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Ask HN: What exactly happens when accelerated startup fails?

by nmbdesign on 1/10/14, 6:34 PM with 9 comments

Hi, just got an offer from accelator for our idea/project accelaration and Im quite dumb about how things work in financial side of things. Will we owe them 20k seed capital if in case something bad happens and we fail? How its usually handled? Thanks!

  • by smileysteve on 1/10/14, 7:59 PM

    Your typical investment is just that, an investment.

    Therefore, it is at risk and if the startup fails, the money is lost. Qualified/Accredited investors (non friends, family, fools) are required to have such high net worths/income to prove that they can accept these losses.

    Even if it were debt, if it was not personally secured, (and there weren't any shady and extremely wasteful actions by the management), the company / startup has $0 in assets when it fails, and therefore can not pay its obligations.

    Add'l info : Accredited Investors by the SEC must have 200k annual income and 1mln+ 'liquid' assets

  • by kposehn on 1/10/14, 6:47 PM

    Well, typically accelerators take a percentage of the company in return for the money they offer. Post the terms that they gave you here and we'll help review it. Of course, make sure that you are not bound by some NDA or confidentiality agreement first :)

  • by lun4r on 1/10/14, 6:54 PM

    Is the 20K convertible debt or as equity?