Fri · Jan 29

Tips on Formation and Fundraising

This hour-long episode of the Startup School Radio podcast is focused entirely on the basics of company formation and fundraising.

Our host Aaron Harris was joined by three of his fellow Y Combinator partners, YC's CFO Kirsty Nathoo and YC's general counsel Carolynn Levy and Jon Levy, to talk about the key financial and legal basics that founders should keep in mind when establishing a startup and raising early funding rounds.

Below is an edited transcript of some of their advice.

Establish expectations

Aaron : Kirsty, starting with you, what are the things in your head that are sort of the basic requirements when two founders are taking on something? Is there anything that they should write down at the very beginning?

Kirsty : The key thing is communicating with each other. And to make sure that, if there's two people on the founding team, if there are two founders, that they have the same goals, they have the same expected outcome. If one's saying, "I want to take this public," and the other one is saying, "Well, I want to work on this for six months and then maybe sell it for a million dollars," you know, that's very different outlooks. And those are the kind of situations where it can lead to problems down the line because founders don't agree on the plans and strategy for the company.

So I think a lot of it comes down to just communicating and being clear and setting expectations. And setting expectations around how much of each founder's time they want to put into this. You know, some people are willing to work 24-7 on their startups, some people aren't because they have family or they have, you know, other things they need to concentrate on. And so again, if one founder's willing to work 24-7 and the other founder's saying, "Well, you know, this is a 9 to 5 thing for me," again, there needs to be that understanding of it in advance because that will be the kind of things that cause problems down the line.

And if founders don't get along, and if founders struggle to communicate with each other, then that's just going to go through the company as they grow. And the employees will not know which direction to be pulled in. And these things, you know, are problems for the company.

Aaron : Kirsty is saying something which I think is so important. Which is the idea that it's not necessarily about writing things down, right? It's really not about having things on paper. It's really about communication.

Especially at the beginning. Because you're right, if you don't have that communication as the bedrock of the relationship -- and I guess this is true of all relationships --problems are just going to flow. Right? There's going to be problems at every turn.

Kirsty : Yeah. And you know, startups are pressured environments. And any little thing that can cause a problem. It can be just a tiny little niggle or a little doubt at the beginning that will just grow and grow and turn into a big thing because everybody's under pressure. So it's really important to just make sure that everybody's on the same page on strategy, on expectations, on equity splits, on how these kind of basic things are going to work.

Make a clean start

Aaron : So I want to pick up on one of the things in there, because we see problems with it all the time. It's actually one of the things that we look at very specifically when we're looking at applications. We want to understand why equity is split the way it is. And we don't say it has to be one way or the other. But typically we look for as even a share as possible, especially at the early stages of a company.

Turning it over to Jon and Carolynn a little bit on this, when you're looking at equity splits and thinking about how to set that up, is this the kind of thing where, okay, you've talked about it. Should this be written down? Like should your equity split, as soon as you decide what it is, should that be down on paper or should it just be, "You know what, Carolynn? Yeah, you take 50, I'll take 50. Nah, no need to put it in email. Let's just go."

Carolynn : It kind of depends on what your mechanical plan is for actually forming your company. I don't think that founders need to take the step of actually writing it down. I think the better step to take is, you know, if it's a go, if the two founders have decided they're doing this, to go ahead and form their corporation and actually immediately buy the stock in the allocations that they've discussed and agreed upon.

Aaron : I'm going to stop you because there's a lot things in there to unpack which I think are really important. And these are things that people miss.

So first, the point at which it's a go. Right? Deciding that you actually want to spend time on this. And we're going to assume that these founders are doing what Kirsty said and they're communicating about what they want and where they want to go. Is there a point where it's too early to form a company around what you're doing?

Carolynn : Well, so I was thinking about this when Kirsty was speaking. I think one important thing that founders should think about -- and I think most people know this because at YC we're not seeing this be a huge problem, but just to lay it out there -- you need to have either your jobs, like these are founders that have current employment, they either need to have quit their jobs before they start working on this company. Or they need to make sure that, if they're starting to work on this idea together and they are both employed, that they're not using their employer's time or materials to start this company.

Aaron : Didn't that happen in "Silicon Valley," the TV show? Right? There was the whole plot was around that?

Carolynn : I think probably everything we talk about is somehow touched upon in that show. Whether or not it's too early probably depends on whether the founding team has decided, "Okay, we're going to quit our jobs. And this is something we're going to work on all the time." And if that's the decision that has been made, then yes, I think go ahead and leave your jobs. Start working on it full-time.

