on acceptance.

Let me disagree. Applications are 6 months apart, this makes it for new applicants statistically ~3months + the time until acceptance makes roughly 4months.

Considering that lots of startup founders apply many times before being accepted, the median is easily in the years range.

The median application is submitted about 2 days before the deadline.

It seems misleading to consider multiple applications, since we're talking here about the time between applying and getting money or a no.

Are you referring to the median funded application or the median submitted application?

You had mentioned the day before the deadline applications are submitted at a rate of one per minute, which is bound to bring the median closer to the deadline, but only YC knows how many of the applications submitted during the last 2 days were funded. The median funded application could be submitted 2 months before that for all we know.

If it's the median funded application, shouldn't you be correspondingly alarmed YC-funded startups apply 2 days before the deadline? Would setting more deadlines (having more funding cycles) generate more YC startups?

Ok true, then it would be 1 month application period, 2 weeks for an interview invite, 2 weeks to have the interview, so it would be around 2 months vs. 2 weeks, 4 times longer.

But that's fine, because your expertise is a more long-term approach over several months, Kima's expertise are burst-investments. You have completely taken up the "hatching investments" space, Kima will completely take up the burst-investment space.

I think is the next logical step of startup investments after accelerators. Just as we've now seen accelerators popping up everywhere (and now dying down), we could see Kima-clones popping up everywhere soon.

Useful data, PG! I agree the value of YC is far higher than Kima15. But given the level of competition to get into YC, I would say you have lower risk profile than Kima15.

I think they probably fit a nice spot for founders who can't get to YC but are looking for funding. Overall it's win for founders.

The comparison of 15% for 150k vs 22% for 813k is unfair because it suggests that $5m valuation is entirely because of YC. The fact that many YC companies don't raise clearly indicates that YC helps but not a sufficient factor.

Since YC companies' approx valuation is $5m, the 80k note will take about 1.6% equity. So I would say YC is offering 98k for 8.6% (18k + 80k for 7% + 1.6%).

Seems lots of people are calling the terms terrible, but for an early stage investment it seems pretty reasonable to me. Plenty of things are in the 1M valuation and under range. If you are shooting for something 8 figures or higher, in the long run this won't kill you, and in the short run it lets you get started and gives you a good bit of runway for say 2 founders.

I'm not looking for funding at the moment, but the speed would be a huge bonus for me. There is a huge amount of value in being able to focus on making your business succeed instead of focusing on getting funding so that you can continue trying.

These terms are far from terrible. Outside of a few selected places like Silicon Valley, you can dream of getting $150K for 15% as an early stage startup with no sales.

It could be argued that YC brings a lot of added value to the table, but if we are simply looking at the terms, their ~$20K for ~6% is far worse than $150K for 15%.

The remaining 9% though (that YC leaves on the table) could be worth at least $100k during next funding round, probably more if you expect to be successful.

Of course but with this said:

> This should help you to launch the first version of your product and to test your initial hypothesis about the market before (potentially) raising more funding to grow the business.

They are shooting for helping companies who know what they need to execute do it fast and not worry about the rest, at least for a bit. After personally going through almost 6 months of angel investing diligence hell to get a similar deal, this is completely something I appreciate.

I think YC does this too, though the costly expertise is internal, so the $20k pays for rent/food, etc..

It's definitely good to have these options, so people can make better choices for themselves / their needs - and hopefully be able to get access to what they need. :)

It's pretty good for two founders in the earliest stages (e.g. only a rough idea of what they want to build). It's not so attractive for startups that already have a prototype and a couple of customers.

We have a prototype and a couple of customers and still think this is a good deal. It would let us go from pure bootstrap mode (chasing money in any form) to longer-term thinking.

Can you expand on why that is the case? If your runway is running out and taking a loss on operating costs is not an option how can it be better to just fold it?

All the projects submitted to Kima15 since the launch 3 hours ago are more than a prototype. Real products with customers already...

If you look at early stage investments in Europe, the terms are pretty good. Eg. compared to accelerators, seed round investors etc.

Awesome, as a Kima company who took investment before this "Kima15" offer had been announced, I can say the biggest thing that attracted us over the other firm offers we had at the time was Kima's commitment to moving fast with the cash.

We'd maxed out personal credit cards and we were literally on a ~2 month timebomb of personal runway.

So yeah, awesome to see they've now put this "move fast" promise into a transparent offer. Sure there's limits on the cash and valuation but, I guess better to see it upfront.

