I really like the idea behind this, but I take issue with the fact that if someone does start a company, Pioneer will take 3% with the option of buying 5% more of the company for $20,000. That seems pretty unfair.
I would be inclined to participate if this term didn't exist, or if it were either more financially generous or took less equity. But I wouldn't want to develop any idea through Pioneer if any future idea (for the next 8 years) could be poached for so little. It almost strikes me as a lazy way of running a semi-accelerator. I do think it's great that you're giving $5000 grants to help people develop projects and themselves, but this seems to disproportionately penalize people who want to commercialize their current or any future ideas
(Edit: why was my comment moved from being the top reply to the danicgross comment to a reply to the top level article?)
I agree if you're a Silicon Valley tech entrepreneur who knows they can raise a seed round together. If that's you, you shouldn't take our offer. Raise the seed round; you'll get great terms.
There are about 7.4 billion people who aren't Silicon Valley tech entrepreneurs. Most of them do not have a convenient line to investors, because investors don't happily fund writing the next great American novel, working on a demo tape, trying to prototype out an undergraduate research paper, or running companies in their neck of the woods. Pioneer could potentially fund all of those things.
We're going to be making bets on folks substantially before they have the indicia of success that investors screen for... substantially 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.
I think there are a couple of reasons for the reactions here:
1. By using Einstein's name in your marketing, you're using the name of a scientist who worked for a university whose ostensible mission is to create and disseminate knowledge for the public good. By contrast, you're seem to be running a small investment firm.
2. If we accept that you're looking to make a financial investment in a company, the amount of money that you're offering is astoundingly low given the terms that you propose. Yes, if someone doesn't like your offer, they don't have to accept it. However, at the same time, you seem to be targeting people who don't know how to obtain their own money, which suggests young and naive. From that perspective, your investment seems exploitative.
Candidly, from my own personal opinion, these sort of arraignments are not OK. Learning to run a business is hard, but in my opinion, ultimately rewarding. Offers like these attempt to normalize a behavior that experienced business people would scoff at. Unfortunately, $5k is not going to pay many bills. If I'm in a position to take advantage of the networking that you imply, that means that I already need to have enough money to support myself until the business gets off the ground. If I have that much money laying around, then I'm already a good position to make a go at business and giving up that much equity is exploitative.
Further, there are details implied in the offer that are generally not good for a new business. Equity means I need to have shares, which probably means an S-corp or a C-corp. Most starting businesses should probably file as a sole-proprietorship (as an LLC or not) because the accounting is vastly easier, which means cheaper. How does your arrangement work if someone has a business structure with no shares?
In case someone else asks how to get money for a new business if not for programs like this: There are others depending on where you live. In the U.S., both government SBIR and STTR grants are, in my opinion, good sources of money and don't require equity. A phase-1 grant gives about $80-100k, phase-2 $400-500k, phase-3 low millions. In Norway, I've seen good things from Innovasjon Norge.
Certainly, I appreciate when people try to help others learn business. It just seems like this strategy isn't it.
> If you're a Silicon Valley tech entrepreneur who knows they can raise a seed round together. If that's you, you shouldn't take our offer.
This definitely makes it seem like you are preying on the uninformed given the tiny amount of funding you are providing for the percentage of ownership and being essentially handcuffed for 8 years.
I see the logic behind this. I guess part of me wishes that the fact that this is investment, rather than philanthropy, were made more clear. I didn't realize that financial sustainability was contingent on bringing in non-donated money.
At first I was prepared to nod my head re: terms feeling a little exploitative. Then I traced my own path, and I think doing so publicly might help some people understand what you're trying to do.
I started graduate school in 2010 with the promise of "being educated for free" and was massively disappointed when I realized a good chunk of STEM graduate programs exploit well-intentioned lower to middle class students without safety nets for labor with the dangling promise of higher employability down the line. I quickly dropped out to try my hand at my first company.
