Gary Lee’s Post

#InTheNews | From Dream Launch to Nightmare: Startup Accelerator's Fall Leaves Founders in Debt. «The now-defunct Austin accelerator had filed for bankruptcy amid employee and customer discontent. The court has since ordered the company to auction off the warrants it held in more than 1,000 of the startups that went through the accelerator program. Normally, private companies like startups have control over which investors are allowed to buy shares and the prices they pay. But the bankruptcy court, which works to restore creditors rather than equity holders, isn’t allowing Newchip’s startups to exert that kind of control. Instead, the auctions are ongoing, with the first tranche already sold and upcoming tranches expected to be sold this spring and summer.» #StartupNightmare #FounderStruggle #InvestorBeware #FundraisingFail #EquityAuction #FounderRightsMatter #LeadershipLessons #StartupLeadership #StartupEcosystem #InnovationBetrayal via TechCrunch https://lnkd.in/dF-77Gsc

Dear US-based startup founders and investors. Can anyone explain to me (like I was Autistic) how an early-stage startup can operate in your legal system without constant fear and developing PTSD?  I thought it would only become an issue when we decide to operate in the US. Now, I see that your courts want to democratize access to trauma for all founders in the global startup ecosystem. Let me start from the beginning. As founders, we constantly receive invitations to apply to different accelerators and startup programs. One of them is the Newchip Accelerator, whose representatives have approached us a few times in recent years.  They advertised as "#1 Online Accelerator 🌍 2,500+ Portfolio Companies 📈 $2.2B+ Raised by Alumni" and had TechCrunch exposure. We never had time to complete the program until early 2023, when we finally had some time and a bit of spare cash to actually invest in such an initiative.  We passed the recruitment, and during the "Newchip: Acceptance Status" meeting, we got accepted just a few days before the start of the next batch.  During our "Acceptance Confirmation!" meeting, where we were supposed to sign the papers, something seemed off. My spidey sense took off straight into an ultrasound internal scream.   I've asked them to postpone the signing for an additional 24 hours. This evening, I've done a deep dive to discover why my nervous system objects to joining them. I found that the number of negative comments about the accelerator has grown in the last few months. The next day, on March 30, 2023, I told them that we would not sign anything or pay anything and would not be joining the program.  On 13 May, newspapers published a memo stating, "Newchip Enters Into Bankruptcy Liquidation" (filed for Chapter 11 bankruptcy protection on March 17).  I was sure that we'd dodged a bullet. At least until early May 2024... A few weeks ago, we received 83 pages of legal documents from the US BANKRUPTCY COURT FOR THE WESTERN DISTRICT OF TEXAS.  I can summarize that bullshit by "trustee wants to sell rights to your shares and needs your financial statements to elevate the price; you must obey or else...".  My first thoughts were: "WTF?!" (17x times) I checked the documents quickly, and there were 1316 more startups on their list! Spread across the whole world! Even more "WTF?!" kicked in. I'm glad that there is interest in trading OUR shares. However, as a founder, I prefer to sell my shares on agreed-upon terms to someone I can trust. Not to some random warrant bearer.  We've wasted weeks of precious growth time, weeks of our lawyers' time, and a lot of our hard-earned startup cash.  All that is just to prove to some random dudes on the other side of the planet that they have NO RIGHT to sell anything related to our company!  Why do we even need to prove that?  In any decent legal system, the plaintiff must prove that he has rights to their claims. How can one operate in a system like that and sleep well at night?

If you are an #entrepreneur read this story to do your diligence when selecting an #accelerator: “Lacey Hunter thought all was well as she put her startup through the three-month #Newchip accelerator. Then the organization filed for #bankruptcy in May 2023. Things went from bad to worse later that year when she discovered #warrants of her company — rights to buy an #ownership #stake — had become part of the proceedings, which ultimately forced her to shut down her company.” #entrepreneurship #startupadvice #duediligence #risk #caution #investing #stakeholders

"The now-defunct Austin accelerator had filed for bankruptcy amid employee and customer discontent. The court has since ordered the company to auction off the warrants it held in more than 1,000 of the startups that went through the accelerator program. Normally, private companies like startups have control over which investors are allowed to buy shares and the prices they pay. But the bankruptcy court, which works to restore creditors rather than equity holders, isn’t allowing Newchip’s startups to exert that kind of control. Instead, the auctions are ongoing, with the first tranche already sold and upcoming tranches expected to be sold this spring and summer." It is not news that accelerators vary widely in quality. What this incident highlights is that a bad choice (ok, a really bad choice) can actually be fatal to your venture. There are "fixes" to the warrant terms that could address the issues created by this accelerator bankruptcy, but the reality is that ventures entering accelerators rarely have the legal firepower or bargaining leverage to get those changes.

