Y Combinator Simple Agreement For Future Equity

Kirsty: Thank you very much. All right. Hi everyone. My name is Kirsty Nathoo. I am CFO, one of the partners of Y Combinator. And now I`ve worked with probably more than 1,500 companies to put them in the coffers, to make our investments in the YC, and then see them through their subsequent increases, either on transformational instruments or on equity sessions. I`ve seen a lot of things before. And so this presentation is supposed to give you some understanding for some of the things that people don`t necessarily understand when they raise money and hopefully will help you avoid some of the pitfalls we`ve seen… some of the mistakes made by the founders. The key message of this presentation is that it is important that you understand, at all stages of the company`s lifecycle, how much of the business you have sold to investors and, in this context, how much you own. The thing that complicates this is that most companies will first collect money for convertible instruments, and since these processing instruments are not yet shares, for many founders it is not immediately clear how much of the business they have sold.

So I`ll talk about it through some of the mechanics and help you understand how everything works, so you won`t be surprised when it`s too late and you can`t do anything about it. So the other thing you should take into account is that a lot of companies and founders are just going to say, “Oh, I don`t have to worry about my heading table. My lawyers take care of my table. I don`t have to worry.¬†And in fact, it`s a really dangerous statement. Here too, make sure you understand. It is your responsibility as CEO or founder of the company to understand all of this. And there are many ways to maintain your cap table. There are many ways to keep this in mind. And the simplest form is just a table.

All he`s going to show is who owns, how many shares, and that`s it. That`s all you need at first. But there are other services out there that can help, and I will include them in a resource list after the presentation, but there are tools like captable.io and Carta that will also help you track these things. Our first safe was a “pre-money” safe, because at the time of its launch, startups collected smaller sums of money before collecting a funding cycle (typically a Preferred Stock Round Series).