I don't think that there's a reason not to form a corporation. And we can, like you said, unpack that a little bit because I'm sure people are wondering, "Doesn't that cost money and why would I spend money for something if it's too early to do?"

Aaron : One of the things I do want to ask because I think this is actually relevant to a lot of people starting companies, is that idea of not using your current employer's time or money. I mean, everyone when they sign up for a job -- at least nowadays in the Valley and at most technology companies -- you sign an assignment of invention. If I'm an employee at Google and I'm thinking, "You know, I'm going to leave Google because I have this really great idea. I want to start working on it," how do I make sure that Google doesn't own whatever it is I try to create in my startup?

Carolynn : Yeah. So you definitely don't use any Google equipment. Google may have given you a laptop, a phone, or whatever equipment you use to do your job at Google. You need to use the materials and the equipment and the electronics you bought for yourself.

Aaron : Got it. So if you have a company laptop, that's not your laptop. Don't code on it. Don't do anything on it.

Carolynn : Right, exactly.

Jon : Not on the company's time either. Like, while at Google, you shouldn't be working on your new startup. This differs state to state. California has strong protections for any inventions created outside of work. So let's say you work at Google. But in the middle of the night, you have a dream where you cure cancer. And this is an extreme example. Google would not own your dreams hopefully and the...

Aaron : By the way, read your employment agreement because maybe...

Jon : It's actually very interesting with Google because in California the law talks about the demonstrable R&D of a company, so if Google is working on a cancer cure -- and Google actually is working on everything, because they're trying to have all knowledge owned or created and kept on the Internet or whatever their mission statement is, it's pretty broad. The point is, keep everything separate.

Aaron : And if you're daydreaming at work about the cure for cancer... [laughter]

Carolynn : Google owns it.

Aaron : Google owns it.

Carolynn : Google owns everything.

Aaron : The core root here really is, make sure that there is a separation. So even if you're still working...

Jon : Keep everything separate.

Aaron : ...because you need to fund whatever it is you're doing, make sure you're doing it at home on your own time. Not on your corporate campus, not on your 20% time, nothing like that.

Jon : Exactly.

Incorporate (and keep it simple)

Aaron : Okay, so both founders now have made the decision that we're both going to work on this. We've decided that we are going to go forward. At this point, it's time to form the corporation?

Carolynn : I would say yes.

Aaron : But isn't it a pain in the butt? I mean, so our advice at YC is often the only two things you should be doing, writing code and talking to users. Why form a company?

Jon : What we do at YC is try to make formation and setting up a company look the same. You know, in a very cookie-cutter fashion. We want every company to kind of just use our basic documents, standard documents.

Aaron : And these are documents that we let the whole world see, right?

Jon : We let the whole word see. They're on Clerky.com. We have very simple steps to go through and incorporate a company. And it is actually very cheap to form a company. You can, you know, go to the Delaware website and form a company in a day. A 24-hour turnaround, I think it's $200, $300. So it's not a big expense.

Aaron : And you know, I think that's very surprising to a lot of people. I think most of us who haven't formed companies think, "Oh my God, I've got to get a lawyer. It's going to take weeks and paperwork and this thing or that thing." We're talking about an afternoon. A couple clicks on a website. And a credit card payment to the State of Delaware.

Carolynn : Yeah. And I will say that the reason that that myth probably persists is because historically it wasn't that easy. But if you look at the rise of all these platforms, I mean, I'll even mention LegalZoom, there are, outside of the Silicon Valley ecosystem, there are companies that use platforms that actually do this and make it very, very easy. It's just different than it was 10 years ago. There kind of is no reason not to go ahead and form that corporation.

Kirsty : I will put in a health warning for LegalZoom, because they tend to kind of leave you hanging and you end up not doing all of the paperwork that you need. So if you are going to start incorporating a company on your own, then make sure you understand actually what the paperwork is that you need. Just filing in Delaware is not actually enough. And with LegalZoom, it's very easy to just do that.

So one of the problems we see when we're working with these companies is that we have to then unpick what they've done and what they still need to do. So LegalZoom is great because it allows you to do it without engaging a lawyer and without paying lawyers' fees, but it does come with a health warning. Clerky is more understanding of the processes and they kind of don't let you stay hanging.

Jon : Right. For example, there are little details, like founders will have to purchase stock, or they will not be stockholders.