In our case, the fees were £1,800 (incl 20% VAT) for our lawyer, and €1,136 (inc 19% VAT) for Kima's lawyer.

The partners are based in Israel + Paris (no one in the US), which makes things complicated with time zones of they are investing in North American companies.

A request for "weekly updates" is also quite burdensome on founders, and they also have the optionality of a board seat (also unusual for investments at this stage).

I would think anybody who hands over $150k gets the courtesy of an hour phone call a week. Considering that you wouldn't have to spend weeks / months doing the show-and-tell to dozens of potential investors, I think that's a small price to pay.

I think we invested in 60 US companies ;-) No problem to discuss with them. We don't always need to do that in real time. Email is good for 99% of subjects.

My previous startup was based in the US and our investors were in Europe. The time difference wasn't an issue at all, an inconvenience at most (getting on a 7am call after a coding marathon, we've all been there).

What I learned from getting an investor from Europe is lack of connections in the SV/USA which could be a disadvantage for some startups.

About weekly updates, I think it's critical for founders to have to write a 3 lines weekly update but not only for us, investors, but also for their team , cofounders and themselves. It's helping focusing on the right thing each week and increase performance.

Some of our founders are sending an update every 48 hours...

I wish this had existed years ago. To raise a $150k round from an angel group, it took me 10x the time (150 days). I spent countless hours on dog-and-pony shows, negotiations, documents, contracts, lawyers, and ended up with ridiculous amounts of drama around the board composition, placating founders, and literally weeks of driving around to pick up individual checks from the angel club members... to ultimately gain investors whose interests weren't really aligned with ours and, aside from writing a check, did nothing to help to company.

I'm not saying we walked uphill both ways in the snow to get a round of funding... but it's definitely easier right now. Hope YV and Kima is more representative of a new normal than a passing fad.

When we were looking for funding with Weekdone (https://blog.weekdone.com/weekdone-wins-slush-announces-200k...) what attracted us to KIMA was the speed and ease of doing business with them. Looking at my notes, 6 days from the call to agreeing the terms, which is quite exceptional in Europe for a cross-border transaction. Speed was my no 1 goal in fundraising to get back to product and customers, so this was a blessing.

You can follow KIMA portfolio day live on Monday, tune in: http://www.dailymotion.com/kimaventures#video=x17ww6i

A board seat for 150k does not sound reasonable.

Check the SLA on the homepage: "-request the right to a board seat (2 founders, 1 investor) but we do not take the seat unless required to solve founder conflicts and have no intention to tell you how to run your company."

You're free to offer any terms you desire and if people accept them than may you find mutual success, but I've got two comments:

1) People who know what "the going rate" is will not be overwhelmingly enthusiastic about you asking for a board seat given the package deal here. An option on a board seat is, approximately, as expensive or more expensive than a board seat. For example, it's going to cause auto-failures of negotiations with later stage firms who would otherwise be prepared to pay market price for board seats (my SWAG from outside the Valley is "in the neighborhood of multiple millions currently"), because board seats have to be static and scarce to retain value.

You also probably uniquely cause signaling risk because at least some actors are going to model your decision to take or not take board seats like they would themselves choose to take or not take board seats, and come to the conclusion "A prior investor has a free option on a board seat and has declined to exercise it, despite having had full knowledge of the business' deepest secrets for the last year? Wow, that makes my investing decision a lot easier: PASS!"

2) It seems to me that your strategic reason for asking for the option to a board seat is that you desire to take a personal hand in managing downside risk when some startups you fund implode. This implies that you both believe your contribution will help to manage downside risk when startups implode, and that rescuing imploding startups is a great use of your time. Many people in the community would advise that a startup which is imploding is almost immune to correctional action and accordingly valued at approximately zero, and that startups imploding is sort of the model and that your main source of risk reduction is having 7.5% invested in Google 2020 rather than tweaking twenty imploded companies to slightly-north-of-imploded.

Or, to rephrase, if the successful outcome is "We do not get a board seat" then do not ask for a board seat.

1/ For next rounds, we are almost all the time leaving our seat to the new investor (if it's a good/great one. Not if it's a shark VC) More than 50% of our 2010/ 2011/2012 investments raised a Series A, Series B and more. So nope, you're not right. We have excellent reputation in the ecosystem.

We invested in 220 startups. Had this right to join board everywhere and never used it until now but I still prefer to keep this right.