As a legal expert who works closely with investors, I've seen many startups feel stuck during the fundraising stage. It's a complex process with numerous considerations, and it's natural to want to make the right moves and ensure success. The key is to build confidence in your fundraising strategy. Seeking guidance from experienced individuals can help ease your concerns and boost your attitude. Based on my experience assisting startups and investors, here are some strategies I recommend for startups like yours going through the fundraising stage. #legalexpert #legalexcellence #investorguide #legalcircle #startup #fundraisingtips

𝗩𝗖’𝘀 can be very 𝗽𝗿𝗲𝗱𝗮𝘁𝗼𝗿𝘆 for startups, but there’s another way to raise capital 𝘄𝗶𝘁𝗵𝗼𝘂𝘁 𝘁𝗵𝗲 𝗱𝗼𝘄𝗻𝘀𝗶𝗱𝗲𝘀. How 𝘥𝘰𝘦𝘴 VC funding harm startups? 𝟭. 𝗜𝗻𝗳𝗼𝗿𝗺𝗮𝘁𝗶𝗼𝗻 𝗜𝗺𝗯𝗮𝗹𝗮𝗻𝗰𝗲: VC’s make 𝘩𝘶𝘯𝘥𝘳𝘦𝘥𝘴 of deals 𝘦𝘢𝘤𝘩 𝘺𝘦𝘢𝘳, while founders might only negotiate 𝘢 𝘧𝘦𝘸 𝘪𝘯 𝘵𝘩𝘦𝘪𝘳 𝘭𝘪𝘧𝘦𝘵𝘪𝘮𝘦. This puts founders at a 𝗱𝗶𝘀𝗮𝗱𝘃𝗮𝗻𝘁𝗮𝗴𝗲—making it easy for VC’s to 𝗺𝗮𝗻𝗶𝗽𝘂𝗹𝗮𝘁𝗲 them. 𝟮. Conflict of Interest: VC’s aim to buy equity at the 𝘤𝘩𝘦𝘢𝘱𝘦𝘴𝘵 price and get 𝘢𝘴 𝘮𝘶𝘤𝘩 𝘤𝘰𝘯𝘵𝘳𝘰𝘭 as founders would 𝘨𝘪𝘷𝘦 𝘢𝘸𝘢𝘺. 𝟯. 𝗣𝗿𝗲𝗱𝗮𝘁𝗼𝗿𝘆 𝗧𝗲𝗿𝗺𝘀: 50+ page term sheets with clauses like 𝗹𝗶𝗾𝘂𝗶𝗱𝗮𝘁𝗶𝗼𝗻 𝗽𝗿𝗲𝗳𝗲𝗿𝗲𝗻𝗰𝗲𝘀 𝗮𝗻𝗱 𝗮𝗻𝘁𝗶-𝗱𝗶𝗹𝘂𝘁𝗶𝗼𝗻 𝗽𝗿𝗼𝘁𝗲𝗰𝘁𝗶𝗼𝗻 are 𝗽𝗼𝗼𝗿𝗹𝘆 𝘂𝗻𝗱𝗲𝗿𝘀𝘁𝗼𝗼𝗱 by founders, potentially 𝘫𝘦𝘰𝘱𝘢𝘳𝘥𝘪𝘻𝘪𝘯𝘨 their company's future. 𝟰. 𝗟𝗼𝗻𝗴 𝗣𝗮𝘆𝗼𝘂𝘁 𝗪𝗮𝗶𝘁: With VC’s, it can take 6-12 months for founders to see cash in the bank after VC’s have committed to a deal. With VC funding, your 𝗼𝗿𝗶𝗴𝗶𝗻𝗮𝗹 𝘃𝗶𝘀𝗶𝗼𝗻 and 𝘁𝗵𝗲 𝗹𝗼𝗻𝗴-𝘁𝗲𝗿𝗺 𝘃𝗶𝗮𝗯𝗶𝗹𝗶𝘁𝘆 of your company could 𝘢𝘭𝘭 𝘣𝘦 𝘢𝘵 risk. 𝗘𝗾𝘂𝗶𝘁𝘆 𝗰𝗿𝗼𝘄𝗱𝗳𝘂𝗻𝗱𝗶𝗻𝗴 is a funding solution for startups that raises the same capital, but 𝘄𝗶𝘁𝗵𝗼𝘂𝘁 𝘁𝗵𝗲 𝗱𝗼𝘄𝗻𝘀𝗶𝗱𝗲𝘀. Here are some of the 𝗯𝗲𝗻𝗲𝗳𝗶𝘁𝘀 𝗼𝗳 𝗘𝗖𝗙: 𝟭. 𝗡𝗼 𝗠𝗮𝗻𝗶𝗽𝘂𝗹𝗮𝘁𝗶𝗼𝗻 𝗼𝗿 𝗟𝗲𝘃𝗲𝗿𝗮𝗴𝗲: You create 𝘺𝘰𝘶𝘳 𝘰𝘸𝘯 𝘵𝘦𝘳𝘮 𝘴𝘩𝘦𝘦𝘵𝘴 so there can’t be tricks or hidden clauses. 𝟮. ⁠𝗡𝗼 𝗟𝗼𝘀𝘀 𝗼𝗳 𝗖𝗼𝗻𝘁𝗿𝗼𝗹: You don’t 𝗴𝗶𝘃𝗲 𝘂𝗽 𝗮𝗻𝘆 𝘃𝗼𝘁𝗶𝗻𝗴 𝗿𝗶𝗴𝗵𝘁𝘀 or 𝗯𝗼𝗮𝗿𝗱 𝘀𝗲𝗮𝘁𝘀. 𝟯. ⁠𝗬𝗼𝘂𝗿 𝗶𝗻𝘃𝗲𝘀𝘁𝗼𝗿𝘀 𝗮𝗿𝗲 𝘆𝗼𝘂𝗿 𝗰𝗼𝗺𝗺𝘂𝗻𝗶𝘁𝘆: You'll be supported by people who 𝘢𝘭𝘳𝘦𝘢𝘥𝘺 use your products and 𝗯𝗲𝗹𝗶𝗲𝘃𝗲 𝗶𝗻 𝘄𝗵𝗮𝘁 𝘆𝗼𝘂’𝗿𝗲 𝘁𝗿𝘆𝗶𝗻𝗴 𝘁𝗼 𝗱𝗼. They will 𝘨𝘦𝘯𝘶𝘪𝘯𝘦𝘭𝘺 want to 𝘀𝘂𝗽𝗽𝗼𝗿𝘁 your 𝗴𝗿𝗼𝘄𝘁𝗵 𝗮𝗻𝗱 𝘀𝘂𝗰𝗰𝗲𝘀𝘀. 𝟰. 𝗙𝗮𝘀𝘁𝗲𝗿 𝗣𝗮𝘆𝗼𝘂𝘁𝘀: You cash out your 𝗰𝗵𝗲𝗰𝗸𝘀 𝗲𝘃𝗲𝗿𝘆 𝘁𝘄𝗼 𝘄𝗲𝗲𝗸𝘀 instead of the 𝟲-𝟭𝟮 𝗺𝗼𝗻𝘁𝗵𝘀 it usually takes with 𝗩𝗖’𝘀. Are 𝘺𝘰𝘶 currently facing challenges in 𝗳𝘂𝗻𝗱𝗶𝗻𝗴 𝘆𝗼𝘂𝗿 𝗯𝘂𝘀𝗶𝗻𝗲𝘀𝘀?  Tell me in the comments, I’ll see how I can help. #EquityCrowdfunding #CrowdInvesting #Wefunder #VentureCapital #Startups #Funding

