Washout Weekend

As the organizer of Atlanta Startup Weekend I have been involved with a few companies that emerge from the event.  And as they move forward there is always an issue.  An issue of equity holders and complexity of the cap table.

This issue has been a subject of conversations within both Skribit and Twitpay.  Investors don’t like the look of the cap table of Startup Weekend companies.  Too many founders.  Too much complexity.  To an investor it is a bit of a mess.  Something to be avoided.  But how to do so?

The big news a few weeks back was that Twitpay was acquired for $100,000. Or more specifically, “the investors acquired Twitpay’s assets for $100,000 and plan to plow an additional $1 million in product development and marketing.”

Now I have done quite a few asset acquisitions in my time.  Well over a hundred.  The beauty of such transactions is that you get to buy the things that you believe to have value while leaving the liabilities and things that you don’t believe have much value behind.  While the co-founder participants in Startup Weekend may not like it, the fact of the matter is that over a year or so into a company they really don’t add a lot of value while adding a lot of complexity to the company.  As an investor an asset acquisition is an smart way to clean that up.

If other Startup Weekend companies garner angel funding in the future you may see transactions take the same form as the Twitpay deal.

March 1, 2010  |  Comments  |  Tweet  |  Posted in Business, Startups