2/ Discordance between cofounders (in case they are not sharing the same strategy) is not always a startup implosion. Sometimes we just need to come and become the 3rd vote who can decide which founder strategy we will choose.

Have 50% of YC investments raised a series A?

The term sheet gives you the unconstrained option to appoint a director. Again: $150k doesn't sound like "appoint a director" money.

The 5% premoney pool is another thing that will dilute founders (unless I am reading this wrong). YC doesn't require a premoney option pool for employees.

From the term cheat:

"The  Investor  will  invest  up  to US$150,000  and would hold no less than 15% of the Company on a fully diluted basis."

I'm not a lawyer, but doesn't this say that their 15% never dilutes? If so, that would be a horrible scenario in case of future fund raising.

It's surprising how transparent Kima is. The terms are reasonable and it's not like you have to take the money. Speed is a huge deal as well...knowing whether you can close or not can mean spending another 1-2 months working on your product and not have to worry about taking meetings from various VCs/angels.

off-topic: the red background seriously hurts my eyes

Agreed - it was painful but worth the time to change background to teal w/ StyleBot Chrome extension. Really like how this is all laid out and the term sheet is right there at the bottom.

Thanks for your feedback. Better now?

The darker red is definitely better, but generally red is a bad color to use excessively. Plenty of studies have shown that red can invoke the fight or flight response and increase stress.

Maybe that's what they're going for. :P

Not at all ;-) What color do you suggest ? ;-)

Even the new red is painful on my eyes. I navigated away before I finished reading, and when coming back here, it still created an afterimage on my retina.

I recommend a much more muted background, especially for the textual portion of the site. Run red banners down the side if you must, but change the text section to a more readable contrast.

More of a neutral background would be a good start, something like the Kima Ventures site where white-on-red is used as a bold title versus the whole page text.

http://www.smashingmagazine.com/2010/01/28/color-theory-for-... is the knockoff answer, but you should get the input of an actual designer - I've used yellow-on-red AND the <blink> tag before, both at the same time.

Don't have the whole page one background color - use it as either side panels as suggested below, or as a focal element like this: http://imgur.com/hwsUhKI

New red is much better. Red wine instead of ketchup.

Thanks. It's much better for me now

Still difficult for me to read.

Great offer I guess but I seriously had to shut down the page after looking at it for 30s..

Kima Ventures is probably the fastest and most efficient VC I had the pleasure working with. I recommend all companies pre-seed to try simply try it out. Jonathan Messika www.Vodio.com

Love the "fast" approach!

Now, it only it was a convertible note, possibly discounted but a convertible note...


Variability on the initial maturity of the startup, mostly.

Reduction of adverse selection on your side, also.

Based on your historic numbers, would it be a significant cap on your upside?

To get the potential of a better than $1m valuation is my guess.

I'll admit being skeptic at first but every time we asked @jberrebi for help in my previous Kima-backed company, he was both smart and fast. Impressive feat with so many startups in the portfolio+pipeline.

I like the approach, but I don't understand why an investment that's so well defined ("based on the standard Seedsummit documents") requires legal fees at all.

If you can find us a lawyer working for free, would love an intro ;-)

Having standard terms should mean lawyers are only needed the very first time (to set up the standard terms).

The rest should be 'fill in the blanks', and since valuations/dollar amounts are not negotiated here, the only blank each investment should have to fill in is the company information (name, incorporation location, address, etc.)

Maybe I'm missing some steps in my mental model?

Unfortunately, lawyers have to check that the company exists, request info from founders, check that the IP is owned by the company etc...So cost is 2.5K to $4K (and it's not expensive)

We HATE paying lawyers... :-( We are not investing in a company for that. So we will try to work with all good lawyers with great prices. As you said, it's not so difficult.

Jeremie, I don't know if that is part of an agreement you have with your LPs that you need to have a lawyer doing due diligence for you and that require you to spend 2.5k-4k but allow me to propose a perspective of a founder who finished fundraising and one of the thing that I did was to ensure to keep my lawyer out of the equation when it was not needed.

1. Checking if the company exists - meaning looking over incorporation documents, validating the bank details and other information to make sure you're funding who you think you're funding - could be done with someone with some common sense and not a lawyer - probably hiring a person who does administration and work full time for you (the high volume of seed deals you're making make me think you already have that person).

