"We expect a fraction of Pioneers to start companies. In exchange for the investment and benefits below, Pioneer will retain 3% of any company you found over the next eight years. Pioneer will also have the option of investing an additional $20,000 for 5% in any of those companies. These conditions apply if you already have an incorporated company."
yeah, as an outsider looking for entry into startup - it just doesn't seem right! i get the fact that you guys have to fund the company some way! but it just seems too costly. i would be short selling myself.
If you have the opportunity to join other programs, go for it! Our hope is that this model enables us to reach the billions of people that are outside the network of Silicon Valley. They might not even be sure if they have a "company". They just want support on whatever project they're pursuing.
We're hoping that becoming a Pioneer vastly increases the odds that you turn your "shower-thought" into something real, even if it takes a few years to mature.
We're going to be making bets on folks substantially before they have the indicia of success that investors screen for. Before anyone could even say "This person will someday found a company." The math for this to be sustainable requires that the equity slice be higher than someone would ask for if they knew 100% of their investments were in high-potential companies.
If you are able to think through this, this fund is not for you. As mentioned in OP's comment, they are targeting folks who aren't even sure if they are building a company, just based on their 'potential'. It is a risky endeavor and from that perspective, the equity portion is justified. For someone who has access to this advice and support, it's not worth it. But for those who don't, this is Godsent.
this is a deal breaker as it makes your plan B inviable.
if your startup fails, you will never join another as an earlier employer, which is the plan B for most failed founders. becuase now you are a toxic asset to any early stage company which you can be said to be a early founder. now you will only be able to find 9-5 jobs at big Co as your plan B.
It strikes me that the lack of conviction in the people that the Pioneer fund itself is selecting (as evidenced by such a low amount of money for such a high percentage, and lock-in) means that all that they will get is going to be half-baked shower thoughts. Ultimately, you get what you pay for.
It's just marketing spin on what incubators and many early venture firms typically do, except your goal is particularly to exploit people from around the world who may not yet be savvy to how the SV system "works."
And before you object to the notion of exploitation, let's just contrast your quasi-moral claims about loss to "the economy from the loss of ideas and wealth they could have produced," to the rather huge liberties you'll take with the people who you'll be supporting. So are you really concerned about the grand loss to the world of people in whom the world doesn't sufficiently invest, or are you most concerned about maximizing venture capital? These goals are in logical conflict.
If the network you offer is very valuable, and you maintain a good relationship with the future founder, they will probably choose you as an investor automatically when the time comes, out of trust and simplicity.
3% for so little cash is not enough to fund projects in anything besides short term software plays with an acquisition exit strategy. This is a valuation of ~100k which is less than what a bay area software developer makes in a year.
+5% for 20k is not that much better, it's a valuation of less than half a million.
If you want a biotech, or a hardware company, or something that really moves the needle, you'll have to put more money in there. Things that really change the world need a longer runway. Things that change the physical world need 5-10 years of burndown funding, and a team of 5-20 people.
20k buys you an hplc. Or a really cheap shuttle run. What is the expectation beyond that? Further raises on an early seed? Even let's say there's a 5x bump in value, to raise 1-2m to do something real and hire people takes on the order of 20-40%... And I've seen more than one companies fail to raise a series A with a risky and dangerous new idea because there had been too much seed dilution.
I couldn't do some really basic cancer drug research on $60k - i had to stop renting a lab and move to my garage, deal with multiple equipment failures from out of pocket, and suffer 3-and-going-years of delay due to having to get a job and reequilibrate personal finances and lose time to work on it, and I'm continuing work on a dribble as and when I can afford to do it... $20K would not have covered my animal studies, which themselves were low-n and strictly "proof of principle". Even this project had its initial phases funded through the traditional academe, and I don't see such a low investment getting any such a thing to a point where a for-profit would have a saleable asset (be it IP or otherwise) or at least a product and cashflow to convince series A to throw in when so much equity has already been given.
Without hitting on whether or not this is the right company to do this, I don't think the idea is itself at all unreasonable. By the time you're concerned about 8% equity, you've basically already 'made it' in the sense that you have likely have enough capital to start to more independently pursue your other ideas, or alternatively seek more favorable funding with some history for more traditional venture capital types.
This project seems to be clearly aiming people who have ambition and competence, but minimal to no current resources or connections; the goal being to get them to where that is no longer the case -- helping them to reach their potential. It's hard to call anything at all exploitative if it succeeds in getting people from that critical nothing to something point, regardless of how it does it.
"by the time you're concerned about 8% equity, you've basically already 'made it' in the sense that you have likely have enough capital to start "
Nope! haven't made it.
"This project seems to be clearly aiming people who have ambition and competence, but minimal to no current resources or connections; the goal being to get them to where that is no longer the case -- helping them to reach their potential"
hi, that's me!
"It's hard to call anything at all exploitative if it succeeds in getting people from that critical nothing to something point"
i see the value of taking people from nothing to critical mass i.e - YC. in case of pioneers - i might be nothing now but highly unlikely - i will be nothing for the next 8 years!
imho, this 5 + 3% won't select for the best of people! I would totally judge a person who lock herself in this 8 year contract! that's just me
I've always thought this argument was really hypocritical. The argument is you shouldn't be concerned about a few percent of equity since once it matters you will be rich and not care. Except the person making that argument is certainly rich and seems to care a lot about these few percentage points. Why are we expected to not care when they clearly do?
Similarly, those few % of equity means less equity later for future rounds of funding or for paying out to employees.
1. Someone you can trust
2. Someone you’re not afraid to speak up with or against, without fear of repercussion personally within reason (ie, if you call each other crap every day, you’re not a good match most of the time)
