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Sunday, September 02, 2007

Some useful startup guidance from stalwarts

Least I expected the publication of this interesting article in USA TODAY ( gives a low down on the stellar startup incubation initiatives of Paul Graham’s Y Combinator and Seth Levine’s Tech Stars) to stir up such a debate.

[I wish IAN and Mumbai Angels should take note and expand their scope of activities.]

What followed was real fun. Seth Levine has been quoted in that article questioning the clarity of limits of Y Combinator model on startup costs and has his own take on how much cash startups at various stages should be using up. To that, Paul Graham gave a riposte by way of an illustrative essay (woof…it’s more of an algebraic model) explaining a method to decide whether to accept angel investment and if so, how much of your company to cede to that Angel. It also deals with how much of stock grants that you can make to a new employee.

Seth Levine is clearly flustered with the fallout. Here he sets the record straight and swears towards the end never to give another telephone interview after the one he gave to the daily.

Coming back to what Paul says – “if you trade half your company for something that more than doubles the company's average outcome, you're net ahead.” Fair enough. But the question that confounds most startups is this - Given that outcome is futuristic, how to judge the growth impact upfront? Not many answers except to go by pure instincts….

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