2. Checking that the IP is owned by the company is usually done by doing a TAA (Technology assignment agreement) and in that case this could be a standard doc that you let the founders sign on. I would believe that someone on your behalf could also check that the validity of the signatures.

3. Use a service like RightSignature to collect signature, IPs, timestamps and even Identification cards picture or something of the sort in order to check the legitimacy of the person signing on the docs - this will allow you to remove the lawyer from the equation as well.

4. Last but not least - try documenting the things you need from the company beforehand and post it somewhere on the site - knowing in advance what are the things you are requesting usually eliminate the unneeded ping-ping with lawyer.

On a personal note - I streamlined the fundraising process by creating a few templates (with wire details) and having forms on Rightsignature. I had all of my investors go through that process and closed very fast - including countersigning and dating the documents once the wire reach our account. I think every process could and should be streamlined especially if you deal with 200 companies. Lawyer like to interject in between deals because they can bill and in our case we were able to save around ~$10k in legal fees because we didn't let our lawyers talk with our investors and negotiate for us - and we used a standard note provided by our lawyers.

I'm not saying you could do that but if there's room to reduce the $4k to something like $500 or even nothing - that mean an extra $400k that can be re-invested into ~3 companies - imagine that!

EDIT: I know you have way more experience closing deals than me - I just wanted to offer a founder experience and perspective on that process.

Thanks a lot for your feedback but here we are talking about an equity deal not convertible notes... Did you really issued new shares without a lawyer ?

Most of the investment were notes and I understand it is way easier - however the first investment from 500startups were shares. we signed on a SPA (stock purchase agreement) and did some other stuff as well. Most of it were done using Right Signature and quite fast to close. The person on the other hand handling this process was not specifically a lawyer. I hope this can shed some light - I'm not saying you can necessarily remove your lawyer from the equation but I am quite sure you could reduce that number to be non-significant. Perhaps you should talk to 500startups :) They are doing lot of deals and I never saw them charge anything for the deal - they must be doing something right :)

Why do you need a lawyer, if you have standard documents already? Maybe this is something with the Europe / Israel legal framework that I'm not familiar with?

Nope, we need a lawyer everywhere to issue shares certificate and doing many other things.

Ok, that's interesting, but doesn't really answer the question. You don't need a lawyer in the U.S. for example. (You may want one, to make sure you're not shooting yourself in the foot, but that's what the standard docs are for. Never in these sorts of things is it actually required that you have someone with a law degree sign off on it in every instance.)

You mentioned you invest all over the world. How does the legal stuff work with companies incorporated outside well understood markets like the US, EU, Singapore etc. Do you require they reincorporate somewhere else? How fast do you make decisions in these cases?

Our decisions are fast for everyone. Sometimes lawyers could need a little more time... We are not requesting reincorporation most of the time but sometimes we are advising the company to do that for many reasons

Would a Australian Pty Ltd be an instance were you would suggest reincorporation?

Explaining the Seedsummit, term sheet, creating the bespoke shareholder agreement, handling small details over back-forth emails, creating employee contracts (for the directors), filing relevant forms with local companies registry....

Depending on the home country of the company will mean each deal will need customised docs too I guess

Most of it can be streamlined and re-used.

grellas (who posted in this thread) comes highly respected in the startup community and from what I've heard works on flexible terms. I don't think he actually works for "free" though.

Very interesting. Looks like a great option for those who understand and need it. For the founders 85% of something is better than 100% of nothing... Or, 85% * some risk of Kima behaving 'badly' (from the founders' perspective).

Having read the term sheet, I'll say that the desire to get for Kima the post-acquisition excess benefit of any acq-huire exit seems a reasonable request in concept ("Equalization of financial terms") but it does make the 15% more expensive if there are others who would invest similarly without it and figure that N % will acq-huire instead of failing, stalling, or growing. And it potentially goes a bit too far if one of the founders grows to be a business unit head at a large company. Would need to see the actual document language that addresses that though. Also, sorry to be OCD - to be consistent, "financial terms" should be capitalized in the section title.

The biggest issue I'd have is the "Important Decisions" clause. Incubators and many (but not all) angels don't typically look for this level of ability to control that can block the company from growing.

There is some evidence that Kima doesn't use their rights maliciously but that's the clause to think carefully about - if there is any disagreement, the IP is in the company and you can't raise money, give distributions, or sell the company (among other things) without consent.

However, they invite you to talk to other Kima family companies, so I'd definitely do that and talk about business operations and decision making in the context of those Kima rights with them.