Founding a #startup isn't easy, but Babs Ogundeyi, Group CEO and Founder of Kuda shares some of what he's learnt on his #entrepreneurial journey. In five years, #fintech Kuda has grown to over 7 million customers #globally, and here are the insights that have helped Babs along the way: 🤝 A good #team is essential 💰 #Funding is key to a successful startup 📈 Focus on customers and creating a product they want and need 💪 Navigate challenges and have an understanding of financial sustainability and resource allocation ↪️ Know when to change direction and pivot Via Tech Funding News https://bit.ly/4aoCV1q #Advice #Founder #Neobank #Scaleup #Technology

🚀 Warning to all startup founders! A recent TechCrunch article reveals a shocking story of how some founders thought they were joining an accelerator program, but instead lost their startups. 😱 The article highlights the importance of doing your due diligence before joining any accelerator program. It turns out that some programs may not have the best intentions and could potentially take control of your startup without your knowledge. 🤔 As a founder, it's crucial to thoroughly research any program you're considering and ask tough questions about ownership, equity, and control. Don't let your hard work and passion go to waste by falling victim to a predatory accelerator. 💪 Remember, your startup is your baby. Protect it at all costs! #startups #accelerator #due diligence #founders

We understand that finding the right platform to invest in early-stage companies can be challenging. That's why we've done the legwork for you. Our comprehensive guide highlights the most reliable and user-friendly sites that bring together investors and startup founders. From equity crowdfunding to angel investing networks, we cover a wide range of options. Check out the list: https://lnkd.in/gi4zrERF StartEngine OurCrowd FundersClub Indiegogo Sweater Republic Wefunder AngelList #investing #startupinvesting #entrepreneurship #funding #investors #equitycrowdfunding #innovation

#FinTech Startup Contact Directory: Get your hands on a detailed list of 2,800+ funded startups complete with 2,800+ Founders/CEOs and 2,300+ email addresses for effective communication. https://payhip.com/b/lWFOH #wealthmanagement #globalstartups #techstartups #funding #growthhacking