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Bad Actor: Startup Accelerator Program

Candelaria8·Jul 18, 2020

Posted in:Advice

Does anyone have experience successfully dealing with a bad/ predatory accelerator program? As a startup with limited resources the accelerator knows we can't mount much of a legal battle to get them off our cap table. Sadly we are not the only victim of this organization which continues to target female founders.

mehrakvahidi·Jul 18, 2020

Which accelerator? So we try to avoid?

Candelaria8·Jul 20, 2020

Note: Clause in the contract that prohibit discussing anything negative about the program should have been a red flag. :/

Iynna·Jul 25, 2020

aie aie ... that's terrible I am so sorry to hear - as someone in the business it saddens me/angers me so much to know that these types of sharks exist. obviously I don't know the specifics of the situation and/or how bad it has turned out to be so can't speak on it. That said one thing you could do is to discuss with alumni companies - how did they deal with similar issues - assuming they faced similar ones? Any takeaway they can share with you?Now you mention cap table - do you want to kick them out? Couple of things you could do all centered around buying back their shares but PLEASE read through your SPA and shareholders agreement, and consult a lawyer:1) get an existing investor to buy their shares? are they your first investor or do you have others on the cap table who could step in - this would obviously require a strong business rationale and so forth (even though you feel that they are awful and they are f*cking you up, in the proposal it won't work - it would need to be something of the effect that the relationship is a misfit and you won't see value on the long run and your exit option are likely limited with them etc. think about it) 2) newer investor in a round: are you raising and do you have some commitment - those could possibly buy those shares back3) personally buy back the shares - if you are in a financial position to do so 4) the company can buy back the shares In any of these instances, make sure your lawyer and you draft a non compete!

Candelaria8·Jul 26, 2020

Thank you so much for your reply. There is a group of former alumni who feel the same way and we have coordinated to individually request our equity be relinquished at the same time. The answer was no.I've thought about buying the equity back but neither the company nor I am capable of doing so at the moment. We are also not able to have our attorney work on this as there are other priorities (like development and launching pilots) that we want to spend our limited resources on. We are raising a pre seed but also need to move the company forward in the meantime. I'm concerned that going through some kind of a lawsuit with this program may hurt my fundraising efforts as investors may see it as poor judgement or just a reason to say no.As frustrating as this is it is possible we will just have to bring them along for a while until we can buy them out in some way. Including a non compete is a great tip!Thank you again!

Iynna·Jul 26, 2020

Hey there! I am glad you have the support of other alumni - very important in these types of situations! I agree with you, going through some lawsuit will reflect poorly on you... Unfortunately, to investors this situation will be a red flag any way and you won't be able to avoid it, the only thing you can control is how you frame it - obviously don't talk about it in the the first meeting but as you enter more serious due diligence, be upfront about it and own it that "we went through this program here is what we achieved and it served us well however along the way we realised there was a misfit because of xyz" - some investors will probably run away and it will be demoralising but don't get depressed ! Others will most likely respect you for being upfront and transparent.Either way, please feel free to reach out on how things go and if you need other insights!

Candelaria8·Jul 27, 2020

Good advice for the due diligence.Thank you for the additional feedback and offer of support!

sansanfibri·Jul 19, 2020

I had an experience with a single-woman led “program”. A total hoax and no value for the money.

Candelaria8·Jul 20, 2020

Did they take equity? How did you handle it?

Iynna·Jul 25, 2020

@sansanfibri - Wow I am sorry to hear this... Not sure how you feel about it now and this is really a suggestion more than anything - consider writing about it so people don't fall in that same trap?