Nice and simple. Now who are Kima 15?

Sounds like a Japanese girl band...

That's a project by Kima Ventures: http://www.kimaventures.com/team/

Getting 150K and a company board with qualified people on day1 would be very attractive for an H1B engineer like me. So I could bootstrap a startup while having a paid job in a company and if Kima15 invests, this would qualify for an H1B transfer to my own company(Having a board to supervise your company would qualify for H1B transfer).

From the FAQ:

> [We] will continue to make investments via Kima Ventures at earlier/later stages or lower/higher valuations. Projects looking for funding outside Kima15 can be submitted via the Kima Ventures website.

From the frontpage:

> We will not invest in future funding rounds of your company to avoid signalling issues.

That's not good communication. Otherwise, looks very good.

What do you mean? You're talking about 2 differents things.

When you say that you offer an investment based on default terms and in the next paragraph you say you also continue to make investments at later stages and at different valuations then people have no reason to assume that those investments are mutually exclusive.

We are investing only once in startup or via Kima15 or via many type of deals through Kima Ventures

We are never reinvesting in one of this deals.


I'm saying the phrasing is unclear. Bad communication. If you don't reinvest in any deals then that should be mentioned clearly in the FAQ. Right now it isn't.

Second example:

> Will you consider my business if we are later stage (higher valuation)?


> Kima15’s standard offer allows us to make decisions and close investments very quickly but we realise [sic] that not all companies will be at this specific stage so we also continue to accept submissions via Kima Ventures

This implies that yes, you do invest at a later stage. But the next sentence goes:

> We do still only invest at the earliest stages...

Which implies the opposite: that only early stage investments are an option.

So although I like the idea of Kima15, some extra proofreading wouldn't hurt.

Ok. Thanks a lot. We are trying to make it clearer

"Realise" is the standard non-US spelling, so it's appropriate for a not-US-specific FAQ.

I thought it was perfectly clear when I read it. If you are already at a later stage or want more money or a different valuation, this other part of the company is still into normal VC stuff. However, if we invest in you in this program we will not do another later investment to avoid signaling issues.

While it is two different things, the way it is worded is slightly confusing and I can see how someone might be confused.

This makes perfect sense and is a good policy.

As a policy, they won't invest in future rounds. So everyone else knows they won't, and no one asks "why isn't Kima investing in this round?". It can be bad when an investor who's already in a company doesn't participate in future rounds, as it signals that someone which more data isn't interested in putting more money in. They're avoiding this entirely, which is good for the startup.

It's a really bad signal when you get seed funding from someone who does do follow-ons, but they don't want to follow-on with you. It can make it very hard to fundraise.

@Kima testimonial -- these guys took a look at my recent venture very fast, very authoritative, read the docs and sent the money, and have been completely hands-off. Kima is not a startup school for "teach me" founders. It is a the model of a quick-decisions seed fund. In my case they followed a co-investor who they knew well. "He's in? We're in. Done." People say this but I rarely see it.

As for what else they add -- I'll find out next week in Paris at their summit next to Le Web. I suspect the 100s of CEOs they have backed and big european network will be things I value. They are relevant for the company I'm building.

I think the Kima pitch has a lot in common with the PG worldview -- founders want fast decisions, money, network. Maybe they want a school or maybe they can run a school; founders vary.

If you're this ready for funding, you should probably shop around.

500 Startups offers $100,000 at a $2M valuation (i.e. 5%). Cheaper than $150,000 at $1M (i.e. 15%).

As far as I know, it's $50K for 5% not $100K

So exactly the same postmoney valuation.

500 offers $50k at $1M or $100k at $2M (~5% regardless of check size).

Source: http://readwrite.com/2011/02/10/dave-mcclures-500-startups-a...

I added Kima15 to this investor database: https://docs.google.com/spreadsheet/ccc?key=0AszA0J0G-ptCdG1...

As this is looking like a AMA for jber, I will ask:

How many brazilian startups have you funded? I understand that you are investing everywhere, but the country counts? I mean, bigger markets = better chances?

Also, just to reassure me, can you completely guarantee that if I don't have an answer in 5 five workdays is because I didn't pass? Just to control my expectations and illusions here if that happens.

No investment in Brazil yet but some in Argentina. The country can count but we are investing everywhere and Brazil is an enormous market.

About the 5 days, we will do our best to give an answer in 5 days. If not, it means that we are not doing our job well ;-)

thanks, and good luck!