Aaron : How does that actually work? You think, "Okay, it's stock. It's my company. I just formed it. It's mine." Why do I have to buy it?

Carolynn : I'll talk about an interim step. Right after you form the corporation and you tell Delaware, "Here's my certificate of incorporation," and you file it and you become official in Delaware. The next thing you need to do is have an action by incorporator. And the action by incorporator then appoints a board of directors because you need that, too. So the incorporator, the person who signed their name on the certificate, will appoint directors. And then once you have a board, the very next step you should take is issue stock to yourselves. Because a corporation that has no stockholders isn't owned by anybody and there needs to be ownership of the corporation.

Aaron : But why do I have to buy the shares. Why can't they just be granted?

Carolynn : Because Delaware has a concept called par-value, which can be any number you want it to be. And as many people may be aware, it's often ridiculously low. Like a thousandth of a penny. And there just has to be some consideration for the shares. And no one questions what the consideration is. And I'll say that's a big asterisk by that but at the very beginning, you can pay this ridiculously...just a couple cents and own those initially issued shares. And that's just required. That's just statutory.

It really isn't about the number of shares. It's more about what you own. So you could have 100 shares, or you could have 10 million. The Valley tends to favor larger numbers and lower prices.

Split equity fairly

Aaron : When it comes to shares this is I think one of the biggest questions that startups face, is how to actually split up their early equity. And I think there are, you know, a million people out there with these complicated equity calculators out on the Internet, of how much you get for this and that thing. When it comes to how much equity to apportion between founders, what would you say? What looks the best from the company's perspective and from the success perspective?

Kirsty : So when we're looking at equity structure, when we're looking at companies to fund, we tend to look for something that's fairly even. It doesn't have to be exactly even, but something pretty close. I think that when we see situations where one founder has 90% of the equity and the other founder has 10% of the equity, it starts to ring alarm bells for a number of reasons. One of those problems might just be that they haven't really thought it through fully.

You know, we often get the argument that the founder with 90% says, "Well, I've been working on this for three months. I coded up the first prototype. And then I brought on this co-founder, so I should get all the equity. It was my idea."

Aaron : So if I'm sitting out in the world, and I say, "You know, I came up with this idea. I'm a genius so I deserve 80% of the company. Plus, you know, I raised the first $15,000 of the capital and I put in $5,000 of my own. I deserve 90% of the company." Why isn't that valid?

Kirsty : Well, there's a number of reasons why it's not valid. The biggest reason is that three months of work is an absolute drop in the ocean when you think that this company, if it's going to be a success and it's going to IPO, you could be working on this company for ten, fifteen, twenty years. So it just seems such a small piece to it. And also, you know, so many companies, the initial idea bears absolutely no resemblance to what actually becomes the thing that has product-market fit and that is the thing that you move forward on.

So yes, you may have come up with the idea, but there's a whole load of execution that needs to happen after that that needs to be wrapped into the idea. And you know this comes back to the communication point and being a team. And if you feel that you are an equal set of co-founders who have an equal say in the company then that should be reflected. And yeah, you know, if one of the founders has put some money in to seed the company to begin with, then maybe they do get another percent or two or a small number of extra shares.

But the very big imbalances just don't seem to work in our experience. And it's another thing that festers resentment, and it could...you know, everybody's stressed, everybody's working really long hours. And you know one of the founders has this huge potential for upside and the other one doesn't and they start to wonder, "Is it really worth it?"

Aaron : You know that potential for upside thing for me is always too complicated to think about because the truth is, most of the shares that people are issued in their early stage startups are worth nothing and will never be worth very much at all. And trying to sort of evaluate who makes more money in some fantastical scenario where they actually do succeed is super, super hard.

Look, if this company is worth $100 billion, 10% is pretty good. But it doesn't feel like you're the same owner. Right? If you're both working on it for 10 years and you just feel like you're a junior partner and you've done everything, that just creates such a bad scenario. And like you said before, in conjunction with bad communication, that filters into every decision at the company.

Kirsty : Yeah, it really does. It flows through. You know, there's just so many things that it can cause problems with. And it really does come back down to the fact that you have to communicate. That you have to make sure that all the founding team is happy. That they feel that it's fair. And that they're, you know, they're willing to put all those blood, sweat, and tears into the company.