This is where I started imagining Pioneer could seem exploitative. Reflecting, if Pioneer had existed I would have been very likely to apply -- potentially giving up some percentage of my future potential that I couldn't quite understand -- for a few thousand dollars in the process. I was desperately broke at that point in my life, though I had been coding since I was eight (was 22 in 2010). I had many ideas and projects I was working on. I had zero "signals" for future success -- no awards, a degree from a Canadian school unknown for software, nothing -- just a desire to learn and build.
It's 2018. That's eight years -- the time frame we're all talking about here re: Pioneer equity. Through a tremendous amount of luck, happenstance and many highs and lows, I'm now happily the founder of an early stage startup in San Francisco. There's still a lot of work ahead of us, but I wake up every morning thrilled and thankful to have the opportunities I have. If Pioneer had existed in 2010 and I had found the good fortune to be accepted, they'd own part of my company.
I recently spent some time helping two young (around my age in 2010) entrepreneurs with their business. They're looking at opportunities now I could only have dreamed of (and, well, was dreaming of) when I was broke and 22. I look at these talented founders and wish I had known somebody, anybody that could have helped me out eight years ago. I'm not sure how different my outcome would have been or where I would be, but I can only imagine even a few hours of advice and care from somebody who knew what they were doing could have accelerated my trajectory completely at that age. To be honest, the $5,000 grant would probably have ended up paying to fix scratches on a BMW I gently hit on the DVP in 2011 with my busted old Saturn (D:), but the connections... and really, just knowing somebody out there has your back... well, that would have been life-changing. The money is the least material aspect.
I don't know Daniel directly, but I anticipate he has heard these sorts of stories over and over again, and has found himself wishing to be able to give others more access and opportunity at an early and formative stage in their life.
So -- Daniel, I wish you the best of luck. And it's my hope you can do some good things for people who wish for the opportunities some of us have been very lucky to have. :)
This reply comes across as saying you’re preying on people too desperate or poor to have any choice but to accept your terms, and too inexperienced and naive to be able to evaluate them.
I could swallow the 3%, the networking opportunities are probably worth that to be honest (especially for a 'project' that isn't a tangible company or product yet), but the option is ridiculous.
I also don't understand the system. I have to put my idea for a project on some leader board for other people to vote on? If I feel my idea has any worth why would I do that?
I actually just planned on starting up a project, and I'd be interested in applying - but I don't want to put my plans out on a forum full of ambitious, eager, and talented people.
I agree on the 3% although the fact that it applies to any company founded over the next 8 years seems a little bit of a stretch. If you meet someone 5 years later who wants a cofounder, seems like it could be not-insignificant penalty. I would honestly prefer to not take the $5000 if it meant I could get the networking opportunities without the 3% equity.
The option is just egregiously not worth it and represents a major liability to anyone looking start a company that needs to raise significant amounts of capital
Ambitious, eager, and talented people that are likely already working on their own projects.
"Idea theft" is a thing that happens sometimes, but the far more common problem is "idea stillbirth", where people are willing to put ridiculous barriers up in front of themselves for fear of their idea being stolen.
If there's valuable help available that will improve the chances of turning an idea into a tangible thing, then people should accept it and let go of the fear that they're risking some kind of innate value in the idea itself.
I don't see that the ask from Pioneer is all that onerous either, although I'm not a cut-throat business guy. They seem to be pursuing people for whom this would be a fantastic opportunity regardless. I think HN is a being a bit quick to judge this through the lens of, "I already have lots of opportunities and this one just isn't good enough for me."
I am glad I read the comments first, the 8 years clause is not at all obvious at first and that is a huge deal. Even if you are a starving genius in Africa with access to the internet, that hardly seems lucrative assuming you will go on from your first effort (with just $5k to run on you must really be a genius). Then this vulture fund takes and takes and takes. This reeks of exploitation.
I would be inclined to participate if this term didn't exist, or if it were either more financially generous or took less equity. But I wouldn't want to develop any idea through Pioneer if any future idea (for the next 8 years) could be poached for so little. It almost strikes me as a lazy way of running a semi-accelerator. I do think it's great that you're giving $5000 grants to help people develop projects and themselves, but this seems to disproportionately penalize people who want to commercialize their current or any future ideas
(Edit: why was my comment moved from being the top reply to the danicgross comment to a reply to the top level article?)