A naive question to founders who have taken such seed funding before - can you directly take money out of a investment like this to pay for your living costs or you have to go through the headache of establishing payroll and a small salary for the founders?

Payroll is obligatory for tax reasons...

I see. Any pointers to a cheap payroll processing company?

Nope . It depends where you are. but really, it's very easy to find online.


I don't see it being specifically limited to software startups. Some startup with a physical product/service might find this useful to finance inventory/growth. The terms don't sound so bad when you look at it from that perspective

Yep and we love IOT startups! Check some of our investments http://petnet.io http//www.greenboxhq.com

This could be just as important as YC if it works. This is closer to what many people really want. It's enough money enough to seriously test an idea, but not enough that you could waste a lot of time going down a bad path.

Giving up 15% of your company for $150k? That's the amount you'd expect to give up, roughly, in your seed round. It's hardly worth considering if you think your company has any value.

I'm blind, it's too red, what does the page say?

We just changed it. Better now?

I didn't see the before one. But there is a strange delay to render time. Not sure if there is some heavy library or something is being loaded.

Also impressed that Jeremie himself replied to this thread and not some intern.

Thanks Salim ;-) We don't have any interns ;-) That's why ;-)


Do you require startups to be legally incorporated, or can that be done during the funding process?

Also, Is your preferred US Entity a Delaware C Corp?


I never understood why people bother with such tiny amounts of money.

1) It's the amount you can borrow from your family most of the time. Or just make it working in IT and saving like mad.

2) It's barely useful. $150K is not enough to hire even one great developer for a year.

You're overestimating and underestimating a lot of things at the same time. $150k is not 'tiny' by any measure, raising this much from family alone would mean you have a pretty well-off and trusting, loving family to begin with, not all developers reside in SF, U.S.A to demand or even need such a yearly salary etc. etc. I don't want to start tearing too much into your argument because I kind of like it that people are still able to think so...rosily on average.

1) - Never borrow from your family when you're launching a company. You have more chance to fail and will never be able to reimburse. - You need to have a rich family if you want to do that. Did you already borrowed 150K to your family to launch your startup?

2) -We are investing in team when at least one founder is a developer if not all... So $150K is not to hire people. -All developers are not in the Silicon Valley. You can find developers at much lower price in many countries and we are investing everywhere.

My thoughts exactly. Just save, bootstrap, launch and raise a large Series-A round. $150K for most companies is still not enough.

I wonder if Amazon would have existed today if Bezos had waited another 2 years while he worked a day job to scrape together $150k.

Time = Money

Time = Money only for ideas that are easily reproducible. if you truly found a niche it's nearly impossible for another business to execute it the same way.

Except that most of the "best investments" that VCs make are not in companies in a niche that are not hard to reproduce.

Twitter & FB are easily reproducible, and they provided awesome returns for their investors.

I'm sorry but I absolutely hate your response because it seems to come from such a high and privileged position. In my opinion, 150K is quite bit of money, especially if the team has technical founders or can find a "mediocre" developer.

Some people have financial obligation or living situation where they could save like mad and it would still take them years to accumulate 150k.

Barely useful? This is that SV bullshit mentality. There are thousands of great entrepreneurs all over the world who could turn 150k into a profitable little company. Might not make millions in the first few years (or ever) but if they love it and people love their product/service, that is very useful. Surviving off very little is an admirable characteristic, you don't need millions to build something meaningful and if that's the way you think, I would never work with or invest in you.

> There are thousands of great entrepreneurs all over the world who could turn 150k into a profitable little company.

Alas, VCs are not after profitable little companies. They just plainly would not allow you to become a little company, profitable or not.

Not in our case, we love startups reaching profitability by just raising a seed round. It's most of the time the best way to confirm that the business model is right.

It's also easier to raise a big round after that, invest a lot and grow.

Okay, how do you suppose to exit then? I take $150K from you, create a small SaaS service a la @patio11 and then start slowly crank up customer base, showing stable 10-25% y/y growth. I see no exit for your 15%

We sold Sparrow to Google with this model and the founders are now millionnaires. but this is not what I'm saying. You're reaching profitability first and you're building a big company just after. Market Size is the most important but it's not because your market size is big that you have to take risk and hit the wall without enough cash to survive. Profitability/Breakeven is giving you the time to raise as much money you need/want

It's a seed round meant for founders to get an initial product working enough prove the idea.

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