Aaron : I know one of my favorite things that happens in an interview sometimes is when you have a co-founding team where it's one of these extreme 90-10 equity splits. And we say, "Just so you know, that's fine if you've talked about it. But in our experience, this is more usual." And you see the founder with less. Like, their eyes light up thinking, "Oh, wow. I didn't even know that."

So you're teaching someone something and hopefully creating a better situation for that company going forward, where they'll then talk about it. Which is great. That's the message that we want to get out there. Not that this is what has to happen. Right? It doesn't have to be an equal split. But if it's not, there has to be a reason and it has to be agreed to and communicated by both parties. It can't be imposed by the idea...

Carolynn : You also notice that sometimes the founder with the 10% starts justifying it and the 90% founder just sits there. And it's like watching Stockholm syndrome, right? They're just like, "Oh, well, that's because I didn't have the idea and I don't have, you know, the education." Or whatever the excuse is. And you just sit there and go, "Oh, man, they have not communicated about this at all."

Vest to protect

Aaron : When you decide what the split should look like -- what percentage each side gets -- how do you actually structure how those stocks, that those shares are shared? Do people just get them upfront? It's like, "You know, okay, I get 50% of the company. Day one of the company, I have 50%."

Carolynn : Mostly they purchase them on what we call a "restricted stock purchase agreement." You decide what your allocation is among the founders and then you do purchase them. And you purchase them on an agreement which has a lot of important legal stuff, but the number one most key thing in there is vesting. And the whole idea of vesting is that you buy your shares. You own those shares. You can vote those shares. But they are subject to what we call forfeiture. That means the company can claw them back if you quit or are terminated from the company before you are fully vested in those shares.

Aaron : I think it's a really weird concept unless you're super-familiar with it. Which is you actually own something, but the company can take it back from you. You don't have full ownership rights, even though you've paid for them.

Jon : Like Kirsty was saying earlier, the founders need to communicate and to have alignment. You know, vesting kind of helps with all these key elements for a company to get started in the right way and move forward in the right direction. If somebody were to leave a company and own 50% of the company after having worked for, you know, a few months, that's not good for the company going forward. It puts the company in a terrible position. So vesting, while it may look unfair to some, is actually very important because like we were saying...like Carolynn and Kirsty were saying...this is a long haul. You don't build a company overnight. It's not just an idea. Like, the execution matters and vesting is key for the future.

Aaron : You know, one of the things that I think people miss when they're incorporating a company, which I think is important, is that you're actually trying to protect the company. This is about the good of the company and the success of the company over the long-run. Not necessarily the individual interests of individual founders.

And the reason it's bad for a founder to walk away with 50% of the company... it might be great for that founder theoretically...but then the company has so little stock that they can then issue to investors or future employees to give them a feeling of ownership and upside over the long run that it really handicaps the success of the company. And the founders should realize that and realize that 50% of nothing is 50% of nothing.

Carolynn : I also think I would warn people against the idea...I'm sure some people are thinking like, "Well, if a founder leaves with 50%, I'll just go authorize more, millions more, and I'll shower them on myself. Me, the remaining founder." And unfortunately that sounds easy. It just doesn't work that way. And there's a complicated legal reason why, but I think I'll just say like, you can't do that easily. And so don't think that that's your fall-back. Don't think that's a good reason not to have vesting.

Or maybe if it's not even the dilution issue, so much for the founder that left. It's more like, if you have actually built value in that company, you can't get that stock for par value anymore. You have to pay fair market value for that stuff. And that can be very expensive. Can the remaining founder come out of pocket to pay for that? I mean, there's, you know, workarounds and stuff. But none of them are uncomplicated and it's just not recommended.

Jon : Right. There are other issues. The one period at Y Combinator where we saw a lot of changes was after the Social Network movie came out, founders would come in and ask for all these strange changes to their formation documents. Like 10-1 voting and special preferences, so the founders can keep control, after having seen the movie. And that's great. You know, we want founders to have control of the company. But you know the reason...we alluded to this before...but the reason we have standard formation documents is because it really is best practice.

So when you change and add complications, not only does it lead to some unintended consequences like your future investors taking a good look at your documents, you know, it extends the diligence time. Questions come up during fundraising. That can be difficult. There are other reasons, like the pricing is different when you buy more shares. The reason we have these documents in a standard way, in standard formation documents, is because we've over time realized that it's the best for the company going forward.

LLC vs. S Corp vs. C Corp?

