But it wasn`t just Demo Day that helped us raise money. Compared to fundraising in Europe, the Bay Area process is extremely efficient and favourable to the founders. Pre-Series A investments are usually made through a standardized, simple agreement called SAFE, which is 5 pages long. The company receives an investment in exchange for granting the investor rights to future equity in the company similar to a share warrant. There are no lengthy investor negotiations on investment terms and no expensive lawyers or notaries who need to be involved. The agreement is signed electronically via the online platform Clerky. In practice, this means that the time of an investor who says “yes, I want to invest” to get the money in the bank can be as short as 2 days. This can be critical to the success of your business if you consider that you can work faster and continue to build the team and the product. “How can this be a multi-billion dollar enterprise?” The market potential is enormous, with 20 million salespeople, representing a market size of $20 billion. Six months have passed and the deadline for applications for the winter of 2019 is approaching. We were not sure we would apply ourselves a second time with the same idea. But even though we thought there was only a small chance of being invited, we still applied — the same product, the same team, the same vision. The only difference is that this time we were able to show more progress and initial traction.
We had a functional product and more than 10 paying customers. Our updated safes are post-money safes. By “post-money” we say that the safe owner is measured by post, all the safe money is accounted for – which is now his own trick – but before (before) the new money in the price cycle that transforms and dilutes the coffers (normally series A, but sometimes the Seed series). The post-money safe has what we think is a great advantage for founders and investors – the ability to calculate immediately and exactly how much property the company has been sold. For the founders, it is essential to understand how much dilution is caused by each chest they sell, just as it is fair for investors to know how much they have bought ownership of the business. When Y Combinator startups make their first sales, we provide them with a sales model to make the legal part simple. In 2015, Y Combinator open bought its sales model for all startups. The sales model is specifically designed for software start-ups (SaaS) – that is, companies that charge for subscription cloud software.
You should consider the YC model as a starting point and adapt it to your needs. YC focused on the areas most likely to vary from startup to startup based on its experience. During the YC program organizes weekly dinners with all the founders of the office. Each time, they organize a successful YC-Alum that speaks and shares its experience at the event. In our case, speakers like Mathilde Collin – founder of Front (whom I admire very personally!), Peter Reinhardt – founder of Segment, Patrick Collison – founders of Stripe, Solomon Hykes – founders of Docker and Kyle Vogt – were the founders of Cruise, among others.