Aaron : There's one last piece on this formation side that I want to talk about before we move on which is, what kind of corporation and where? We mentioned Delaware almost as a default. But I know that when I was founding my company, we were trying to figure out, "Do we want to be an LLC? Do we want to be a C Corp? S Corp?" And we didn't even know what these meant, but when you talk to a corporate lawyer about what you're going to do, unless they know what you're trying to do, they're like, "Oh, LLC. It's great, taxes, this thing, that thing." It seems easy. It seems great. We were in New York, and said, "Let's just do it in New York," because it was good for taxes or whatever.

Why is it that we try to advise all companies, no matter who or where, that Delaware C Corp is the right thing to do?

Carolynn : When you are thinking about an LLC versus a corporation, founders often have family members, friends who are lawyers or whatever, chime in and say, "This is absolutely the best thing for you, tax-wise." And that may be true. If you're going to be a lifestyle business in a particular state and you're not going to get big, that may be exactly the right entity for you.

But we think, you know, assuming you're planning for success...and success means that you're going to be a big company with possibly venture capital investors and you're going to get all this outside money in...that is not the right structure. So what you're just doing is optimizing for taxes, you're not optimizing for success. And that's just, you know, companies that get an outside investment need to be C Corps. I mean, of course, LLCs can get outside investment.

But the kind that, you know, that grow here, you know venture backed companies are C Corps. The reason we choose Delaware...I mean, it's okay to be a corporation in any state. Delaware is the default for lawyers, corporate lawyers, you know, mostly everywhere, primarily because public companies are much better off in Delaware and there's a whole...it's because there's a robust case law...the Delaware Chancery Court has, you know, all this case law, deciding all these, you know, statutory and fiduciary duty and all this kind of stuff is important for public companies.

It trickles down to private companies because Delaware's statute is just so familiar to so many corporate lawyers. It's easy to interpret, and Delaware is just sort of the go-to place. It's also extremely administratively easy to be there. They're set up to do everything fast and easy and cheap.

Aaron : You know, the last thing I want to say on this topic is really just, it seems so easy when you do this, right? And Jon, to your point about standardizing things, if you just do this standard and don't try to get cute or clever on this, you're in a better situation. All of your endeavors and your thought and invention about starting a company should be going into, what does that company do? Not into how you form it and what you do.

We were recently dealing with a particular case which we obviously won't mention the specifics of, where a company really screwed up their formation badly. And got to the point where they were doing another round of fundraising and ended up in a crazy situation. And I think you guys have seen a lot of these, like a crazy situation where all this stuff was messed up. And it could have hurt them. Thankfully it didn't. But this stuff can really cause big headaches and huge, huge legal bills down the road if you don't do it right. So just do the standard.

Control your cap table

Aaron : I want to move on to the next big place where lawyers typically touch companies, where financing really becomes an important piece of what's going on. When you start thinking about, "What is my cap table?"

So first off, Kirsty, the term "cap table" seems so obvious to all of us, but there was a great article in "The Economist" last week actually, talking about how thinking about that document is actually kind of new. And the actual knowing who owns what is important. What is this cap table that startups have and why is important?

Kirsty : In its simplest form, a cap table just splits up the ownership of the company. And in the early days, that's probably just the two co-founders or the three co-founders. But as soon as you start getting employees or you start getting investors who are buying shares, then you need an easy way to keep control of that and understand what the company looks like and what the ownership of the company looks like.

So it's really just a list of people and the number of shares they own and what percentage of that company that relates to. It gets much more complicated because you can be issuing options to employees. Then the employees leave and what happens to those options? Or the options are exercised and keeping track of all of that information. So it can get very complicated very fast. But the basic thing about it is just knowing who owns shares in your company.

Aaron : Is there something that happens when there's too many people who own shares? If you lose control of the cap table and you don't know what's going on, what could go wrong?

Kirsty : I guess if you don't know who owns the company, then there's probably bigger problems there. But you know, these things become important at really stressful times. So knowing who your shareholders are become important if you're doing an equity round. If you, you know, you're raising money from VCs and you need to get signatures from all the people who own shares in your company.

And if you don't have an easy list and you don't know who those are, then that's a really difficult thing to do. You end up scrambling around, trying to find the agreements that you signed with them, trying to recreate it. And it's the last thing you want to be doing at this point because there's so many other things to think about. So it's one of those sort of hygiene issues, where if you just have it set up from the start and you keep it under control, then you almost don't notice it. But when you don't have it, it's a big problem.

Aaron : Yeah. And so let's talk about that moment where your cap table starts to get pretty complicated, which is usually...it's either when you start issuing shares to employees, but usually from a startup, it's sort of at the point where you start raising money. Right? Where all of a sudden, these outside parties...whether they be VCs or angels...all of a sudden start showing up on your cap table. That first fundraising that a company does, what is it usually?

Kirsty : The type of fundraising.

Aaron : Who's it coming from and what kind of instrument do they use to actually bring money?

Kirsty : It's actually not done on priced equity rounds. So the people that are putting money into the company aren't getting shares immediately. And they're using instruments like the safe or a convertible note. And what that's basically saying is the investor puts in money now and at some point in the future, it will convert into shares later down the road. So even though they're not currently shareholders, coming back to the cap table, you still need to understand what's happening. And you still need to keep a list of who those people are that are putting money in.

Then when you are accepting money, you need to understand how much those people are going to convert their investment into, into shares at the time that they actually get those shares. Because if you're giving away at that point 50% of the company, then you as a founder suddenly own less of the company. Much less of the company. And so you need to understand that.

Because if you're giving away too much in the early days, then when you get to your next round -- which is likely to be what we generally call a "Series A," so a priced round where investors are actually buying shares -- they're going to want to take more of the company as well. And before you know it, the founders have single digit percents of the company. And again, that's not going to incentivize the founders in any way. So it's about understanding what the situation is. And how much money you're taking and on what terms. And what's actually going to happen down the road.

Aaron : You know, as you talk about sort of these things that happen at different points, one of the things that pops out is that the first round of financing isn't typically a priced equity round. I think most people who think about investing think, "Oh, I go buy stock on the stock market. And that's just equity. I know what the price is." Or if I'm buying into a company, shouldn't I know? Why isn't equity the preferred way to raise money whenever you're doing it?

Carolynn : There's two reasons. I think that startups tend to favor these convertible rounds where you're not pricing equity because it's very fast to raise money that way, so they don't get distracted.I've seen throughout my whole career, [raising priced rounds] has gotten more simple and more streamlined, but nonetheless, someone who is an outside investor who is pricing your company, they're actually valuing your company. And they're doing diligence to get to that valuation.

And then they're doing legal diligence. They're actually looking at your contracts and looking at your formation. It's a process. And then there are financing documents that both the company's lawyers and the investor's lawyers generate these finance documents. They're often negotiated. It's a process that takes time.

It's very appropriate to do a price round where a company is at the point where it's raising $1.5 million or maybe more. But for companies that have a plan to boot-strap, and want to take certain milestones, and they don't want to take the time to have investors do diligence and price them, then these convertibles are a really good way to get, you know, we call it seed money. You get seed money into the company and then these instruments convert later when there is a priced round.

Aaron : One of the interesting things here that sort of circles back to this thing that the three of you keep sort of emphasizing, which is this idea of standardized systems, and trying to make things quick and easy. This feels like the kind of thing where investors are probably like, "Well, I'd rather be able to do diligence. I'd rather be able to set a price. I'd rather take longer to think about the investment." Whereas the founder is like, "No, I need money now."

Because for founders, the most valuable resource at that point in their lives isn't actually money. It is time. It's how much time they have before they die. And how much time they have to make their users happy and actually satisfied with their product. So this is one of these things where it's a huge founder-friendly initiative and I think YC, largely thanks to the three of you, sort of pushed these converts and then safes as, "This is the founder-friendly way to do investing at the earliest stages of a company." It's fast. It's easy. It gets startups back to what they should be doing, which is building.

Jon : Absolutely. I think it's very difficult to figure out valuation for startups. It's very tough to have a meeting of the minds at the very early stages. And having standardized documents is very helpful. And these convertible notes and the safes are extremely helpful because the founders will focus on the business, which is kind of the larger point. Like, we were talking earlier about the standardized documents, the crazy voting agreements, and wasting time at this stage instead of executing on the company is the big mistake.

We've seen companies all of a sudden grind to a halt when they were undergoing their Series A process or trying to raise money. And that's the crucial error. We always say at Y Combinator, talk to users. Focus on your company. Write code. Exercise so you're healthy. You know, don't go crazy. And that's the focus. It shouldn't be, "Okay, let's negotiate Series A documents right when we're starting to get users." It should be focused at a crucial time in the company's juncture. To grind to a halt over legal documents is kind of like a crime.

Aaron : Just do it fast, get it closed, get back to working on the company.

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